SURVEY PREDICTS DRAMATIC INCREASE IN HEALTH COSTS

In its 2002 Health Care Cost Survey, Towers Perrin found that health care costs for large sponsors would rise by 14% next year.  This is the highest increase since the firm began conducting the survey in 1993.

The report goes on to cite the rising costs of prescription drugs, escalation in HMO premiums and increases in fees paid to hospitals and physicians as the primary factors behind the increase in health care costs.

However, the survey found that employers are taking steps to minimize the damage of a possible increase by a number of measures, such as:

· Increasing employee contributions, deductibles and co-payments

· Restructuring vendor/HMO offerings

· Implementing targeted programs relevant to individual employer’s populations such as disease management, wellness and centers of excellence

· Using technology to provide information to employees and to support self-service.

Retiree Costs

For active employees, the average reported 2002 cost of medical coverage for all types of health plans combined is $228 per month ($2,736 on an annual basis) for employee-only coverage; $466 per month ($5,592 annually) for employee-plus-dependent and $661 per month ($7,932 annually) for family coverage.

For retirees under age 65, the cost of employer-sponsored medical plans tended to be higher than for active employees. Costs for retirees 65 and older were generally lower because of Medicare benefits.

Still, the cost of coverage for Medicare-eligible retirees is growing at a faster rate than costs for younger retirees and active workers. Drug costs make up a larger share of the cost for Medicare-eligible retirees, and drug cost increases have been greater than costs for other medical services in recent years. In addition, there has been a rapid escalation in Medicare plus Choice premiums over the past few years.