PwC: Employers' healthcare costs expected to rise 9% in 2011

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According to a Behind the Numbers report by PricewaterhouseCoopers’ (PWC) Health Research Institute, medical costs are expected to increase by 9 percent in 2011, a decrease of 0.5 percent from the 2010 growth rate. 

The report--consisting of a Health and Well-Being Touchstone survey of more than 700 employers from 30 industries--noted that the higher medical cost trend is based on hospitals shifting costs from Medicare to private payers and employers, increasing provider consolidation and hospital systems’ plans of EHR implementation. Plus, more employers are raising out-of-pocket limits, replacing co-pays with co-insurance and adding high-deductible health plans.

PwC indicates three primary deflators that will help employers hold down medical costs:

  • Employers are moving toward pre-managed care benefit design by increasing deductibles and replacing co-pays with co-insurance. By requiring workers to spend more out-of-pocket at the point of care, employers believe they will rein in utilization of services and drugs.
  • Drug costs are tempered by generics. Insurers are benefitting from the growing use of generic drugs. Generics account for as much as 80 percent of all prescriptions.
  • COBRA costs are expected to return to more normal levels in 2011. A combination of declining unemployment and expiration of the COBRA subsidies is expected to lead to reduced enrollment in COBRA.

Next year, more employers plan to drop health benefits for retirees and/or expand or improve wellness programs, according to the report. In addition, 42 percent intend to increase employee contributions for health insurance coverage, and 41 percent plan to increase medical cost-sharing for employees.