After almost a decade of flat growth in healthcare costs, employers are once again facing double-digit increases..
Some of your corporate clients may already be feeling the impact. A survey of 100 U.S. companies showed that their healthcare costs had risen 20 to 40 percent over the past three years.
Several studies predicted a 13-15 percent rise in employer premium costs for 2002, with preliminary quotes for 2003 even higher. In fact, a survey of more than 3,000 firms of all sizes found that between May 2001 and May 2002, health premiums increased 12.7 percent on average, the highest increase since 1990.
What's Driving Costs
A number of factors are responsible for the continuing cost escalation, particularly advances in healthcare technology, which account for more than half the growth. In addition, many managed care companies have eased tight limits on care adopted in the 90s. Other reasons for the increase include rising prescription drug costs, higher hospital and physician fees, increases in HMO premiums and a shift by some employers to more flexible – and more costly – types of medical plans.
Employers respond
Medical costs for employers are on a track that is significantly outpacing inflation. Studies show that employers have been absorbing much of these premium increases. But in today's weakened economy, companies are putting an increased emphasis on cost management and improved profitability. Employers of all sizes are considering cuts in benefits or additional cost sharing by workers in response to rising premiums.
Smaller companies perhaps have the fewest options available to them. If they shift additional health plan costs to employees, workers may choose not to participate and the company might not meet minimum participation rates. Dropping health plans altogether isn't an effective solution, either, since it could negatively affect a company's ability to attract and retain key talent – a primary concern for 75 percent of human resources professionals surveyed recently.
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