If you have health insurance at work, the portion you pay could increase again this year. Health-care costs in 2003 are projected to rise at least 15 percent–a bigger jump than even last year–and employers say they cannot shoulder the burden alone.
A survey of more than 500 U.S. companies by human resources consultant Hewitt Associates, based in Lincolnshire, found that on average, the maximum increase employers say they are willing to absorb is 8 percent, leaving a 7 percent gap. So, who pays the rest? The workers, most likely, and they don’t like it.
Last week, General Electric Co. workers staged a two-day strike to protest higher premiums. GE recently raised certain co-payments for employees participating in a health-care plan by about $200 per employee. Since 1999, GE’s health-care costs have risen 45 percent, to $1.4 billion in 2002, the company said.
Higher employee contributions and higher co-pays are the most visible way employers reduce their health-care costs. But as companies struggle for profitability, there are other ways to reduce costs as well, said Brigitte Madrian, associate professor of economics at the University of Chicago Graduate School of Business.
Increased costs “can be passed on indirectly in the form of lower wages or smaller wage increases, which is what you’re more likely to see,” Madrian said.
What’s driving up the cost of health care and what does this mean for employer-sponsored health-care plans?
There are numerous reasons for the rising costs, including more advanced technology, the aging Baby Boomers and the large number of uninsured Americans. But Madrian stresses that large annual increases in health-care costs are nothing new.
“Medical costs have been increasing faster than the rate of inflation for 40 years. In the 1950s, there wasn’t a lot that medical care could do for you. Now, we can save babies at 26 weeks and extend people’s lives who have had heart attacks,” she said.
In exchange for receiving better medical care, paying more doesn’t seem all that bad, she said. But as companies look at ways to reduce costs, workers could see larger bills or less desirable health coverage. Already, some companies are less likely to cover contingent workers, such as temporary employees, and are encouraging employees to find coverage elsewhere.
“I know a company that made employees pay extra if their spouses have insurance through their own company,” Madrian said.
Last year, employers paid an average $5,456 per employee for health insurance. This year, they will pay an estimated $6,300.
Still, most workers get a better deal on health insurance through their employers than they would on their own. “(They) are one of the most attractive rewards that a company can give their people,” Dave Fortosis, a Hewitt health-care consultant, said.
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