Hewitt: Health-Care Costs Up 12.6% in 2004

October 14, 2003 (PLANSPONSOR.com) - Health-care cost increases in 2004 are expected to be at 12.6%, a decrease from 2003's 14.7%.

With the increase, employers can anticipate average increases in 2004 of13.5% for health maintenance organizations (HMOs), 12.5% for traditional indemnity plans, and 12% for preferred provider organizations (PPOs) and point-of-service (POS) plans. However, these numbers are slightly down from 2003’s figures, signaling a trend downward, Hewitt Associates says.

“Companies should still expect 9% to 14% rate hikes,” said Jack Bruner, national health-care practice leader for Hewitt Associates, the firm supplying the data. “Clearly, health-care cost increases are not going away anytime soon; however, we are seeing some moderation in hospital cost increases and stabilization of prescription drug costs.”

Translated out though, employees can still expect rising health-care cost to touch their wallets. From 2003 to 2004, the average cost of health care for a person working at a major company will increase from $6,018 to $6,831 for HMOs; $6,300 to $7,056 for PPOs; $6,391 to $7,158 for POS plans; and $6,738 to $7,581 for indemnity plans.

However, employees should take heart knowing their company will absorb the majority of the health-care cost increase. The average employee contribution for 2003 is projected to be $1,565, only 22% of the overall health-care premium.

Hardest hit by the increase in 2004 will be company health plans in the west, with the Denver metropolitan area leading all others in the country at 19.8%. Following the Mile High City was:

  • San Francisco – 19.0%
  • Los Angeles – 17.7%
  • Houston – 16.2%
  • Chicago – 15.6%
  • Tampa Bay – 15.6%
  • Cincinnati – 14.8%
  • Philadelphia – 14.4%
  • Dallas/Fort Worth – 14.2%.

In response to this, companies are implementing a number of different strategies, including:

  • re-evaluating cost-sharing and contribution strategies through moves that include higher payroll contributions, lower subsidies for dependents, and increased office, hospital inpatient and emergency room copayments
  • changing prescription drug coverage and implementing higher copayments
  • contracting with plans that offer specialized or disease management programs
  • offering new consumer-driven health plans
  • linking active and retiree health care programs.

Hewitt’s data is based on an analysis of its database of 2,000 health plans in 139 US markets.