Health Care Cost Trends

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Group Insurance: A Better Deal for Most People Than Individual Plans.
McDevitt, Roland; Gabel, Jon; Lore, Ryan; Pickreign, Jeremy; Whitmore, Heidi; Brust, Tina; Health Affairs; v29 no1 pp 156-164 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A comparison of health care costs through group insurance and individual insurance, using data from multiple surveys and simulations, shows group health insurance to be more affordable. Costs for employer-sponsored coverage get favorable tax treatment and other advantages, available to few individual purchasers. Coverage through group plans is more comprehensive, most often including maternity benefits and serving those with major health problems. Employer-sponsored plans covered 80 percent of charges in 2007, while individual plans covered only 64 percent. Group plans also offer more cost support with premiums and out-of-pocket costs.
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Health Spending Growth at a Historic Low in 2008.
Hartman, Micah; Martin, Anne; Nuccio, Olivia; Catlin, Aaron; Health Affairs; v29 no1 pp 147-155 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The increase in expenditures on health care fell from 6.0 percent in 2007 to 4.4 percent in 2008, the slowest growth rate since this data series began in 1960. Expenditures covered health care goods and services including hospital care.Yet spending nationally rose to $7,681 per person, $2.3 trillion overall. Federal spending on health care increased to 35 percent of all national health spending due to greater demands on Medicaid and Medicare. Health care consumed 16.2 percent of the gross domestic product, up from 15.9 percent in 2007. This increase is typical of periods just before and following recessionary periods. Such increases in health care spending exceed the nation's ability to fund care.
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Taming Health Plan Cost Trends: Small Changes Can Equal Major Savings.
Kaplan, Edward; Employee Benefit News; v23 no15 pp 44-45 Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Segal projects medical claims costs to soar to between 10.2 percent and 13.3 percent, over four times the typical employee's raise for 2010. The main culprits are medical service and supply cost inflation, cost shifting toward private sector payers, growing utilization by an aging populace, litigation, fraud and abuse. Expanded mental health benefits will slightly increase costs. The effects of any health insurance reform are unknown as of early 2010. Employers can seek savings by concentrating on vendor price negotiations, capping hospital charge increases, expanding cost conscious incentives for employees, managing use and costs of outpatient imaging and giving preference to generic drugs. Utilization audits, wellness programs, medical tourism and consumer education can also trim costs.
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Health Care Plan Costs Rise 5.5% in '09: Study.
Geisel, Jerry; Business Insurance; v43 no42 pp 3, 22 Nov 23, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to a Mercer survey, group health care plan costs rose from $8,432 per employee in 2008 to $8,945 in 2009, an increase of 5.5 percent. This was the lowest increase in over a decade, and 0.8 percent less than the 2007 to 2008 increase of 6.3 percent. A Mercer spokesperson said that the cost increase is better than expected, since recessions often lead to spikes in health care cost increases. Mercer cited a number of factors to account for the slower increase, including increased adoption of consumer driven health plans, rising employee enrollment and increased employer adoption of health management programs.
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Job-Based Health Insurance: Costs Climb at a Moderate Pace.
Claxton, Gary; DiJulio, Bianca; Whitmore, Heidi; Pickreign, Jeremy; McHugh, Megan; Finder, Benjamin; Osei-Anto, Awo; Health Affairs; v28 no6 pp W1002-W1012 suppl. Nov-Dec 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Responses to the 2009 Kaiser/HRET Survey of Employer Health Benefits shows six in ten firms responding offered health coverage in 2009. Group health insurance premiums for families increased five percent, up to $13,375, and deductibles and copayments rose. The average employee contribution percentage has not changed significantly, though this varies by industry. Enrollment in high deductible health plans held steady since 2008, despite the economic downturn, but more workers had deductibles of $1,000 or more. A rising percentage of employers provide health risk assessments, with 11 percent offering financial incentives for completion, and 58 percent offer wellness programs. About one in five reduced health benefits or raised employee costs. Self-selection by employers responding to the survey may have skewed survey results.
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The New Health Participation and Access Data From the National Compensation Survey.
Ford, Jason L.; Compensation and Working Conditions Online; 19 pp Oct 26, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Starting with March 2008 data, the National Compensation Survey ties employer health care costs to employee access and participation in health insurance plans. The data indicate six in ten workers participate in at least one health care plan compared with 56 percent who participate in a medical plan. Annual health costs are 142 percent higher for management, professional and related workers than for those in service positions, and their participation rate is double that of service workers. State and local governments pay close to twice as much per employee than do private sector employers. Only 31 percent of service workers in private industry participate in employer-sponsored health plans, compared with 71 percent of government service workers.
