Higher Healthcare Costs in 2011

WASHINGTON :- The amount employers spend on their workers' healthcare costs will reach a 5-year high in 2011, and employees will also face larger out-of-pocket costs for their medical care next year, according to a forecast released Monday by the consulting group Hewitt Associates.

Because of higher medical claim costs, an aging population, and changes under the new healthcare reform law, employers can expect to pay nearly 9% more toward their employees' healthcare costs than they did in 2010.

The findings are in line with a recent survey by the National Business Group on Health that asked large employers what they expected to pay for their workers' medical costs in 2011. The answer: about 9% more than in 2010.

The average total healthcare premium per employee working at a large firm will be $9,821 in 2011 -- up from $9,028 in 2010.

Employees will contribute, on average, $2,209, or 22.5% of the total premium, which is a few hundred dollars more than in 2010, when the average employee at a large firm paid 21.8% of their total premium, to total slightly less than $2,000. Once out-of-pocket costs for co-pays and deductibles are factored in, employees can expect to pay about $486 more than they paid toward their medical costs in 2010.

The authors of the Hewitt report say that the new figures mean that healthcare premiums have more than doubled in the past decade and employees' share of their medical costs will have more than tripled.

The high 2011 cost projections are based on a number of factors, the study authors said. For one, employers haven't hired many new employees in recent years, which has resulted in a slightly older work force that is more prone to expensive medical conditions.

Certain insurance market reforms contained in the Affordable Care Act (ACA) -- such as covering dependents until age 26 and eliminating lifetime and annual limits -- contributed to about 1% to 2% to the 9% increase in what employers are likely to pay in 2011.

"After 18 months of waiting for healthcare reform to play out, employers find themselves in a very challenging cost position for 2011," said Ken Sperling, Hewitt's healthcare practice leader, in a press release. "Reform creates opportunities for meaningful change in how healthcare 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 healthcare needs of an aging work force with the economic realities of a difficult business environment."

Hewitt's data came from a database with detailed census, cost, and plan design information for 350 large U.S. employers representing 14.4 million participants and $51.9 billion in 2010 healthcare spending.