Anderson Forecasts Double-Digit Hikes in Health Costs

The group’s Health Care Cost Trend Survey was conducted to find the annual trend rate, or the expected annual increase in cost and price, projected by the survey respondents.

Average trend rates for 2002 were generally found to be higher than those of 2001 – a finding consistent with the earnings reports issued from the managed care and health insurance industry.

The following average annual trend rates, or cost-over-price increases for 2002, were found to be:

• an increase of 11.7% in Health Management Organizations (HMO), compared with 9.3% in 2001
• a 12.3% increase in the cost/price ratio in Point of Service Plans (POS), compared with an increase of 10.9% in 2001
• a 13.7% hike in Preferred Provider Plans (PPO), compared to11.5%
• a 15.5% uptick in the trend rate of indemnity, in comparison to a 13.8% rate in 2001
• an increase of  22.1% in the expected annual increase in the cost and price of prescription drugs, compared with a previous 19.6%
• a 9.2% cost/price increase in Indemnity Dental, versus 7.1%
• a hike of 8.2% in PPO Dental, in comparison to the 2001 rate of 7.2%

According to Anderson, despite HMO plans being somewhat less expensive than the alternatives, the acceleration of the HMO trend may point towards the increasing inability of the HMO model to continue to generate incremental savings over alternative plans.

Methodology

The survey analyzed 36 insurance companies and managed care organizations to determine what health care trend factors were prevalent in the marketplace for group insurance plans renewing on January 1, 2002.

– Camilla Klein                           editors@plansponsor.com