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.

The Early Retiree Reinsurance Program: $5 Billion Will Last About Two Years.
EBRI Notes; v31 no7 pp 7-12 Jul 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A component of the Patient Protection and Affordable Care Act is a $5 billion fund to subsidize 80 percent of health care costs between $15,000 and $90,000 for early retirees, their spouses and eligible dependents. The funds are to remain available until January 1, 2014 or earlier if they run out. The intent of the fund is to encourage employers to continue offering health care coverage for early retirees. In 2001 only about 30 percent offered coverage, and the costs to retirees continue to rise. Census Bureau and other survey data from 2007 estimate the number of early retirees and dependents covered through employer retiree health care programs at 1.3 million. Extrapolating health care spending from 2007 figures, subsidies to employers will amount to $2.5 billion in the first year of the program and will likely be depleted in 2011.
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Health Care Costs: Employers' Health Costs May Rise by 9 Percent in 2011, PwC Report Says.
Brown, Christopher; BNA's Pension & Benefits Reporter; v37 p 1429 Jun 22, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to a study by Pricewaterhouse Coopers' Health Research Institute, employer health care costs will rise nine percent in 2011, down slightly from 2010's 9.5 percent increase. The study said that most of the early effects of the Patient Protection and Affordable Care Act of 2010 were relatively low impact, with the major effects of the Act expected in 2014. The biggest factors increasing health care costs in 2011 will be cost shifting from Medicare, provider consolidation and increased spending on electronic health record systems. Restraining influences on health care costs will include increased participant cost sharing, the shift to generic drugs and the return of COBRA costs to normal levels.
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Health Care: CRS Says Few Workers Take COBRA Due to Costs; Congress Mulls Legislation.
Forbes, Sean; Daily Labor Report; no55 p A6 Mar 24, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : The cost of continuing health coverage under COBRA is too much for most unemployed individuals. In 2008 under ten percent of those eligible elected to take COBRA, down from 27 percent in 2006, the Congressional Research Service reported. The COBRA subsidy has not helped very much. Ceridian Corp.'s data on about 7.3 million employees shows fewer than 18 percent of eligible terminated workers took the subsidy, up from 12 percent in the three months before the subsidy became available. Limits in eligibility and coverage compound the challenge to takeup. Congressional bills would extend the duration of the subsidy, increase the subsidy and lengthen coverage until an alternative is available through a health insurance exchange.
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Health Care: Annual Survey Shows Some Employers Have Controlled Rise in Health Care Costs.
Olsen, Florence; Daily Labor Report; no49 p A4 Mar 16, 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : In March 2010 Helen Darling, president of the National Business Group on Health (NBGH), presented the results of the NBGH/Towers Watson annual employer survey. Employers, Darling said, believe that overhauling the health care system will lead to higher costs and fewer benefits. The survey finds that health care cost increases are stabilizing at around seven percent annually, with the employers most successful at controlling costs seeing only a 0.3 percent increase per year from 2008 to 2010. The employee share of health insurance premiums is expected to rise only one percent to 21 percent, indicating that employers are still unwilling to shift costs to employees.
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Fuzzy Math.
Quinn, Neil; Employee Benefit News; v24 no3 pp 34-35 Mar 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Surveys report the average increase for health insurance premiums from 2007 to 2008 was five percent. But that statistic is meaningless out of context, and employers should not respond to a benchmark without more data for valid comparison. Average benchmark statistics abound, but a savvy employer will ask questions to determine how the generalized number relates to one specific organization, its workforce, expense structure, wages and benefits and its competition. Benefits must be considered in the context of benefits constraints and priorities, cost goals, human resources management and strategic objectives.
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Health Care Costs Continue to Moderate: Kaiser Research.
HRFocus; v87 no3 pp 6-7, 10-11 Mar 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A Kaiser Family Foundation survey finds that health insurance premium costs rose five percent in 2009, the same increase as in 2008. Increases were on a decline from 2003 to 2008. The percentage of employers offering health benefits has fallen from 66 percent in 1999 to 60 percent in 2009. Average monthly worker contributions were $65 for single coverage and $293 for family coverage, up from $60 and $280 in 2008. The four leading cost-control strategies for employers were disease management programs, high-deductible health plans with health savings accounts, increased employee cost-sharing and tighter restrictions on managed care.
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Tracking Health Insurance Coverage by Month: Trends in Employment-Based Coverage Among Workers, and Access to Coverage Among Uninsured Workers.
