Employer Health Costs Continue Soaring

Whatever Congress does about health care costs and health insurance reform don’t expect much, if any, near-term cost relief. Surveys of health insurance costs and health care costs continue showing what seems inevitable: Costs for 2010 and beyond will rise faster than wages, faster than inflation. While the U.S. economy is stagnant, and employee wages are stagnant or falling, health care and health insurance costs in 2010 will rise as much as 6 percent to 10 percent. For the scary future, continue reading.

HEALTH COST REFORM LIKELY? NOT ANYTIME SOON

No matter what happens in Washington, DC, with health insurance legislation one thing is certain: Health insurance costs and health care costs for employers and employees will rise faster than inflation.

The increase in health care costs and health insurance costs at rates greater than overall inflation and increases in wages appears inevitable. At least for the next few years.

Annual surveys of health care and health insurance costs indicate that for 2010 the costs are going up in the range, on average, of 6 percent to 10 percent. (In the last 10 years the annual inflation rate typically has been in the 2 percent to 3.5 percent range. This year the inflation rate is stagnant.)

Employees’ share of costs – in increased share of premiums and increased co-pays – are going up. And in 10 years health care/health insurance costs could reach a staggering 20 percent of the U.S. economy.

Here are the details:

The Towers Perrin survey: The Towers Perrin 2010 Health Care Cost Survey of 279 large companies finds employer-based health insurance costs will rise an average of 7 percent for 2010. That’s compared to a 6 percent increase in 2009.

This survey finds the average cost per employee of these large companies will be $10,212 for the year. In addition, the employees’ share of the cost premium increases and co-pay increases) will go up, on average, by 10 percent, to an average of $2,292 in premiums and an additional $200 in co-pays and other costs.

The Towers Perrin survey shows health care costs paid by employers in 2010 will be up 149 percent since 2000. During the same period, employee wages are up only 37 percent.

The Commonwealth Fund. Recently the private foundation projected that, if changes don’t happen, employer-provided health insurance costs would go up 94 percent in the next 10 years. By 2020, the Commonwealth Fund projected, average family health insurance would cost $23,842.

The Business Roundtable. At about the same time, the Business Roundtable predicted that, without reforms resulting in lower costs, employer health care related costs would go up 166 percent by 2019. The Business Roundtable predicted the employers’ cost would average close to $29,000 per employee by 2019 and the employees’ share of the cost would average more than $14,000.

Reporting on the survey results, the Workforce Management magazine stated: “The Business Roundtable predicts that without reforms, runaway health care costs will cripple the employer-based health insurance system and choke the U.S. economy. If nothing changes, total health care spending will [consume] more than 20 percent of the U.S. gross domestic product, far outstripping the portion of GDP consumed by health care in any competitor nation.”

Kaiser Family Foundation. Along with the Health Research & Educational Trust, the Kaiser Family Foundation recently issued results of their 11th annual survey of health insurance benefit costs. This study also confirmed that health insurance costs are rising substantially faster than inflation. This survey reported that employers’ health insurance costs rose an average of 5 percent this year over last year. Health care premiums rose 131 percent in the last 10 years. That’s an increase of about ten times faster than inflation.

Hewitt Associates, Inc. The annual study of health insurance costs by HR consulting firm Hewitt Associates shows that group health insurance costs rose six percent in 2009 and will rise another six percent in 2010. This study compiled information from more than 325 large employers. Cost-shifting to employees continues. The employees’ share of health care and insurance costs went up 6.5 percent in 2009. And the study projects another 10 percent increase in costs for employees in 2010.

Note: Most of these survey and study results are based on findings from large employers. The Hewitt Associates study, for example, obtained data from employers with an average of 16,000 employees. Expect that most employers – those with much fewer employees – will experience higher costs and higher increases because very large employers are able to self-insure, experience lower administrative costs, and obtain other savings.

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HEALTH CARE QUALITY LAGS IN U.S.

U.S. employers and employees are shelling out high dollars for health care.and getting less than quality results compared with companies and people in competing industrial countries.

For example, The Commonwealth Fund (a private foundation) recently issued findings from “A Survey of Primary Care Physicians in 11 Countries, 2009.” The survey found:

58 percent of U.S. physicians report their patients often have difficulty paying for some out-of-pocket costs, including medications. The highest result from physicians in any other country in the survey was 37 percent.

Among U.S. physicians, only 29 percent reported they made arrangements to provide patients with after-hours care. In the Netherlands, New Zealand and the United Kingdom, nearly all the surveyed physicians reported offering after-hours care to prevent unnecessary emergency room visits.

In the U.S., just 46 percent of physicians reported using electronic medical records. In other industrialized nations (such as Australia, Italy, the Netherlands, New Zealand, Norway, Sweden and the United Kingdom), more than 90 percent of physicians reported using electronic medical records.