Double-Digit Increases For Health-Care Costs Expected In '01

Double-digit increases in health-care costs will hit U.S. employers in 2001, the third year in a row for a major hike, according to Lincolnshire, Ill.-based benefits firm Hewitt Associates. Hewitt is projecting increases of 10% to 13% depending upon the type of health plan offered. This follows a 2000 rate hike of 9.4%, the highest increase since the early '90s. "The key drivers behind health-care increases continue to be prescription-drug costs and the pressure HMOs are under to produce improved bottom-line results," says Jack Bruner, national health-care-practice leader for Hewitt. "Health plans are standing tough in negotiations, as they are focusing more on profitable membership, rather than total membership as in years past." Some companies will absorb the majority of next year's rate hikes, but many will pass along at least 25% of the increase to employees, according to a Hewitt study. With the average health plan projected to cost $4,707 per employee next year, up from $4,222 in 2000, that means most employees will pay $125 more for their health coverage next year. "With today's tight labor market and fierce competition for talent, companies are doing everything they can to not pass along the increases to employees, but with the continued rate hikes, they simply cannot afford to cover all the costs," Bruner says. "Unfortunately, employees will again have to pay more out of their paycheck for health care."