Health Costs Still Headed North

December 10, 2001 ( - Employee health-care costs have skyrocketed 11.2% in 2001 and employers can look forward to more of the same in coming years, a Mercer study says.

According to the Mercer study, average 2001 health costs rose to $4,924 from $4,430 the year before. This year’s sizable percentage increase follows a hefty 8.1% hike in 2000.

The outlook for 2002? More bad news as costs are expected to rise by 12.7%, while 15% of employers will get walloped with increases ranging from 15% to 20%.

Other survey results include:

  • small (10-499 employees) companies shelled out an average $4,649 per employee this year, up 11.6% from last year
  • large employers (500 or more workers) had an average 2001 health cost of $5,162, up 12.1%
  • the deductible imposed by small employers doubled from $250 to $500 for an individual while 17% of small companies imposed deductibles of $1,000 or more.

And the same thing is on the way for large companies, the Mercer study said.

With health care getting alarmingly expensive, companies continue shedding retiree health plans.   In 2001, the number of large employers offering medical coverage for pre-Medicare-eligible retirees fell from 31% to 29%, while the number offering coverage for Medicare-eligible retirees slid to 23% from 24%. 

Finally, cost savings for prescription drug benefits have apparently begun to kick in with an average projected increase of 15% next year, compared to 17.5% in 2000. 

To complete the survey, Mercer used a national probability sample of public and private employers and weighted the results to reflect the demographics of all employers in the US with 10 or more employees that offer health coverage.  The results represent about 600,000 employers and over 90 million full- and part-time employees.