U.S. employers will see medical benefit expenditures increase 7% in 2010, pushing the average annual per-employee costs for healthcare across the $10,000 threshold, according to Towers Perrin's annual Health Care Cost Survey.
The survey is also projecting components under consideration in healthcare reform legislation—such as an excise tax on so-called Cadillac health plans—could potentially increase the cost burden for employers, who will pass those additional costs to employees, exacerbating the affordability gap.
The 7% rise in 2010 marks the sixth consecutive year of single-digit percentage increases, but it also means record-high costs for both employees and employers. While employers will continue to fund 78% of the cost of the benefits in 2010, employee premium contributions, on average, will rise by 10%, or just more than $200 next year. The increase for employees was 8% in 2009. This additional burden is exacerbated by indirect cost shifting through benefit design changes, such as increased copayments and other out-of-pocket expenses, which add to the overall employee cost.
"For employees, the affordability challenges associated with this year's cost increases are even more acute than the general survey numbers suggest," says Dave Guilmette, managing director of the Towers Perrin Health and Welfare practice. "The cost-shifting actions employers are taking for 2010 are consistent with what's been done in years past, which is surprising in an economy where bigger shifts might be expected."
Guilmette says the increased employee cost in healthcare is part of a triple whammy for workers who also face flat or declining wages, and reduced 401(k) matches and balances. "The financial hardship associated with rising employee costs is top of mind—and not sustainable for many people," he says.
The Towers Perrin 2010 survey includes data on health benefits provided by 300 of the nation's largest employers, which total 5.2 million employees and their dependents, who collectively spend $29.4 billion on healthcare every year. The average reported cost of medical coverage is $5,124 annually ($427 per month) for active employee-only coverage, $10,500 annually ($875 per month) for employee-plus-one-dependent coverage, and $15,084 annually ($1,257 per month) for family coverage.