The possibility of health care reform, coupled with business downsizing and the aging workforce, may have conspired to cause the apparent bottoming out of health insurance premium prices last year, according to a new analysis.

Tom Wildsmith

Philadelphia, Pa.-based management consultant Hay Group said analysis of its annual Hay Benefits Prevalence Report (HBPR) shows employer-sponsored plans paid less in premiums last year than in any year since 2000, while its Federal Employee Health Benefits Program (FEHBP) suggests that recent declines in annual premium rate hikes may have hit their low point.

“There are several factors contributing to this trend including the aging working population, especially given recent downsizing, and possible increases in underlying healthcare prices in anticipation of reform,” said Tom Wildsmith, a senior consultant in Hay Group’s benefits practice, in a statement.

The Hay Group, which has provided annual trend analysis in health insurance premiums for 30 years, is predicting that annual premium increases for health insurance will rise an average of 9% this year, exclusive of any changes to plan designs or administration.

The Hay Group’s study indicates a strong correlation between increases in health premiums for employers, as reported in the HBPR, and increases in FEHBP health premiums, as reported by the Office of Personnel Management. Since 2002, however, FEHBP health premium increases have generally been smaller than those among all employers. FEHBP health premium trends are often leading indicators of premium trends for employers, the report said.

The annual rates of increase for employer sponsored health plans have declined significantly since 2003. The trend rates for the FEHBP program have reversed, however, and have risen in both 2009 and 2010.

Premium trends in the FEHBP program have historically served as a leading indicator for premiums in the broader employer health plan market. Using this approach, the data suggests that the recent history of declines in the annual rate of premium increases may be coming to an end. Hay Group’s experience with client health plan renewals during 2009 confirms this trend, with premium increases consistently higher than in prior years, it said.

Numerous factors may be influencing this trend, which reflects total cost increases, as opposed to a shift in the allocation of costs between employers and employees, Hay Group said.

The 2009 Hay Benefits Prevalence Report includes data from 842 U.S. employers. The FEHBP looks at premiums paid for the government to cover workers, retirees and dependents.