NCPA - National Center for Policy Analysis


June 22, 2007

The nation's employers can expect a return to single-digit increases in health benefit expenses in the year ahead, according to a new report by PricewaterhouseCoopers LLP (PwC).

For 2008, PwC has identified four major trends driving the deceleration of health care cost increases:

  • Slower spending growth for prescription drugs, which accounted for 14 percent of benefit premiums in 2007.
  • Increased transparency and cost sharing with employees.
  • Total-health management approach to benefits, such as wellness programs.
  • Broadening of the digital backbone in health care, including greater use of information technology and electronic medical records.

One of the major factors has been the growth of consumer-directed health plans, says PwC.  While too early to evaluate the long-term impact of the plans, it appears that their cost trend is running about 2.5 percentage points below cost trends in HMOs and PPOs.

Overall, according to PwC:

  • Private insurers are anticipating an average increase in medical costs by 9.9 percent for preferred provider organizations (PPOs).
  • A 9.9 percent increase is expected for health maintenance organizations (HMOs)/point of service plans (POSs)/exclusive provider organizations (EPOs).
  • A 7.4 percent increase is estimated for consumer-directed health plans.

These figures compare to increases last year of 11.9 percent for PPOs, 11.8 percent for HMOs, POSs and EPOs, and 10.7 percent for consumer-directed plans last year, says PwC.

Source: "Health Care Costs to Increase At Slower Pace in 2008," Prime Newswire, June 19, 2007

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