Increase in health care costs slows

By GUY BOULTON

The cost of health care benefits is rising at a slower rate in the Milwaukee area, with 29% of employers holding the increase to less than 5% this year, according to an annual survey.

Slightly more than half of the surveyed employers - 51% - reported increases of less than 10% for this year, up from 39% in 2004, according to the Greater Milwaukee Annual Report on Health Care.

But many small employers continue to struggle with soaring costs. Roughly one in six companies with 20 to 49 employees opted not to provide health benefits this year.

The survey found that 36% of the employers in that category reported cost increases of 15% or higher, and 17% dropped health care coverage.

More than 170 companies responded to the annual survey by the Greater Milwaukee Annual Report on Health Care and HCTrends.com.

The survey, done in cooperation with the Metropolitan Milwaukee Association of Commerce, is sponsored by Benefit Services Group, a benefits consulting firm, Milliman-Milwaukee, which does consulting and actuarial work, Aurora Health Care and WPS Health Insurance.

Although not scientific, the survey provides one of the first gauges of the cost of health care benefits in the Milwaukee market.

The survey tracks increases in employers' costs as opposed to increases in the total cost of health benefits. It does not include information on costs shifted to employees through higher premiums, deductibles, co-payments or co-insurance. Cost rise varies

This year, 43% of employers reported increasing deductibles, co-pays and co-insurance, down from 71% last year, according to the survey. Further, 35% of employers increased their employees' share of insurance premiums, roughly the same as in 2004.

"Last year, it seemed employers were much more aggressive in shifting costs," said Dave Jensen, the editorial director for the annual report.

The survey found that the rise in health care costs varies widely, with large employers overall having more success in keeping increases below 15% this year.

The steepest increases were for companies employing 20 to 49 people. But those with fewer than 20 employees fared only slightly better.

Of the companies that responded to the survey, 27% with fewer than 20 employees said the cost of providing health care benefits increased 15% or more this year, and 6% of them stopped providing health coverage.

In contrast, only 6% of employers with 200 to 499 employees and 10% of employers with more than 500 employees reported cost increases of more than 15%. Results echo national statistics

Bruce Peterson, a senior benefits consultant with Virchow Krause & Co., said the survey's overall results were consistent with other surveys.

He estimates that health care costs increased about 10% in the past year and that changes in how health plans were designed cut the increase to single digits for many employers.

Overall health care costs continue to rise at a rate that far outpaces inflation. In addition, the drop in the size of the annual increases follows roughly five years of double-digit increases.

Nationally, employers are spending 63% more on health care than they spent four years ago, and 88% more than eight years ago, according to Towers Perrin, which does benefits consulting.

At the same time, employees have seen their share of the cost of health benefits increase 59% in the past four years and 75% in the past eight.

Towers Perrins' national survey found that employers expect health care costs to increase about 8% this year.

The survey noted that, though the increase as a percentage was smaller than in the past five years, the increase in dollars would be about the same as 2004. City costs higher than others

In addition, health care costs in the Milwaukee area are higher than in other Midwestern cities, according to studies done for the Greater Milwaukee Business Foundation on Health.

The most recent study found that the total average cost of providing health care benefits for each employee in the Milwaukee area was $8,144 in 2003, or 39% higher than other Midwestern cities.

That figure takes into account demographics, the type of health plans offered and other factors. When the study looked at only the prices charged by hospitals, doctors and other health care providers, the difference between the Milwaukee area and other Midwestern metropolitan areas fell to 27%.

Despite the higher costs, most employers in the Milwaukee area continue to heavily subsidize the cost of family coverage.

The Greater Milwaukee Annual Report on Health Care found that employers - no matter their size - paid more than 80% of the cost of health benefits for family members.

Small companies, in fact, were generally more generous than large employers, paying 85% to 89% of the cost and having lower limits on total out-of-pocket expenses.

Jensen, who oversees a similar survey in Seattle, said that employers in that market increasingly are no longer paying for family coverage.

Daniel Burkwald of Burkwald & Associates Inc., a benefits consultant in Pewaukee, said many employers are reluctant to shift more costs to their employees.

The survey also found roughly one in four employers has set up health reimbursement accounts or health savings accounts, in which the employer or employee sets money aside for medical expenses.

But an additional 30% said they plan to, or are definitely interested in, setting up the accounts next year.

"This was a year in which a lot of employers sat back and watched how this evolved," Peterson said.

The interest in health savings accounts was strongest among larger employers, who were also more likely to have wellness and prevention programs, such as weight-loss programs and health assessments.

Peterson and Burkwald said such programs are becoming more common as employers look for long-term solutions to rising health care costs.

"You can't look at this as a year-to-year thing," Peterson said. "You need to have a three to five year strategy."

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