Health Care Costs to Increase 15.4 Percent in 2003

The global consulting firm Hewitt Associates has analyzed recent trends in health care and the news is not good. Health care costs are projected to increase 15.4% in 2003, which comes on top of a 13.7% increase in 2002. This represents the highest increase in health care costs since the early 1990s. "Unless there is a fundamental change in the way health care is delivered, costs will double in the next five years," according to Jack Bruner, national health care practice leader at Hewitt.

This translates into big dollars for corporate America. The average corporate cost per person for health care in 2003 is expected to increase from $5,157 to $5,982 for HMOs (Health Maintenance Organizations), $5,545 to $6,367 for PPOs (Preferred Provider Organizations), $5,639 to $6,485 for POS (Point-of-Service) plans, and $6,304 to $7,249 for indemnity plans.

"Employers simply cannot afford to continue to absorb these types of rate hikes and, unfortunately that means employees will have to pay a lot more for health care," Said Mr. Bruner.

Employers are looking for alternative ways to provide health care benefits to employees and at the same time cut down on costs. Here are some options to consider:

  • Increasing payroll contributions
  • Reducing support for dependents
  • Charging extra for spouses
  • Increasing penalties for using services outside the provider network
  • Increasing co-payments for medical services
  • Increasing co-payments for prescription drugs
  • Customizing prescription drug options
  • Re-evaluating existing plans for ways to simplify administration and consolidate coverage
  • Offering programs that specialize in frequently-used medical services
  • Combining high-deductible plans with health care reimbursement accounts

The bottom line is that "companies have to help employees take more responsibility and become more active health care consumers," said Mr. Bruner.


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