Employer Healthcare Premiums Up 88% Since 2000, Analysis Shows

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A detailed study of healthcare premium costs for employers indicates that they have risen 88% since 2000 with the average increase being 9.8% for the nine years including the current 12-month period which is expected to be 8.7% for 2008.

Smaller firms have less clout with insurance companies and therefore are forced to accept higher premiums.

Employer healthcare premium costs have risen 88% since the turn-of-the-century with 2008 increase coming in at 8.7% considerably higher than 2007. The analysis shows that the average increase was 9.8% for the nine years including the current 12-month period. The study was done by Information Strategies, Inc.'s (ISI) staff analyzed data from a variety of sources and developed a composite picture of healthcare premium costs in this decade.

While 2006 and 2007 showed the slowest increases (7.7% and 5.1%), the current year's increases have average 8.7%. These increases are occurring in the face of higher usage of Health Reimbursement Account (HRAs) and Health Savings Accounts (HSAs). Because they usually have higher deductibles, these plans are normally less expensive to employers than more traditional plans.

In both cases, companies and insurers also report that utilization as a percent of premiums are below that of more traditional programs.

"We believe the burden has fallen more on smaller enterprises as large corporations have more successfully striven to reduce their healthcare premium costs," JoAnn M. Laing, ISI's President said. "Smaller firms have less clout with insurance companies and therefore are forced to accept higher premiums."

"Many of them have opted to reduce benefits, increase employee contributions or even stop offering healthcare insurance," she said. "Our studies and surveys of smaller firms indicate that they have embraced HSAs to a greater extent as a means of reducing healthcare premiums," Laing added.

"Many others are giving employees a stipend and having them find their own insurance," she said.

Laing said her firm's research also indicated that there were significant regional differences with northeast based companies being hardest hit in terms of costs. Healthcare premiums are also far outpacing the rate of inflation by almost three-to-one.

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Donald Mazzella
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