Human Capital & Careers

Aon: Health-Care Costs Will Climb 11 Percent

Still, the current growth rates for medical expenses are less than they were a year ago.
Stephen TaubJune 6, 2007

Health care costs will increase by an average of 11 percent in the next 12 months, Aon Consulting estimates.

Breaking down the costs by types of health plan, the benefits-consulting firm projected to jump by 10.9 percent for health-maintenance organizations, 10.8 percent for point-of-service plans, 11.2 percent for preferred-provider organizations, and 10.7 percent for consumer-driven health plans. The survey covered more than 70 health care insurers representing more than 100 million insured individuals,

Aon found a sliver of a silver lining, however. The current health-care- cost trend rate has declined more than four percentage points since fall 2001, when the projection was 15.6 percent, according to the benefits-consulting firm, which conducts it health-care study twice each year.

Indeed, the current rates of increase by plan are lower than they were a year ago, when HMO cost increases were 12.2 percent; POS plans, 11.9 percent; PPOs, 12.4 percent; and CDH plans, 12.5 percent for plans. “Although it is encouraging to see a continuing decline in health care trend rates, employers are still challenged by the fact that health care cost increases are more than four times general inflation rates,” said Bill Sharon, senior vice president with Aon Consulting and director of the study. Indeed, Aon’s current overall projection of medical cost increase is more than four times the February 2007 increase in consumer price index for all urban consumers of 2.4 percent, the firms found. “For many businesses, health care costs continue to be their fastest growing expense,” Sharon said.

For retirees, the picture is even bleaker. The firm projects health-care rate increases for retirees over the age of 65 to be 11.2 percent for Medicare Supplement plans and 9.2 percent for Medicare Advantage plans. Aon attributes the lower Medicare Advantage trend rate to favorable government reimbursement rates and the competitive market for such plans.