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Double-digit Rate Hikes Projected for Health Plans
Many popular private healthcare plans that cover nearly 100 million Americans will see double-digit rate increases into 2010, according to a national survey of more than 100 health insurers, HMOs, and third-party administrators.
"Although our survey reveals a slight decrease in cost trends since our prior study, there are signs that we're going into another cycle of high trends," says Harvey Sobel, a principal and consulting actuary at Buck Consultants, who directed the survey.
"Health insurers may increase costs in light of the continuing economic downturn and legislation, such as mental health parity and the recent expansion of COBRA," Sobel says. "They may also attempt to increase their prices prior to the implementation of national healthcare reform, including a new public insurance option."
For its 20th National Health Care Trend Survey, Buck analyzed responses from more than 100 health insurers, HMOs, and third-party administrators, and measured the projected average annual increase in employer-sponsored healthcare benefit costs. Insurers providing medical trends for the survey cover about 95 million people.
Costs for the most popular plans continue to increase by more than 10%, and are slightly lower than the trends reported in Buck's most-recent September 2008 survey. Health insurers reported an average prescription drug trend of 10.8%, down 0.6% from the 11.4% reported in the September 2008 survey. This is three percentage points higher than the 7.8% reported by pharmacy benefit managers, who generally do not take any underwriting risk.
Robert Zirkelbach, a spokesman for the industry trade group America's Health Insurance Plans, says health insurance premiums track the cost of medical care.
"As the cost of care goes up, premiums go up accordingly. Government data has shown that to be a consistent trend for the last 20 years," Zirkelbach says, adding that the Buck survey highlights the need to address underlying medical cost drivers.
"The question needs to be 'why are those medical costs going up?'" he says. "We know there are wide variations in practice patterns across the country. New medical technologies are driving costs.
Unfortunately, we don't have good data in this country about which treatments are most effective." Health insurers providing Medicare supplemental plans project an increase of 7.4% excluding prescription drug coverage. This lower trend reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and copays.
Health insurers use trend factors to calculate premium rates, and large self-funded employers use these trend factors to budget their future healthcare costs. In general, trend factors provide for price increases that may result from such variables as inflation, utilization of services, technology, changes in the mix of services, and mandated benefits.
Secaucus, NJ-based Buck Consultants is an independent subsidiary of Affiliated Computer Services, Inc.
John Commins is an editor with HealthLeaders Media. He can be reached at jcommins@healthleadersmedia.com.
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Robert Stone (6/10/2009 at 10:20 AM)
Health care costs are going up because thereis excessive demand from an increasingly unhealthy populous.
Greg Y (6/9/2009 at 2:05 PM)
Where is the documentary evidence supporting renewed cyclical (medical cost delivery) increases as the sole driving factor behind these increases? The unadjusted annual medical Care CPI ending April 09 was 3%, whereas the 3 month trend was 3.7% for the quarterly adjusted compound annual rate. Premium increases are projected to be more than double those rates. The health insurance industry always leads with the same recitative ??The providers made us do it,? but isn?t it conceivable that premium trends (and the cyclical nature of profit cycles) bear some of the responsibility for leading medical care inflation rather than the other way around? I wish some would re-examine the cycle of unusually steep premiums escalation that started in 2001 as that cycle may well be repeating ? but with a more quizzical eye to determine analytically how much of the driving effect may have been push pull lead by input cost inflation, and how much might have been premium induced. I think the behavior is amenable to critical review from the perspective of revenue maximization and the capitol needs borne from industry consolidation rather than pure medical underwriting increases. I acknowledge that providers reliably seek more return per unit and deliver more units if and when they sense more money will be available ? I?m also pretty sure, though, their demand curves are elastic as that was amply demonstrated in the nineties.