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Employers to Face Double Digit Health Care Cost Increases For 2001, Hewitt is projecting average increases of 10 to 13 percent, depending on the type of health plan. This comes after last year's rate hike of 9.4 percent, the highest increase since the early 1990's. Some companies will absorb the majority of next year's rate hikes, but many will pass along at least 25 percent of the increase to employees, according to Hewitt's study. With the average health plan projected to cost $4,707 per employee next year, up from $4,222 in 2000, that means most employees will pay $125 more for their health coverage next year. ``The key drivers behind health care increases continue to be prescription drug costs and the pressure HMOs are under to produce improved bottom line results,'' said Jack Bruner, national health care practice leader, Hewitt Associates. ``Health plans are standing tough in negotiations, as they are focusing more on profitable membership, rather than total membership as in years past.'' On average, Hewitt forecasts that companies will receive 2001 cost increases of at least 10 percent for preferred provider organizations (PPOs) and point-of-service (POS) plans, 12 percent for traditional indemnity plans and 13 percent for health maintenance organizations (HMOs). That means from this year to next, the average cost per person for most major companies will increase from $4,059 to $4,586 for HMOs; $4,249 to $4,674 for PPOs; $4,298 to $4,727 for POS plans; and $4,996 to $5,595 for indemnity plans, according to the Hewitt Health Value Initiative(TM), a cost and performance analysis of more than 2,000 health plans in 139 U.S. markets. ``These dramatic cost increases are a major concern to employers as this marks the third consecutive year companies have been hit with significant cost increases,'' added Bruner. ``With today's tight labor market and fierce competition for talent, companies are doing everything they can to not pass along the increases to employees, but with the continued rate hikes they simply cannot afford to cover all the costs. Unfortunately, employees will again have to pay more out of their paycheck for health care.'' ``We don't expect to see health care costs slow down anytime in the near future, so employers need to be prepared for additional rate hikes,'' said Bruner. ``Companies may continue to see 10 percent increases over the next few years, and this will result in a significant impact on an organization's bottom line.'' How are organizations reacting to the rate hikes? In addition to passing along part of the increase to their employees, Hewitt Associates finds that companies also are doing the following: Making design changes for prescription drug plans. ``Because skyrocketing drug costs are a major driver behind the insurance hikes, many organizations are changing their prescription drug coverage by moving toward a three-tier system, where employees pay the least amount of money for a generic drug, more for a brand name drug on an approved formulary list and the most for a brand name drug that isn't on the list,'' said Bruner. Tightening up managed care plans. ``Employers also are making design changes to their managed care plans by increasing co-payments for office visits and providing heftier out-of-network penalties,'' Bruner added. Eliminating ``cost inefficient'' plans. ``The recent health care cost increases have forced employers to review all aspects of the health plans they currently offer, including cost efficiency,'' Bruner said. ``Employers should regularly review the performance of their current health plans and eliminate those that aren't cost efficient or meeting employees' health care needs. We've found that companies that switch to the most cost efficient plan in each community pay 10 to 15 percent less than their competitors for health care.'' Moving toward PPO plans. Bruner also added, ``We are seeing PPOs supplant open access POS plans as the preferred managed care model. PPOs offer lower administrative fees, competitive discounts, greater freedom for employees and can be relatively cost neutral to organizations. Companies that believe their younger and healthier employees are currently in HMOs are particularly concerned about paying high insurance rates for their workforce. If HMO rates continue to go up, I think we'll see more employers encouraging enrollment in this option.'' Standing strong in negotiations. ``Due to the pressure HMOs are under to produce improved financial results, HMOs are negotiating tougher than ever before,'' Bruner said. ``It's important for companies to stand strong during negotiations, have good comparative cost and market data, and be willing to move to other plans that provide the same quality health care at a lower cost.'' Contracting with plans that offer specialized programs. ``Companies with employee populations that have a high prevalence of specific health conditions, such as asthma, diabetes or heart problems, are starting to contract with health plans that offer programs specializing in those areas,'' said Bruner. ``In doing this, their employees receive more specialized care to assist in managing their conditions, and as a result, their health care costs usually decrease.'' ``Most consumers are concerned and frustrated to receive health care increases once again,'' observed Bruner. ``Employees should take a close look at their options and see if there might be another plan that offers the service and physicians they want, but at a more affordable price. Employees also can encourage their company to offer a variety of health plans, if it isn't doing so already, so they have a selection of plans and prices from which to choose.'' |
