Report: health care costs to rise 9 percent in 2010

INDIANAPOLIS -- Employers who offer health insurance coverage could see a 9 percent cost increase next year, and their workers may face an even bigger hit, according to a report from consulting firm PricewaterhouseCoopers.

Costs will rise in part because workers worried about losing their jobs are using their health care more while they still have it, the firm said in the report released to The Associated Press. The report also said rising unemployment is driving up medical costs.

Health care reform legislation currently being hashed out in Congress likely will have little impact on next year's costs, said PWC principal Michael Thompson. But he noted that the intense focus on health care may slow price increases.

"Nobody wants to be front page news when all the lights are shining on your industry," he said.

The report projects the expected cost increase per person for employee benefits plans, and it factors in things such as price increases, as well as utilization changes.

Businesses confronted with increases will likely pass some of the burden to employees via higher premiums, deductibles or copays, Thompson said.

"If the underlying costs go up by 9 percent, employees' costs actually go up by double digits," he said, noting that will have a "major, major impact" when many employers also are freezing or cutting pay.

A total of 42 percent of employers surveyed said they would increase employees' share of costs.

The 9 percent increase predicted for 2010, however, represents a slight decrease from the 9.2 percent PWC projected for this year, and 9.9 percent predicted for 2008. A growing use of generic drugs has helped tame spending, according to the most recent survey.

Actual cost increases for this year and last were not available.

PWC surveyed more than 500 employers and health insurers. One of the factors it found that may increase medical costs next year is the lingering threat of unemployment. Workers worried about losing their health coverage along with their jobs tend to seek medical care they might otherwise put off.

PWC also said health care providers tend to shift costs to private insurance plans to make up for the revenue drop they see from a rise in the uninsured population or from an increase in the percentage of people covered by Medicaid, the state-federal insurance program for the poor.

Georgetown University health economist Jean Mitchell said she sees one main reason behind any health care cost increase: overutilization. Mitchell, who was not involved with the survey, said health care costs have been rising faster than inflation because the payment system rewards care providers for doing more.

"Until we fix that, we're never going to be able to rein in health care costs," she said.