After years in which annual group health care plan cost increases have held steady in the 6% to 7% range, large employers are expecting much bigger increases in 2011, according to a survey released last week.

Employers responding to a National Business Group on Health survey said they expect costs to shoot up by an average of 8.9% next year, up from a projected average increase of 7% this year.

At least part of the reason cost increases are accelerating is that most employers will have to expand coverage to meet requirements laid down by the new health care reform law starting next year, NBGH President Helen Darling said at a briefing in which the survey was released.

Of that 8.9% increase, about one percentage point is attributable to changes employers will have to make to comply with the health care reform law, she said.

For example, 70% of surveyed employers will have to remove lifetime dollar limits now imposed by their plans, 26% will have to end annual dollar limits and 19% will have to take out pre-existing condition exclusions for children under age 19 as mandated by the law.

While the health care reform law is raising employer costs, a bigger driver is medical providers who continue to raise rates beyond overall inflation, Ms. Darling said.

“Hospital rates keep going up,” she said.

As health care costs continue to increase, employers are stepping up their efforts to shift at least some of those increases to plan enrollees, according to the survey of 72 members of the Washington-based NBGH.

For example, 63% of employers say they will increase the percentage of health care premiums that employees pay next year compared with 57% this year.

In addition, 46% said they plan to increase out-of-pocket maximums next year, up from 36% this year; while 21% say they will boost copayments or coinsurance for specialist care, up from 13% this year.

For some types of care, though, employers are shying away from employee cost-shifting. For example, just 6% of employers say they intend to increase employee copayments or coinsurance for primary care services in 2011, down from 11% in 2010. In fact, Armonk, N.Y.-based IBM Corp. pays 100% of primary care services, Ms. Darling noted. Some employers believe if medical problems are detected early by primary care providers, the likelihood of those problems remaining undetected until they mushroom into more expensive-to-treat conditions is reduced.

Employers are taking other steps to try to rein in cost increases, according to the survey. For example, 20% next year will offer a consumer-driven health care plan as their sole option, double this year's level.

Typically, CDHPs couple a high-deductible health insurance plan with a health savings account or health reimbursement arrangement that employees can tap to pay for a portion of out-of-pocket expenses. Because employees are exposed to more costs, CDHP premiums typically are less than more traditional plans. Preventive services, though, typically are covered in full, or close to it.

The survey also found that 69% of employers are considering whether to change their prescription drug plans covering Medicare-eligible retirees.

Under current law, the government provides tax-free reimbursement of 28% of employers' retiree prescription drug expenses that fall within a certain range. But under the health care reform law, that tax treatment will be scaled back, effective in 2013. While the tax-free subsidies will continue, employers receiving them no longer will be allowed to take a tax deduction for prescription drug costs equal to the amount of the subsidy.

While some analysts have said it could be more cost effective for employers to terminate their health care plans, pay the financial penalties set by the health care reform law, and increase salaries to help employees buy coverage through state health insurance exchanges that will be set up in 2014, Ms. Darling doesn't see that happening anytime soon.

To remain competitive, employers for now will continue to offer coverage, she said. Down the road, whether they continue to offer coverage will depend on variables such as the competition level in their industry and how effective the insurance exchanges are in holding costs in check, she said.