Benefits September 27, 2001

Health Costs Rise, Employee Share Doesn't – Yet

September 27, 2001 (PLANSPONSOR.com) Employer-based insurance premiums increased by 11%, the fifth annual increase in a row and the largest since 1993, according to a new report. However, the employee share has remained relatively stable 15% for single coverage and 27% for family coverage.
Reported by

According to the Center for Studying Health System Change, the cost of health care rose 7.2% last year, with the cost of hospital care accounting for nearly half the increase.

Component Costs

Spending on outpatient care increased by 11.2% from 1999 to 2000, more than a third of the increase, according to the report – up from the 8.9% growth in the prior year.

Spending on inpatient hospital care rose by 2.8%, a sharp departure from the mid-1990s when inpatient costs were falling.

Drugs Higher

Spending for drugs also rose ? up 14.5% in 2000 after an 18.4% spike in 1999. Drug costs accounted for about a quarter of the overall cost increase, but that was less than the 41% they constituted in 1999.

The authors of the report suggested two primary causes for the decline in drug costs as a percentage of total costs:

  • no new “blockbuster” drugs that drive up demand
  • an increased use of tiered pharmacy plans, where patients pay extra to get name-brand drugs

The report’s authors said that insurance companies are anticipating continued cost increases ? and are trying to make up for profits lost in the late 1990s as they cut costs to gain business.

You can check out more of the report, Tracking Health Care Costs, at http://www.hschange.org/CONTENT/372/ .

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