Study predicts health care costs to rise for workers, employers

CHICAGO - The cost of medical benefits is projected to jump again next year with premiums and out-of-pocket expenses rising 10 percent. That likely will mean more pain for workers, who have seen their share of the tab triple since 2001.

In 2010, the combined average premium and out-of-pocket costs for health care coverage for a worker are projected to climb to $4,023 a year, a 10 percent increase from this year, according to an annual study by Hewitt Associates released ahead of open-enrollment season for medical benefits.

Companies, meanwhile, will see their health insurance costs go up 6 percent, to an annual tab of $9,120 per employee, or double the employer's annual worker tab from eight years ago, according to Lincolnshire, Ill.-based Hewitt.

"If we do nothing, we will probably see another doubling effect in seven to 10 years," said John Vlajkovic, principal in Hewitt's health management practice, referring to the specter of Congress not passing health care reform legislation this year.

Next year, workers are expected to contribute about $174 a month, 10 percent more than they do now. And they'll be paying roughly an additional $162 in out-of-pocket costs each month, a 10 percent increase. Out-of-pocket costs include copayments and coinsurance.

This projected increase in coverage costs comes as Congress and President Barack Obama grapple with a way to provide uninsured Americans with affordable health care coverage. With costs rising for covered workers, Hewitt's projections provide an added urgency to health care reform as employers see medical costs eating away at their bottom lines and as pinched consumers deal with the recession.

"The debate over health care reform is at a critical juncture," said Antonio Perez, chairman of the Business Roundtable's consumer health and retirement initiative, after the business group released a report showing costs per employee potentially tripling by 2019 "without effective reforms."

"Maintaining the status quo is simply not an option," said Perez, who is also chairman and chief executive of Eastman Kodak Co. "These costs are unsustainable and would put millions of workers at risk. But it's not too late to act."

Workers will get their first glimpse of health care costs during the coming weeks of open-enrollment season, the annual corporate ritual that allows employees to select or change their benefit plans for the following year.

Hewitt's projections are calculated with data from 325 major employers and more than 13 million health plan participants, and they are reported as an average per worker. Employees with family coverage tend to pay more, and workers with single coverage tend to pay less. And because Hewitt's survey focuses on employers with an average of 16,000 employees, businesses with fewer workers tend to have higher costs than those highlighted in the survey.

In the absence of health care reform, employers have been stepping up efforts to encourage their workers to make more informed choices.

Avon Products Inc., for example, has moved away from flat-fee copayments for doctor visits to coinsurance, which usually results in workers paying more for specialized care and lab tests.

Though coinsurance typically leads to higher out-of-pocket costs for workers, employers say coinsurance gives people a better idea of the cost of a drug or medical service, forcing them to think twice before choosing a more expensive medicine or procedure.

"For a specialist visit, you could get the visit and lab work and it will cost $200, and the old copay might have been $15 and with 10 percent coinsurance it might be $20 or more," said Michele Levine, Avon's director of global benefits. "Coinsurance makes people smarter consumers."

On the prescription drug front, Avon has joined a parade of companies that have eliminated copayments or coinsurance for generics for chronic conditions like high cholesterol and asthma. The practice encourages workers to choose cheaper generics over a brand name drug.

Offering generics for free or at reduced costs also can lead consumers to better adhere to taking medications for chronic conditions. That, employers say, should lead to healthier lifestyles and help avoid expensive hospital stays.

"I think we are doing most of what the president is talking about," Levine said. "We are trying to remove the obstacles so they get the care that they need."

(c) 2009, Chicago Tribune.

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