Workers' health-care costs to rise

NEW YORK — Employers are facing continued double-digit increases in health care costs in 2005 and likely will require their workers to pay an even greater share of the bill, according to a new survey of more than 900 firms.

The survey, released Thursday by Mercer Human Resource Consulting, found that employers expect health care costs to rise 12.9 percent on average next year if they leave benefits unchanged. But companies that participated in the survey, both those that buy insurance and firms that are self-insured, are only budgeting an average increase of 9.6 percent in their health care spending.

The firms are likely to shift much of the difference to employees in the form of higher required contributions and co-payment fees, or by limiting their choice of insurance plans, the report said.

That would mark the third consecutive year that employers have shifted a portion of health care costs to workers in an effort to keep pace with rapidly rising expenses.

Mercer said employers forecast a 13 percent increase in health costs in 2004 and ended up paying about 10 percent more, chiefly because employees were asked to pick up more of the tab.

Past cost shifting, though, has done little to solve the underlying problems driving up the price of health care, said Blaine Bos, a Minneapolis-based health care consultant for Mercer.

"If you get into an environment where you have double-digit inflation year after year after year, essentially both the employer and the employees are having to share a bigger and bigger burden, and that burden at some point can break your back," Bos said.

Smaller employers, faced with an average 13.4 percent increase in health expenses next year if they maintain the status quo, will likely shift a particularly large share of the burden to workers, Bos said. That could mean some employers dropping health care coverage altogether, he said.

Many employers have already set their health care budgets for next year, but it is too soon to know precisely how they'll bridge the gap between inflation and their spending plans, Bos said. A significant part of the gap will likely be filled by cost shifting, but employers may also be able to reduce their expenses by taking advantage of surplus capacity among health care providers in some markets that could create competition. Some also have started disease management programs in recent years that are just now starting to yield savings.