2004 Health Coverage Price Hikes Forecast to Pick Up

August 15, 2003 (PLANSPONSOR.com) - With employers' 2004 health-care costs projected to accelerate their recent double-digit increases, many companies will turn to their workers to dig deeper in their pockets to help offset the added expense.

In fact, according to Buck Consultants’ tenth National Health Care Trend Survey of insurers and third-party administrators, the rate of projected increase for the next 12 months actually picked up a bit from the firm’s fourth quarter 2002 poll (See Buck Finds No Cure in Sight for Healthcare Costs ). The latest survey conducted in mid-2003 showed a 0.2% hike for each of the three most popular types of health benefit plans:

  • Preferred Provider Organization (PPO) – 15.2%, up from 15.0%
  • Point-of-service (POS) – 15%, up from 14.8%
  • Health Maintenance Organization (HMO) – 14%, up from 13.8%

“Based on the results of our survey, we believe that 2004 will see many employers raising the share of health care costs paid by their employees,” said Buck consulting actuary Brian Stitzel, a survey co-author, in a statement. “However, some of our clients indicated that they are looking at offsetting those potential increases through the selection of better provider networks, by self-funding, and by negotiating greater prescription drug discounts and rebates.”

There was a small bit of good news, however, in the forecast trends for prescription drug programs. According to the survey, while drug coverage is still expected to be higher than those for general medical programs, the increase has actually moderated slightly from the prior poll:

  • Insurers – 20%, down -0.3%
  • Pharmacy Benefit Managers – 14.9%, down -0.1%
  • Combined -16.2%, down -0.2%

“Even though these trend factors remain stubbornly high, many of our clients have experienced more moderate trends in the first half of 2003 than those being forecast,” said survey co-author and Buck consulting actuary Harvey Sobel, in a statement.

Health insurers use trend factors by coverage – such as medical, prescription drugs, dental and vision care – to calculate their 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, utilization of services, technology, changes in the mix of services and mandated benefits.

A full copy of the survey is available for $100 from Buck’s Benefit Survey Department, Buck Consultants, Inc., 500 Plaza Drive, Secaucus, New Jersey, 07096-1533. Telephone 201-553-6400. Contact Ed Gadowski of Buck Consultants, 212-330-1123. Buck is a Mellon HR Services company.