Employer Health Care Costs To Increase by 11% in 2005, Analysis Finds

Employer health care costs are expected to rise 11.3% in 2005, according to an analysis by consultant Hewitt Associates, the Detroit Free Press reports (Norris, Detroit Free Press, 10/12). The study is based on data from 2,000 health plans of 300 employers and 18 million health plan members (Austin, Denver Post, 10/12).

The rate of increase in 2005 is lower than the 12.3% rise in 2004, which might indicate some moderation, the Free Press reports (Detroit Free Press, 10/12). The study indicates that health plan mergers, prescription drug prices, liability issues, the growing number of uninsured people and the cost of new treatments and technology contribute to the expected increase in employer health costs (Denver Post, 10/12).

Hewitt analysts say their data signal more moderate growth in future employer health costs, which might be "a result of cost-saving initiatives," such as prevention and wellness programs, the Free Press reports (Detroit Free Press, 10/12).

However, Hewitt's analysis also found that workers themselves are paying more of their health coverage. The average employee is expected to contribute $1,481 toward health coverage in 2005, compared with $1,288 per employee in 2004 (Denver Post, 10/12).

Three newspapers and NPR recently addressed the issues employers face to provide health care coverage to workers. Summaries appear below.

• NPR's "Morning Edition": The program on Friday reported on rising health care costs, an issue that "looms large" for small businesses. The segment includes comments from Jessie Brairton, manager of legislative affairs for the National Federation of Independent Businesses; Todd McCracken, president of the National Small Business Association; and small business owners (Sydell, "Morning Edition," NPR, 10/8). The complete segment is available online in RealPlayer.
  


• St. Paul Pioneer Press: More employers are giving workers "a hefty financial stake" in their health plans, making them "increasingly responsible for figuring out which doctors, clinics and hospitals best meet their health care needs," the Pioneer Press reports. Consumer-driven coverage "will involve lots of options -- and lots of confusion," according to the Pioneer Press. Health savings accounts have become some of the "hottest new product[s]" to offer, and employers also are offering other plans, including health reimbursement arrangements and tiered plans, the Pioneer Press reports (Majeski, St. Paul Pioneer Press, 10/10).
  


• Washington Post: The Post on Monday examined the experience of South Dakota-based Raven Industries in trying to contain the rising cost of providing employee health benefits, as well as how health costs this year more than ever have "sparked so much unrest in the electorate." According to the Post, the health proposals of President Bush and Democratic presidential candidate Sen. John Kerry (Mass.) "have not reached the 800 workers at Raven." Still, the company has addressed rising health costs, choosing to "provide more affordable care" rather than drop coverage, the Post reports. Raven CEO Ronald Moquist said that care providers should be more efficient, adding, "They have no electronic files, no standard protocols, no evidence-based medicine. There are huge costs that can be rung out of providers." Moquist added that Raven will likely offer HSAs combined with high-deductible catastrophic coverage, no-cost or discounted physician checkups, screenings and workplace wellness programs in 2006 (Connolly, Washington Post, 10/11).
  


• Wall Street Journal: In their efforts to control rising health costs, some employers have been targeting workers who smoke, are obese or have chronic diseases, people thought to disproportionately drive up health expenses, the Journal reports. According to Jack Scanlon, senior vice president of Illinois-based First Health Group, within the company's large-employer database, 11.5% of workers are responsible for 80% of health costs. A Union Pacific pilot program in seven states recently stopped hiring smokers, and General Mills charges smokers an additional $20 per month for health care coverage. In Alabama, a blue ribbon panel considered charging obese state employees higher premiums and recommended monthly surcharges for smokers. Critics, however, have said that "charging different rates for health care is based on a false assumption" that workers will be able to easily change their situations. "If you require people to achieve certain outcomes, and there's no scientific evidence this is within their control, then you open yourself to a lawsuit," Watson Wyatt Worldwide senior consultant Linda Bergthold said (Wysocki, Wall Street Journal, 10/12).

The San Francisco Chronicle this week will publish a five-part series, titled "In Critical Condition, Health Care in America," that examines issues related to increased U.S. health care costs. The series addresses the causes of increased health care costs, the effects of increased health care costs on retirees, health care issues faced by labor unions and employers and the Canadian health care system. For the series, Chronicle reporters interviewed health care experts, academics, health care providers, employers and consumers (Colliver, San Francisco Chronicle, 10/11). Parts one and two of the series are available online.