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Group health plan cost increases picked up steam in 2010 after several years of relative stability, and the health care reform law is expected to help that surge continue in 2011.
Higher medical fees and increased utilization caused group health care plan costs to jump an average of 6.9% in 2010, the largest increase since 2004, according to Mercer L.L.C. That brought average annual costs to $9,562 per employee vs. $8,945 in 2009, according to the annual survey.
Similarly, a Milliman Inc. study found that average medical costs for a typical family of four enrolled in an employer-sponsored preferred provider organization rose an average of 7.8% in 2010. The $1,303 increase was the largest dollar gain since 2005.
Higher-than-usual COBRA enrollment rates also pushed up total health care spending, researchers at Hewitt Associates Inc., now Aon Hewitt Inc., found. That was due to a federal subsidy of COBRA premiums, boosting the typical 12% enrollment rate to as high as 46% in June 2009. Insurers also established higher reserves for COBRA enrollees, who traditionally are greater users of medical care.
Improvements in group health benefit coverage mandated by the Patient Protection and Affordable Care Act could increase costs even more for employers. If no plan design changes are made, costs could grow as much as 10.1% in 2011, Mercer researchers warned.
Hewitt forecasts that group health plan costs per employee will increase an average of 8.8% in 2011, the largest percentage gain since 2005. That compares with a 6.9% actual increase in 2010.
In fact, group health insurance rates for small and midsize employers already jumped between 11% and 20% for 2011 renewals that occurred during the summer, according to the Council of Insurance Agents & Brokers' June survey.
However, the 12th Annual Kaiser Family Foundation/Health Research & Educational Trust survey found that employer-sponsored health insurance costs climbed just 3% in 2010, but that was due largely to increased cost-shifting to workers.
Since 1999, the share of health care premiums paid by employees has increased 159%, while the cost of employer-sponsored health care benefits has grown 138%, according to the KFF/HRET survey.