Hewitt Analysis Says Group Health Costs Projected to Rise 8.8 Percent in 2011

Group health care plan costs are expected to increase an average of 8.8 percent in 2011, the largest percentage gain since 2005, new research shows.

The average group health plan cost per employee is projected to rise to $9,821 next year, according to an analysis released Monday, September 27, by Lincolnshire, Illinois-based Hewitt Associates Inc. Costs include employer and employee premium contributions, but not employee out-of-pocket expenses, such as co-payments and co-insurance.

The analysis is based on information from 325 large employers, which mainly self-fund their health care programs.

That 8.8 percent cost hike compares with a 6.9 percent increase this year and 6 percent increases in 2008 and 2007.

The spike in costs is driven in large part by the economy, said Jim Winkler, a managing principal in Hewitt’s Norwalk, Connecticut, office.

With the ongoing weak economy, employers have drastically reduced hiring. That has resulted in an aging workforce because new hires tend to be younger than existing employees, Winkler said. Older employees typically have more medical problems than younger workers, boosting the average health care costs per employee, he said.

In addition, employers have seen increased frequency of high-cost claims of $50,000 and up, which also could be related to aging workforces, Winkler said.

In addition, the new health care reform law is driving up costs. Provisions, such as eliminating lifetime dollar limits and expanding coverage to employees’ adult children up to age 26, begin on January 1, 2011, for most employers.

By type, health maintenance organization plans are projected to have the largest percentage increase in 2011, a 9.4 percent rise to $10,254 per employee. Point-of-service and preferred provider organization plan costs each are projected to increase an average of 8.5 percent, rising to $10,575 and $9,408 per employee, respectively.  

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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