Worker health costs to increase

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Employees will pay $150 more for medical expenses next year, a new survey projects.

Next year's health care expenditures for the nation's employers are expected to rise by an average of $577 per employee, to an average total cost of $9,312. Of that, employers will pay 78 percent and employees will cover the rest, in addition to out-of-pocket expenses such as co-payments and deductibles.

That means employees will pay a total of $2,040 for health care in 2008, $156 more than last year and 59 percent more than they were paying in 2003, according to the survey released yesterday by Towers Perrin, a global health care consulting firm.

Health care costs for employers will increase by 7 percent next year, nearly one point higher than this year's growth rate, Towers Perrin said.

"Increasing employee contributions, deductibles, co-pays and premiums are causing many workers to opt out of their employers' health plans, forcing significant numbers of employees to join the ranks of the working uninsured," said Dave Gillette, managing director of the Tower Perrin Health and Welfare practice.

The survey includes information on the health benefits program of 300 of the nation's largest employers.

Premiums for employer-sponsored health insurance rose an average of 6.1 percent this year, according to an earlier report by the Kaiser Family Foundation.

In 2006, the increase was 7.7 percent. Next year's projected increase means health care costs likely will continue to rise at double the rate of wage increases and inflation, both below 4 percent last year.

Mercer Health and Benefits, a rival health care consulting firm, earlier this month projected a 6 percent increase in medical expenses for employers.

Towers Perrin found that companies are attempting to save on health care costs by reducing retiree coverage.

"One of the most significant findings of our 2008 survey is that we are seeing a clear and dramatic divergence in how companies are defining their financial commitment for active employees versus retirees," said Ron Fontanetta, a principal in Tower Perrin's Health and Welfare practice. "They are clearly doing less to help employees prepare for medical expenses in retirement."

Mr. Fontanetta added that the long-term effect could be to encourage older workers who want to leave the work force to stay in their jobs primarily to receive company-subsidized health care. The total cost of health insurance coverage for retirees younger than 65 is $569 per month, of which the retiree will pay an average of $277.

A new type of health insurance, dubbed consumer-driven health care, did not make significant headway from last year's levels, the survey found. Consumer-driven plans give employees more responsibility for medical decisions because out-of-pocket costs are much greater. The out-of-pocket expenses, however, are offset by tax-favored accounts that can be used for medical care.

Analysts tout consumer-driven health care as an alternative approach to employers paying for nearly all workers' medical treatment.

"The relative absence of growth in account-based health plans implementations reveals an important gap in organizations' retirement planning," Mr. Fontanetta said. "But the uptick isn't there, and that suggests that employers are not connecting the dots by positioning tax-favored savings opportunities as a means to help fund post-retirement medical expenses."