Employers' health-care costs soar

By V. Dion Haynes
Washington Post Staff Writer
Monday, November 22, 2010

The cost to employers of providing health benefits soared 6.9 percent on average this year, according to a national survey released last week, an increase some experts say was driven by the growing use of expensive imaging devices in hospitals and an expanding population of aging and obese patients suffering from chronic conditions.

The survey of 2,800 employers at large and small firms across the country shows that the cost of medical coverage this year experienced its highest annual jump in six years, surpassing the 5.5 percent increase in 2009. Local data mirror national trends. The majority of employers said they expect medical expenses on average would rise by 10 percent in 2011 without such widely used cost-sharing remedies as higher premiums and deductibles.

In interpreting the data, officials at the Mercer consulting firm, which conducted the survey, saw some indicators possibly reflecting more positive attitudes among workers about their job security. They theorized that costs are rising in part because of pent-up demand from a growing number of employees opting for medical care they feel they no longer have to put off.

"People who have jobs are a little more secure in them and they feel a little more comfortable to take time off from work and go to the doctor," said George Lane, principal of Mercer's health and benefits business. "They're not fearful they may have something that may keep them out of work."

A breakdown of the data on Washington area employers shows that health-care costs here reached $10,100 per worker, an average increase of 6.4 percent. Only 79 employers participated in the Washington area survey, and Mercer says the local data are not weighted and cannot be compared with national figures or with 2009 local numbers.

Employers here said they expect expenses to rise 10.1 percent in 2011, but they will hold down that increase to 6.4 percent by passing on more costs to workers. Thirty-four percent said they will increase employees' share of premiums and 28 percent said they will raise deductibles, co-payments or out-of-pocket costs; 21 percent said they will boost employee costs some other way.

In the national Mercer study, more employers this year offered incentives to get workers into "wellness" programs -- including smoking-cessation and weight-loss classes -- designed to instill good health habits. This year, 27 percent offered prizes such as $75 in cash to workers signing up for the programs, compared with 21 percent in 2009.

Some experts said the efforts could actually be a factor pushing up health costs in the short term.

"That investment identifies people with high blood pressure, asthma and diabetes," said Paul Fronstin, director of the Employee Benefit Research Institute's health research program, who was not involved in the Mercer study. "All of sudden they're taking medicine they didn't before."

Helen Darling, president and chief executive of the National Business Group on Health, a nonprofit membership organization consisting of some of the largest corporations in the nation, said the new health care law could add to medical costs next year.

The law requires "that you have to cover dependents up to age 26," said Darling, who also was not involved in the Mercer study. That and other provisions of the law could add "one full percentage point alone" to the costs.

© 2010 The Washington Post Company