Employers can expect double-digit cost increases to continue for all types
of medical coverage this year, with HMOs and POS plans forecast to increase
at 14.1 percent, according to Aon Consulting's Spring 2004 Health Care
For the first time, Aon is also forecasting the rate of increase to be expected
for companies using consumer-driven plans, based on input from actuaries at
leading healthcare insurers. That type of plan is also expected to see 14.1
percent increase for 2004, but Aon warns that the number "should not be
taken out of context."
"It's important to look at overall cost for healthcare programs,"
said Bill Sharon, senior vice president with Aon Consulting and director of
the study. "Our analysis reveals that a company can realize first-year
savings of up to 8 percent of their cost if they implement an effective consumer-driven
healthcare strategy. So, although consumer-driven plans will likely see the
same level of increase as other coverage plans this year, considerable savings
will still be recovered by making the switch. It all depends on the financial
incentives and the resulting changes in consumers' healthcare consumption."
But short-term savings aside, consumer-driven plans are expected to be an even
more attractive model in the years to come, according to Aon.
"Early returns on the impact of consumer-driven plans have been positive.
Significant reductions in unnecessary care have been charted. Once the actuaries
begin to see these results continue year over year, we predict that this will
be reflected in trend rates and future trend lines will drop lower than other
plan models," Sharon said.
Additionally, although the pharmacy rate projections are slightly lower than
last year, they still come in at 14.4 percent, showing that employers must continue
to take a look at how their prescription drug coverage is designed.
Connie Perry, vice president with Aon Consulting and director of the company's
national pharmacy practice, said: "As we see employees continue to play
a larger role in their own healthcare decisions, use of generic drugs is helping
to lower the overall trend line for prescription drug coverage. However, in
the months to come, we will see discussions about expensive 'biotech injectable'
drugs move to the forefront, so plan design in light of these innovations will
The role of biotechnology-derived injectable medications, which are used primarily
to treat high-cost disease states for which previous treatments may have been
either more invasive or unavailable, is important for companies to pay attention
to. Current estimates are that only 5 percent of total prescription drug costs
are from these drugs, but their cost impact on health plans will become more
pronounced as their use increases.
2004 rate projections
These numbers are forecast for health care "costs" as opposed to
"premiums." Additionally, these numbers are a forecast for cost before
changes to plan design.
|Type of Plan
||Increase With Rx
||Increase Without Rx
|Medical - HMO
|Medical - POS
|Medical - PPO
|Medical - Indemnity
|Medical - Consumer-Driven (CDHP)
|Dental - DHMO
|Dental - PPO
|Dental - Indemnity