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Double-Digit Health Care Cost Increases Continue in 2011, Says Aon Consulting
Cost increases drive employers to consider new health care benefit strategies

CHICAGO, Sept. 14 /PRNewswire-FirstCall/ -- Medical plan costs are forecasted to increase at double-digit rates in the next 12 months(1). Employers must evaluate their health care benefit strategies, preparing for increases in 2011 and after health care reform provisions are implemented.  Today, Aon Consulting, the global benefits and human capital solutions business of Aon Corporation (NYSE: AON), released its summer 2010 Health Care Trend Survey.

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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 10.5 percent for HMOs, 10.6 percent for POS plans, 10.7 percent for PPOs and 11 percent for CDH plans.  These findings are slightly higher than a year ago when HMO increases were 10.4 percent, POS plans were at 10.4 percent, PPO increases were 10.7 percent and CDH plan increases were at 10.5 percent.

During the next 12 months, the prescription drug cost trend is expected to be 8.4 percent, compared to 9.3 percent in the spring of 2009. The specialty pharmacy trend rate is projected to be 14 percent, versus 13.2 percent a year ago.

Meanwhile, health care rates for retirees over the age of 65 are projected to be 7.5 percent for Medicare Supplement plans and 6.7 percent for Medicare Advantage plans.  These are up from 6.6 percent and down from 7.3 percent, respectively, from the spring of 2009.

Aon Consulting says the health care reform law is expected to add 2 percent to 5 percent to the medical trend over the next three years.  Additional costs will become apparent as health carriers pass along costs from additional regulation and excise taxes.  In addition, providers subject to reductions in Medicare reimbursement may try to shift costs to the employer-based system.

"As employers start to fully understand the long-term cost impact of health reform, many are looking to redesign their health plans," said John Zern, Aon Consulting's U.S. Health & Benefits practice director.  "Strong employee wellness and prevention programs, along with institutionalized best practices in care delivery, are key components to a successful redesign."

A change that organizations can make to combat rising costs is to develop a comprehensive organization-wide wellness program.  In 2011, smaller employers will be eligible for grants to help initiate wellness programs.  In 2014, employers will be allowed to reward employees up to 30 percent of the cost of coverage for participating in a program.  Current wellness regulations call for up to 20 percent.

Dr. Paul Berger, U.S. Health & Benefits Chief Medical Officer with Aon Consulting, added: "Investments in well-designed health management and wellness programs can create a healthier and more engaged employee.  Long term, employers are likely to see a decrease in chronic diseases and an increase in employee productivity with reduced absence.  Comprehensive wellness and health management programs also can be an important factor in the recruitment and retention of employees."

In addition to implementing wellness programs, employers will likely increase deductibles, co-pays, out-of-pocket maximums and employee contributions.  They will implement consumer driven health plans as well.

The following table summarizes the Aon Consulting Health Care Trend Survey results from 2003 – current. Additional graphics are available upon request.




Spring 2003

Spring 2004

Spring 2005

Spring 2006

Spring 2007

Spring 2008

Spring 2009

Summer 2010

Medical -- Actives & Retirees <65 (with Rx)










HMO


16.40%

14.10%

13.20%

12.20%

10.90%

10.60%

10.40%

10.50%

POS


16.10%

14.10%

13.00%

11.90%

10.80%

10.50%

10.40%

10.60%

PPO


15.70%

14.20%

13.00%

12.40%

11.20%

10.70%

10.70%

10.70%

Indemnity


17.20%

15.30%

14.60%

14.40%

12.70%

12.40%

11.90%

12.40%

CDH



14.10%

12.70%

12.50%

10.70%

10.50%

10.50%

11.00%

Medical -- Actives & Retirees <65 (without Rx)










HMO


14.70%

13.40%

12.90%

12.00%

11.00%

10.80%

10.50%

10.80%

POS


14.50%

13.50%

12.70%

11.80%

10.90%

10.50%

10.50%

10.90%

PPO


14.40%

13.50%

12.70%

12.30%

11.30%

10.90%

11.00%

10.90%

Indemnity


16.40%

14.70%

14.60%

14.40%

13.10%

12.60%

12.40%

12.80%

CDH



13.30%

12.40%

12.30%

10.70%

10.30%

10.40%

11.10%

Medical - Retirees Age 65+ (with Rx)










Medicare Supplement





11.50%

11.20%

7.30%

6.60%

7.50%

Medicare Advantage





10.20%

9.20%

7.70%

7.30%

6.70%

Medical - Retirees Age 65+ (without Rx) 










Medicare Supplement





9.90%

9.00%

7.30%

6.60%

7.80%

Medicare Advantage





8.00%

8.00%

7.00%

7.00%

6.30%

Dental 










DHMO


4.80%

5.00%

4.70%

4.80%

4.50%

4.20%

4.10%

4.20%

PPO


7.60%

7.30%

7.10%

6.70%

6.10%

6.30%

5.90%

6.00%

Indemnity


7.60%

7.70%

7.60%

7.10%

7.00%

7.00%

6.50%

6.80%

Pharmacy 










General


17.70%

14.40%

13.10%

12.20%

9.50%

9.40%

9.30%

8.40%

Specialty





17.00%

15.10%

12.40%

13.20%

14.00%

Vision












3.80%

3.90%

3.90%

3.60%

3.10%

3.10%

2.90%

2.90%




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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 more than 6,300 professionals in 229 offices worldwide. The firm 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, 2008 and 2009. For more information on Aon Consulting, please visit http://www.aon.com/human-capital-consulting/default.jsp.

About Aon

Aon Corporation (NYSE: AON) is a leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 36,000 colleagues worldwide, Aon 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, 2009 and 2010 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 and 2009. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007, 2008 and 2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and http://www.aon.com/unitedin2010 to learn about Aon's global partnership and shirt sponsorship with Manchester United.

(1) This survey forecasts the health care trend rates for the 12-month rating periods beginning between July 2010 and December 2010.

Media Contact:


Joe Micucci

Cybil Rose

312.381.4786

312.755.3537

Joe.Micucci@aon.com

cybil.rose@kemperlesnik.com



SOURCE Aon Corporation



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