Segal: Health Costs Could Soon Be Quarter of Payroll

February 7, 2003 ( - 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.

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.