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2011 Health Plan Cost Trend Projected to Outpace Inflation Again

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According to the 2011 Segal Health Plan Cost Trend Survey, prescription drug cost and medical cost trends are yet again expected to denote a considerable increase over core inflation. "Trend" is a forecast of per capita claims cost that takes factors such as price, utilization, new treatments, government-mandated benefits, and inflation into account. Segal's survey used insurance carriers, pharmacy benefit managers, third party administrators, and managed care organizations to project a year to year change in the per capita cost of health plans - cost trend.

This is the 14th annual Health Plan Cost Trend Survey by The Segal Company, an independent firm of compensation, benefit, and human resource consultants. According to the Segal survey data, all types of 2011 medial plans will experience cost trends eight times greater than the CPI (consumer price index) for urban consumers, which was 1.1% during a 12-month period ending in August of 2010.ff by running vehicles and cooking and heating equipment.

2008 was the bottom of several years of declining trends, with 2009 marking the return of an upward cost trend rate direction. One new component of the health plan cost trend is compliance with The Affordable Care Act. The Segal survey found that over 75% of the participants said that health care reform would increase the overall health plan cost trend by over 1%.

More Key Findings of the Segal Health Plan Cost Trend Survey
* Cost trend rates for HDHP's (high-deductible plans) and indemnity plans, when compared to 2010 data, are forecasted to grow slower in 2011.
* The biggest element of the overall plan cost trend is price inflation for supplies and services, with in-patient stays in a hospital being of greatest note.
* Compared to 2010, the trend rates for point of service plans and preferred-provider organizations in 2011 will be somewhat higher.
* Over the last three years, trend projections for prescription drugs have consistently been below 10%.

Cost Control

The Segal survey also addressed how plan sponsors plan to mitigate the increase with cost-management steps and strategies:
* Use of designs that drive lower net prescription drug costs by generating greater generic drug usage, waste elimination, and taking advantage of step therapy programs.
* Reasonable cost payment increases by spotlighting aggressive network hospital dialogue.
* Reduce emergency room visits; reduce excessive use of MRI and CT scans; and better use of low-intensity health care providers, such as a nurse practitioner or primary care provider, by putting smarter design rules into practice.
* Move away from contracts that are fee-for-service by investment in controlled wellness and preventive services and on-site clinics.
* Create meaningful incentives and needed support services, to assist participants in engaging in healthy behaviors and improve overall health status, and determine key cost drivers by mining medical data.

According to Segal, comparing the actual increases to past projections on health plan cost is indicative of pharmacy benefit managers and insurers tending to make conservative projections, as forecasts have previously tended to be higher than what was actually experienced. However, past projections also show that forecasters are growing more accurate in health plan cost projection.

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