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Aug 25
2009

Increases in health-care costs will be sick next year

Posted by RedConn in John Goffhealth carebudgetbenefits

RedConn

A whole lot of folks out there have been demanding that Pres. Obama and Congress leave the U.S. health-care system as is. If they get their way, corporate benefits directors can expect more big bump-ups in the cost of providing health-care coverage to workers.

According to new research from The Segal Company, medical plan cost trends in 2010 will be more than four times greater than the annual increase in average hourly earnings. That spike will stand in sharp contrast to changes in the consumer price index for all urban consumers, which have been relatively flat or negative over the past 12 months.

Plan cost trend (which is based on forecasts from health-care providers, insurers, benefits managers, and third-party administrators) is a forecast of per-capita claim costs. The figure takes into account things like price inflation and utilization. Typically, there is a high correlation between the trend rate and costs assessed by carriers.

According to Segal, the cost trend for the average claim for a fee for service/indemnity plan (without prescription coverage) will rise by 13.3 percent next year. That cost trend will go up by 11.9 percent for high-deductible plans. The cost trend for preferred provider plans isn't much better: Segal expects it to go up by 10.8 percent.

Plan sponsors looking to HMOs to help hold down the costs of company-sponsored plans can forget it. Trend costs for HMOs are projected to increase 10 percent in 2010. And that will come on the heels of a 10 percent trend cost increase this year.

In an ominous sign for plan sponsors, Segal noted that projected trends for 2010 do not appear to have been affected by the prospect of national health-care reform. "This is in marked contrast to what happened during the Clinton Administration's unsuccessful attempt at national health-care reform, when projected trends decelerated dramatically."

Buckle up.

(To access the full study by The Segal Company, click here)

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