Holdin' Down the Costs

According to accounting/research biggie PriceWaterhouseCooper (PWC), the incredible acceleration of health care costs (and hence, insurance costs) is beginning to ease up. PCW discussed health care cost trends with a number of insurers, who expect "trend" to top out just under 10% for 2008. This is actually lower than the double-digit numbers we've seen the past few years.

[Graphic courtesy of Employee Benefit News]

It's important to remember that trend is not the same as rates. That is, how much higher health care is expected to be is but one factor in determining how much an insurer will charge. Lower trends have a positive impact on rates, of course, which is good. It also underscores our mantra here (originally and succinctly promulgated by Mike Feehan) that "health insurance costs increase because health care costs increase." Amen.

There's actually a lot of interesting information in the report; for example, carriers are expecting prescription drug costs to slow down a bit, an increase in EMR and other digital applications, and more widespread adoption of transparency tools. According to the report, prescription drug costs accounted for some 14% of all health care costs this past year, while physician charges represented the lion's share (35%).

I was pleased to see that HDHP rates are expected to rise much less (25% less, in fact) than more "traditional" HMO and PPO plans. That's good news, indeed. Of course, by shifting some of the costs of health care back to those who actually use it, it follows that there would be more careful utilization, resulting in lower health care expenditures (and cost). Kind of a win-win deal.

The report itself is pretty easy reading, and is available (in pdf form) here.