Health Insurance Cost Increases To Slow In 2005
Employers can expect health care insurance costs to rise by an estimated 8% in 2005, down from the double-digit increases of recent years, according to a survey by professional services consultancy Towers Perrin. Researchers credit employer efforts to improve efficiency through vendor management and care management initiatives for the lower rate of increase.
But researchers also warned that the average expected increase of $582 per employee is still unsustainable. "Don't be fooled into thinking that total costs will be significantly lower this year than in years past," said Jim Foreman, managing director of global health and welfare for Towers Perrin. "The cumulative effect of soaring costs year over year has created a bigger cost base, which means that, while this year's percentage increase creates an appearance of lower costs, the increase in the actual dollar amount is similar to past years."
On a more positive note, Foreman added, "The good news is that, while employers have simply shifted some costs to employees through benefit design changes, their efforts to control the underlying drivers of health care cost increases are beginning to make a difference. Specifically, care management and vendor management initiatives have each cut approximately two points off the average pace of cost increases for employers who have put these measures into place."
According to the survey of 200 companies, the average reported 2005 cost of medical coverage for all types of health plans combined is $328 a month per month for employee-only coverage, $668 per month for employee-plus-one-dependent coverage, and $945 per month for family coverage.
Employers plan to ask employees to pay more out-of-pocket for their medical coverage in 2005 than in previous years, but most companies still intend to pick up the bulk of the premium cost, the survey found. On average, employees will contribute 19% for individual coverage, and 25% for dependent coverage. The employee share of premium costs will increase by an average of 14% in 2005, while the employer share will rise by 7%, the survey showed.
Researchers noted that employees are paying 56% more in health care costs currently than they were four years ago, and 71% more than they were eight years ago. Employer costs, however, have gone up even more dramatically over time: according to the survey, companies are now paying 63% more in health care costs than they were four years ago, and 87% more than eight years ago.
The main factors driving the cost increases cited by respondents were rising HMO rates, continued high use of heavily promoted prescription drugs, sharp increases in the price of hospital services, greater demand for more expensive diagnostic tests, and higher utilization of physician specialists.
