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| Sample Newsletters | MarketPlace AIS Products & Services |
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AIS's Health Business Daily
Featured Story August 25, 2008 Lower Medical Cost Trend Rate Is Good News, Bad News for Health Plans and Employers Reprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans. By Steve Davis, Managing Editor, (sdavis@aispub.com) First, the good news: The annual medical trend rate for health care in 2008 increased by its lowest percentage since 2001. The bad news: The average increase is still in the double digits and is three times the Labor Dept.'s Consumer Price Index, according to results of a study released Aug. 11 by Aon Corp. Health plan actuaries surveyed by Aon expect costs will increase an average of 10.6% during 12-month rating periods that begin between April and September of this year. A year ago, AON forecast a 10.9% increase from the prior year. And in 2002, the first year of the study, the company predicted a 16% increase (see table, below). Bill Sharon, senior vice president at Aon and director of the study, attributes the decrease in trend rate to a growing number of employers that have launched wellness and health promotion programs, shifted more financial responsibility to employees and placed greater attention on the use of generic medications. "Over the past six to eight years, employers have gotten more aggressive with tactics such as the management of chronic conditions, wellness programs and greater focus on pharmacy costs," he tells HPW. "Employers have put more pressure on health plans to focus on areas like utilization management." In turn, he adds, insurers are putting more pressure on providers to control costs. Despite rising health coverage costs, health benefits have gotten thinner over the past several years, and employees are being asked to take on more financial risk in the form of higher deductibles, larger premiums and bigger copayments. But employers can shift costs only so far before it affects their ability to attract and retain employees, Sharon says. Once employers reach that point, the next stage is to target wellness and disease management, he explains. Employers Boost Incentives But employers have discovered that wellness programs won't impact coverage costs unless a large percentage of employees participates. For a health risk assessment to be effective, for example, at least 50% of employees need to take part, Sharon asserts. To boost participation, he says, employers are boosting financial incentives. Health plans should expect tougher negotiations this fall as employers gear up for the annual open-enrollment period. "Employers want help in managing costs in a way that goes beyond shifting more cost to employees," Sharon says. "They are asking [insurers] to guarantee a return on investment for wellness and preventive care programs." In addition, Aon says, rate increases for retirees more than 65 years old are projected to be 7.3% for Medicare Supplement plans and 7.7% for Medicare Advantage plans, down 11.2% and 9.2%, respectively, from a year ago. To see a copy of
the study, visit http://aon.mediaroom.com/.
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