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Small Business Digest


Healthcare Insurance Benefits Costs Expected To Rise 10.5%

While overall premiums are expected to increase by 10.5%, those of Health Savings Account offerings are thought to be lower.

Aon Consulting expects costs for employer-provided health plans are expected to rise more than 10 percent within the next 12 months, a jump workers may feel in their paychecks or through changes to their insurance coverage.

The firm cites an aging population, rising costs and growing patient demand for services are among the reasons for the higher costs cited in an Aon Consulting report.Aon Consulting, a subsidiary of Chicago-based Aon Corp., surveyed about 60 health insurers around the country earlier this year.

The study found that, on average, insurers expect to pay out 10.5 percent more in claims costs in the next year — slightly less than the 10.6 percent increase forecast last year.

At the same time, a study by Information Strategies, Inc., this newsletter's parent, indicates that HSA increases will be less than projected figure based on insurer premiums.

While actual increases for each insurer or plan can vary by such factors as plan design, geography or the general health of the people covered, this projection is an overall cost and who will pay for the increase, employer or employee will also vary.

"Some employers also might swallow the higher costs because workers this year already have had to contend with salary freezes, reductions and layoffs," said Tom Lerche, Aon Consulting's health care practice leader.

"There's one school of thought that says, 'Our employees have borne enough, let's minimize or not pass any costs along to the employee,'" he said.

However, others may ask workers to pay more through increased deductibles or copayments. They could make changes to the plans they offer, such as eliminating a traditional plan and offering a consumer-directed, high-deductible plan instead.

A recent survey by ISI of 340 small employers indicated that 55% of all respondents were actively considering ending or severely modifying their healthcare benefits.

Lerche said most employers will consider it "an absolute business imperative" to lower any cost increases to mid- to low-single digit percentages. This view was echoed by other small business experts.

It has been reported that "companies also could deal with rising health care costs by limiting pay increases," said Joseph Antos, an economist with the Washington, D.C.-based American Enterprise Institute for Public Policy Research.

He was not involved with the Aon study."Employer contributions are not gifts, they're part of total compensation," he said. "And if you end up having a more expensive health benefit that your employer pays most of, that means that your wages aren't going to up as fast as they would have."

The Aon survey also found that prescription drug costs are expected to rise 9.3 percent, a slight dip from the 9.4 percent trend forecast a year ago.

Lerche said a number of brand-name drugs have lost patent protection, which allows patients to buy less-expensive generics. Employers also have encouraged their workers to use generic drugs and cost-management programs.

Relief from these increases are not expected to kick-in until at least 2012, even if the most radical healthcare plan currently being discussed in Washington is approved.

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