Health Care Expenses Will Rise Dramatically in 2003

Consulting firm Hewitt Associates has released survey results showing an anticipated 20 percent increase in health care costs for 2003. Increases may be even greater for small businesses. Overall, health care premiums rose 15.6 percent in 2002.

As businesses begin the negotiation process for next year’s health plans, health care providers are citing the high price of prescription drugs, the cost of new medical technologies, and the need for new computers and software programs to comply with new federal medical privacy regulations as reasons for the increase. In addition, an anticipated increase in health maintenance organization (HMO) costs for 2003 is attributed to a mass exodus of healthy people from the plans, leaving an HMO population of sicker and more costly patients. Survey information regarding HMO rates indicates that the average increase in the cost of an HMO plan will be 22 percent in 2003, but some plans will show an increase of as much as 94 percent.

"We are seeing unprecedented HMO increases for 2003. With no clear solutions on the horizon we expect that it's going to get worse before it gets better," according to Mindy Kairey, e-business leader for Hewitt's Health Management Practice. "Companies cannot afford these increases and will have to be even more aggressive in making plan design and employee contribution changes for next year. Unfortunately, this means consumers should expect to pay a lot more for health care."

Plan changes are already showing up in 2002 health plans. Increases in co-pay arrangements show many companies moving employees to higher co-pay rates. Forty percent of company plans are requiring a $10 co-pay for generic drugs as compared with 27 percent in 2001, and 26 percent are requiring a $20 co-pay for name brand drugs as compared with 12 percent in 2001. Previously, the most common co-pay arrangements provided for a $5 co-pay for generic drugs and a $10 co-pay for name brand drugs. In addition, 25 percent of companies now require a $15 co-pay for office visits to doctors as compared with 13 percent in 2001.

The Hewitt survey is based on information from nearly 140 employers representing a total of over 1 million employees.

For more information on combatting rising health care prices, see Five Steps to Reduce Company Health Insurance Costs.

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