Health Care Costs to Rise in 2011

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Employers in the U.S. expect health care costs to rise by 9% in 2011, according to a survey conducted by PricewaterhouseCoopers’ Health Research Institute.

The institute’s 2011 Behind the Numbers report showed that most of the American workforce will have a health insurance deductible of $400 or more, as companies raise out-of-pocket limits, replace co-pays with co-insurance and add higher deductible plans.

Additionally, more employers are dropping health benefits for retirees. Only 22% of employers with more than 5,000 employees subsidize post-65 retiree medical coverage, down from 37% in 2009, the report says. According to Reuters, about 60% of Americans under the age of 65 get health insurance through an employer.

The rise in costs for these employees will be caused primarily by the shifting price of Medicare, which will reduce its payments to hospitals after seven years of increases.  Additionally, more doctors have left private practices to join local hospitals or larger physician groups, which has given doctors more bargaining power when it comes to negotiating payment rates. A switch to certified electronic health record systems in hospitals has also contributed to the increase. However, the report points out that these changes should gradually lower medical costs as the new healthcare reform goes into effect by 2014.

“Health reform delivers only a minor impact on the underlying medical cost trends in 2011 and introduces hundreds of changes in the healthcare system designed to reduce costs and improve efficiencies in the long-term,” Kelly A. Barnes, U.S. Health Industries Leader at PricewaterhouseCoopers said in a press release. “These changes could bring significant new cost savings opportunities for employers and payers as well as new choices and transparency for workers buying insurance.”

For now, companies plan to counter the increase in costs by offering more wellness and disease management programs to employees. According to the survey, 67% of employers said they intended to improve or expand upon existing programs, 63% already administer health risk questionnaires, 39% offer weight management programs and 27% provide nutritional training.

“For more than 50 years, U.S. employers have used health benefits as a critical part of their compensation package to recruit and retain workers,” Michael Thompson of PricewaterhouseCoopers Human Resource Services said in the press release. “Companies are now working with their health plan providers for new post-recession, post-health reform strategies to sustain their programs and promote health and well-being as their next competitive advantage.”

PricewaterhouseCoopers Health Research Institute conducted the survey by interviewing representatives of 700 U.S. companies across the country from 30 different industries. They also interviewed health plan actuaries and other executives whose companies provide health insurance for 47 million American workers and their families.

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