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Life Health > Health Insurance

Health Care Costs Could Spike In 2002

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By Kap Su Seol

U.S. employers are about to be socked with double-digit health care cost increases in 2002, according to Hewitt Associates, Lincolnshire, Ill.

On average, Hewitt forecasts that companies will receive cost increases of at least 13% for preferred provider organizations and point-of-service plans, 15% for traditional indemnity plans and 18% for health maintenance organizations.

The average cost per person for most major companies will increase $4,522 to $5,336 for HMOs; $4,834 to $5,463 for PPOs; $4,857 to $5,489 for POS plans.

“With a slowing economy, skyrocketing health care costs and shrinking bottom lines, containing healthcare cost is becoming a top priority for organizations,” says Jack Bruner, manager of health care management with Hewitt. Many employers will see a 16% rise in their health care bills, the largest increase in more than a decade at a time when the economy has slowed markedly, he says.

Although some companies will attempt to absorb the majority of rate hikes many employers plan to ask their workers to pay up to 30% of their health care costs, next year up from 25% this year. For employees, that means paying up to $463 more in premiums notes Bruner.

The upward trend in health care costs will not be showing a sign of containment any time soon. This year alone, health care costs rose 10.2% nationally, according to Hewitt. “Health care costs will continue to increase at a double digit pace for the next few years,” says Bruner, “unless there is a fundamental change in the way health care is delivered.”

Among the hardest hit will be small and midsize companies and their employees. “The bad news is that employees will again have to pay more out of their paycheck for health care, and some smaller to midsize companies may not be able to afford to provide health care coverage if rate increases continue at this pace,” says Bruner. The reeling economy will add insult to injury. “As the economy slows, and as it impacts companies’ bottom line, employers are more resolute in addressing the health care costs problem,” he adds.

Rate hikes of up to 16% will affect almost every major U.S. metropolitan area next year, with the following cities seen to record the highest increases: 15.8% in Cincinnati; 13.9% in Houston; 13.7% in Phoenix; 12.8% in Boston; 12.5% in Dallas/Fort Worth; 12.4% in Tampa Bay; 12.1% in Detroit; 12% in Atlanta; and 11.6% in Denver. “Unfortunately, no one is safe from health care cost hikes,” says Bruno. “Locations with significant HMO penetration seem to be the hardest hit because of the continued financial pressures on the managed care industry.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 5, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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