Buck Consultants Survey: 2007 Health Care Costs Will Continue to Outpace Inflation

Costs for the most popular types of health care coverage are projected to increase at double-digit rates in 2007, according to a national survey of insurers and administrators. The survey released today by Buck Consultants, an ACS company and one of the worldís leading human resource and benefits consulting firms, analyzed responses of more than 70 health insurers, HMOs and third-party administrators.

In its 17th National Health Care Trend Survey, Buck Consultants measured the projected average annual increase in employer-provided health care benefit costs. Insurers providing medical trends for the survey cover a total of approximately 50 million people.

As the data below indicates, costs for the most popular plans continue to increase by more than 10%, similar to trends reported in Buckís previous survey, conducted in July 2006.

Type of Plan: Preferred Provider Organization (PPO)
17th Survey: 10.6%
16th Survey: 10.9%
Difference -0.3%

Type of Plan: Point-of-service (POS)
17th Survey: 10.6%
16th Survey: 10.8%
Difference -0.2%

Type of Plan: Health Maintenance Organization (HMO)
17th Survey: 11.1%
16th Survey: 10.8%
Difference 0.3%

Type of Plan: High Deductible Consumer Driven
17th Survey: 11.1%
16th Survey: 11.0%
Difference 0.1%

Health insurers reported an average prescription drug trend of 11.3%, down .1% from 11.4% reported in the prior survey. This is considerably higher than the 5.2% reported by pharmacy benefit managers (who generally do not take any underwriting risk).

ìEmployers need to consider all available strategies for controlling their health care costs,î said Harvey Sobel, FSA, a Buck Principal and Consulting Actuary who directed the survey. ìMany of our clients have had success through consumer driven health care plans, care management programs, and vendor audits and management.î

Health insurers use trend factors by coverage ó such as medical, prescription drugs, dental, and vision care ó to calculate their premium rates, and large self-funded employers use these trend factors to budget their future health care costs. In general, trend factors provide for price increases that may result from such variables as inflation, utilization of services, technology, changes in the mix of services, and mandated benefits.

Trend factors for Medicare supplement, dental, and vision coverage are also included in Buckís survey.