Health benefits cost lid may tip

Companies' efforts to hold down rising expenses are hitting plateau, studies hint

November 24, 2006|By McClatchy-Tribune

Employers may have temporarily exhausted their ability to hold down increases in their annual health-benefit costs.

For several years, employers have whittled the annual growth rate in their total health-benefit costs - by embracing new types of insurance plans, by redesigning plans and by shifting more costs to employees.

But the National Survey of Employer-Sponsored Health Plans, released this week by Mercer Health & Benefits, says those efforts appear to have hit a plateau.

Nationally, total health-benefit costs to employers rose by 6.1 percent this year, the same rate as last year and the same as expected next year, the Mercer report said, based on a survey of 3,000 U.S. employers.

A more pessimistic cost outlook was released last week by PricewaterhouseCoopers, which reported that the cost of health benefits is expected to jump between 10.7 percent and 11.9 percent in 2007, depending on the type of insurance plan.

That increase would be more in line with the double-digit health-benefit cost jumps during the 2001-2003 period that the Mercer report recalled.

The flurry of new cost surveys for health care, which come as millions of American workers go through the annual rite of enrolling in employer-sponsored health plans, adds fodder to a continuing debate over health care policy.

Continued escalation in employer-sponsored health insurance costs - whether 6.1 percent or 13 percent - is sure to get close attention from the newly elected Democratic Congress, which has vowed to make controlling health care costs a priority.

Major industries have acknowledged as much, and are moving to shape the debate.

Last week, the health insurance industry introduced a proposal to expand coverage to nearly 47 million uninsured Americans, recognizing that costs rise for the insured partly because of uncompensated care provided the uninsured. Also, the chief executives of the United States' Big Three automakers met with President Bush to bemoan, among other things, the soaring cost of providing benefits to their workers and retirees.

Increases in health care costs are hitting employers and their workers hard.

According to the Mercer study, employers' total health-benefit costs for active employees this year averaged $7,523 per employee.

Meanwhile, the average employee contribution for employee-only coverage in the Mercer sample was $87 a month - or $1,044 annually - this year in preferred provider organizations, the most widely used insurance plan.

The average employee contribution for employee-plus-family coverage was $272 a month - or $3,264 per year.

The big difference between employers' total benefits costs and what employees are contributing is one factor driving big changes in insurance plans.

Mercer, PricewaterhouseCoopers and insurance broker Power Group Benefits all agreed that, no matter what the inflation rate for health care costs, employers are attempting to control costs by presenting redesigned plans to their employees.

For example, the average deductible that members of preferred provider organizations are required to pay for getting health care within the PPO's network jumped from $769 in 2005 to $846 this year, according to the Mercer survey.

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