Health care for employees costs employers 7% more

Smaller businesses are hit hard with a 9.8% increase while inflation declined by 0.4%. A report points to outpatient spending as driving the increase.

By — Posted April 14, 2010

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Employers continued to absorb much of the rise in health care costs, even as overall inflation dropped in 2009, according to research by Thomson Reuters.

Businesses spent 7.3% more per capita for health care in 2009 than the previous year, while overall inflation declined by 0.4% and health care spending in the U.S. rose by 4.8%, said the report, released in March.

The report's author, Thomson Reuters Director of Practice Leadership Chris Justice, said the spending figures were drawn from mostly self-insured employers, who pay claims directly rather than paying an insurance company a premium to cover workers' claims.

Smaller businesses, defined as those with fewer than 5,000 employees, bore the brunt of the increase, with a 9.8% increase in health spending. That was compared with a 6.5% increase for medium-sized employers (5,000 to 50,000 workers), and a 5% increase for large employers (more than 50,000 employees).

"It's a more volatile world they live in," Justice said. "Their experience is more volatile anyway, because with 1,000 employees, one large $250,000 claim for heart surgery and all the complications could cause the underwriting for the group to have a big double-digit increase for the next year."

According to the report, increased medical spending was driven more by the cost of outpatient care than inpatient care. Inpatient care spending rose by 4.7%, and outpatient spending rose by 8.7%.

Within the outpatient category, facility costs rose 12.8% and professional costs -- fees and reimbursements to physicians and other health care workers -- rose by 5.7%.

Compared with consumer or government spending, Justice said, employers are bearing a large part of the overall rise in health care spending. "It says to me that they continue to have to absorb a disproportionate share of the health care trend."

The report is online (link).

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