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Health Plans Expect 8.4% Increase in Premiums for 2006

October 7, 2005

Philadelphia. October 7, 2005. Health plans nationwide report that premium rate increases in 2006 will be 8.4%, 0.9 percentage points lower than last year. Before buy-downs, premium rate increases are expected to be 11.1% down from 11.3% last year. We estimate that the difference between before and after buy-down rate increases implies a 21.2% increase in employee contribution for 2006.

Plans report that they expect a 0.2 percentage point increase in the proportion of premiums to be spent on health benefits. We estimate that this corresponds to a medical trend of 8.7% on average.

Previous Sherlock Company surveys have proven reliable. Last yearís projection of 9.3% corresponded to Kaiser Family Foundationís recently released poll of actual increases of 9.2%, and United Benefit Advisorís of 9.6%.

The Mid-Atlantic region, including New York and Philadelphia, had the highest rate of increase in premiums and medical trends. The East North Central region, including Chicago, Milwaukee, Detroit, Cleveland and Cincinnati showed among the lowest trends.

Sherlock Companyís eleventh annual health plan pricing survey comprises the results of 80 health plans, representing 24.4% of 328. Results were for all forms of insured products.

Additional details are available on our website or by contacting us at:

Douglas B. Sherlock, CFA
Sherlock Company

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