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Health benefit costs to moderate in 2008: Study


The rate of increase in employee health benefit costs should return to single digits next year, according to a report released this week by PricewaterhouseCoopers L.L.P.

Private insurers expect 2008 medical costs to increase an average 9.9% for preferred provider organizations and health maintenance organizations and 7.4% for consumer-driven health plans, according to PwC. This compares with increases of 11.9% for PPOs, 11.8% for HMOs and 10.7% for CDHPs this year.

The report, "Behind the Numbers: Healthcare Cost Trends for 2008," identified four major trends slowing the growth in health care costs: slower spending growth for prescription drugs, increased transparency and cost-sharing with employees, total health management approaches such as wellness programs and greater use of technology in the health care delivery system.

The PwC study found that prescription drug spending is decelerating because fewer blockbuster drugs are being introduced while others are going off patent; some drugs are transitioning to over-the-counter status; and acceptance of tiered formularies, which is driving an increase in generic usage.

Increased transparency and cost-sharing triggered by the introduction of CDHPs also is having a positive impact on medical trends, even though only about 4% of the commercially insured U.S. population is enrolled in such plans, according to the report.

Wellness programs also are helping to hammer down cost increases by encouraging employees to lead healthier lifestyles and undergo preventive screenings, leading to fewer medical claims and lower medical costs, PwC found.

Increasing use of health care technologies such as electronic medical records, wireless systems, imaging software and biometric devices are helping providers to coordinate and improve care, decrease duplication and reduce costs, PwC found.

The report's findings were derived from a survey of the nation's five largest health insurers that collectively represent more than 30 million members, as well as proprietary research and analysis of publicly available reports and government data. The report is available online at