Employers should brace for more double-digit increases in their health insurance costs in 2010, according to surveys from two benefit consulting firms.

Based on feedback from health insurers, managed care organizations, PBMs and TPAs, Aon Consulting and The Segal Company are projecting that health benefit costs will be between 10.4% and 11.9% higher next year, depending on the type of plan.

"While we're seeing a slight decrease in the trend rates, it's still at double digits," says John Zern, Aon's U.S. health & benefits practice leader. "This year it's compounded by a struggling economy, lower wage increases and, in some cases, salary freezes." 

Aon's survey of 60 health care insurers indicates that the cost of PPO/POS plans will increase 10.4% to10.7%, while Segal’s poll of 80 health insurers, managed care organizations, PBMs and TPAs shows a 10.6% to10.8% increase for these types of plans. Similar hikes are in store for HMOs; Aon expects a 10.4% hike and Segal predicts 10.2%.

The biggest difference between the two surveys is in the projected cost increases for consumer-driven, or high-deductible, health plans. Aon anticipates a 10.5% increase for CDH plans and Segal forecasts an 11.9% jump.

Both companies' results are equal to or within two-tenths of a point from their respective 2009 projections, with the exception of Segal's HMO projection, which increased by 1.1% from 10.8% in 2009.

Prescription drug cost increases are expected to remain within the 9% range. For 2010, Aon expects the costs will rise 9.3%; Segal predicts a 9.1% increase.

Cost-containment strategies

In response to health costs’ unrelenting pace, plan sponsors are accelerating their utilization of wellness and disease management programs, changing value-based plan designs, eligibility audits, and seeking more competitive vendor terms through bids and other innovative strategies all in an effort to curb rising health care costs, Segal reports.

"More plan sponsors are offering financial incentives to employees that are linked to changes in health status, as opposed to just participation in programs,” says Eileen Flick, VP of Segal's Health Technology Services. “An example is premium reduction tied to weight loss. Also, in order to put teeth into their programs, some plan sponsors are seeking out vendors with innovative contract terms and putting in caps on trends, for example, a major plan sponsor has recently included a shared savings agreement with its PBM to encourage the greater use of generic drugs." 

More findings from the 2010 Segal Health Plan Cost Trend Survey include:

• Inpatient hospital claim trend rates are expected to blow past both prescription drug and physician services claim trends in 2010.
• Regional trend rates varied for preferred provider organizations and point-of-service plans combined. The Midwest can expect the lowest trend rates (9.5%) and the Northeast can expect the highest (10.9%).
• Prescription drug trends will remain under 10% for the second consecutive year and continue to drop from their 2001 high of 19.7%. To mitigate this trend, employers have upped utilization of programs designed to monitor and ensure appropriate prescription drug utilization.
• As reported for both 2008 and 2009, price inflation for services and supplies continues to be the overshadowing element of overall medical plan trend in 2010. Trends in utilization rates are forecasted to increase compared to 2009 for both hospital and physician services. Utilization will represent the largest component of trend for physician services.