NCPA - National Center for Policy Analysis

Health-Care Costs Register Biggest Jump Since 1990

December 9, 2002

Public and private employers experienced an average increase in their workers' health-benefit costs this year of 14.7 percent -- seven times the rate of inflation -- according to a survey conducted by Mercer Human Resource Consulting. That figure has an error range of plus or minus 3 percent.

  • The average employee cost his employer $5,646 this year in health benefits -- up 56 percent from just five years ago.
  • Small- and medium-sized firms were hit even harder -- with increases averaging 18.1 percent in 2002.
  • The proportion of businesses with 10 to 49 employees offering a health-care plan fell to 62 percent from 69 percent in just one year.
  • Prescription-drug costs rose 16.9 percent in 2002 for employers -- following an increase of 17.8 percent in 2001 and 18.3 percent in 2000.

When surveyed at the end of last year, employers predicted costs would rise 12.7 percent this year. Mercer consultants speculated that the employers underestimated the rise by 2 percentage points because they couldn't believe the jump could be so high.

For 2003, employers are predicting a rise of 14 percent, and nearly half of large employers say their workers will pay a larger share of health-plan costs next year through high premiums.

At least people are getting more for what they're paying for: freer access to doctors and specialists, new and more expensive medicines, diagnostic equipment and various other breakthroughs to treat people for diseases and conditions that once were untreatable.

Source: Barbara Martinez, "Health-Care Costs Jump 14.7 Percent in the Biggest Rise Since 1990," Wall Street Journal, December 9, 2002.


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