Tuesday, October 18, 2005

Actuaries Miss, Too...

No one likes rate increases (okay, no one who isn’t an insurance company employee likes rate increases). Sometimes, though, they’re inevitable and justified.
And sometimes they’re not:
According to The Segal Company, health care costs projected for 2004 were way off: actual costs were lower than expected, pretty much “across the board.” For example, PPO costs were projected to rise by almost 14%; they actually rose about 10% -- a difference of almost 30%.
HMO’s and POS (Point of Service) plans were presumed to rise by about 13% each, but only grew by 11.5%; not so great a disparity as with PPO’s, but significant nonetheless.
Interestingly, we seem to have hit a plateau of sorts. It’s important to remember that trending accounts for only part of the overall rate picture, there are other factors, as well. But it is notable that costs seem to be rising at a much lower rate than had been assumed. Some of this may be due to the increased presence of Consumer Driven Health Care (CDHC) plans, such as HRA and HSA.
Interestingly, in their 2006 Health Plan Cost Trend Survey, Segal notes that “2006 will mark the third consecutive year of lower projected trend rates for medical plans. Still, medical plan trend rates are three to four times the rate of general inflation.” And they also note that “trend rates for prescription drugs continue to moderate and are close to 1998 levels.
We’ve discussed the impact that prescription medication has on overall health care costs. According to the same Segal report, “trend rates for prescription drugs continue to moderate and are close to 1998 levels." This is good news, especially since the gummint is about to roll out its new Medicare Part D drug program (about which I’ll be posting later this week; stay tuned).
What I take away from this is that the health care market is not in such dire straits as the punditry would have us believe. It’s also heartening to think that the drive toward more consumer driven care may be having a bigger impact than previously believed.
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