Employer Health Care Cost Increases to Remain Stable

September 29, 2009 (PLANSPONSOR.com) - Health care rate increases are projected to remain stable for the third consecutive year, according to an analysis by Hewitt Associates.

In 2009, average health care premiums increased 6%, consistent with 2008, according to a press release. Hewitt projects a 6% average premium increase for employers again in 2010.

Hewitt data shows the average total health care premium per employee for large companies will increase from $8,607 in 2009 to $9,120 in 2010. The amount employees will be asked to contribute toward this cost is $2,085, or 23% of the total health care premium. This is up 10% from 2009, when employees contributed $1,890, or 22% of the total health care premium, the press release said.

Average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, are expected to increase to $1,938 in 2010, also up 10% from $1,766 in 2009.

These projections mean that in nine years, total health care premiums will have more than doubled from $4,159 in 2001 to $9,120 in 2010. Employees’ share of those costs – including employee contributions and out-of-pocket costs – will have more than tripled from $1,262 in 2001 to $4,023 in 2010.

In 2009, Hewitt saw average cost increases of 7.4% for health maintenance organizations (HMOs), 5.4% for point-of-service (POS) plans, 5.2% for preferred provider organizations (PPOs), and 2.7% for traditional indemnity plans. For 2010, Hewitt forecasts that companies will see average cost increases of 5% for PPOs, POS plans, and traditional indemnity plans. Companies will see an average cost increase of 8% for HMOs.

That means from 2009 to 2010, the average cost per person for major companies will increase from $8,264 to $8,677 for PPOs; $8,869 to $9,579 for HMOs; $9,320 to $9,786 for POS plans; and $8,762 to $9,200 for traditional indemnity plans, Hewitt said.

Hewitt’s health care cost data is derived from the Hewitt Health Value Initiative, a cost and performance analysis database of more than 1,700 health plans throughout the U.S., including 325 major employers representing more than 13 million health plan participants.