Benefits October 14, 2003

Aon: Health-Care Cost Hikes Soar By Double-Digits Into 2004

October 14, 2003 (PLANSPONSOR.com) - Even though lower than rates seen in 2003, the forecast for 2004's health-care rates shows the fifth year in a row of double-digit cost increases.
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Where in the past, it was common to see a big disparity among the rates of different health-care plans – particularly between PPO and Indemnity rates compared to HMO and POS rates – in 2004, increases varied little by plan type, according to Aon Consulting’s Fall 2003 Health Care Trend Survey. Overall, health plan rates, including prescription coverage, will increase:

  • 16.3% for Indemnity plans
  • 14.9% for PPOs
  • 14.8% for HMOs
  • 14.8% for POS.

Pharmacy plans are expected to be 15.3% higher in 2004 and, when prescription coverage in health-care plans is not included, very similar trends are forecast:

  • 15.5 % for Indemnity plans
  • 14.3% for PPOs
  • 14.0% for POS
  • 13.7% for HMOs.

These double-digit health care increases are approximately eight times the annual general inflation rate of 2.1% most recently reported by the Bureau of Labor Statistics. However, slightly lower are increases forecast for dental and vision plans:

  • 7.7% for PPO dental plans
  • 7.6% for Indemnity dental plans
  • 5.1% for DHMO plans
  • 3.4% for vision plans.

Good news comes in the form of lower medical plan trend rates when compared with Aon’s Spring 2003 survey (See Aon: Health Care Seeing Double-Digit Increase In 2004 ). Particularly down is the pharmacy trend rate that stood at 17.7% in the earlier report. This is primarily due to more consumer generic drug use and somewhat lower utilization of prescription drugs due to higher co-pays, Aon explained.

A complete copy of the report can be found at http://www.aon.com/about/publications/issues/2003_fall_survey.jsp.

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