2005 Health Care Cost Increase Lowest in Six Years

October 11, 2005 (PLANSPONSOR.com) - Research from Hewitt Associates shows that the increase in employers' health care costs for 2005 is the lowest since 1999.

According to its press release, Hewitt says health care costs increased 9.2% for employers in 2005. It projects a 9.9% increase for 2006. Annual cost per employee in 2005 is $7,323, with projected cost per employee of $8,046 in 2006.

Employees continue to pay more for their health care, with the average employee contribution to health care premiums $1,366 in 2005, according to Hewitt’s data. It projects the average employee contribution in 2006 will be $1,612, representing 20% of overall health care premium. Out of pocket employee expenses continue to rise also as Hewitt’s data shows projected costs of $3,136 in 2006, up from $2,810 in 2005.

Hewitt says these cost increases for employees are offsetting salary gains. According to the release, an employee making $40,000 today, receiving a projected salary increase of $1,440, will use 23% of that salary increase to pay for the health care cost increase in 2006.

Traditional indemnity and Point-of-Service plans will experience the largest increase in 2006 (10.5% each), according to Hewitt. Preferred Provider Organizations and Health Maintenance Organizations will experience increases of 9.5% and 10% respectively.

Hewitt said employers are using several strategies to manage health care costs, including:

  • offering consumer directed health plans
  • contracting with plans that offer specialized or health risk management programs and focus on wellness and prevention
  • requiring more quality data and price transparency
  • changing prescription drug coverage.

The Hewitt press release is here .