Employers Shift More Healthcare Costs To Workers

October 15, 2001(PLANSPONSOR.com) - The economic downturn, softening labor market and accelerating health care costs are forcing employers to carefully review their current health care strategies, in some cases, shifting a greater portion of the cost to employees, a new survey from Watson Wyatt finds.

In the face of next year?s projected double-digit health care benefit cost increases:

  • more than half of employers interviewed will raise employee contributions by as much as, or more, than their cost increases, and
  • over 70% are considering benefit reductions or an increase in employee co-pays over the next year

The survey, based data from 200 companies covering 1.4 million employees, revealed that employers expect health plan costs for active employees to rise 13.6% next year, up from 12.2% this year and 8.1% in 2000.

On the Up

According to the survey, between 2001 and 2002, it is anticipated that the premium costs for active employees with:

  • Indemnity plans will increase by 14.4%,
  • Health Maintenance Organizations will rise by 13.9%,
  • Preferred Provider Organizations will go up by 13.7%, and
  • Point of Service plans will rise by 12.7%

In addition, respondents expect

  • prescription drug benefit costs to increase by 17%,
  • medical only to rise by 13%, and
  • dental to go up by 6.7%

Employers expect even higher cost trends for their retiree medical plans. Cost increases for post-65 retirees are expected to accelerate from 13.3% this year to 15.1% in 2002. Much of this increase for is attributed to an 18% anticipated rise in the cost of prescription drug benefits.

For pre-65 retiree plans, employers predict an overall increase of 15% for 2002, with an average cost increase of 14.4% for medical and 18.4% for prescription drugs.

Cost Management

Asked what actions they plan to take to manage health costs over the next year:

  • three-quarters are likely or somewhat likely to use the Internet for employee education,
  • a little over 70% are likely or somewhat likely to reduce benefits or Increase employee co-pays,
  • three-fifths are likely or somewhat likely to resort to target interventions, such as health management,
  • while 32% will are likely or somewhat likely to be more aggressive in managed care

The complete summary report .