Health Cost Hikes Predicted to Stay Flat

February 23, 2009 ( - A new survey of large U.S. employers found the median rate of health care cost increases is expected to remain at 6% in 2009 - the same as employers actually experienced in 2007 and 2008.

That was a key finding of a poll of 489 employers by Watson Wyatt and the National Business Group on Health, according to a joint news release.

The average employer health care expenditure per employee in 2008 was $7,173 and is expected to increase to nearly $7,400 in 2009, according to the survey. Employees paid an average of 20% of their total medical premium costs in 2008, a number that will likely stay the same in 2009.

The news release said in addition to the predicted 6% health care cost hikes, the survey also found more employers were planning to put in place a consumer-directed health plan (CDHP) in 2010 as a cost-control mechanism. The announcement pointed out that the 6% figure, while nearly twice the current rate of inflation, is actually lower than the 8% level seen in 2006.

“Cost increases have stabilized, but the financial crisis is causing many companies to reevaluate their health plan strategies,” said Ted Nussbaum, group and health care practice leader at Watson Wyatt, in the announcement. “While large-scale changes appear unlikely, economic realities are leading companies to adopt strategies that emphasize greater personal health accountability to their workers.”

While companies will be taking a close look at benefit offerings because of the recession, most do not plan major program changes, according to the survey. A large majority of employers do not plan to delay or cancel their planned program offerings (86%) or changes to plan design (87%).

The news release said just more than half (51%) of companies now offer workers a CDHP, up from 47% in 2008. Another 8% are expected to adopt a CDHP by 2010.

Despite potential cost savings with a CDHP, challenges remain for employers trying to provide more affordable coverage to their workers, according to the news release.

Two-thirds of employers (67%) cite the poor health habits of their employees as a considerable challenge to managing their health care costs.

Other challenges include underuse of preventive care services (42%), the high cost of catastrophic and end-of-life care (36%), and poor employee understanding of how to use the plan (30%).

Other preliminary findings include:

  • Nearly one-third of employers (30%) have revamped their health care strategy, with another 30% planning to do so in 2009. A smaller number of companies are working on contingency plans for midyear changes to benefit offerings (13%).
  • Employers' confidence in the health benefit system remains high, though market conditions have caused this sentiment to dip. Nearly two-thirds (62%) of employers are very confident in their ability to provide health benefits 10 years from now, down from 73% a year ago.