Economists and health insurance industry experts say future health care costs will skyrocket despite a trend of slowing cost growth since 2002. Costs for employers shot up more than 15 percent in 2002, but increases then steadily dropped to less than 8 percent last year, according to Illinois-based Hewitt Associates, a human resources consulting company.
Data from Mercer Human Resource Consulting, based in Lincolnshire, Ill., differs on annual percentages but reflects the same trend. The rise in health care plan costs peaked at more than 14 percent in 2002 and then steadily declined to 6 percent in 2005 and 2006, Mercer reported. They predict a 2007 growth rate of 6.1 percent.
A 6 percent rise in health care costs may seem encouraging relative to earlier, higher increases, but it's still twice the rate of inflation, said Dr. Donald Conway, a physician and the director of Dartmouth College's Healthcare Initiative at the Tuck School of Business. Increases in insurance premiums tend to be cyclical over a five- to seven year period, so the recent dip can be misleading, he added. "We will see a constant march up," he said.
Mercer and Hewitt research doesn't include federal employees' health care costs. Federal Employees Health Benefit Program plans saw a steeper cost growth decline. Their average growth slowed from 12.9 percent in 2002 to 1.8 percent for 2007, according to a December report by the Government Accounting Office, the investigative arm of Congress.
But federal plans benefit from funds used to help make premiums more favorable and can't be viewed as a barometer for the industry as a whole, said Gary Claxton, a spokesman for the Kaiser Family Foundation in Washington, D.C. He, like other experts, predicted high future costs for private-sector employees. "Turnings things around is a tall order," Claxton said.
Economists with the federal Centers for Medicare and Medicaid Services in Washington, D.C., this week released a report estimating health care will account for $1 of every $5 spent in the U.S. by 2016. The agency predicts out-of-pocket expenses, such as co-pays, will increase from $850 this year to nearly $1,400 for private-sector employees.
Health care spending overall will reach nearly $4 trillion, the report estimates. The report also predicts the nation will move "incrementally away from traditional sources of insurance, such as employer-based coverage, to a system comprising more federal and state government-provided health care."
Great Britain spends 8 percent of its gross domestic product on its single-payer, government-run system, while America is spending 16 percent and could be spending as much as 20 percent in the next decade, Dartmouth's Conway said.
"It seems inevitable that the burden is going to be placed on the employee" with higher premiums, co-pays and deductibles if the nation continues to offer employer-based coverage, he said.
Baby boomers, as they retire and confront higher costs, might force the country to shift to government-run care by exerting a great deal of political pressure "even if it's through the ballot box," he said.
Some insurers say they can offer more cost-effective plans. Anthem Blue Cross/Blue Shield, for example, is rolling out new plans this year, said Brian O'Grady, vice president of sales in New Hampshire. Anthem Blue Cross/Blue Shield reports having 572,000 members statewide. It's the state's largest health insurance provider, with "a significant amount of the market," said Kathleen Belanger, a New Hampshire Department of Insurance spokeswoman.
Anthem Blue Cross/Blue Shield began offering "consumer-driven" plans in January, and employers using them could save an average of 15 to 20 percent on annual premiums, O'Grady said. The plans offer high-deductible insurance coupled with health savings accounts. The industry first introduced the plans in 2005, and they are just beginning to gain momentum, O'Grady said. He said the company also expects to offer programs to let businesses offer different insurance to workers with chronic conditions. The company plans to offer members personal health records so doctors have more information about previous treatments as well. That could help avoid the duplication of services, he said. The organization predicts employers with 50 or fewer employees will see a 6 to 8 percent increase in premiums this year, while employers with 50 or more employees likely will see a 9 to 11 percent increase, he said.
Adapted from article by Robert M. Cook at Fosters