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Employer-Sponsored Health Plan Costs Expected To Increase

Armen Hareyan's picture

Employer-Sponsored Health Plan

Employer-sponsored health insurance premiums increased by more thantwice the rate of inflation in 2007, and costs are expected to continueto rise next year, with employees shouldering more of the costs,according to a study released Monday by Hewitt Associates, Dow Jonesreports. The study was based on survey data that included 1,800 healthplans, including 400 large employers, and more than 18 million planenrollees.

According to the study, the cost of providingemployee health benefits increased by an average of 5.3% in 2007 -- thesmallest rate of increase in nine years -- down from 7.9% in 2006.Hewitt estimates that costs will increase by 8.7% in 2008. The reportprojects that the average annual premium cost per employee will be$8,676 next year, up from $7,982 in 2007. Employees' out-of-pocketcontributions to premiums next year are expected to rise to $1,859, or21.4% of total premiums, compared with $1,690, or 21.2%, this year.

Hewittalso predicts that employees' out-of-pocket health expenses will riseto $3,597 in 2008 -- 10.1% more than in 2007. The study also finds morethan 20% of employers offer or will offer by the end of 2007 ahigh-deductible health plan with a health savings account. More thanhalf of employers are considering offering such a plan at a futuredate, according to Hewitt.

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Jim Winkler, practice leader ofHewitt's Health Management Consulting business, called the slowing rateincrease of employers' health care costs encouraging, but he noted thata primary way companies are limiting increases in health expendituresis shifting some costs to employees. He said, "While some cost-shiftingis appropriate, it's critical that companies design their health careprograms in a way that encourages employees to use them -- and use themwisely." He added, "Otherwise, they are essentially tradingpreventative care now for 'rescue care' later, which will lead tounhealthy employee populations, a decrease in employee productivityand, ultimately, higher health care costs" (Knight, Dow Jones, 9/25).

Towers Perrin Survey Finds Similar Results

Large companies will pay an average of 7% more to provide health plansfor their employees in 2008 than they did this year, according to astudy released on Monday by consulting firm Towers Perrin, the Washington Timesreports. The study, based on responses from 300 large companies,projects that health care costs per employee will increase an averageof $577 to total $9,312.

Towers Perrin estimates thatemployers will pay 78% of health care premium expenditures and thatemployees will cover the rest, in addition to out-of-pocket spending onitems such as copayments and deductibles. The survey also found thatcompanies are reducing coverage for retirees, a move that mightencourage older workers to remain in the work force to receiveemployer-sponsored benefits, according to Ron Fontanetta, a principalin Towers Perrin's Health and Welfare practice. Health insurance forretirees younger than age 65 costs a total of $569 per month, of whichretirees pay $277. They survey also found that the use ofconsumer-driven health care did not increase greatly over last year'slevels.

Dave Gillette, managing director of the Towers PerrinHealth and Welfare practice, said, "Increasing employee contributions,deductibles, copays and premiums are causing many workers to opt out oftheir employers' health plans, forcing significant numbers of employeesto join the ranks of the working uninsured" (Lopes, Washington Times, 9/25).

Reprinted with permission from kaisernetwork.org. Youcan view the entire Kaiser DailyHealth Policy Report, search the archives, and sign up for email deliveryat kaisernetwork.org/email. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, afree service of The Henry J. Kaiser Family Foundation.