2006 Saw Lowest Increases in Health Care Cost in Eight Years

Employers this year saw the lowest health care cost increase in eight years, but the overall rate of the increase continues to be a concern for employers and employees.  In 2006, according to a recent survey by Hewitt Associates, a human resources services company, average health care rate increases were 7.9 percent.  For 2007, Hewitt is projecting a 7.7 percent average increase for employers.

According to the study, the average health cost per person will increase from $7,744 in 2006 to $8,340 in 2007.  The amount employees are being asked to contribute in 2007 will be $1,678, representing 20 percent of the overall health care premium and up from $1,576 in 2006.  Average employee out-of-pocket costs, such as co-payments, coinsurance and deductibles, are also expected to increase from $1,489 in 2006 to $1,627 in 2007.  Overall, employees' total health care costs -- including employee contribution and out-of-pocket costs -- are projected to be $3,305 in 2007, up 7.8 percent from $3,065 in 2006.

Hewitt predicts that increases in employee contributions will continue to offset salary gains for many workers next year.  In 2007, Hewitt projects, salaried employees can expect a base salary increase of 3.7 percent.  Therefore, an employee making $40,000 today who receives the average salary increase ($1,480) will use 16 percent of that salary increase to pay for the increase in health care costs next year.