Rate of Health Care Cost Increase Levels
Health care costs for U.S. employers with more than 500 workers increased 6.1% to $7,523 per employee in 2006, the same rate of increase as in 2005, according to a nationwide survey by Mercer Health & Benefits, the Pittsburgh Post-Gazette reports. This year's increase marked the first time in four years that the growth rate was not lower than the previous year's.
The survey examined responses from about 3,000 public and private U.S. employers with at least 10 employees. The survey found that health care costs for employers with fewer than 500 employees increased 7% in 2006 (Levin, Pittsburgh Post-Gazette, 11/20).
According to the survey, cost-shifting to employees as a means to control health care spending was not as prevalent in 2006 as it had been in previous years (Feldstein, St. Louis Post-Dispatch, 11/20). Increases in deductibles, copayment amounts and out-of-pocket maximums were "modest" in 2006, according to the survey.
Thirty-one percent of employers said shifting costs to employees or reducing benefits would be an important cost-management strategy in the next five years, the survey found (Levick, Hartford Courant, 11/20).
The survey found that more employers are using consumer-driven health plans -- such as low-premium, high-deductible plans with health savings accounts -- and disease prevention programs as cost-management strategies. Six percent of employers offered consumer-driven plans in 2006, three times the percentage in 2005, the survey found. An additional 14% of employers said they plan to offer consumer-driven plans in 2007 (Yi, Los Angeles Times, 11/20). Employers preferred HSAs to health reimbursement accounts, which require an employer contribution, the survey found (Shanley, Denver Post, 11/20).
The survey found that six in 10 small employers offered a consumer-driven plan as their only insurance option, compared with one in 10 large employers (Fitzgerald, Newark Star-Ledger, 11/20). The survey stated, "Small employers are showing a clear preference for HSAs, which don't require an employer contribution to the account," adding, "In 2007, HSAs will be offered more often by both small and large employers" (Denver Post, 11/20).
About one-quarter of employers offered preventive screenings in 2006. Among large employers, the percentage who offered preventive screenings has nearly doubled in the last three years (Los Angeles Times, 11/20).
Employees enrolled in plans with HSAs on average paid monthly premiums of $41, compared with $85 for PPOs and $76 for HMOs, the study found (Denver Post, 11/20). Including employers' contributions, the annual per-employee cost for a consumer-driven plan was $5,770, compared with $6,616 for an HMO plan, according to the survey.
The cost increase for consumer-driven plans in 2006 was 5.3%, the survey found (Hartford Courant, 11/20). Copays for employees enrolled in HMOs averaged $18 in 2006, the same as in 2005. Deductibles for PPOs increased to $846 last year, compared with $769 in 2005 and $523 in 2002 (Los Angeles Times, 11/20).
Bruce Prangley, a principal in Mercer's Norwalk, Conn., office, said employers are showing less dependence on cost-shifting "and more emphasis on care management -- helping people better take care of health issues" (Hartford Courant, 11/20).
Tim Simpson, a principal at Mercer's St. Louis office, said, "So the multimillion-dollar question for employers is, 'If the cost growth in health benefits has stopped slowing, will it now start to accelerate?' I would expect that 6% increase might be a little bit larger next year" (St. Louis Post-Dispatch, 11/20).
Laura Baker, a principal in Mercer's Los Angeles office, said, "Employers are realizing that if it is unaffordable, it is not a benefit anymore."
Kirby Bosley, an analyst at Watson Wyatt Worldwide, said, "Everything else we've been doing to date has been ignoring the root cause of the problem of rising health care costs." Bosley added, "Cost-shifting or cost-sharing does nothing to reduce utilization, to create a workforce that is healthier, and to get people to seek care that is more efficient and cost-effective" (Los Angeles Times, 11/20).