Employers Brace for Health Care Cost Increases
Employers can expect 2011 healthcare cost increases to be at their highest levels in five years, according to a study by AON Hewitt (formerly Hewitt Associates), a global human resources consulting and outsourcing company. Next year, Hewitt projects an 8.8 percent average premium increase for employers, compared to 6.9 percent in 2010 and 6.0 percent in 2009.
According to Hewitt’s analysis:
- The average total healthcare premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010. The amount employees will be asked to contribute toward this cost is $2,209, or 22.5 percent of the total health care premium. This is up 12.4 percent from 2010 when employees contributed $1,966, or 21.8 percent of the total health care premium.
- Average employee out-of-pocket costs, such as co-payments, co-insurance, and deductibles, are expected to be $2,177 in 2011, a 12.5 percent increase from 2010 ($1,934). These projections mean that in a decade, total healthcare premiums will have more than doubled, from $4,083 in 2001 to $9,821 in 2011. Employees’ share of medical costs, including employee contributions and out-of-pocket costs, will have more than tripled, from $1,229 in 2001 to $4,386 in 2011.
The increases are primarily attributed to higher medical claim costs, an aging population and health care reform. For example, Hewitt reports an increase in costly catastrophic claims, particularly among older workers. Meanwhile, the most immediate applications of health care reform—including covering dependents to age 26 and the elimination of certain lifetime and annual limits—contributed approximately 1 to 2 percent of the 8.8 percent projected increase for 2011.
“After 18 months of waiting for health care reform to play out, employers find themselves in a very challenging cost position for 2011,” said Ken Sperling, Hewitt’s health care practice leader. “Reform creates opportunities for meaningful change in how health care is delivered in the U.S., but most of these positive effects won’t be felt for a few years. In the meantime, employers continue to struggle to balance the significant healthcare needs of an aging workforce with the economic realities of a difficult business environment. While health care reform cannot be blamed entirely for increasing costs, the incremental expense of complying with the new law adds fuel to the fire, at least for the short term.”
Employers Brace for Heath Care Cost Increases
Employers can expect 2011 healthcare cost increases to be at their highest levels in five years, according to a study by AON Hewitt (formerly Hewitt Associates), a global human resources consulting and outsourcing company. Next year, Hewitt projects an 8.8 percent average premium increase for employers, compared to 6.9 percent in 2010 and 6.0 percent in 2009.
According to Hewitt’s analysis:
- The average total healthcare premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010. The amount employees will be asked to contribute toward this cost is $2,209, or 22.5 percent of the total health care premium. This is up 12.4 percent from 2010 when employees contributed $1,966, or 21.8 percent of the total health care premium.
- Average employee out-of-pocket costs, such as co-payments, co-insurance, and deductibles, are expected to be $2,177 in 2011, a 12.5 percent increase from 2010 ($1,934). These projections mean that in a decade, total healthcare premiums will have more than doubled, from $4,083 in 2001 to $9,821 in 2011. Employees’ share of medical costs, including employee contributions and out-of-pocket costs, will have more than tripled, from $1,229 in 2001 to $4,386 in 2011.
The increases are primarily attributed to higher medical claim costs, an aging population, and health care reform. For example, Hewitt reports an increase in costly catastrophic claims, particularly among older workers. Meanwhile, the most immediate applications of health care reform—including covering dependents to age 26 and the elimination of certain lifetime and annual limits—contributed approximately 1 to 2 percent of the 8.8 percent projected increase for 2011.
“After 18 months of waiting for health care reform to play out, employers find themselves in a very challenging cost position for 2011,” said Ken Sperling, Hewitt’s health care practice leader. “Reform creates opportunities for meaningful change in how health care is delivered in the U.S., but most of these positive effects won’t be felt for a few years. In the meantime, employers continue to struggle to balance the significant healthcare needs of an aging workforce with the economic realities of a difficult business environment. While health care reform cannot be blamed entirely for increasing costs, the incremental expense of complying with the new law adds fuel to the fire, at least for the short term.”
Source: Hewitt Health Value InitiativeTM database, which contains detailed census, cost, and plan design information for 350 large U.S. employers representing 14.4 million participants and $51.9 billion in 2010 health care spending. Visit www.hewittassociates.com
