Healthcare costs continue double-digit increase

Costs for the most popular types of healthcare coverage are projected to increase at double-digit rates through the remainder of 2008 and into 2009, according to a survey of U.S. insurers and administrators from Buck Consultants, an independent subsidiary of Affiliated Computer Services.

The National Health Care Trend Survey analyzed responses from 79 health insurers, HMOs and third-party administrators, measuring the projected average annual increase in employer-provided healthcare benefit costs. Insurers providing medical trends for the survey cover a total of approximately 98.7 million people.

Costs for the most popular plans continue to increase by more than 10 percent. Payors reported an average prescription drug increase of 11.4 percent, down slightly from the 11.7 percent reported in a 2007 survey from Buck. This is considerably higher than the 7.8 percent reported by pharmacy benefit managers (who generally do not take any underwriting risk), according to survey results.

For plans that supplement Medicare, health insurers reported a projected increase of 6.9 percent excluding prescription drug coverage. The lower trend reflects the impact of federal controls on Medicare fees and the lower increases expected in Medicare deductibles and co-pays.

"While trends have come down significantly since 2003, they still remain stubbornly high," said Harvey Sobel, a Buck 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 healthcare providers to raise their fees."

Health insurers use trend factors to calculate premium rates, and large self-funded employers use the factors to budget their future healthcare 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, according to Sobel.