Health-Care Costs To Rise More Than 10% Next Year
The Wall Street Journal
Tuesday, August 12, 2008
Health-care costs are expected to rise more than 10% into next
year, according to a survey of insurers by Aon Consulting
But that increase is the smallest Aon has seen in six years.
Experts say it shows that efforts to tame costs, such as
employee wellness or disease management programs, may be paying
"There's a variety of tactics that employers have been employing
over the last 3 to 6 years that has had an impact on the
market," said study director Bill Sharon, an Aon Consulting
senior vice president.
Aon Consulting surveyed about 70 health insurers around the
country, including companies such as
It found that actuaries expect costs to rise an average of 10.6%
during 12-month rating periods starting this year between April
That represents a slight drop from last year's forecast of 10.9%
and a bigger fall from 2002, when health care costs were
expected to rise by more than 16%. But the percentage likely
won't be what the average employee faces for a premium hike next
year. It doesn't reflect insurance plan designs or changes an
employer might make to benefits plans.
"Pretty much every employer has to do something or is doing
something in an effort to bring that number down," Mr. Sharon
He said actual cost increases have wound up being three to four
percentage points lower than preliminary estimates in the past
couple of years. Still, he said Aon Consulting's survey gives
employers a benchmark to use as they consider premium renewals.
Many employers have started researching their benefit options
for 2009. Consultants say it's too early for predictions on next
year's health care plan costs.
But Ken Ambos of Equity Risk Partners Inc. said midsize
employers could see a cost increase of roughly 9 to 12% that
they pare down to 6 to 9%. Equity Risk Partners is a risk
management and employee benefits consulting firm
Costs are still rising to keep up with growing patient demand
for services, the needs of an aging population and prescription
drug and technology costs, according to Aon Consulting, a
subsidiary of Aon Corp.
Overuse and misuse of services and an "out-of-control medical
liability system" also contribute to increases, said Robert
Zirkelbach of America's Health
Insurance Plans, a trade association representing nearly 1,300
"It is encouraging that the growth in health care costs is going
down, but there is still more work to be done," he said.
Mr. Zirkelbach said health insurers have offered disease
management programs and encouraged the use of cheaper generic
drugs to help contain costs.
Employer wellness programs also have played a role, Mr. Sharon
said. He noted that doctors, hospitals and employers all have
worked to curb costs.
"When costs go up as great as this, there's a lot of market
pressure brought to bear on all of the parts of the market to
bring those costs down, and I think that's what's been happening
over the last six years or so," he said.
Aon Consulting has forecast a steady decline in cost increases
since 2002. But Mr. Sharon said this decline has grown smaller
the past few years, a sign the reductions may be bottoming out.