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CCH® HR MANAGEMENT 12/19/07

Health care costs projected to increase at double-digit levels in 2008

Costs for the most popular types of health care coverage are projected to increase at double-digit rates into 2008, according to a national survey of insurers and administrators by Buck Consultants.

In its 18th National Health Care Trend Survey, Buck measured the projected average annual increase in employer-provided health care benefit costs. Insurers providing medical trends for the survey cover a total of approximately 91 million people.

Costs for the most popular plans continue to increase by more than 10 percent, similar to trends reported in Buck's 17th survey, conducted in early 2007.

Costs for Preferred Provider Organization (PPO) were projected to increase by 10.75 percent, up 0.15 percent from 2007. Point-of-service (POS) plans could see increases of 10.54 percent, down slightly (0.02 percent) from 2007. Health Maintenance Organizations (HMO) will see increases of 11.14 percent, up 0.03 percent from 2007. The most significant year-to-year difference was projected to be in High Deductible Consumer Driven plans, which although up 10.36 percent, is 0.75 percent lower than 2007s increase of 11.11 percent.

Health insurers reported an average prescription drug trend of 11.68 percent, up slightly from the 11.33 percent reported in the prior survey. This is considerably higher than the 4.52 percent reported by pharmacy benefit managers (who generally do not take any underwriting risk).

Health insurers reported lower trends for plans that supplement Medicare -- 7.32 percent for plans with drug coverage and 6.82 percent for plans without. This reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and co-pays.

"Insurers are concerned about the cost shifting to private employers that may result due to health care reform at the state level," said Harvey Sobel, FSA. "Complying with federal and state mental health parity laws is also expected to raise costs."

Health insurers use trend factors to calculate premium rates, and large self-funded employers use these trend factors to budget their future health care 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.

For additional information on this and other HR topics, consult CCH Human Resources Management or Personnel Practices/Communications.

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