Insurance costs set to increase 10 percent

By | Tuesday, August 12, 2008

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ASSOCIATED PRESS

Health care costs are expected to rise more than 10 percent into next year, according to a survey of insurers by Aon Consulting Worldwide.

But that increase is the smallest that Aon has seen in six years. Experts say it shows that efforts to tame costs, such as employee wellness or disease-management programs, may be paying off.

"There's a variety of tactics that employers have been employing over the last three to six years that has had an impact on the market," said study director Bill Sharon, an Aon Consulting senior vice president.

Aon Consulting surveyed about 70 health insurers across the country, including companies such as Aetna Inc. and Cigna Corp. It found that actuaries expect costs to rise an average of 10.6 percent during 12-month rating periods starting this year between April and September.

That represents a slight drop from last year's forecast of 10.9 percent and a bigger fall from 2002, when health care costs were expected to rise by more than 16 percent.

But the percentage likely won't be what the average employee faces for a premium hike next year. It doesn't reflect insurance plan designs or changes an employer might make to benefits plans.

"Pretty much every employer has to do something or is doing something in an effort to bring that number down," Mr. Sharon said.

He said actual cost increases have wound up being three to four percentage points lower than preliminary estimates in the past couple of years. Still, he said Aon Consulting's survey gives employers a benchmark to use as they consider premium renewals.

Many employers have started researching their benefit options for 2009. Consultants say it's too early for predictions on next year's health care plan costs.

But Ken Ambos of Equity Risk Partners Inc. said midsize employers could see a cost increase of roughly 9 percent to 12 percent that they pare down to 6 percent to 9 percent. Equity Risk Partners is a risk-management and employee-benefits consulting firm.

Costs are still rising to keep up with growing patient demand for services, the needs of an aging population and prescription-drug and technology costs, according to Aon Consulting, a subsidiary of Aon Corp.

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