The cumulative effect of ongoing cost increases combined with the current economic climate are creating significant affordability challenges for both employers and employees, according to new data from Towers Perrin. The study findings also show that many employers are preparing to take action by embracing new approaches to benefit management that have the potential to fundamentally transform the current model of health care delivery.

. . . [T]he 7 percent rise in 2010 medical benefit expenditures, although marking the sixth consecutive year of single-digit percentage increases, will mean record-high costs for both employers and employees. The average annual per-employee spend will, in 2010, cross the $10,000 mark, and while employers will continue to fund 78 percent of that amount, the actual dollar burden on employees has grown due to the ever-increasing cost base and the added impact of benefit design-related increases in out-of-pocket costs.

Employee premium contributions, on average, will rise by 10 percent, or just above $200, during 2010 -- a bigger jump than the 8 percent increase seen in 2009. This additional burden is exacerbated by indirect cost shifting through benefit design changes such as increased copayments, which add significantly to the overall cost for employees.

“For employees, the affordability challenges associated with this year's cost increases are even more acute than the general survey numbers suggest," said Dave Guilmette, Managing Director of the Towers Perrin Health and Welfare practice. "The cost-shifting actions employers are taking for 2010 are consistent with what's been done in years past, which is surprising in an economy where bigger shifts might be expected."

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