Human Capital & Careers

Health-Benefits Costs Will Surge 15 Percent, Consultant Predicts

Anxiety after 9/11 and increased COBRA coveraged spur rise in forecast.
Stephen TaubNovember 28, 2001

Health-benefit cost hikes will be steeper than originally expected for many corporate benefit plans in 2002.

Consultant Watson Wyatt now expects corporate health-care-benefit costs to increase by more than 15 percent next year. The consultancy’s recent health-care cost survey of 200 employers employers showed they were bracing for a 13.6 percent increase.

“The additional projected increase in costs for 2002 can be attributed to the post-September 11 upswing in behavioral health and employee-assistance-plan services, as well as a rise in anti-anxiety and anti-depressant prescription drug expenses,” notes Randall Abbott, a senior health care consultant at Watson Wyatt, in a press release.

Another reason for the larger-than-expected increase: a boost in usage of Consolidated Omnibus Recovery Act (COBRA)continuation coverage. It seems that laid-off employees moving to COBRA plans typically incur costs at least 50 percent greater than active employees, according to Watson Wyatt. For example, the added COBRA costs associated with a 10 percent reduction in staff can produce an additional 10 to 15 percent increase in overall health-benefit costs per active employee for as long as 18 months.