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Health Care: 2010 Health Care Costs May Rise 7 Percent, Annual Towers Perrin Employer Survey Finds.
Daily Labor Report; no194 p A10 Oct 9, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to an October 2009 Towers Perrin survey, health benefit costs are likely to rise seven percent for U.S. workers from 2009 to 2010. The survey projects an annual expenditure of about $10,212 per employee in 2010, with employees paying about 22 percent of that amount. Employee contributions will likely rise about ten percent in 2010, compared to eight percent in 2009. While employers continue to bear the majority of the health cost burden, increases in employee payments will continue to outstrip employee wage increases. The survey also found that more than half of high performing employers, those with the power to affect current delivery models, plan to offer employee incentive programs such as health risk assessments, health promotion programs and on site biometric screenings by 2012.
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Open Wide: The Importance of Dental Care in the Workplace.
Tapp-McDougall, Caroline; Benefits and Pensions Monitor; v19 no7 p 19 Oct 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Like medical insurance, the cost of dental benefit coverage is rising, and employers shoulder most of the burden. In 2000, employers and individuals paid for 86 percent of the care delivered. Most appreciate the important part dental care plays in overall health. Those with dental coverage are 2.7 times more likely to get dental treatment than others. Compared with health benefits, employees use dental benefits more often and focus on diagnosis and prevention. They view the benefit differently and perceive it to have high value. Despite the rising costs, employers should appreciate the importance of dental care for their workers and ensure they understand the benefit and use it appropriately.
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The Relationship Between Union Status and Employment-Based Health Benefits.
Fronstin, Paul; EBRI Notes; v30 no10 pp 15-21 Oct 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Among union members, 78.9 percent had health benefits in 2007, with 61.7 percent having coverage through their own job and 17.3 percent receiving coverage as dependents. Lack of coverage was rare, only 2.9 percent compared with 14.2 percent for nonunion members, though union workers' coverage was less likely to extend to dependents. Having employment-based benefits varied with union status, a worker's job, company size and industry. Premium costs for union members exceeded those for other individuals, $4,836 to $4,635 in 2008. Though medical coverage correlates strongly with union membership, it declined by three percent from 2003 to 2007. As union coverage declines, the overall rate of employment-based coverage will slip.
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Annual Medical Spending Attributable to Obesity: Payer- and Service-Specific Estimates.
Finkelstein, Eric A.; Trogdon, Justin G.; Cohen, Joel W.; Dietz, William; Health Affairs; v28 no5 pp W822-W831 suppl. Sep-Oct 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Per capita health care spending is 42 percent higher for obese individuals that for those of normal weight. Obesity costs were estimated in 1998 at $78.5 billion, and Medicare and Medicaid covered about half the cost. By 2006, the higher prevalence of obesity generated $40 billion higher costs, potentially amounting to $147 billion in 2008, nearly ten percent of total medical spending. Drug spending was the primary cost driver in 2006, strongly affected by the Medicare Part D benefit. By 2008, private payers bear most of the total cost, but government programs still pay much of it. Most obesity-related costs come from diseases associated with the condition. Growing evidence supports the cost effectiveness of bariatric surgery.
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Costs for 3 Types of Health Plans in New Mercer Survey.
Managing Benefits Plans; no09-09 pp 5-7, 11 Sep 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Mercer's annual survey on cost trends for employer sponsored health insurance shows the average cost per active employee for 2008 was $8,482. Employers in the Northeast, in the transportation, utilities and communications sector, and employing between 10,000 and 19,999 workers face the highest costs. The average PPO cost per employee was $7,815, up 6.3 percent or $436 from 2007, while the mean HMO cost was $7,768, up 9.1 percent or $648. For consumer driven health plans, the average was $6,207, up four percent or $237. The figures are based on large employers' costs. For fair comparison, smaller firms should lower the costs by eight percent.
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Income, Insurance, and Technology: Why Does Health Spending Outpace Economic Growth?
Smith, Sheila; Newhouse, Joseph P.; Freeland, Mark S.; Health Affairs; v28 no5 pp 1276-1284 Sep-Oct 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Research from the 1990s suggested expanding medical technology was responsible for one quarter to one half of rising medical care spending from 1940 to 1990. More recent research indicates technology alone is responsible for less cost growth. However, the combined effect of technology, income and insurance has a strong impact on costs. The rising availability of insurance is pushing technology development. Aggregate national income, but not household financial status, interacts with insurance coverage, stimulating technology use. Administrative costs, practice inefficiency and competitive demand contribute relatively little, though demographics are rising in importance.
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Is Healthy Spending Excessive? If So, What Can We Do About It?