Fronstin, Paul; EBRI Notes; v31 no3 pp 8-12 Mar 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A longitudinal study of employment-based health coverage from December 1995 to March 2009 reveals the related influences of recessions and unemployment. From late 1995 to late 2007 there was little change in health insurance through employment, hovering in the 60 percent range. The rate dropped from 60.4 percent in December 2007 to 56.8 percent in May 2008 and further to 55.7 percent by March 2009. The recession starting in late 2007 pushed the uninsured rate from around 14 percent to the high 17 percent level in May 2008 and almost 19 percent by March 2009. Cost has long been a chief reason for foregoing health insurance and was key for 87 percent of survey respondents in early 2009.
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A Delicate Balance.
Lepage, Suzanne; Benefits Canada; v34 no2 pp 20-21, 23 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : According to ESI Canada's 2008 Drug Trend Report, specialty or biologic medications make up 14.7 percent of drug costs, and the amount spent on biologics is growing by 17 percent a year, compared to three percent for other drugs. Biologic drugs are best suited to intravenous administration, meaning they are often delivered in a hospital. Many insurers consider them insured hospital services under Canadian law and expect hospitals to pay for them. Sponsors may be unable to completely avoid paying for biologic drug claims, but they can manage the cost by ensuring the drugs are being used appropriately. Tiered formularies, requiring lower cost biologic therapies to be used first and therapy management for members on biologic drugs can also help reduce biologic drug costs.
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Plugging the Dam.
Koster, Kathleen; Employee Benefit News; v24 no2 pp 12-13 Feb 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A Mercer national survey of almost 3,000 employers found their costs for health benefits in 2009 rose at a slower rate than for the previous decade. Other surveys forecast from six to seven percent increases for 2010. However, employee premium increases are escalating, ten percent for 2010. Small employers are raising PPO deductibles and slowly switching to consumer driven health plans (CDHPs). Large firms are more likely to offer CDHPs but are focusing on improving employees' health through member incentives, behavioral economics, personalized health management strategies and provider incentives. Mercer found organizations with workforce health management or wellness initiatives see cost increases two percent lower than others.
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2010 Benchmarks: Key Measures to Monitor.
HRFocus; v87 no1 pp 1, 13-15 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Pricewaterhouse Coopers Saratoga's 2009/2010 U.S. Human Capital Effectiveness Report identifies some key benchmarks and trends for human resources personnel to watch in 2010. Revenue per full time employee has risen for several years, increasing over 25 percent from 2006 to 2008. Voluntary turnover rates continued to be highest for the youngest generation of workers, Generation Y, but their voluntary turnover rate decreased in 2008, and 2008 also saw Generation X becoming the majority of the workforce. Health care costs per active worker decreased for the first time since Pricewaterhouse Cooopers Saratoga began tracking them, due to baby boomers leaving the workforce and employers reaching the limit on what they are willing to pay.
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3 Surveys Outline 2010 Health Care Cost Increases & Companies' Intentions.
Managing Benefits Plans; no10-01 pp 1-7 Jan 2010; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Surveys by Mercer, Towers Perrin and Hewitt all point to rising health costs, though at different rates. Mercer predicts a nine percent increase for 2010, up from 6.4 percent in 2009, but finds employers are trying to limit the actual cost increase to 5.9 percent through various cost containment measures. Towers Perrin anticipates a seven percent rise. Hewitt expects a six percent increase, the same as for 2008 and 2009. All agree the costs put serious pressure on employers and employees alike with more employees unable to maintain insurance with the added costs. Cost sharing is the most common strategy for containing the increase, followed by eliminating high cost options and promoting consumer driven health plans and other moderately priced alternative plans. Plan audits and renegotiated vendor contracts are also common.
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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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National Survey of Employer-Sponsored Health Plans.
52, 48 pp 2010; book

Availability :
Abstract : The average per-employee cost for health care benefits rose 5.5 percent in 2009, following increases of 6.1 percent in 2005 through 2007 and 6.3 percent in 2008. The average benefit cost per employee was $8,945. Due to job losses, fewer people were covered by employer-sponsored health plans than in 2008. Small employers held down costs by moving employees into consumer-directed health plans and increasing PPO deductibles. Larger employers added wellness programs and policies to manage health care costs. The average cost for prescription drug benefits was up 7.6 percent.
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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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