According to forecasts released on Monday, employers in the US can expect to pay nine percent more for their employees’ healthcare costs in 2011.
The announcement could prove bad news for employees: according to the report from consulting group Hewitt Associates, an estimated 60 percent of employers will expect employees to cover around 12 percent of the increased healthcare costs. Given that the average salary raise is likely to hover in the vicinity of three percent for 2011, employees will see a subsequent decrease to their income.
According to the Hewitt report, the cause of the rise in healthcare and medical costs is due in part to America’s ageing population, but also a direct result of the US healthcare reform. The latter has caused a real stir in political and non-political circles since President Obama announced the changes earlier this year, and is still a thorn in Obama’s side as the November congressional elections approach and voters learn they must wait for promised savings to come into effect.
Calculating the cost of reform
Reuters have calculated the fiscal effect of the report, and projected that average health care cost per employee will rise to $9,821 in 2011, up from $9,028 in 2010. Employees will pay $2,209, or 22.5 percent of the total premium, up 12.4 percent from 2010.
“After 18 months of waiting for healthcare reform to play out, employers find themselves in a very challenging cost position for 2011,” Ken Sperling, Hewitt’s health care practice leader, said in a statement.
In a more detailed breakdown of the growing costs, IndustryWeek confirm that other rising costs are due in part to employers moving toward pre-managed care benefit design by increasing deductibles and replacing co-pays with co-insurance, drugs representing about $26 billion in annual sales are expected to go off patent in 2011, including the world’s best-selling drug, Lipitor, and COBRA subsidies passed by Congress in 2009 created a one percent increase in the medical cost trend, and costs are expected to return to more normal levels in 2011.
IndustryWeek do highlight that the biggest inflation of healthcare costs is due to the rising cost of hospital treatment and physician costs, which account for 83 percent of premium costs.
“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,” said Kelly A. Barnes, U.S. health industries leader at PricewaterhouseCoopers. “These changes could bring significant new cost savings opportunities for employers and payers as well as new choices and transparency for workers buying insurance.”
Health Savings Accounts (HSAs) helping employers cut healthcare | PBM financial quote – Healthcare employee benefits | Issue 10 – Healthcare & Benefits | Healthcare consumerism: driving better informed choices to reduce