Employer Medical Costs to Increase by 9.6 Percent in 2009, According to PricewaterhouseCoopers...

Employer Medical Costs to Increase by 9.6 Percent in 2009, According to
PricewaterhouseCoopers Report

WASHINGTON, June 17, 2008 (PRIME NEWSWIRE) -- Although medical costs have
increased steadily for decades, the rate of growth has been slowing in each of
the past five years. No more, however: In 2009, the downward trend is expected
to level off, according to a new PricewaterhouseCoopers Health Research
Institute (HRI) report, "Behind the Numbers: Medical Cost Trends for 2009,"
which is based on HRI analyses and a survey of more than 500 employers and
provider-based health plans. Actual Medical costs are expected to grow 9.6
percent in 2009, compared with a 9.9 percent rate in 2008 and double-digit
annual increases in prior years.

"While the continued slowing of medical cost growth is welcome, the fact that
the rate of growth may no longer be declining as sharply is worrisome and could
have implications for employers and workers," said David Chin, M.D., leader of
the Health Research Institute. "With medical cost growth already exceeding the
overall inflation rate and inflation heating up in so many other sectors,
healthcare providers, insurers and employers will have to monitor medical costs
carefully if we are to avoid a resurgence of the double-digit annual increases
seen in the past."

According to the report, multiple factors are expected to help drive medical
cost increases in 2009:

* The healthcare industry is in an era of booming construction to
replace facilities and adjust to consumer demands, such as a
preference for private hospital rooms and a move to outpatient
venues.

* Cost-shifting from the uninsured, Medicare and Medicaid to private
payers continues to increase and will account for nearly one in
every four dollars spent by private payers in 2009. This trend is
expected to continue because the federal government is underfunding
public medical insurance programs while the number of uninsured is
increasing.
Medical cost trends reflect the projected increase in the costs of medical
services. They are the "numbers behind the numbers" and are used by health
insurers to estimate what it will cost to provide coverage in the coming year
and to set premiums. Insurers and employers use the trend projections to design
the benefit packages that will be offered to workers next fall.

While medical cost trends are not necessarily a perfect predictor of increases
in premiums, because employers make changes to plan benefits and add
cost-sharing features rather than increase premiums, medical costs and premiums
tend to move in the same direction.

Much of the progress on cost management in recent years has come from strategies
to reduce medical costs for workers with private insurance. The strategies have
included greater cost-sharing by workers, improved medical management and
substitution of lower-priced treatments. Among the factors that will help to
restrain the rate of cost growth in 2009 are the continued use of generic drugs,
which currently account for two-thirds of all prescriptions (although fewer drug
patents will expire in 2009 than in the past two years). In addition, improved
medical management of high-cost patients, such as programs that improve
adherence to medication regimens, is reducing hospitalizations and controlling
costs.

"In the past, employers have tried to restrain increases in the insurance
premiums their workers pay by changing their health plans or by increasing
co-payments or deductibles. This has helped to keep insurance premium increases
lower than the growth in medical costs," said Michael Thompson, global human
resource services principal at PricewaterhouseCoopers. "However, employers' use
of this strategy may be declining. About one-third of the employers we surveyed
said they expected to increase cost-sharing in their medical plans in 2009.
Increasingly, employers are adopting plan designs that help workers 'earn'
discounts or bonuses for behavior that keeps them healthy, productive and
engaged."

According to the report, employers are responding in a variety of ways:

* Wellness programs and initiatives to personalize the experiences of
health plan members are on the rise. Health plans, which are
competing for a slowly eroding number of employer-based members,
are increasingly focused on personalizing member experiences to
attract and retain large corporate accounts.

* Employers will rely on prevention and disease management programs
to temper costs in 2009 rather shifting higher levels of cost-
sharing onto workers.

* The number of privately insured continues to slowly decrease, which
increases cost shifting, makes it more difficult to control costs
and increases competition among health plans as they try to keep
cost growth in check without sacrificing member satisfaction.
According to the report, certain other factors could affect these cost
projections. For example, a recession in 2009 could result in higher costs,
since medical price growth historically has risen faster during recessions. The
outcome of this year's elections also could have an impact: If a Democratic
president takes office in 2009 and puts in place initiatives to expand coverage
of the uninsured, cost-shifting could be reduced, which may benefit employers
and workers, but also may increase taxes.

This is the third consecutive year that PricewaterhouseCoopers has provided an
estimate of year-ahead medical costs trends. The complete report may be accessed
at www.pwc.com/hri/employerhealthcosts.

Methodology

In preparing "Behind the Numbers: Medical Cost Trends for 2009,"
PricewaterhouseCoopers Health Research Institute (HRI) reviewed historical and
prospective medical cost trends and the influences behind them through
interviews, surveys and published reports. In addition to reviewing analyst
reports and documents for publicly traded health plans, HRI conducted a survey
of more than 500 employers and provider-based health plans. The number of
individuals covered by the employers and health plans surveyed totaled more than
11 million.

About the PricewaterhouseCoopers Health Research Institute

PricewaterhouseCoopers' Health Research Institute (http://www.pwc.com/hri) is an
unparalleled resource for health industry expertise. By providing cutting-edge
intelligence, perspective and analysis on issues impacting the health industry,
HRI assists executive decision-makers and stakeholders worldwide in navigating
their most pressing business challenges. PricewaterhouseCoopers is one of the
only firms with a dedicated global healthcare research unit, capitalizing on
fact-based research and collaborative exchange among our network of
professionals with day-to-day experience in the health industries.

About PricewaterhouseCoopers' Health Industries Group

PricewaterhouseCoopers' Health Industries serves as a catalyst for change and
the leading advisor to organizations across the health continuum, including
payers, providers, health sciences, biotech/medical devices, pharmaceutical and
employer practices in the public, private and academic sectors. With a
distinctive approach that is collaborative, multi-disciplinary and
multi-industry, PricewaterhouseCoopers draws from its broad perspective and
capabilities across and beyond the health industries to help solve the array of
emerging complex problems health organizations face, lead cultural and clinical
transformation, and create a new sustainable model for care delivery that is
quality-driven, patient-centered and technology-enabled.

PricewaterhouseCoopers' Health Industries' clients include both 40 of the top
100 hospitals in the U.S. and 16 of the 18 best hospitals as ranked by US News &
World Report; all 20 of the world's major pharmaceutical companies; all of the
top 20 commercial payers in the U.S.; municipal, state and federal government
agencies and many of the world's preeminent medical foundations and
associations.

PricewaterhouseCoopers has a network of more than 4,000 professionals worldwide
and 1,200 professionals in the U.S. dedicated to the health industries. Our
health industries professionals include a cadre of physicians, nurses, ancillary
health providers and some of the nation's leading minds in medicine, science,
information technology, operations, administration and health policy.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax
and advisory services to build public trust and enhance value for its clients
and their stakeholders. More than 146,000 people in 150 countries across our
network share their thinking, experience and solutions to develop fresh
perspectives and practical advice.

"PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP or, as the context
requires, the PricewaterhouseCoopers global network or other member firms of the
network, each of which is a separate and independent legal entity.

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CONTACT: PricewaterhouseCoopers LLP
Todd Hall
(617) 530-4185
todd.w.hall@us.pwc.com

The Hubbell Group, Inc.
Lisa Stearns
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lstearns@hubbellgroup.com