“Unprecedented” Health Care Increases Predicted for 2003

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“Unprecedented” Health Care Increases Predicted for 2003

Expect to pay considerably more for your health care next year. Based on early surveys of 2003 health insurance premiums, the average increase is likely to be 17%. And retirees’ health insurance premium increases are likely to be even higher. Early data is based on all persons including younger workers and also examines rate increases in Health Maintenance Organizations (HMOs), which tend to have lower costs than traditional fee-for-service plans.

“The 2003 expected increase, if implemented,” says Milliman USA’s 11th annual HMO Premium Rate Survey, “would be the largest annual increase in the 11 years of this survey. Increases of this magnitude are likely to accelerate the movement of cost sharing to employees (including retired employees) as employers seek to reduce their benefit costs.” Another well-known consulting firm, Hewitt Associates, says, “We are seeing unprecedented HMO increases for 2003. Companies cannot afford these increases.”

Employers are already trying to cope with sharply increased costs in recent years by making employees (including retired employees) cover a higher share of the cost, or in some cases discontinuing coverage altogether. A survey performed by the Kaiser Family Foundation and The Commonwealth Fund found that firms offering retiree health benefits fell seven percentage points from 1999 to 2001 (from 41% to 34%) reaching the lowest rate in five years.

Indeed, if large corporate employers can’t afford these massive increases, how can seniors living on Social Security benefits? One thing is for sure: seniors certainly will not be able to rely on the annual Social Security COLA increase, to make up the difference.

Sources: “Record High Health Care Costs Predicted for 2003” Milliman USA’s Eleventh Annual HMO Intercompany Rate Survey, July 1, 2002. “HMO Rates Continue to Rise at Double Digit Pace,” Hewitt Associates, June 4, 2002. “Aon Survey: Health Care Costs Will Continue Double Digit Increases,” Aon Consulting, June 25, 2002. “New Survey Shows Retiree Health Benefits Continue to Decline,” Kaiser Family Foundation and The Commonwealth Fund, April 15, 2002.

For a related story see “Legislative Update: What Kind of Medicare Prescription Drug Benefit?” at http://www.tscl.org/NewContent/101593.asp.

October 2002