A Healthy Blog

Massachusetts health care — wonky, with a healthy dose of reality

This Is the Good News?

This Is the Good News?

August 9, 2005

Today's Wall Street Journal contains a rosy-toned article on how the rate of growth in health insurance costs are moderating. Here are some tidbits from "Insurers Expect Slowing Growth in Medical Costs":

"Major health insurers continue to see stable or slowing growth of medical costs, recent corporate earnings reports and forecasts show, and the slowing medical-cost trends are reaching employers. WellPoint Inc., Aetna Inc., UnitedHealth Group Inc., Humana Inc. and PacifiCare Health Systems Inc. have reported steady or moderating medical-cost trends in their commercial health plans.

"Generally, the companies are reporting slowing growth in pharmaceutical expenses, stable increases in physician costs, slightly moderating outpatient pricing expansion and flat hospital inpatient demand, according to J.P. Morgan analyst Scott Fidel. ... Employers, which have been passing on more expenses to workers, are seeing some health-cost pressure ease. In June human-resources consulting firm Hewitt Associates said U.S. health maintenance organization rates for 2006 are expected to rise at their most moderate pace nationally in more than five years.

"WellPoint, the largest U.S. managed-care company by membership, said medical-cost growth continued to slow in the second quarter. The company expects such costs to rise by less than 9% this year, about one percentage point better than in 2004.

"In reporting its second-quarter results, Aetna noted that it started the year forecasting commercial medical-cost growth of 8.5%. By the end of the first quarter, Aetna had lowered that view to a range of 8% to 8.5%. UnitedHealth Group expects its growth in medical costs to remain at 8% or lower with no meaningful increase for the rest of the year, and for 2006 to remain roughly in line with the 2005 range."

With inflation growing at about 2.5 percent and overall US economic growth rising at about 3.5 percent, that means health insurance costs are still rising two to three times faster than everything else. Last week, the Boston Globe reported that premium increases for Massachusetts based health plans will rise between 8 and 12 percent in the coming year, the sixth year in a row of double digit increases.

Generally, in decent economic times like these, we see premium increases tend to moderate much more than we're seeing now. Something's amiss -- who's paying attention, and who has any constructive ideas?