Aon Forecast: Rise in Medical Plan Trend Rates to Taper Off Slightly, But Double-digit Increases Will Continue in 2004.

Business Editors/Health/Medical Writers

CHICAGO--(BUSINESS WIRE)--May 3, 2004

    First-ever Consumer-Driven Health Plan Rate Forecast from Aon
                     Benchmarks at 14.1 Percent;
      But Predicted to Drop Below Other Medical Plans Next Year

     Bright Spot: Consumerism Driving Pharmacy Trend Rates Lower

According to Aon Consulting's Spring 2004 Health Care Trend Survey, employers can expect more of the same: double-digit increases for all types of medical coverage, with HMOs and POS plans forecast to increase at 14.1 percent.

For the first time ever, Aon is also forecasting the rate of increase to be expected for companies using consumer-driven plans, based on input from actuaries at leading health care insurers. This trend rate is also 14.1 percent, but, according to Aon, should not be taken out of context.

"It's important to look at overall cost for health care programs," stated Bill Sharon, senior vice president with Aon Consulting and director of the study. "Our analysis reveals that a company can realize first year savings of up to eight percent of their cost if they implement an effective consumer driven health care strategy. So, although consumer-driven plans will likely see the same level of increase as other coverage plans this year, considerable savings will still be recovered by making the switch. It all depends on the financial incentives and the resulting changes in consumers' health care consumption."

But short-term savings aside, consumer-driven plans are expected to be an even more attractive model in the years to come.

"Early returns on the impact of consumer-driven plans have been positive. Significant reductions in unnecessary care have been charted. Once the actuaries begin to see these results continue year over year, we predict that this will be reflected in trend rates and future trend lines will drop lower than other plan models," said Sharon.

Additionally, although the Pharmacy rate projections are slightly lower than last year, they still come in at 14.4 percent, showing that employers must continue to take a look at how their prescription drug coverage is designed.

Connie Perry, PharmD, vice president with Aon Consulting and director of the company's national pharmacy practice, commented: "As consumerism continues to take hold, and we see employees continue to play a larger role in their own health care decisions, use of generic drugs is helping to lower the overall trend line for prescription drug coverage. However, in the months to come, we will see discussions about expensive 'biotech injectable' drugs move to the forefront, so plan design in light of these innovations will be vital."

The role of biotechnology-derived injectable medications, which are used primarily to treat high-cost disease states for which previous treatments may have been either more invasive or unavailable, is important for companies to pay attention to. Current estimates are that only 5 percent of total prescription drug costs are from these drugs, but their cost impact on health plans will become more pronounced as their use increases.

2004 Rate Projections

These numbers are forecast for health care "costs" as opposed to "premiums." Additionally, these numbers are a forecast for cost before changes to plan design.

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                   Rate Increase (With Rx)  Rate Increase (Without Rx)
Medical
HMO                14.1%                    13.4%
POS                14.1%                    13.5%
PPO                14.2%                    13.5%
Indemnity          15.3%                    14.7%
Consumer-Driven
 (CDHP)            14.1%                    13.3%

Dental
DHMO                5.0%
PPO                 7.3%
Indemnity           7.7%

Pharmacy           14.4%

Vision              3.9%

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About Aon

Aon Corporation (www.aon.com) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. The company employs approximately 53,000 professionals in its 600 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

Aon Consulting is among the top global human resources consulting firms, with 2003 revenues of $1.193 billion and 7,500 employees in 140 offices throughout the world. Aon Consulting delivers integrated consulting solutions to help clients with employee benefits, human resources outsourcing, compensation, communication and management consulting.

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, resolution of regulatory issues, pension funding, ultimate paid claims may be different from actuarial estimates and actuarial estimates may change over time, 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, 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, is contained in the Company's filings with the Securities and Exchange Commission.