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Employers Face 10.5 Percent Health Care Cost Increases, Says Aon Consulting

Increases consistent with a year ago, but sluggish economy creates worse situation for many employers and employees

PRNewswire
CHICAGO
(NYSE:AOC)
Aug 25, 2009

CHICAGO, Aug. 25 /PRNewswire-FirstCall/ -- Health care costs are expected to increase on average 10.5 percent in the next 12 months,(1) according to Aon Consulting, the global human capital consulting organization of Aon Corporation (NYSE: AOC).

(Logo: http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO)

Aon Consulting surveyed more than 60 leading health care insurers, representing more than 100 million insured individuals, and found that health care costs are projected to increase by 10.4 percent for HMOs, 10.4 percent for POS plans, 10.7 percent for PPOs and 10.5 percent for CDH plans. These are slightly lower than one year ago, when HMO cost increases were 10.6 percent and POS plans were 10.5 percent. PPOs and CDH plans remain steady at 10.7 percent and 10.5 percent, respectively. (See below for trend data from Aon Consulting's prior health care surveys.)

"Aon Consulting conducts a health care trend survey twice a year to forecast the expected future increase in employer-provided health plan claims cost, before any plan changes, based on input from leading health plan actuaries," said John Zern, Aon Consulting's U.S. Health & Benefits Practice director. "This data helps employers evaluate the competitiveness of health insurance premium renewals. For employers with self-funded health plans, it helps in developing future claim estimates for budgeting purposes.

"While we're seeing a slight decrease in the trend rates, it's still at double digits, and this year, it's compounded by a struggling economy, lower wage increases, and in some cases, salary freezes."

Aon Consulting's U.S. Health & Benefits Chief Medical Officer, Dr. Paul Berger, acknowledges there has been progress in lowering the medical trend rate during the last several years, but emphasizes there's still significant work to be done. He suggests wellness and health promotion initiatives are critical in the next phase of lowering the medical trend rate.

"Approximately 30 percent of workers have chronic medical conditions, which account for 65 percent of this nation's medical spend," said Berger. "Wellness programs provide a strong platform for effectively managing chronic conditions and preventing future problems, but it's up to the individual to take advantage of the programs offered. Behavior change is never easy, but those willing to make changes in this capacity benefit from better health and lower health care costs."

Prescription drug costs are expected to increase 9.3 percent, which is slightly lower than the 9.4 percent trend rate one year ago. The specialty pharmacy trend rate is 13.2 percent, up from 12.4 percent one year ago. Aon Consulting points to the sluggish rate of drug adoption across the board, compounded by the FDA's reduced rate of drug approvals - especially for new molecular entities and biologic products - as the contributing factors leading to this decline.

In addition, health care rate increases for retirees over the age of 65 are projected to be 6.6 percent for Medicare Supplement plans and 7.3 percent for Medicare Advantage plans, down from 7.3 percent and 7.7 percent, respectively, one year ago.

To learn more about this Health Care Trends Survey, please visit http://insight.aon.com/?elqPURLPage=4355.

About Aon Consulting's Health & Benefits Practice

Aon Consulting's Health & Benefits Practice is a global leader, with one of the largest wholly owned networks of worldwide offices of any consulting firm. To learn more about Aon Consulting's health care reform initiatives, please visit http://www.aon.com/healthcarereform.

About Aon Consulting

Aon Consulting is among the top global human capital consulting firms, with 2008 revenues of $1.358 billion and more than 6,300 professionals in 229 offices worldwide. Aon Consulting works with organizations to improve business performance and shape the workplace of the future through employee benefits, talent management and rewards strategies and solutions. Aon Consulting was named the best employee benefit consulting firm by the readers of Business Insurance magazine in 2006, 2007 and 2008. For more information on Aon, please visit www.aon.mediaroom.com.

About Aon

Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 37,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world's best broker by Euromoney magazine's 2008 and 2009 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007 and 2008, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007 and 2008 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com/.

(1) This survey forecasts the health care trend rates for the 12-month rating periods between April 2009 and September 2009.

    Media Contact:
    Sara Carlson                             Tiffany Greco
    312-381-5045                             312.755.3549
    sara_carlson@aon.com                     tiffany.greco@kemperlesnik.com

The following table summarizes the Aon Consulting Health Care Trends Survey results from 2002 - current:


                                             Spring    Spring   Spring  Spring
                                              2002      2003     2004    2005

    Medical - Actives & Retirees <65 (with Rx)

    HMO                                       16.2%    16.4%    14.1%    13.2%
    POS                                       16.0%    16.1%    14.1%    13.0%
    PPO                                       16.0%    15.7%    14.2%    13.0%
    Indemnity                                 18.3%    17.2%    15.3%    14.6%
    CDH                                                         14.1%    12.7%

    Medical - Actives & Retirees <65 (without Rx)

    HMO                                       14.6%    14.7%    13.4%    12.9%
    POS                                       14.5%    14.5%    13.5%    12.7%
    PPO                                       14.6%    14.4%    13.5%    12.7%
    Indemnity                                 17.1%    16.4%    14.7%    14.6%
    CDH                                                         13.3%    12.4%

    Medical - Retirees Age 65+ (with Rx)

    Medicare
    Supplement
    Medicare
    Advantage

    Medical - Retirees Age 65+ (without Rx)

    Medicare
    Supplement
    Medicare
    Advantage

    Dental

    DHMO                                       4.4%     4.8%     5.0%     4.7%
    PPO                                        7.6%     7.6%     7.3%     7.1%
    Indemnity                                  8.4%     7.6%     7.7%     7.6%

    Pharmacy

    General                                   17.8%    17.7%    14.4%    13.1%
    Specialty                                                            22.5%

    Vision
                                               3.2%     3.8%     3.9%     3.9%


                                             Spring    Spring   Spring  Spring
                                              2006      2007     2008    2009

    Medical - Actives & Retirees <65 (with Rx)

    HMO                                       12.2%    10.9%    10.6%    10.4%
    POS                                       11.9%    10.8%    10.5%    10.4%
    PPO                                       12.4%    11.2%    10.7%    10.7%
    Indemnity                                 14.4%    12.7%    12.4%    11.9%
    CDH                                       12.5%    10.7%    10.5%    10.5%

    Medical - Actives & Retirees <65 (without Rx)

    HMO                                       12.0%    11.0%    10.8%    10.5%
    POS                                       11.8%    10.9%    10.5%    10.5%
    PPO                                       12.3%    11.3%    10.9%    11.0%
    Indemnity                                 14.4%    13.1%    12.6%    12.4%
    CDH                                       12.3%    10.7%    10.3%    10.4%

    Medical - Retirees Age 65+ (with Rx)

    Medicare
    Supplement                                11.5%    11.2%     7.3%     6.6%
    Medicare
    Advantage                                 10.2%     9.2%     7.7%     7.3%

    Medical - Retirees Age 65+ (without Rx)
    Medicare
    Supplement
                                               9.9%     9.0%     7.3%     6.6%

    Medicare Advantage
                                               8.0%     8.0%     7.0%     7.0%
    Dental

    DHMO                                       4.8%     4.5%     4.2%     4.1%
    PPO                                        6.7%     6.1%     6.3%     5.9%
    Indemnity                                  7.1%     7.1%     7.0%     6.5%

    Pharmacy

    General                                   12.2%     9.5%     9.4%     9.3%
    Specialty                                 17.0%    15.1%    12.4%    13.2%

    Vision
                                               3.6%     3.1%     3.1%     2.9%

SOURCE Aon Corporation

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http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com

SOURCE: Aon Corporation

Web site: http://www.aon.com/



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