2006 Segal Health Plan Cost Trend Survey

Abstract

The 2006 Segal Health Plan Cost Trend Survey - The Segal Company's ninth annual survey of managed care organizations (MCOs), health insurers, pharmacy benefit managers (PBMs) and third party administrators (TPAs) - forecasts continued declines in trends in 2006 compared to 2005 for almost every coverage surveyed. Trends for prescription drug coverage are projected to decelerate most significantly in 2006 to levels that are closer to medical coverage.

Notable survey findings include:

  • Plan sponsors that provide preferred provider organizations (PPOs), point-of-service (POS) plans or health maintenance organizations (HMOs) are expected to experience costs increases of around 12 percent in 2006.
  • 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.
  • The trend rates for prescription drugs continue to moderate and are close to 1998 levels. Prescription drugs trends have declined by about 6 percentage points, after peaking at 19.7 percent in 2001.
  • In lockstep with declining medical plan trend rates, the trend rates for hospital and physician services are expected to fall across the board, except for trend rates for physician services in the HMO environment, which are projected to remain at the same level in 2006 as 2005 projections: 10.2 percent.

The following tables summarize 2006 trend projections:

Medical Plans (Actives and Retirees Under Age 65) (without Rx) (with Rx)*
Indemnity Plans 14.4% 14.3%
PPOs 12.4% 12.7%
POS Plans 11.8% 12.2%
HMOs 11.6% 12.0%
High Deductible PPOs** 12.6% 12.8%

 

Medical Plans (Retirees Age 65 and Older) (without Rx) (with Rx)*
Medicare Supplemental Indemnity Plans 9.5% 11.2%
Medicare Advantage (MA) Plans*** 8.8% 10.7%

 

Prescription Drug
Carve-Out		 Actives and Retirees Under Age 65 Retirees Age 65 and Older
Retail 13.8% 14.2%
Mail Order 14.5% 14.3%

 

Dental Plans
Indemnity Plans 7.0%
Dental Provider Organizations (DPOs) 6.3%
Dental Maintenance Organizations (DMOs) 5.2%

 

* Trend projections were derived by proportionally blending medical trends and freestanding prescription drug trends.
** High-deductible plans are defined as those with a minimum deductible of $1,000.
*** The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 changed the official name of Medicare managed plans from "Medicare + Choice" plans to "Medicare Advantage" (MA) plans.

Projections in the 2006 Segal Health Plan Cost Trend Survey were obtained from a survey of managed care organizations (MCOs), health insurers, pharmacy benefit managers (PBMs) and third party administrators (TPAs). To assess the accuracy of projections, Segal compared the average 2004 trend forecasts by national and regional insurers, MCOs, PBMs and TPAs for group medical, prescription drug benefit and dental plans to the actual average trend rates experienced by the health plans covered by those underwriters for the same 12-month period. In addition to presenting data and analyses, the 2006 Segal Health Plan Cost Trend Survey also offers conclusions and advice based on the survey results.

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