Employee Health Care Costs Rising Again in 2008

Employers will be digging deeper next year to fund employee health care.  According to Tower Perrin’s annual Health Care Cost Survey, rates are expected to grow about 7% or $577, to an average cost of $9312 per employee.  Though most of the companies surveyed were primarily Fortune 1000 members, the implications affect small business health insurance costs as well.

Employers subsidize 78% of premium costs while employees pay 22% plus the co-pays, deductibles and coinsurance costs.  Expected 2008 co-pays should be about $20 for a regular doctor visit and $30 for a specialist.  Prescriptions average $10 for generics or $25 for brand-name drugs.

Overall, however, as benefit values decrease and out-of-pocket costs increase, though the premium cost share remains the same, employees will spend about $156 more next year for the same health insurance services. 

Fewer companies (only 47%) are subsidizing retiree medical coverage, and they are asking retirees to increase their contribution to the cost.  Most retirees will be asked to increase their share approximately 8%, making their portion 50% of the overall cost.  Experts forecast this shift in supporting active employees at a greater level to result in older workers remaining in the work force to receive employer-subsidized health care.

Some companies are experiencing much smaller increases in their health care costs because they have actively taken steps to control many of the factors involved in calculating premiums.  These companies are called “high performers” by Towers Perrin, and mirroring their actions can benefit any company, whether you have a Fortune 100 giant or a Mom & Pop shop.  Tomorrow we’ll discuss the changes made by “high performers” that can reduce quotes for both large and small business health insurance policies.