Talk about bad timing. As the nation debates how to pay for healthcare reform, an annual a semi-annual survey from benefits consultant Buck Consultants (New York) finds that costs for the most popular types of health insurance are expected to increase at double-digit rates through the remainder of 2009 and into 2010 before benefit buydowns.
Even worse, Buck actuary Harvey Sobel adds, “There are signs that we’re going into another cycle of high trends,” with health insurers possibly raising rates in light of the economic downturn, Cobra expansion, mental health parity legislation and potential healthcare reform.
According to Buck, costs before benefit buydowns for 2009-10 are expected to rise 11% for PPOs, 10.2% for POS plans, 11% for HMOs and 10.4% for high-deductible health plans. Buck, an ACS company, has published its National Health Care Trend Survey for 20 years a decade; this year’s most recent survey is based on responses from 100 health insurers and administrators.
Assuming Buck is correct and assuming we’re in for a period of post-credit-crisis stagnant GDP growth, the figures would point to near-term widening excess cost growth in healthcare (i.e., the spread between how much faster healthcare costs are increasing compared to the overall economy; see prior post).
For example, healthcare costs have risen at a compounded annual rate of about 6.4% since 1970. GDP, meanwhile, has risen about 3% annually over the same time frame. That would be 300 basis points of excess cost growth in healthcare.
We can debate the percentage of GDP that healthcare will and should make up in the years ahead. What’s not debatable is that this share is growing, and if Buck is correct, it may start growing at an accelerating rate. What’s the word I’m looking for? Ugly.
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