Benefits February 7, 2003

Segal: Health Costs Could Soon Be Quarter of Payroll

February 7, 2003 (PLANSPONSOR.com) - Many corporate benefits officials could have to grapple with skyrocketing health-care coverage costs that will represent a whopping 25% of wages in less than five years, a new study said.
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With that staggering estimate in mind, the Segal Company analysts warned plan sponsors in the 2003 Segal Health Plan Cost Trend Survey that they need to redouble their cost-saving efforts before their health costs get out of hand.

In the study, Segal projects that rates for all health care plans are expected to jump by more than 14% this year with health maintenance organization plans predicted to be hit with the greatest increase in 2003 relative to 2002 projections.

“Plan sponsors are facing a new round of challenges to balance the needs of their participants with their increasing fiscal pressures,” the Segal researchers wrote in a report. “Health plan sponsors must make health care cost containment a top priority and adopt a new round of strategies and tactics to meet those needs.”

Segal said that some of the factors helping to drive up health coverage costs have been:

  • consolidation of health provider groups allowing providers to hammer out agreements calling for higher reimbursement levels from insurers
  • higher wages for nurses and pharmacists due to labor shortages in those areas
  • higher malpractice premiums
  • unnecessary doctor visits

The Segal report fetures a series of recommended plan sponsor cost-cutting steps including hammering out more aggressive terms with health coverage vendors.

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