Human Capital & Careers

Employers Shifting Health-Cost Hikes to Employees: Survey

Employers estimate a cost surge of 13.6 percent in 2002.
CFO.com StaffOctober 15, 2001

Faced with an expected 13.6 rise in health-benefit costs next year, 56 percent of employers responding to a new survey say they will boost employee contributions by as much as or more than their expected cost hikes.

Further, more than 70 percent of the 200 employers are considering benefit cuts or hikes in employee co-payments over the next 12 months, according to the survey released today by Watson Wyatt.

Employer expectations of a 13.6 percent rise in health plan costs for active employees next year is up from 12.2 percent this year and 8.1 percent in 2000, according to a release issued by the consulting firm. The employers expect the cost of prescription drug benefits to soar an average of 17 percent in 2002.

Among the four major types of health plans, respondents to the survey expect indemnity plans to experience the highest rise at 14.4 percent. The employers predict a 13.9 percent rise in health maintenance organization plan costs; a 13.7 percent increase involving preferred provider organizations; and a 12.7 percent boost in expenses from point-of-service plans.

Employers expect even higher cost trends for their retiree medical plans, according to the survey. Cost increases for retirees older than 65 are expected to speed up from 13.3 percent in 2001 to 15.1 percent in 2002. Employers attribute much of that boost to an 18 percent expected hike in the cost of prescription drug benefits.

For pre-65 retiree plans, employers predicted an increase of 15 percent in overall health-benefit costs next year, with an average increase of 14.4 percent for medical costs and an 18.4 percent hike for prescription drugs.