Bosses Face a Ballooning Price Tag for Health Coverage

Employers next year can expect the largest increase in health care costs in five years, according to an analysis by Hewitt Associates. This spike is being driven by a recent rise in medical claims costs, an aging population, and changes brought about by health care reform, the human-resource consulting firm said.

The increased costs that employers must shoulder for employee health care may help explain why employment-based health insurance coverage continues to erode, according to another analysis, conducted by the nonpartisan Employee Benefit Research Institute. Employees will be asked to pay more as well, the EBRI said.

The average premium increase for employers in 2011 will be 8.8 percent, compared with 6.9 percent this year, according to Hewitt. Employees also will be asked to chip in more for their coverage: 22.5 percent of their total health care premium next year, up from 12.4 percent in 2010.

“After 18 months of waiting for health care reform to play out, employers find themselves in a very challenging cost position for 2011,” said Ken Sperling, the health care practice leader for Illinois-based Hewitt. “Reform creates opportunities for meaningful change in how health care is delivered in the U.S., but most of these positive effects won’t be felt for a few years. In the meantime, employers continue to struggle to balance the significant health care needs of an aging work force with the economic realities of a difficult business environment.”

As costs rise, the percentage of American workers with employment-related health care coverage continues to decline, dipping 2 more percentage points last year, according to the EBRI. Overall, the percentage of individuals under age 65 with such coverage decreased from 61.1 percent in 2008 to 59 percent in 2009 — the lowest level since 1994.

Workers in large firms are more likely to be covered than those in small firms, according to the Washington, D.C.-based EBRI. Overall, about 45 percent of self-employed workers and private-sector workers in firms with fewer than 10 employees had some form of employment-based health benefits, compared with 76.8 percent of private-sector workers in companies with 1,000 or more employees.

“These trends are due to job losses resulting from the recent recession and the slow economic recovery, fewer workers being eligible for health insurance coverage, and more workers with coverage choosing to drop it,” said Paul Fronstin, author of the EBRI report.

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Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on twitter @nedbsmith.