October 18, 2004
Philadelphia. October 18, 2004. Health plans report that premium rate increases, before the effects of buy-downs, are expected to be 11.3% in 2005, well below last year’s increase of 12.8%. Plans reported an expected increase in their health benefits ratios of 0.6 percentage points, the second consecutive year of projected increases. The average expected buy-down spread of 2.1% was the same as last year.
From the reported changes in their expected health benefit ratios, we infer an expectation of a 10.0% increase in per member payments for medical care in 2005. Nationwide, the increase in employee contribution is calculated to be 18.2%, nearly double the increase in employer contribution of 9.3%, after the effect of buy-downs.
Results varied regionally. Health plans in the Northeast region are expecting the greatest health cost increases at 11.5%, while plans from the Mountain region are expecting the lowest increases at 6.5%. Plans in the Mid-Atlantic expect the highest price increases both before buy-downs at 14.1% and after buy-downs at 11.7%. Before buy-downs, plans from the West South Central region are expecting the lowest increases at 9.1%. Plans from the East South Central region are expecting the lowest increase after buy-downs at 5.9%.
Plans from the Mid-Atlantic are expecting the greatest increase in employee contribution, at 22.2%, while Northeast plans are expecting the lowest, at 13.8%. East South Central health plans expect the greatest buy-down spread at 3.3%, while Northeast plans expect the lowest buy-down spread at 0.8%.
Sherlock Company’s tenth annual health plan pricing survey summarizes the intended price increases of health plans for 2005, both before and after the effect of changes in benefit design, such as the scope of benefits or co-payments. The response rate for this year’s survey was 22.5%, or 80 of 355 health plans. This was higher than last year’s response rate of 17.0% and nearly as high as the 22.8% response rate for 2003.
Additional information concerning the Tenth Annual Health Plan Pricing Survey is available from Sherlock Company. Sherlock Company provides benchmarking data and analysis for the management of administrative functions, performs valuation and due diligence for business combinations and other capital market services and offers financial research publications concerning health plans.