Aaron, Henry J.; Ginsburg, Paul B.; Health Affairs; v28 no5 pp 1260-1275 Sep-Oct 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Research shows U.S. health care spending is disproportionate to the overall level of health and wellness. The costs are higher than in other countries, and much of the spending yields little or no benefits in improved health. Factors influencing higher spending include insurance and its favorable tax treatment on the demand side, fee-for-service payment and the mix of specialty and general care health professionals on the supply side, as well as litigation, pay levels and drug research. Maintaining health levels at lower costs would require efficient provider competition, research to identify the most effective treatment methods and ways to identify patients who will benefit from treatments.
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Rebalancing Health Costs.
Wells, Susan J.; HR Magazine; v54 no9 pp 43-44, 46-48 Sep 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Employers continue to look for ways to lower their health care costs, principally by requiring more cost sharing by employees. Towers Perrin found 52 percent of 480 medium to large size organizations polled planning to ask workers to assume more of the burden. Many offer financial incentives, such as a premium share reduction, to encourage healthy behavior and lower health risk factors. Cost management can be approached by rebalancing the premium cost and changing utilization patterns or both. The key is to plan based on identification of critical cost drivers and prediction of medical cost trends. Any changes must be made with employee perception, ability to pay, effective service usage and the competitive environment in mind.
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Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2009 Current Population Survey.
Fronstin, Paul; EBRI Issue Brief; no334 pp 1-35 Sep 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Analysis of the 2009 Current Population Survey provided information on the prevalence of health insurance in 2008. There were 45.7 million people under age 65 without health insurance in 2008, with the rate of insured falling to 82.6 percent. Participation in employment-based insurance fell from 68.4 percent in 2000 to 61.1 percent in 2008. Medicaid and State Children's Health Insurance Programs covered 14.9 percent of the nonelderly population, up from 10.5 percent in 1999. The rate of individual insurance purchase has been stable since 1994 at six to seven percent. Those with full-time, year round jobs in certain sectors and positions and with high incomes were most likely to have employment-based health insurance.
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Health Care: COBRA Enrollment Seen Doubling After Offer of Premium Assistance, Hewitt Reports.
Wyand, Michael W.; Daily Labor Report; no159 p A2 Aug 20, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Analysis of takeup rates for COBRA following the subsidy offered under the American Recovery and Reinvestment Act shows enrollment jumped from 19 percent between September 2008 and February 2009 to 38 percent from March to June 2009. The numbers reflect 300 of the largest companies in the U.S. with 8 million workers total. The figures are supported by the Employee Benefits Security Administration, which has seen sharply higher numbers of applications and inquiries. By sector, industrial manufacturers saw an 800 percent increase in COBRA enrollments, followed by a 300 percent increase among construction, leisure and retail firms.
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Recession Takes Hold: More Were Eligible, Fewer Elected, Costs Stay High.
Employee Benefit Plan Review; v64 no2 pp 27-33 Aug 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In Spring 2009, Spencer's Benefits Reports conducted its 16th survey of employers' and health plan administrators' experiences with COBRA. While average annual health care costs were about 26 percent above 2004 levels among companies that reported costs, average COBRA costs were about 32 percent higher than in 2004 and 53 percent higher than the overall average. In 2009, 16.87 percent of employees became eligible for continuation of coverage, significantly above the 10.37 percent 20-year average. The survey identified the four major problems with COBRA coverage laws: cost of coverage, complexity of the laws and regulations, expansions to the original COBRA program and the collection of COBRA premium payments.
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Health-Care Costs Maintain Dramatic Rise.
Dobson, Sarah; Canadian HR Reporter; v22 no13 pp 1, 14 Jul 13, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : After a four year downward trend, pharmaceutical costs soared up 15.2 percent in 2009, surpassing last year's increase of 14.1 percent. Data from 11 major Canadian insurers reflected an uncertain economy and the tendency for anxious employees to use health care benefits while they are still available. Other cost drivers are the aging of baby boomers, the lower overall health of generation X individuals and the growing use of medications for depression. Medical plan costs rose 14.1 percent, up from 13.1 percent in 2008.
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Health Spending Projections Through 2018: Recession Effects Add Uncertainty to the Outlook.
Sisko, Andrea; Truffer, Christopher; Smith, Sheila; Keehan, Sean; Cylus, Jonathan; Poisal, John A.; Clemens, M. Kent; Lizonitz, Joseph; Health Affairs; v28 no4 pp W346-W357 suppl. Jul-Aug 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A prospective analysis of health care spending shows it to rise 6.2 percent from 2008 to 2018, outpacing the gross domestic product (GDP) by 2.1 percent. The portion of GDP devoted to health care will climb to 17.6 percent by 2009, prompted by the 2008 recession, and further to 20.3 percent by 2018. The recession is also pushing more costs onto public payment systems, which will bear over half the total cost of health care nationally by 2018. Costs will rise from faster enrollment in Medicare by aging individuals and from rising drug spending, while Medicaid enrollment will surge as a result of unemployment and the loss of employer-sponsored coverage.
