Healthcare cost increase expected

January 1, 2003

Pharmaceutical Representative

For the fourth consecutive year, large employers will experience a double-digit increase in their healthcare costs.

For the fourth consecutive year, large employers will experience a double-digit increase in their healthcare costs, according to the preliminary results of Stamford, CT-based Towers Perrin's 2003 Health Care Cost Survey. Based on an analysis of the first 268 responses, the survey found that the cost of large employers' health benefit plans will increase 15% on average in 2003 - the highest year-over-year percentage increase since the survey was first conducted in 1989. The survey also found that employees will pay more out-of-pocket costs in 2003 and that health maintenance organization increases will outpace increases in other types of health plans.

"The effect of these increases is magnified by today's economic climate," said Jim Foreman, managing director of health and welfare for Towers Perrin. "Four years of double-digit increases have taken their toll on many companies. Employers recognize that they must act now to stem the tide."

Employees share the bill

According to the survey, employers are taking a number of actions to control escalating costs. One of the more notable steps will be additional cost-sharing by employees. "Employees will be paying more out-of-pocket this year," said Ron Fontanetta, a principal in Towers Perrin's New York office. "Cost-sharing will come in the form of increased monthly contributions, as well as higher deductibles and co-payments."

The survey found that employees will pay 19% of healthcare costs for employee-only coverage in 2003, compared with 17% in 2002. Employees will be responsible for 22% of costs for family coverage this year, compared with 21% in 2002. In dollar terms, employees will contribute an average of $48 a month in 2003 for employee-only coverage (compared with $38 a month in 2002) and $160 a month for family coverage (compared with $134 a month in 2002).

Fontanetta noted that while employees are being asked to pay more, their companies are still bearing the brunt of the cost increases. PR

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