Healthcare costs in employer-sponsored plans are expected to rise an average of 8% in 2005, the first time the increase has sunk to single digits in the last five years, a new Towers Perrin survey said.
However, the news is hardly a reason to celebrate. The increase comes off an enormous cost base that has exploded in recent years, causing problems for most companies, and employees continue to pay more for less coverage, said Ron Fontanetta, a principal at the New York-based consulting firm.
Fontanetta said the increase in costs is less than in previous years because employers negotiated better deals with health plans and other service providers such as pharmacy benefit managers. Without the negotiations, costs would have increased 11% to 12%, he added.
Programs that help patients manage chronic conditions such as diabetes played a role in stifling costs, Fontanetta said. He maintains such programs are important because typically 15% of workers account for 75% of costs.
The study said the total cost for providing care to an employee in a company-sponsored plan including factors such as premiums, doctor visits, medicines and hospital stays is expected to rise 8% to $7,761. It anticipates the employee portion will rise 14% to $1,610, while the employer segment will jump 7% to $6,151.
Additionally, the study found employee benefit levels fell 2% as workers were asked to pay more for their care through higher co-payments for services such as doctor visits and higher premiums.
"Employers have been more aggressive than they have in previous years in cost-shifting," said Fontanetta.
Fontanetta added that employers are trying to be more equitable as they shift costs, forcing employees to pay more for brand-name drugs when generic medicines exist for conditions such as allergies, but having workers with serious conditions spend less on drug copayments.
Overall, however, employers continue to pay 16% of the premium cost for worker-only coverage and 25% for dependent coverage.
Costs for providing care for retirees under age 65 jumped 11% to $10,332, while costs for Medicare-eligible retirees should increase 6% to $5,112.
The survey includes data provided by 200 of the nation's largest companies, covering over 4.5 million U.S. employees, dependents and retirees.