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Health Care Costs: Employers' Health Care Costs Expected to Rise 9 Percent in 2010, Report Says.
BNA's Pension & Benefits Reporter; v36 p 1498 Jun 23, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : PricewaterhouseCoopers' Health Research Institute issued a report projecting a nine percent jump in the cost of health care benefits for 2010. This increase far exceeds expected rises in inflation and wages. Much of the increase is tied to greater utilization of benefits by employees anxious about losing jobs and coverage. Forty-two percent of survey respondents intend to ask for higher cost sharing and require plan members to take greater responsibility for their health. About the same amount hope to squeeze savings from modified plan designs. Despite wide offerings of wellness and disease management programs, confidence in their cost savings potential is low.
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Employer Costs for Employee Compensation: March 2009.
U.S. Department of Labor: Bureau of Labor Statistics: News; pp 1-27 Jun 10, 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The DOL's Bureau of Labor Statistics reports that, for March 2009, employers paid an average of $29.39 per employee hour worked. The portion representing wages and salaries was $20.49 or 69.7 percent, with all benefits accounting for $8.90 or 30.3 percent. Social Security, Medicare, unemployment and workers compensation averaged $2.28 or 7.8 percent. Life, health and disability insurance costs came to $2.52 or 8.6 percent, paid leave amounted to $2.08 or 7.1 percent and retirement and other savings averaged $1.31 or 4.5 percent. Health insurance benefits were most costly for union workers, in goods producing industries especially manufacturing and in the Northeast.
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Drug Watch 2009.
Cowan, Cory; Benefits Canada; v33 no6 pp 23, 25, 27 Jun 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : ESI Canada reports a 2.1 percent lower overall drug cost trend in 2009 compared to 2008, largely since 45 percent of filled prescriptions were generics. Despite representing under one percent of prescriptions filled in 2008, specialty drug spending is rising 17 percent annually, compared with three percent for others. Biologic drugs are the fastest growing segment. Generic versions of some biologics are promising but will not be available for some time. Some newer drugs are administered in nontraditional settings, resulting in a cost shift from the public sector to private health insurance. Plan sponsors must prepare for these changes by controlling costs where they can, such as by instituting mandatory generic substitution, encouraging generic biologics and establishing utilization management policies for high cost drugs.
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Managing Today's Rapid Growth in Diagnostic Radiology Costs.
Duford, Don; Benefits & Compensation Digest; v46 no6 pp 16-19 Jun 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Increased use of diagnostic radiology has led to an annual growth rate of 20 percent in the cost of diagnostic imaging. Human resource and benefits administrators must be aware of the different types of radiology providers. Hospitals provide excellent radiology services at premium costs, while physicians with their own radiology equipment can lead to questionable quality and unnecessary procedures. Specialty providers can offer the best services, superior scheduling and attractive pricing.
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Mandates and the Affordability of Health Care.
Glied, Sherry; Inquiry; v46 no2 pp 203-214 Summer 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A central issue in the health insurance reform debate is how to balance income with insurance costs to determine what one can afford. The federal government sets policy based on affordability of certain essentials, such as food and housing. The concept of affordability applies differently to health care than to other items, balancing ability to pay with willingness to pay. People adjust their use of health care and insurance against other items, often putting health care beyond their affordability threshold. Safety net institutions help provide food, shelter and some other goods, but offer little for health care. Massachusetts, Germany and the Netherlands mandate insurance coverage but with exemptions based on affordability, a reasonable approach in the absence of universal coverage.
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Savings Needed for Health Expenses in Retirement: An Examination of Persons Ages 55 and 65 in 2009.
Fronstin, Paul; Salisbury, Dallas; VanDerhei, Jack; EBRI Notes; v30 no6 pp 1-11 Jun 2009; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In order for a male aged 65 in 2009 to have a 90 percent chance of having sufficient funds to cover health care expenses through retirement, he would need between $134,000 and $378,000. This amount would be needed to supplement Medicare and cover out-of-pocket expenses. For a 50 percent chance of covering expenses, only $68,000 to $173,000 would be needed. Given longer typical longevity, a 65 year old woman would need $164,000 to $450,000 for a 90 percent chance of successfully meeting expenses or $98,000 to $242,000 for a 50 percent change. These cost estimates are nine percent above those given in 2008 for men and couples and 16 percent higher for single women. The absence of long term care costs from the analysis means actual costs could be significantly higher.
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