Managing costs pays off in the US

US companies managing health insurance programmes actively and
effectively are scoring handsomely, reports professional service
company Towers Perrin. “For the first time in over a decade we are
seeing a number of companies keeping cost growth near the consumer
price index for medical services, which currently stands at about 4
percent,” said Dave Guilmette, MD of Towers Perrin’s health and
welfare practice.

Overall, Towers Perrin forecasts that compared with 2007 the
average annual cost of health insurance per employee will rise 7
percent to $9,312 in 2008. However, what Towers Perrin termed
high-performing companies would be at a big cost advantage, paying
about $1,500 on average less per employee in 2008 than their less
vigilant counterparts. At the extreme of the cost escalation scale,
Towers Perrin said 22 percent of companies would experience cost
increases of 11 percent or more in 2008.

In 2008 employers are expecting to subsidise 78 percent of premium
costs, and employees will have to cover the remaining 22 percent,
plus usage-based co-pays, deductibles and co-insurance, said Towers
Perrin. Though this cost-spit is the same as that applicable this
year, the employee share will buy less coverage. For example, the
incremental cost that employees will assume in 2008 due to plan
design changes is about $200.

Retirees are in an even less enviable position. Towers Perrin said
only 47 percent of the companies surveyed subsidise retiree medical
coverage for current or future retirees. Of those that are
continuing a subsidy, the share retirees must provide is rapidly
increasing, particularly for retirees under 65.

“One of the most significant findings of our 2008 survey is that we
are seeing a clear and dramatic divergence in how companies are
defining their financial commitment for active employees versus
retirees,” said Ron Fontanetta, a principal in Towers Perrin’s
health and welfare practice. “While the data show that many
companies have become quite proactive in terms of supporting active
employees, taking steps to help them manage health care programme
changes, they are clearly doing less to help employees prepare for
medical expenses in retirement.”

Notably, Towers Perrin found that only 29 percent of survey
respondents saw helping employees prepare for financial protection
in retirement as a primary or large role for the
company.