June 2007

Study says healthcare cost increases remain high

Healthcare costs are expected to increase, on average, 11 percent in the next 12 months, according to Aon Consulting, the human capital consulting organization of Aon Corporation. While costs continue to rise at double-digit rates, the current trend rate has declined more than four percentage points since fall 2001, when the projection was 15.6 percent.

Aon Consulting surveyed more than 70 leading healthcare insurers (representing more than 100 million insured individuals) and found healthcare costs are projected to increase by 10.9 percent for HMOs, 10.8 percent for POS plans, 11.2 percent for PPOs, and 10.7 percent for CDH plans. This represents rates of increase lower than one year ago, when HMO cost increases were 12.2 percent, 11.9 percent for POS plans, 12.4 percent for PPOs, and 12.5 percent for CDH plans.

According to Bill Sharon, senior vice president with Aon Consulting and director of the study, there are a variety of reasons for the double-digit health care cost increases, including an increase in patient demand for healthcare services as the population ages; the rise of medical technology and hospital costs; an increase in price and utilization of prescription drugs; and poor lifestyle choices.

Healthcare rate increases for retirees older than age 65 are projected to be 11.2 percent for Medicare Supplement plans and 9.2 percent for Medicare Advantage plans..

For prescription drugs, general pharmacy costs are expected to increase by 9.5 percent, compared with 12.2 percent one year ago. Specialty drug costs will increase by 15.1 percent, down from 17 percent in spring 2006.

Aon Consulting conducts the Health Care Trends Survey every six months. The study is available to download at www.aon.com/us/busi/hc_consulting/hw_redirect.jsp.

Source: Aon Consulting, www.aon.com

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