Articles

Cost of health benefits soaring
In South, rise far outpaces inflation

By Andy Miller
The Atlanta Journal-Constitution
November 20, 2006

Employers based in Atlanta and across the South saw their health benefits cost in 2006 rise at a faster rate than the rest of the United States, according to a survey of employer health plans released today.

That's because companies in the region didn't try to cut medical costs this year as much as employers did elsewhere, said David Foster, an Atlanta consultant with Mercer Health & Benefits, which conducted the survey of 3,000 employers with 10 or more workers.

Health cost increases generally have slowed for companies nationally, the survey found. Total benefit costs nationally rose 6.1 percent -- the same rate as 2005 -- to an average of $7,523 per active worker. That amount includes premiums paid by employees.

But that increase is still about twice the general inflation rate, noted Bill Custer, a health insurance expert at Georgia State University. "Benefits costs are still becoming a larger share of total worker compensation," he said. "Employers still face uncertainty as to what those health care costs will be next year and in the future."

Southern employers saw their costs rise by 11.8 percent, while Atlanta-based employers increased by 9.9 percent. But costs per employee in the South are still less than the national average -- $7,196 vs. $7,523, though the 30 Atlanta companies surveyed hit $7,797.

The survey also found that workers are not flocking to highly touted "consumer-directed" health plans, which combine high-deductible insurance with spending accounts where workers and employers can contribute money to pay for services. The goal is to steer consumers away from unnecessary services and push them to shop wisely for medical care.

Only 3 percent of employees have chosen consumer-directed plans, up from 1 percent the year before. Still, more employers told Mercer that they would offer this option to workers next year.

These plans are cheaper -- $5,770 per worker vs. $6,932 for a preferred provider organization (PPO), which is by far the most popular insurance option, covering 61 percent of employees, said the survey, which is weighted toward companies of 500 or more workers.

A consumer plan is cheaper because "it's less insurance," due to the high deductibles. Custer said, who added: "It's certainly the right solution for employers who can't otherwise offer insurance to employees."

Mercer's Foster said employers are saving money by encouraging workers to take a greater role in their health, through management of chronic diseases and buying generic drugs.

Companies also are offering employees financial incentives to fill out questionnaires to identify health risks, and enter weight-management and smoking-cessation courses, he said.

Health benefits: What companies pay

$7,523: Average cost per active worker for health benefits

$7,196: Average health care cost per employee in the South

11.8%: Amount costs increased in the South. Atlanta-based companies saw a 9.9% increase

Copyright 2006 The Atlanta Journal-Constitution. More information: www.ajc.com.

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