Health Care Costs Increase Less Than Expected for U.S. Employers, Study Finds

U.S. employers shifted "an unprecedented share" of health care costs to employees in 2003 and "slowed their runaway health care costs more sharply than expected," and an additional "wave of cost shifting is likely next year," according to a study released Monday by Mercer Human Resource Consulting, the Wall Street Journal reports (Fuhrmans, Wall Street Journal, 12/8). According to the study, which surveyed 3,000 public and private employers, employer health care costs increased 10.1% in 2003, compared with 14.7% in 2002 and 11.2% in 2001 (Rayner, Richmond Times-Dispatch, 12/8). Analysts had predicted that employer health care costs would increase 14% in 2003 (Wall Street Journal, 12/8). The study also found:

• The cost of health and dental insurance averaged $6,215 per employee, an increase from $5,646 in 2002 (Richmond Times-Dispatch, 12/8).
  
  
• About 30% of employers maintained or decreased their per-employee health care costs in 2003, compared with 22% in 2002 (Appleby, USA Today, 12/8).
  
  
• The average employee contribution for HMO single coverage increased to 35% of the premium in 2003 from 31% in 2002, and the average employee contribution for HMO family coverage increased to 57% of the premium in 2003 from 50% in 2002 (Marshall, Long Island Newsday, 12/8).
  
  
• About 27% of employees were enrolled in HMOs in 2003, compared with 29% in 2002 and 32% in 2000.
  
  
• About 54% of employees were enrolled in preferred provider organizations in 2003, compared with 50% in 2002 and 44% in 2000; about 34% of PPOs included individual deductibles of $1,000 or more, compared with 20% in 2002, and the median out-of-pocket maximum for PPOs increased to $2,000 in 2003 from $1,500 in 2002 (Richmond Times-Dispatch, 12/8).
  
  
• Employees at companies with more than 500 workers paid an average of $224 per month for PPO family coverage, and employees at companies with less than 500 workers paid an average of $389 per month (Vrana, Los Angeles Times, 12/8).
  
  
• Prescription drug coverage costs for large employers increased 16.1% in 2003, compared with 16.9% in 2002 and 17.8% in 2001.
  
  
• About 28% of employers in 2003 offered health coverage to retired employees not eligible for Medicare, compared with 29% in 2002 and 46% in 1993.
  
  
• About 21% of employers in 2003 offered supplemental health coverage to retired employees enrolled in Medicare, compared with 23% in 2002 and 40% in 1993 (Richmond Times-Dispatch, 12/8).
  
  
• Employers expect their health care costs to increase 12.5% in 2004.
  
  
• About 25% of employers said that they will increase employee contributions for health care in 2004, 23% said that they will increase cost-sharing charges in health plans and more than 10% said that they will reduce covered services (Mims, Salt Lake Tribune, 12/8).
  
  
• About 5% of large employers said that they have considered the elimination of health coverage for employees, compared with 22% of small employers (Fitzgerald, Newark Star-Ledger, 12/8).

Blaine Bos, a health benefits consultant for Mercer, said that increased use of disease management and wellness programs could lead to a "lessening of more draconian measures over time." However, he said that in 2003, employers passed a large share of their health care costs to employees (Wall Street Journal, 12/8). "After four years of continuing to be hit up with these huge increases, they finally pulled the string," Mercer consultant Bruce Schilmeister said, adding, "It's the first year where we've seen that in a significant way" (Long Island Newsday, 12/8). Mercer consultant Tracy Watts said that the 10% increase in employer health care costs in 2003 "is no cause to celebrate because the increase is still four times the rate of general inflation" (Brubaker, Washington Post, 12/8). Bos added that a 10% annual increase in employer health care costs "is unsustainable." Paul Ginsburg, an economist for the Center for Studying Health System Change, said, "Ten years ago, we had managed care plans telling people what they could and could not have," adding that raising employee contributions "is the alternative, leaving it to the individual to make the decision, but giving them financial incentives to economize" (USA Today, 12/8).