Workers likely to shoulder still-larger share of health costs next year.

2004 SEP 18 - (NewsRx.com & NewsRx.net) -- Employers are facing continued double-digit increases in healthcare costs in 2005 and likely will require their workers to pay an even greater share of the bill, according to a new survey of more than 900 firms.

The survey, released August 26, 2004, by Mercer Human Resource Consulting, found that employers expect healthcare costs to rise 12.9% on average next year if they leave benefits unchanged. But companies that participated in the survey, both those that buy insurance and firms that are self-insured, are only budgeting an average increase of 9.6% in their healthcare spending.

The firms are likely to shift much of the difference to employees in the form of higher required contributions and co-payment fees, or by limiting their choice of insurance plans, the report said.

That would mark the third consecutive year that employers have shifted a portion of healthcare costs to workers in an effort to keep pace with rapidly rising expenses.

Mercer said employers forecast a 13% increase in health costs in 2004 and ended up paying about 10% more, chiefly because employees were asked to pick up more of the tab.

Past cost shifting, though, has done little to solve the underlying problems driving up the price of healthcare, said Blaine Bos, a Minneapolis-based healthcare consultant for Mercer.

"If you get into an environment where you have double-digit inflation year after year after year, essentially both the employer and the employees are having to share a bigger and bigger burden and that burden at some point can break your back," Bos said.

Smaller employers, faced with an average 13.4% increase in health expenses next year if they maintain the status quo, will likely shift a particularly large share of the burden to workers, Bos said. That could mean some employers dropping healthcare coverage altogether, he said.

Many employers have already set their healthcare budgets for next year, but it is too soon to know precisely how they'll bridge the gap between inflation and their spending plans, Bos said. A significant part of the gap will likely be filled by cost shifting, but employers may also be able to reduce their expenses by taking advantage of surplus capacity among healthcare providers in some markets that could create competition. Some also have started disease management programs in recent years that are just now starting to yield savings.

But the factors driving up the cost of healthcare haven't changed. The general aging of the population means more workers and their insured dependents need more healthcare services. They're tapping into a range of new drugs and healthcare technology, but that is driving up costs as healthcare companies charge high prices to recoup the money of research and development.

Healthcare inflation is particularly acute in some regions with less and less competition, a result of consolidation by hospitals, medical practices and health plans, Bos said.

The survey of employers was released on the same day the Census Bureau reported that the number of Americans without health insurance increased by 1.4 million last year to nearly 45 million, about 15.6% of the population. That compares to 43.5 million people who were uninsured in 2002, about 15.2% of the population.

Some analysts attributed the drop to workers who have lost jobs, which provided their access to health insurance. Bos said the figures from employers could also signal that some companies have shifted such a large percentage of costs to workers that more people can no longer afford the insurance, or have decided it is not worth the expense, and have dropped their coverage.

The Mercer survey collected data from 916 employers of varying size. It was done over the Internet and by mail, with most of the data collected in July and August. The results are preliminary; the company expects to compile results from about 3,000 employers by the end of the year. Bos said he expect results in the full survey to echo the figures supplied by the first group of employers.

This article was prepared by Obesity, Fitness & Wellness Week editors from staff and other reports. Copyright 2004, Obesity, Fitness & Wellness Week via NewsRx.com & NewsRx.net.