Human Capital & Careers

Health-Benefit Inflation Slows Again

Eighty-six percent of 585 big employers recently surveyed reported that their benefit costs came in at or below budget last year.
Stephen TaubFebruary 17, 2006

The rise in the price employers expect to pay to provide health-care benefits to U.S. workers decelerated for the fourth year in a row, according to a new Watson Wyatt Worldwide survey.

Employers expect a median 8 percent bump in such expenses this year, down from the 10 percent boost they foresaw in 2005, the consulting firm reported. Further, they anticipate an 8 percent rise in 2007. Perhaps even more significantly, 86 percent of the 585 big employers that were surveyed said their health-care benefit costs came in at or below budget in 2005.

With health-care costs declining steadily since 2002, Watson Wyatt found, practically all the employers surveyed are either “very” or “somewhat” confident that they’ll still be offering health benefits to their workers 10 years hence. Nevertheless, “health-care costs remain a financial burden for most U.S. employers,” says Ted Nussbaum, the firm’s director of group and health-care consulting in North America.

Thus, many employers are trying to figure out ways to continue to hold costs down and discourage use of health care by their employees. Thirty-two percent of the respondents acknowledged, for example, that in the next one to two years they’ll start encouraging workers to use health-care services wisely. What’s more, 30 percent said they plan to increase the accountability of employees in managing their own health.

Indeed, many employers have already put into practice a number of cost-management strategies. For instance, 47 percent of the respondents either are currently auditing or reviewing who is eligible and who enrolls in their health-care plans or expect to begin doing so this year.

But many companies are clearly averse to causing big strains on their employees. According to the survey, 42 percent of the employers said they would absorb cost increases rather than pass additional costs on to workers.