S&P, Aon Consulting and Milliman Set to Launch Industry’s First Barometer of U.S. Healthcare Costs

Standard & Poor’s, the world’s leading index provider, announced today that it has entered into an agreement with Health Index Advisors (“HIA”), a joint venture between Aon Consulting and Milliman, to develop and publish a family of indices tracking the ongoing change in costs of medical services. The S&P Healthcare Cost Index family will track the change in the cost of healthcare services in the United States.

The first index series within the S&P Healthcare Cost Index family to launch will be the S&P Healthcare Economic Indices. Expected to launch during the fourth quarter of 2010, the Indices will seek to reflect the per capita change in total allowed claim costs incurred by patients (through their co-payments) and healthcare benefit programs for services rendered by hospitals and physicians. 

“The forthcoming launch of the S&P Healthcare Economic Indices will expand upon our growing family of widely followed economic indicators while providing an important measure for insurance companies, employers and governments to understand and monitor changes in the primary cost components of the U.S. healthcare market,” says David Blitzer, Managing Director and Chairman of the Index Committee at S&P Indices.

The S&P Healthcare Economic Indices will meet a longstanding market demand from employers, health plan providers and public policy makers for a current, independent measure of U.S. healthcare cost trends helping to improve their ability to forecast future cost changes and manage the financial liabilities and revenues associated with their healthcare programs. The methodology for the indices is derived in part from Milliman’s proprietary Health Cost Index™ (HCI) model, which the firm has been publishing for its clients since 1987.

“These Indices will significantly improve the transparency of the health care market,” says Andrew Appel, Chief Operating Officer, Aon Corporation.  “We believe the Indices will be the basis for developing new risk management tools, allowing employers to better manage future healthcare cost increases.” 

“Healthcare constitutes almost 20% of the American economy, but the cost drivers are often misunderstood,” says Milliman principal and HCI creator John Cookson. “The S&P Healthcare Economic Indices introduce unprecedented transparency and will help people better understand changes in the cost of medical care and insurance. A tool like this is especially important now with healthcare reform introducing all kinds of new cost dynamics to the system as a whole.” 

Standard & Poor’s and HIA conducted the development and testing of the S&P Healthcare Economic Indices.