US employers drop health cover as costs rise

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BOSTON: The amount of money US employers and workers spend on health benefits will continue to rise at twice the rate of inflation next year, prompting an increasing number of employers to drop coverage for their employees, according to a survey being released Monday.
The survey, conducted annually by Mercer Health & Benefits, the human resources consulting group, found that the total health benefit cost rose by 6.1 per cent in 2007, the same pace as last year, to an average of $7,983 per employee. While the cost increases have held steady for three years - after spiking to nearly 15 per cent in 2002 - the increase is occurring at more than twice the rate of inflation.
Health cost growth is outpacing wages and material costs, and eating into business profitability, according to Blaine Bos, a partner at Mercer and one of the study's authors. "This puts US companies at a significant disadvantage in the global, competitive economy," he said.
The goal, he added, ought to be "for health costs to rise along with wage and price inflation. In a best case scenario, the US needs to make sure our healthcare spending, as a percentage of GDP, is in line with the rest of the developed world."
The survey also found an increase in small employers dropping their health plans for employees. Among employers with fewer than 200 employees, health coverage prevalence fell from 63 per cent to 61 per cent in 2007 - a decline from 66 per cent five years ago. Rising cost of healthcare is one of the most significant issues in the forthcoming presidential election, as spending on healthcare is expected to reach $4,000bn (£1,940, €2,730bn) in 2015, or 20 per cent of GDP, according to recent estimates.
"The number one domestic policy debate is about the uninsured," said Bos.
"The fact that more small employers are exiting the system and contributing to the rolls of the uninsured is a huge issue, and is very worrying.
"The questions are: what do [the employers] define as affordable? And once we've divined that, how do we get them to the point where they provide coverage."
The survey, involving interviews with nearly 3,000 employers, also found that they expected costs to rise 5.7 per cent next year.
That takes into account any changes that employers will make in the level of benefits, the type of plan offered, or the plan vendor. If employers made no changes, the cost of their largest medical plan would rise by about 8 per cent, they predict. — Internet