Ill-Wind: Health-benefit Costs Up, Up and Away

Rate hikes averaging 22 percent; employers passing it on to the employed.

CFOs will be thrilled by this news: The rapid rise in health care costs is expected to persist for another year.

Preliminary 2003 HMO rates are already averaging about 22 percent, but ranging as high as 94 percent. This compares to the average HMO premium increase of 15.3 percent in 2002, according to Hewitt Associates, a global outsourcing and consulting firm.

As a result, employers are expected to share more of the costs with employees through cost sharing and plan design changes.

Hewitt’s preliminary forecasts are based on data from the Hewitt Health Resource, a web site that captures HMO rate information on behalf of nearly 140 employers representing more than one million employees and annual premiums of nearly $4 billion.

“We are seeing unprecedented HMO increases for 2003,” said Mindy Kairey, e-business leader for Hewitt’s Health Management Practice, in a press release. “With no clear solutions on the horizon we expect that it’s going to get worse before it gets better. Companies cannot afford these increases and will have to be even more aggressive in making plan design and employee contribution changes for next year. Unfortunately, this means consumers should expect to pay a lot more for health care.”

Meanwhile, as companies experience rapidly rising health care costs, many of them are passing more of the cost along to employees.

For example, the number of companies with a $15 office co-pay more than doubled from 11 percent in 2001 to 24 percent in 2002, according to Hewitt. At the same time, employers offering $10 co-pays dropped from 64 percent in 2001 to 58 percent in 2002.

In addition, employees are also being asked to pay more for prescription drugs, said the consultancy.

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