Slowdown in premium increase expected to continue into 2007

Don’t look now but the only thing falling in terms of health care costs seems to be the rate of increase of premiums — good news for employers and other purchasers.

Preliminary results from the 2006 Group Health Insurance Survey indicate the lowest average premium increase in seven years. In fact, this is the fourth year in a row in which the rate of premium increase has declined. The 2007 estimated January renewal increase of 9.7 percent for HMOs is 0.9 percentage point lower than last year’s survey result of 10.6 percentage points. This is down nearly 6 percentage points from four years ago, according to the preliminary results published by Milliman, the health care consulting company. In 2007, it is anticipated that PPOs will show an average renewal rate increase of 10.7 percent or 1.0 percentage points lower than last year.

“We expect to see in the 2006 survey a continuing shift towards consumer-driven health care products,” says Doug Proebsting, co-author of this year’s survey. The 2005 survey indicated that insurers were offering products with high deductibles and employee health savings accounts in nearly all employer markets. “As costs escalate, employers, through education, cost sharing, and spending accounts, are looking to engage employees to help reduce costs,” Proebsting adds.

The survey was sent to the nation’s HMOs and fully-insured PPOs that serve the commercial large- and mid-group employer market. Final results will be available in October and will include premium rates and trends, physician payment levels, medical expense ratios, and profit levels.

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Source: Milliman Group Health Insurance Survey