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Healthcare Costs Begin to Moderate
Jun. 1: Chicago - While still reaching double- digit figures, healthcare costs are beginning to increase at a lower rate, according to Aon Consulting, the human capital consulting organization of Aon Corporation.

Aon Consulting surveyed more than 70 leading healthcare insurers (representing more than 100 million insured individuals) and found healthcare costs are projected to increase in the next 12 months by 12.2 percent for HMOs, 12.4 percent for PPOs and 11.9 percent for POS plans. This compared to one year ago, when HMO cost increases were 13.2 percent, PPO increases were 13.0 percent and POS cost increases were also 13.0 percent. Meanwhile, consumer-driven health plans (CDH) are estimated to increase by 12.5 percent, similar to a year ago when these plans were forecasted to increase 12.7 percent.

"This is the sixth year of double-digit increases in healthcare costs," said Bill Sharon, senior vice president with Aon Consulting and director of the study. "Employers have been responding to this by using a variety of strategies to control healthcare costs such as increasing deductibles and co- payments, expanding

disease management programs, adding health promotion programs and introducing new consumer-driven health plans. While these initiatives are slowing the rate of increase, healthcare costs continue to grow at a pace that is three to four times the rate of general inflation."

Insurance companies are forecasting consumer-driven health plan trend rates to be on par with PPO trend rates, but it's important to look at the first year of CDH savings, Sharon said. "Although consumer-driven health plans may increase at a similar rate as other plans this year, considerable savings still will be realized by making the switch. Our analysis shows that a company can achieve first year savings of 8 percent of their premium if they implement an effective consumer-driven healthcare strategy."

Healthcare rate increases for retiree medical are projected to be lower than active employees, according to the Aon Consulting study. During the next 12 months, Medicare Supplement plans are predicted to increase by 11.5 percent and Medicare Advantage plans will likely increase by 10.2 percent.

"Retiree medical benefit cost trends are heavily influenced by government reimbursement rates for Medicare and prescription drug costs," said Jonathan Nemeth, senior vice president, and chief health and benefits actuary with Aon Consulting. "Some modest improvements in these two areas are leading to a slightly lower trend rate for these plans."

As for prescription drugs, general pharmacy costs are expected to increase by 12.2 percent, compared to 13.1 percent a year ago. Specialty drug costs will increase by 17 percent, down from 22.5 percent last year. (Specialty drugs are biotechnology-derived injectable medications used primarily to treat high-cost disease states for which previous treatments were more invasive or unavailable.)