Little change in overall rate of medical and pharmacy cost increases

Pharmacy and medical cost increases for health plans have been relatively steady, according to data collected by Towers Perrin from 2006 through 2008, with the costs associated with account-based health plans (CDHP with HRA or HSA) mirroring traditional health plans, despite their growing presence.

Overall, the top 10 percent of companies (by rate of increase) reported a rate of increase of at least 15 percent in 2008 health care costs over the prior year, while the bottom 10 percent reported a reduction in 2008 health care costs over the prior year.

Mark Olson, a health care actuary and principal at Towers Perrin, says “Even though the medical and pharmacy costs have been in the high single-digit range, the increases are still outpacing inflation and it’s still creating problems for plan sponsors and health plans that are negotiating rate increases.

“For the last couple of years, costs have been in the 6 percent to 8 percent range on average,” he continues. “The variations have been broad, but we’re seeing a lot more account-based plans being implemented.”

He points out that in 2008, half of all plans experienced a 6 percent increase, but only 10 percent experienced a 1 percent decrease.

Range of increases in medical and pharmacy costs by plan type, 2006-2008

Source: Towers Perrin. 2008 Health Care Cost Survey.

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