Aon Forecast: Employer Health Plans to See Double-Digit Increases in 2004.

Business Editors

CHICAGO--(BUSINESS WIRE)--July 7, 2003

Health Plan Increases Are Eight Times Current Inflation Rate;

Increases Vary Little by Plan Type

Employers can expect more of the same in 2004: double-digit increases to the cost of their health plans. This forecast, according to Aon Consulting's Spring 2003 Health Care Trend Survey, represents figures from actuaries at more than 20 leading medical, dental, pharmacy and vision insurers. The ramifications for Corporate America: employers will need to continue to make changes to their health plans in order to limit their rate of increase.

According to the Aon forecast, health plan rates will increase 16.4 percent for HMOs, 16.1 percent for POS plans, 15.7 percent for PPO plans and 17.2 percent for Indemnity plans. These double-digit health care increases are approximately eight times the annual general inflation rate of 2.1 percent most recently reported by the Bureau of Labor Statistics. Interestingly, health plan trend rates now vary little by plan type. In the past, HMO and POS trend rates were several percentage points lower than PPO and Indemnity trend rates.

"This will be the fifth year of double digit increases in health care costs. Faced with rising expenses, we expect companies to increase co-pays and premiums for employees. In addition, we expect employers to continue to explore a range of new options such as consumer-driven health plans, disease management programs, tiered hospital networks, pharmacy coalitions, health promotion incentives and others," said Bill Sharon, senior vice president in the Tampa office of Aon Consulting's health & welfare practice.

The migration from major medical plans to HMOs and POS plans in the late 1980s and early 1990s was spurred to contain costs, but managed care plans with small co-payments are no longer the answer for employers who serve as plan sponsors. The trend is toward plan designs that require more cost sharing by the consumer.

It is worth noting that the Aon forecast predicts year-over-year increases before plan design modifications. Sharon continued, "Companies will, in the coming months, need to make some serious decisions about the design of the health plans they intend to offer their employees in 2004."

Rate Table

The trend rates shown below represent national averages and are the predicted increase in claims cost. Trend increases for specific plans may vary from these trend rates due to regional cost variations, plan design and demographics.

These trend rates apply to an active workforce. Trend rates for post-retirement health coverage might be higher due to the higher percentage of claims associated with the use of prescription drugs and the leveraging affect of Medicare.

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             Rate Increase (With Rx)   Rate Increase (Without Rx)
Medical
HMO          16.4%                     14.7%
POS          16.1%                     14.5%
PPO          15.7%                     14.4%
Indemnity    17.2%                     16.4%

Dental
DHMO         4.8%
PPO          7.6%
Indemnity    7.6%

Pharmacy     17.7%


Vision       3.8%
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About Aon

Aon Corporation (NYSE:AOC) is a holding company that is comprised of a family of insurance brokerage, consulting and insurance underwriting subsidiaries.

Aon Consulting is among the top global human resources consulting firms, with 2002 revenues of greater than $1 billion and 7,800 employees in 140 offices throughout the world. Aon Consulting delivers integrated consulting solutions to help clients with employee benefits, compensation and rewards, communication, human resources outsourcing, talent recruitment and selection, and process redesign.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results, depending on a variety of factors. Potential factors that could impact results include the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, exchange rates, rating agency actions, pension funding, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual costs of resolution of contingent liabilities and other loss contingencies, the heightened level of potential errors and omissions liability arising from placements of complex policies and sophisticated reinsurance arrangements in an insurance market in which insurer reserves are under pressure, the ultimate impact of the business transformation plan, and the timing and resolution of related insurance and reinsurance issues relating to the events of September 11, 2001. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, are contained in the Company's filings with the Securities and Exchange Commission.