Rise in Employee Health Costs Outpaces Inflation

The cost of providing employer-sponsored health insurance this year rose by 6.1%, roughly the same rate of increase as in 2006, according to highlights of a nationwide survey conducted by Mercer, Reuters reports.

The survey, released on Monday, included about 3,000 private and public companies with at least 10 employees (Kenen, Reuters, 11/19).

The survey found the average cost per employee for health coverage was $7,983. Although the 6.1% increase is lower than the 15% increase in 2002, it still is double the rate of inflation, according to the survey (Davis, Denver Rocky Mountain News, 11/19).

The survey predicted a 5.7% increase for 2008, factoring in anticipated changes to benefits. If benefits were left unaltered, costs for 2008 would rise 8%, according to the survey (Jordon, Omaha World-Herald, 11/19). The survey found that high-deductible health plans paired with tax-free savings accounts cost $5,970 per worker per year.

According to the survey, 5% of insured workers have a lower-cost, high-deductible plan linked to a health savings account, compared with 3% in 2006. Among businesses with 20,000 or more employees, 41% offer high-deductible plans linked to HSAs, compared with 7% of employers with fewer than 500 workers. The survey also found that fewer employers are offering coverage altogether. This year, 61% of employers with 200 or fewer employees offered some kind of health coverage, compared with 63% in 2006.

Blaine Bos, a Mercer partner and an author of the survey, noted that even though lower-cost plans have emerged, fewer employers still are offering coverage. He said that determining what affordable coverage is "will be a real political and public policy issue" as the debate about health care reform "stays on the table" (Appleby, USA Today, 11/19).

The survey found that larger employers are addressing rising costs by shifting more expenses to the employees. The average PPO deductible this year increased 11% for employees of companies with 500 or more workers.

Chris Watts, markets business leader for Mercer's Denver office, said, "Given that the majority of covered employees are in PPOs, an increase in deductibles of this size could dampen employers' total health cost increase by about a point" (Denver Rocky Mountain News, 11/19).

The survey also found the following:

• 5% of large employers charge higher premiums for employees who smoke;
• 10% of large companies limit coverage for spouses who have access to health insurance from another source, compared with 8% in 2006;
• 34% of large firms allow same-sex domestic partner coverage, an increase from 29% in 2006 (Wessel, Orlando Sentinel, 11/19);
• 62% of large employers offered some health coverage to part-time employees (Reuters, 11/19); and
• More than one-fifth of small employers that offer health benefits do not extend the coverage to family members (Denver Rocky Mountain News, 11/19).