Human Capital & Careers

Report: Double-Digit Spikes in Health Costs

Employers will pay as much as 11 percent more for health benefits as they did last year, according to a new survey.
Stephen TaubSeptember 11, 2008

A new survey on future health-care costs projects double-digit rate increases for the most popular types of health-care coverage through the remainder of 2008 and into 2009.

This study, by human-resources firm Buck Consultants, analyzed responses from 79 health insurers, HMOs, and third-party administrators. It measured the projected average annual increase in employer-provided health-care benefit costs.

According to the survey, costs for preferred provider organizations (PPO) are expected to surge 11.1 percent; for point-of-service (POS) by 10.8 percent; health maintenance organizations (HMO) by 11.1 percent; and high-deductible, consumer-driven plans by 10.7 percent. Health insurers reported the average prescription drug rate increase will be 11.4 percent, according to Buck.

For plans that supplement Medicare, health insurers project an increase of 6.9 percent, excluding prescription drug coverage. This lower trend reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and co-payments, according to the report.

The consultancy’s conclusion differs from a Mercer survey released last week that said the increase in 2009 health-care costs will be at its lowest in a decade. According to the benefits consulting company, early survey results indicate that cost growth is likely to slow to 5.7 percent next year.

Still, both findings show that employers will be paying higher health costs. “While trends have come down significantly since 2003, they still remain stubbornly high,” said Harvey Sobel, a Buck principal and consulting actuary who directed the survey. “We are concerned that these trends may not yet reflect the impact of recent inflationary increases, which may put additional cost pressure on health-care providers to raise their fees.”

Buck explained that 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, technology, changes in the mix of services, and mandated benefits.