Report says health plans must be altered
Workers likely to pay more if employers change benefits

By Keith Darcé
San Diego Union-Tribune
November 15, 2006

Employers who make no changes to the health insurance plans they offer to workers will face cost increases of between 10 percent and 12 percent in 2007, according to a new report.

Many employers will use the projections to adjust the benefit packages they offer to workers to avoid the double-digit cost increases, said the report from PricewaterhouseCoopers.

Those changes likely will mean higher out-of-pocket costs for workers who increasingly pay a larger portion of their health care bills through higher premiums, deductibles and co-payments, according to the report, which was based on a survey of major health insurers.

"Medical costs continue to grow faster than wages, and this trend is an important driver of insurance company premiums," said Jack Rodgers, managing director of PricewaterhouseCoopers' Healthy Policy Economics Group.

The latest figures are consistent with generally double-digit annual cost increases for employer-sponsored health care insurance plans in the past five years, as reported by the Kaiser Family Foundation and the Health Research and Education Trust.

Costs are expected to increase 11.9 percent in 2007 for preferred provider organizations that offer members lower costs for seeking treatment from within the plan's network of doctors and hospitals. Costs are expected to rise 11.8 percent for health maintenance organizations that cover care provided only within the insurer's network.

Costs for "consumer-driven" health plans, which combine high deductibles with tax-discounted medical savings accounts, will rise an estimated 10.7 percent.

Driving costs are increased uses of new tests and treatments, continued growth in the amount of health care sought by workers, and higher rates of obesity and inactivity, which contributes to poorer health.

Employers and the government have traditionally insulated workers from the rising cost of health care by subsidizing insurance benefits, the report said. Consumers spent about 6 percent of their personal budget on medical costs in 2004 Ð about the same percentage as spent by consumers in 1960.

But that percentage is changing as medical costs and insurance premiums continue to rise.

For example, a Kaiser Foundation study said costs for employer-sponsored health insurance rose 12.5 percent for PPOs in 2006, while HMO costs rose 13 percent.

"Health care is a huge concern to" San Diego employers, said Mike Nagy, who directs the San Diego Regional Chamber of Commerce's health care committee. "There is a feeling that it is becoming more severe, and that something must be done."

"Having employers bear the brunt of paying for the cost of health care just doesn't make any sense," he said.

Hoping to prod workers into spending health care dollars more prudently, HMOs have increased deductibles 42 percent, while PPOs have increased the same charges 85 percent, according to the report.

Some employers are introducing wellness programs in an effort to improve the health of workers and reduce their visits to the doctor and hospital. Moving a worker from a high-risk health category to a lower-risk category can reduce his or her health care costs more than $3,000 a year, the report said.


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