Employer health care costs rising despite health care reform bill

An operating room during surgery

Rising employer health care costs in the next year despite the health care reform bill are being passed along to workers in the form of higher deductibles. Flickr photo.

Employer health care costs will continue to rise this year and next, but the rate of increasing costs for employer health insurance appears to be slowing down. Despite the health care reform bill, a nine percent employer health care cost increase is projected in 2011 compared to the 9.5 percent jump expected this year. To control rising health care costs in lieu of a health care reform bill, employers are dropping medical benefits for retirees and making workers pay a greater portion of health care premiums. Workers, in turn, are settling for higher deductibles. Hospitals shifting costs from Medicare to private payers and employers is seen as the primary reason for higher employer health care costs.

Higher health insurance deductibles

Companies are trying to offset employer health care cost increases by requiring their workers to spend more of their own money before coverage activates, according to a survey of 700 employers by PricewaterhouseCoopers. The Associated Press reports that most American workers are expected to have health insurance deductibles of $400 or more. Two years ago, only 25 percent of companies participating in the PricewaterhouseCoopers survey said they asked employees to pay deductibles of $400 or more. That grew to 43 percent in 2010 and is expected to pass 50 percent next year.

Retiree health benefits disappearing

The report also found a steep drop in the percentage of employers that subsidize retiree health coverage. The survey reported that only 22 percent of employers with more than 5,000 workers subsidized retiree coverage after age 65 this year. That’s down from 37 percent in 2009.

Wellness programs: missed opportunity

To slow the growth of employer health care costs, two-thirds of the companies responding to the survey said they planned to expand wellness programs and 63 percent already offer health risk questionnaires. But Reuters reports that only 39 percent offered wellness programs in the form of weight management and just 27 percent provided nutritional training. More than two-thirds of Americans are overweight or obese, a cause of many of the most expensive health conditions such as heart disease, diabetes and cancer.

Medicare changes fuel increases

The biggest employer health care cost increases for 2011 will be in hospital and physician costs, which make up 81 percent of premium costs. Industry Week reports that hospitals shifting costs from Medicare to private payers and employers is seen as the main reason for higher medical costs. In 2011, Medicare, the single largest payer for hospitals, will reduce payment rates for the first time after seven years of increases that matched or exceeded inflation. Most hospitals are likely to shift more costs to employer-based health plans.

Health care costs: could be worse

The rate of employer health care costs, although increasing, is being held down by some recent changes in the market. CNNMoney.com reports that the cost of providing COBRA coverage–which lets laid off workers extend their health plans–skyrocketed during the recession. Employers will save money as COBRA costs are expected to return to “more normal levels” in 2011.

Generic drugs soften the blow

Another factor keeping employer health care costs from accelerating faster is that drugs representing about $26 billion in annual sales are expected to go off patent in 2011. These drugs include the world’s best-selling drug, Lipitor. Expiring patents will open the drugs up to competition from cheaper generic versions. Generics account for as much as 80 percent of all prescriptions.

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