More Bad News on Health Care Premiums

Healthcare insurance premiums are poised to head higher next year. To be sure, the latest Hewitt Associates study shows that health care cost rate increases hit a nine year low in 2007. But that's small comfort, considering that the average health care rate increase for employers of 5.3% was about double the rate of inflation. Hewitt is projecting that rates will surge by an average of 8.7% in 2008.

To put that figure in dollars and cents, the average health cost per person for major companies will increase from $7,982 in 2007 to $8,676 in 2008. And, according to the report, the amount employees will contribute in 2008 will be $1,859--approximately 21% of the overall health care premium. Average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, will also increase from $1,576 in 2007 to $1,738 in 2008.

For employees, here's the bottom line: Overall, employees' total health care costs — including employee contribution and out-of-pocket costs — are projected to be $3,597 in 2008, up 10.1% from in 2007.

And here's the money quote, from Jim Winkler, practice leader of Hewitt's Health Management Consulting business.

"However, one of the primary ways employers have been accomplishing this is by passing a significant percentage of costs to employees, and we're seeing evidence that this strategy is prompting an increasing number of employees to forego necessary preventative care and/or not comply with prescribed medications. While some cost shifting is appropriate, it's critical that companies design their health care programs in a way that encourages employees to use them — and use them wisely. Otherwise, they are essentially trading preventative care now for 'rescue care' later, which will lead to unhealthy employee populations, a decrease in employee productivity and ultimately — higher health care costs."

About the author

Chris Farrell is the economics editor of Marketplace Money.

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