Higher Health Care Costs Force Workers To Pay More for Employer-Sponsored Coverage, Study Finds
Employers nationwide anticipate their health costs will rise 14.6% next year, on top of a 14.7% increase this year, a rate nearly seven times inflation and the sharpest rise since 1990, according to a new survey, the Los Angeles Times reports (White, Los Angeles Times, 12/9). Conducted by Mercer Human Resources Consulting, the National Survey of Employer-Sponsored Health Plans 2002 examined 2,900 public and private employers nationwide (Stafford, Kansas City Star, 12/9). According to the survey, companies' health costs increased from an average of $3,594 per employee in 1997 to $5,646 per worker this year, a 56% increase. The survey found that the "unrelenting" increase in health care costs resulted from a host of events, including the "backlash" against managed care. New technology also has resulted in more expensive medicines, diagnostic equipment and other "breakthroughs" (Martinez, Wall Street Journal, 12/9). According to actuaries working on the survey, increased hospital charges accounted for most of this year's cost increase. Prescriptions drug prices also increased this year, but less than in past years -- a 16.9% increase in 2002, compared with 17.8% in 2001 and 18.3% in 2000 (Los Angeles Times, 12/9). Medical costs are also increasing because hospitals and other providers have "gained clout" and have negotiated higher payments from health plans, which have increased premiums to improve their finances. At the same time, the population has aged, resulting in a higher utilization of health benefits. Gregory Mazol, a consultant with Buck Consultants, said, "It is sort of like the perfect storm. All of these things are coming together at the wrong time" (Goldstein, Philadelphia Inquirer, 12/9).
The health cost increases most impacted small- and medium-sized businesses, which experienced an 18.1% rise this year. As a result, some employers dropped worker health insurance altogether, and the percentage of businesses with 10 to 49 employees that offered a health plan dropped from 66% to 62% between 2001 and 2002, according to the survey (Wall Street Journal, 12/9). By comparison, the percentage of companies with 500 or more workers that offer health plans dropped to 87% from 88% over the same time period (Fitzgerald, Newark Star-Ledger, 12/9). Adam Stavisky, a Mercer analyst, said that employers have attempted to reduce costs by increasing workers' copayments and deductibles (Heldt Powell, Boston Herald, 12/9). Workers' monthly premiums also increased; companies generally increased employees' premiums by the percentage their health costs increased.
Many large employers also began to offer consumer-driven health plans, which are designed to shift costs to patients by involving them in health care purchasing decisions. Under such a plan, companies set up accounts for workers, who select their own health coverage. After the account is exhausted, workers are responsible for paying a deductible for any further care (Silber, Contra Costa Times, 12/9). The survey also found that the "influence and popularity" of HMOs is starting to diminish, the Los Angeles Times reports. Enrollment in HMOs dropped from 33% to 29% in 2001, while enrollment in less-restrictive preferred provider organizations increased from 46% to 50%, according to the survey (Los Angeles Times, 12/9). "Companies are hitting the wall in terms of how much they can absorb and how much they can pass on to their employees," Stavisky said. "They're having to reassess how they're going to provide benefits. This is not just a one- or two-year blip. We're in the middle of a long-term cycle," he added (Boston Herald, 12/9).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.