Employee Health Plan Costs Set To Increase 8.7% in 2008
Employer-sponsored health insurance premiums increased by more than twice the rate of inflation in 2007, and costs are expected to continue to rise next year, with employees shouldering more of the costs, according to a study released Monday by Hewitt Associates, Dow Jones reports. The study was based on survey data that included 1,800 health plans, including 400 large employers, and more than 18 million plan enrollees.
According to the study, the cost of providing employee health benefits increased by an average of 5.3% in 2007 -- the smallest rate of increase in nine years -- down from 7.9% in 2006. Hewitt estimates that costs will increase by 8.7% in 2008. The report projects that the average annual premium cost per employee will be $8,676 next year, up from $7,982 in 2007. Employees' out-of-pocket contributions to premiums next year are expected to rise to $1,859, or 21.4% of total premiums, compared with $1,690, or 21.2%, this year.
Hewitt also predicts that employees' out-of-pocket health expenses will rise to $3,597 in 2008 -- 10.1% more than in 2007. The study also finds more than 20% of employers offer or will offer by the end of 2007 a high-deductible health plan with a health savings account. More than half of employers are considering offering such a plan at a future date, according to Hewitt.
Jim Winkler, practice leader of Hewitt's Health Management Consulting business, called the slowing rate increase of employers' health care costs encouraging, but he noted that a primary way companies are limiting increases in health expenditures is shifting some costs to employees. He said, "While some cost-shifting is appropriate, it's critical that companies design their health care programs in a way that encourages employees to use them -- and use them wisely." He added, "Otherwise, they are essentially trading preventative care now for 'rescue care' later, which will lead to unhealthy employee populations, a decrease in employee productivity and, ultimately, higher health care costs" (Knight, Dow Jones, 9/25). The report is available online.
Large companies will pay an average of 7% more to provide health plans for their employees in 2008 than they did this year, according to a study released on Monday by consulting firm Towers Perrin, the Washington Times reports. The study, based on responses from 300 large companies, projects that health care costs per employee will increase an average of $577 to total $9,312.
Towers Perrin estimates that employers will pay 78% of health care premium expenditures and that employees will cover the rest, in addition to out-of-pocket spending on items such as copayments and deductibles. The survey also found that companies are reducing coverage for retirees, a move that might encourage older workers to remain in the work force to receive employer-sponsored benefits, according to Ron Fontanetta, a principal in Towers Perrin's Health and Welfare practice.
Health insurance for retirees younger than age 65 costs a total of $569 per month, of which retirees pay $277. The survey also found that the use of consumer-driven health care did not increase greatly over last year's levels.
Dave Guilmette, managing director of the Towers Perrin Health and Welfare practice, said, "Increasing employee contributions, deductibles, copays and premiums are causing many workers to opt out of their employers' health plans, forcing significant numbers of employees to join the ranks of the working uninsured" (Lopes, Washington Times, 9/25).