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Double-Digit Health Care Cost Increases Continue in 2011, Says Aon Consulting

Source: Aon

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Posted on 15 Sep 2010

Medical plan costs are forecasted to increase at double-digit rates in the next 12 months(1). Employers must evaluate their health care benefit strategies, preparing for increases in 2011 and after health care reform provisions are implemented. Today, Aon Consulting, the global benefits and human capital solutions business of Aon Corporation, released its summer 2010 Health Care Trend Survey.

Aon Consulting surveyed more than 60 leading health care insurers, representing more than 100 million insured individuals, and found that health care costs are projected to increase by 10.5 percent for HMOs, 10.6 percent for POS plans, 10.7 percent for PPOs and 11 percent for CDH plans. These findings are slightly higher than a year ago when HMO increases were 10.4 percent, POS plans were at 10.4 percent, PPO increases were 10.7 percent and CDH plan increases were at 10.5 percent.

During the next 12 months, the prescription drug cost trend is expected to be 8.4 percent, compared to 9.3 percent in the spring of 2009. The specialty pharmacy trend rate is projected to be 14 percent, versus 13.2 percent a year ago.

Meanwhile, health care rates for retirees over the age of 65 are projected to be 7.5 percent for Medicare Supplement plans and 6.7 percent for Medicare Advantage plans. These are up from 6.6 percent and down from 7.3 percent, respectively, from the spring of 2009.

Aon Consulting says the health care reform law is expected to add 2 percent to 5 percent to the medical trend over the next three years. Additional costs will become apparent as health carriers pass along costs from additional regulation and excise taxes. In addition, providers subject to reductions in Medicare reimbursement may try to shift costs to the employer-based system.

"As employers start to fully understand the long-term cost impact of health reform, many are looking to redesign their health plans," said John Zern, Aon Consulting's U.S. Health & Benefits practice director. "Strong employee wellness and prevention programs, along with institutionalized best practices in care delivery, are key components to a successful redesign."

A change that organizations can make to combat rising costs is to develop a comprehensive organization-wide wellness program. In 2011, smaller employers will be eligible for grants to help initiate wellness programs. In 2014, employers will be allowed to reward employees up to 30 percent of the cost of coverage for participating in a program. Current wellness regulations call for up to 20 percent.

Dr. Paul Berger, U.S. Health & Benefits Chief Medical Officer with Aon Consulting, added: "Investments in well-designed health management and wellness programs can create a healthier and more engaged employee. Long term, employers are likely to see a decrease in chronic diseases and an increase in employee productivity with reduced absence. Comprehensive wellness and health management programs also can be an important factor in the recruitment and retention of employees."

In addition to implementing wellness programs, employers will likely increase deductibles, co-pays, out-of-pocket maximums and employee contributions. They will implement consumer driven health plans as well.


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