The main objective of many HR professionals today is to temper costs by getting employees more involved in their medical care decisions, expenses and overall health. This may be at least partially attributed to the fact that many experts expect health care costs to increase in 2011.
Health Care Cost Projections for 2011
Cost trends are now available for 2011 from various research organizations. The following health insurance cost predictions are based on recent employer surveys.
Hewitt Associates reports that health care cost increases will be the highest levels in the last five years due to rising medical claim costs, the aging population and the changing health care reform landscape. The organization projects an 8.8 percent average premium increase for employers in 2011, up from 6.9 percent in 2010 and 6.0 in 2009. Also, the average health care premium for an employee at a large organization is expected to be $9,821 in 2011, up from $9,028 in 2010. Employees will be asked to contribute $2,209 (22.5 percent) of their total health care premium, which is up 12.4 percent from 2010, when employees contributed $1,966. Employee out-of-pocket costs are also projected to increase to $2,177 in 2011 from $1,934 in 2010.
Hewitt also reports that employers were able to mitigate costs in this difficult economy by cost shifting, negotiating costs with health plans and increasing their efforts to promote preventive care. Of respondents, 95 percent indicate that managing costs is a top business concern. They will reduce these costs by increasing employee cost sharing, conducting dependent eligibility audits, encouraging spouses to enroll in their own employer’s plans when available, consolidating vendors and taking measures to improve their employees’ health.
Kaiser Family Foundation and Health Research & Educational Trust report that while premiums for employer-sponsored health insurance only moderately increased in 2010, employees contributed a significantly greater share of this premium than in previous years. In 2010, premiums rose about 5 percent for single coverage and 3 percent for family coverage. Employees contributed an average of 19 percent of the premium for single coverage and 30 percent for family coverage, up from 17 percent and 27 percent respectively in 2009. Between 2000 and 2010, average total premiums for small firms have increased 103 percent and 120 percent for larger firms (200 or more employees). Kaiser projects that the persisting unemployment rates and slow economic recovery will contribute to the continuing trend of increasing out-of-pocket costs.
Mercer finds that overall costs will rise by 6.4 percent in 2011; however, if employers do not take steps to mitigate plan costs, they would see a cost increase of nearly 10 percent. Their survey also indicates that while much of the cost growth is due to increased utilization of health care services, it is partially attributed to the passage of the health care reform legislation (Patient Protection and Affordable Care Act, PPACA), which added between 1 and 2 percent to the cost increase in 2011.
Milliman, Inc. reports that premium rate increases for 2011 are projected to average 10.2 percent for HMOs and 11.7 percent for PPOs. Similar to Mercer’s findings, Milliman reports that the rate increases can be attributed to increased health care utilization as well as employers starting to implement the requirements of PPACA. This year’s survey asked insurers what cost-reducing initiatives and provider contracting changes they are considering in 2011. Typically, respondents are planning to cut broker commissions, tier provider networks and employ more incentive-based programs. However, Milliman reports that almost all respondents are preparing to participate in the PPACA insurance exchanges in 2014.
PriceWaterhouseCoopers expects growth in medical costs for 2011 to be 9 percent, down 0.5 percent from 2010. The three major factors that contribute to this deflation include employers increasing employees’ out-of-pocket contributions, increased use of generic drugs and COBRA costs returning to normal levels in 2011 due to declining unemployment and expiring government subsidies. Much like other survey findings, PriceWaterhouseCoopers reports that employers will push costs on to their employees in attempt to encourage better management of their health care expenses.
The Segal Group, Inc.’s projections for 2011 remain relatively unchanged from 2010, but are still increasing much faster than average weekly earnings and general inflation. To relieve some of their costs, employers are requiring employees to handle more of their health care costs, tying wellness incentives to patient outcomes and participation rates, advancing value-based plan designs, promoting disease management programs,; using actual plan cost data to negotiate pricing and prepare for rules and requirements under PPACA that will take effect in the coming years.