Segal: Health Plan Costs Remain Above Inflation

September 19, 2007 ( - Medical and prescription drug trends are expected to decline further in 2008 according to the Segal Co., but health plan costs still hover above inflation.

Projected trend cost increases for point-of-service (POS) medical plans (including prescription drugs) for active employees and retirees under 65 have declined from a high of 14.9% in 2003 to 11% in 2007 and are projected to be 10.5% for 2008.

Health maintenance organization (HMOs) (including prescription drugs) rates were 11.7% in 2007 and are expected to drop to 10.7% in 2008. Medicare Advantage HMO plans have the lowest projected medical cost trend for 2008 at 8.8%.

Prescription drug price hikes for active workers and retirees were 11.9% in 2007 and are projected at 10.7% for next year. Prescription drug projected cost trends have declined dramatically, by nearly nine percentage points, since their high of 19.5% in 2003.

Dental rates are expected to go down for all types of plans. However, fixed-scheduled plans and dental maintenance organizations (DMOs) have the lowest forecasted rates: 4.3%.

The survey also looked at medical trends by service type. For example, price inflation per hospital admission is expected to increase by 7.7% in 2008 for open-access PPO plans and prescription drug price inflation is projected to be 6.5%, whereas price inflation for physician services is forecasted to be at 4%.

The survey found some regional variation in medical trend projections – ranging from a low of 9.4% in the Midwest to a high of 11.7% in the West.

For a full copy of the Segal report go here .