The news on 2005 health premiums has been relatively good: Sure, they continued to rise, and much faster than inflation. But the hikes were smaller than in 2004 – Watson Wyatt reported a drop from 12 to 10 percent; Towers Perrin pegged this year’s average hike at 8 percent, a relief after five years of double-digit cost increases.
But health care spending growth isn’t slowing anymore, a new study in Health Affairs shows. After decelerating from an 11.3-percent rise in 2001 to 8.4 percent in 2003, the trend seems to have stabilized, the study says, with costs rising by 8.2 percent last year.
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To the extent that cost trends are the “dominant” factor in long-term premium trends, the study says, this means annual premium hikes probably won’t get any smaller.
But other factors complicate the picture, the study notes, such as a potential “soft patch” in the market that could lead to vigorous price competition among carriers, and changes in prescription drug use due to the loss of two Cox-2 inhibitors, the shift of Prilosec and Claritin to over-the-counter, and the impending expiration of key patents.
In addition, the study says, new incentives for health care consumers to use lower-cost providers or treatments could affect cost and premium trends. And information technology “could lower costs in the future,” though experts are divided on that issue, the study notes.
So what’s the bottom line? The study’s authors aren’t sure, but they’re not betting on employers getting much premium relief.
The forces driving health care spending are “varied,” they wrote, and they’re not all aligned to drive costs up or down. But it does seem “unlikely,” they added, that cost trends “will resume a sustained decline in the next year or two,” because medical technology continues to advance, further driving up spending.
What is clear, the study concludes, is that there’s still no “magic bullet,” and health care costs are continuing to grow faster than workers’ incomes, threatening to leave more uninsured. The “imperative” to control costs, the authors wrote, “remains as high as ever.”
The full text of the study, by Bradley Strunk and Paul Ginsburg, both of the Center for Studying Health System Change, and John Cookson, of Milliman Inc., is available online at www.healthaffairs.org.
