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.

You may like these other stories...

By Jason Bramwell, Staff WriterA recent survey of nearly 100 US financial executives by Deloitte LLP found that 42 percent of respondents pointed to the Affordable Care Act as the reason they had to pass further health care...
By Ken Berry Flexible spending accounts (FSAs) used for health care expenses just became slightly more flexible. On October 31, the IRS announced that employers can modify the "use-it-or-lose it" rule...
Dementia has become the number one cause of disability globally, according to the World Health Organization. Stroke, which can also profoundly impair judgment and decision making, stands at number two. "This year,...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.