$700 Surge Expected In Health Care Costs

Next year, health care costs in New York City are expected to surge by nearly $700 for each employee, the largest increase in more than four years. The cost for one employee will rise 8.7%, to $8,719, according to a report released yesterday by the human resources firm Hewitt Associates. This year, costs were up 3.5%.

The cost increases are being driven by higher HMO premiums and indemnity plans.

The city's numbers are in line with the national average, which is also expected to rise 8.7%, to $8,676. This year, it increased 5.3%, to $7,982.

While companies pick up the lion's share of their employees' health care costs, to cover these higher charges, individual workers will likely end up paying a larger portion of the tab. Hewitt Associates estimates that employees next year will pay 23% of the total cost, or $2,008. Nationally, employees will be asked to contribute $1,859 in 2008, or about 21% of the overall health care premium, up from $1,690 in 2007.

On the issue of passing on health care costs to employees, the practice leader of Hewitt's health management consulting arm, Jim Winkler, said in a statement: "We're seeing evidence that this strategy is prompting an increasing number of employees to forgo necessary preventative care."

The study, which is generated from a database of more than 1,800 health plans across the country, also found that total health care costs, including employee contribution and out-of-pocket costs, are projected to jump 10.1%, to $3,597, in 2008. In New York, the total cost will be $3,585.

"While some cost shifting is appropriate, it's critical that companies design their health care programs in a way that encourages employees to use them — and use them wisely. Otherwise, they are essentially trading preventative care now for ‘rescue care' later, which will lead to unhealthy employee populations, a decrease in employee productivity and ultimately — higher health care costs," Mr. Winkler said in a statement.