Studies Hint At Slowing Health Care Cost Increases

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Although U.S. employers continue to face large health care cost increases, two recent surveys show them to be moderating slightly.

Hewitt Associates Inc., Lincolnshire, Ill., found 2005 saw the lowest average rate increase in six years, at 9.2%. Surveyed employers, however, project an average 9.9% increase next year.

Another survey by the Sherlock Company, Gwynedd, Pa., foresees an 8.4% rise for next year, down from a 9.3% this year.

The Sherlock study surveyed 80 health care plan providers.

Hewitt, a human resources consulting firm, reported a 12.3% average increase in health care costs last year.

Employees are taking an increasingly heavy hit on health care, with their total contributions plus out-of-pocket costs almost doubling in four years, from $1,687 in 2002 to a projected $3,136 in 2006, Hewitt found. It expects the average employee cost this year to be $2,810, consisting of $1,366 for the employee’s share of the insurance premium and $1,444 for copayments, deductibles and coinsurance.

Overall, employees’ total health care spending next year will be up 12%, more than 3 times the average 3.6% pay raise expected for salaried exempt employees, Hewitt noted, citing its recent compensation survey.

With health care costs eating up much of the pay gains for many workers, it remains to be seen how much more of these costs employers can shift onto employees. For instance, an employee making $40,000 now would receive the average salary increase of $1,440 next year, 23% of which would be taken by increased health care costs next year.

Craig Dolezal, national health care practice leader for Hewitt, attributes the reduced cost increases this year to a variety of causes, including increased consumer awareness and financial prudence in using health care services, continued mergers of health plans and providers, and lower overall inflation.