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Health Plans Expect 15.2% Increase in Premiums for 2003

October 7, 2002

Health plans report that premium rate increases are expected to be 15.2% in 2003, narrowly below last year's record setting pace of 15.6%. Results from publicly traded multi-state health plans corroborate these results, expecting premium rate increases of 16.5% on average.

From their reported changes in their expected health benefit ratios, we infer an expectation of a 14.0% increase in per member payments for medical care in 2003. This increase in medical costs represents the highest level of medical cost inflation since we began conducting our survey.

Results varied regionally. Health plans in the Pacific region are expecting the greatest health cost increases, while health plans in the West South Central region expect the largest price increases.

Sherlock Company's eighth annual health plan pricing survey summarizes the intended price increases of health plans for 2003, before the effect of changes in benefit design, such as the scope of benefits or the copayments. This survey summarizes the results of 22.8% of the health plans available and relevant to commercial premium rate increases: Including the supplemental information concerning certain multi-state health plans, this analysis compiles the results of approximately 41.4% of all commercial health plans available to respond.

Additional information concerning the Eighth Annual Health Plan Pricing Survey is available from Sherlock Company.

Douglas B. Sherlock, CFA
Sherlock Company

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