Health Care Costs Expected To Rise 8% In 2006, Survey Shows

U.S. employers expect an 8% increase in their 2006 health care expenses and continue to absorb the rising costs, says a recent Towers Perrin survey.

According to a poll of 204 Fortune 1000 companies, the 2006 gross health care expenditure is expected to rise by an average of $597 per employee to an average total cost of $8,424, representing a 140% increase over the last 10 years.

The survey shows that the surging costs are impacting employers more than their employees who will pay about $155 more in 2006, a 10% increase from the previous year. Employers, on the other hand, expect to pay a $442 increase per employee, absorbing 74% of the total cost increase.

However, some companies are keeping health care costs down by examining all aspects of their vendor relationships. Low-cost companies are more likely than high-cost companies to have consolidated vendors or implemented enhanced vendor performance standards or service levels. They are also more likely to have implemented processes to monitor the results of their care-management initiatives.

"Smart employers are managing their HMOs using tactics that have been successful with PPOs, such as terminating poor-performing vendors and using self-insured arrangements, "says Ron Fontanetta, principal in the Towers Perrin Health and Welfare practice. "The gains achieved through aggressive program management allow these employers to minimize any cost shift to employees, as shown in the contrast between the rate of cost in creases for employees at high-cost vs. low-cost companies."

Low-cost companies, those classified in the survey as spending about $6,866 per employee, experienced an average HMO increase of 7% compared with an average HMO increase of 9% for all companies surveyed.

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