Workers' Health Care Costs Continue to Rise

Insured workers may see their share of medical costs go up as employers continue struggling to pay for rising health care prices, an analysis released Wednesday concludes.

The report shows that although employees' out-of-pocket medical payments have steadily risen for the last decade, employers may soon require many of them to pay an even higher share to cover the cost of care.

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The average American family of four is now paying more than $2,013 per year in co-payments, deductibles, and other costs within preferred provider organizations, the most popular form of employer-sponsored health insurance, according to an analysis released by Milliman Inc., a large health insurance consulting firm. Those health care costs have gone up more than $500 since 2001, according to the report.

The cost does not include health insurance premiums, which in 2004 averaged an additional $2,664 for a four-person family, according to Henry J. Kaiser Family Foundation, a nonprofit health policy group. Those costs have also gone up steadily over the last decade.

But despite the rises, workers' co-payments and deductibles comprise a slightly lower percentage of the total health care spending than they did five years ago, analysts say. The difference means that employers, who are also dealing with annual 9 percent to 10 percent rises in the overall cost of health care, may be preparing to shift more costs to their workers.

"It makes it difficult to sustain growing at that rate, and that makes it difficult for employers to sustain [the costs], says William Thompson, a principal and actuary at Milliman.

"Overall, we don't think employers have raised their deductibles and modified their co-insurance enough to keep up with costs," adds Robert Cosway, another of the firm's principals.

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The trends could mean that employers will also force workers to pay a higher percentage of premiums than they do now. The average worker paid about 20 percent of the total premium costs of health care coverage offered by employers last year, according to Kaiser.

Overall medical costs for an average family of four now total $12,214 with employer-sponsored PPO coverage, Thompson says. Between 2004 and 2005, employers saw their share of the health care cost go up 9.8 percent, while workers saw a 6 percent rise. The disparity could put further pressure on firms to raise employees' costs next year, he says.

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By Todd Zwillich, reviewed by Brunilda Nazario, MD

SOURCES: Milliman Medical Index 2005, Milliman Inc., May 25, 2005. William Thompson, principal and consulting actuary, Milliman Inc. Robert Cosway, principal and consulting actuary, Milliman Inc. Trends and Indicators in the Changing Health Care Marketplace, Henry J. Kaiser Family Foundation, February 2005.