Segal Predicts Further Declines in Health Plan Cost Trends

August 29, 2006 ( - Segal Company's 10th annual Health Plan Cost Trend Survey forecasts a fourth consecutive year of declines in trends for 2007.

Despite declines, medical and prescription drug plan costs are expected to significantly outpace inflation and wage increases, according to the survey report. All medical plan types are forecasted to see cost increases for 2007 that are more than twice the increase in the Consumer Price Index for Urban Consumers (CPI-U) and the annual increase in real average weekly earnings.

Segal defines trend as the forecast change in health plans’ per-capita claims cost determined by insurance carriers, managed care organizations, and third party administrators.

Forcasted trends for preferred provider organizations (PPOs) and health maintenance organizations (HMOs) are 11.6% and 11.1%, respectively. The projected trend for high-deductible PPOs, however, is 12%.

Trends for prescription drug coverage are predicted to decrease for 2007 to levels close to trends for medical coverage. Prescription drug mail order trend rates are projected to decrease at least three percentage points for both active employees and retirees, the report said.

Other key findings of Segal’s survey include:

  • Projected trends for managed dental plans are expected to remain the same in 2007, while dental fee-for-service trends are expected in increase 7.5% – a half percentage point over 2006 increases.
  • For the first time in its survey Segal included vision plans, which are forecasted to have a trend of 5%.
  • For active participants and early retirees, prescription drug trends have declined by nearly 8% from a high of 19.7% in 2001. A10-year analysis of trend rates shows that prescription drug cost trends have declined by early 40% since 2003.
  • Medical indemnity plans continue to have the highest trend rate of all other medical plan types – forecasted at 13.7% for 2007.
  • Price inflation for service and supplies appears to be the biggest element of medical cost trend, as utilization rates increase at more moderate levels.

The survey report is here .