2011 Health Cost Hikes Highest in Five Years

September 27, 2010 ( – Employers can expect an average 8.8% health coverage increase in 2011, up from 6.9% in 2010 and the highest level in five years, according to an analysis by Hewitt Associates.

By Fred Schneyer | September 27, 2010
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A Hewitt news release said the estimate was driven by recent higher medical claim costs, an aging population, and changes brought about by health care reform.

According to the news release, the average total health care premium per employee for large companies will be $9,821 in 2011, up from $9,028 in 2010. The amount employees will be asked to contribute toward this cost is $2,209, or 22.5% of the total health care premium. This is up 12.4 % from 2010, when employees contributed $1,966, or 21.8% of the total health care premium.

Hewitt said average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, are expected to be $2,177 in 2011—a 12.5% increase from 2010 ($1,934). According to the analysis, these projections mean that in a decade, total health care premiums will have more than doubled, from $4,083 in 2001 to $9,821 in 2011. Employees’ share of medical costs—including employee contributions and out-of-pocket costs—will have more than tripled, from $1,229 in 2001 to $4,386 in 2011.

According to Hewitt, a variety of factors are driving the increase in projected health care cost increases for 2011. Employers are seeing an increase in the amount of charges and frequency of catastrophic claims - particularly true today, as slower levels of hiring have left employers with slightly older workforces who are more prone to costly medical conditions. Hewitt estimates that the most immediate applications of health care reform—including covering dependents to age 26 and the elimination of certain lifetime and annual limits—contributed approximately 1% to 2% of the 8.8% projected increase for 2011.

“After 18 months of waiting for health care reform to play out, employers find themselves in a very challenging cost position for 2011,” said Ken Sperling, Hewitt’s health care practice leader, in the news release. “Reform creates opportunities for meaningful change in how health care is delivered in the U.S., but most of these positive effects won't be felt for a few years. In the meantime, employers continue to struggle to balance the significant health care needs of an aging workforce with the economic realities of a difficult business environment.”