Benefit Costs to Rise 7% in 2010 to over $10,000 for the First Time

According to Towers Perrin Health Care Cost Survey Shows Employer-Sponsored Medical

Affordability Gap Widens — Reform, Economic Downturn Combine to Increase Gap and Drive Significant Employer Action.

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STAMFORD, Conn.--(BUSINESS WIRE)--Against a backdrop of prolonged recession, U.S. employers will see an increase in their medical benefit expenditures of 7% in 2010. The cumulative effect of ongoing cost increases combined with the current economic climate are creating significant affordability challenges for both employers and employees, according to new data from Towers Perrin. The study findings also show that many employers are preparing to take action by embracing new approaches to benefit management that have the potential to fundamentally transform the current model of health care delivery.

According to Towers Perrin’s annual Health Care Cost Survey, the 7% rise in 2010 medical benefit expenditures, although marking the sixth consecutive year of single-digit percentage increases, will mean record-high costs for both employers and employees. The average annual per-employee spend will, in 2010, cross the $10,000 mark, and while employers will continue to fund 78% of that amount, the actual dollar burden on employees has grown due to the ever-increasing cost base and the added impact of benefit design-related increases in out-of-pocket costs (Exhibit 1).

Employee premium contributions, on average, will rise by 10%, or just over $200, during 2010 -- a bigger jump than the 8% increase seen in 2009. This additional burden is exacerbated by indirect cost shifting through benefit design changes such as increased copayments, which add significantly to the overall cost for employees.

“While large employers continue to work on health care demand through employee behavior change, they realize they can’t truly impact the underlying cost drivers without also addressing supply,” said Guilmette. “But few employers today can take on the provider payment model. They are instead waiting for government to take the lead and, when it does, they will be quick to follow.” www.towersperrin.com/hrservices