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Employer health care costs to jump 9% in 2011

By Julianne Pepitone, staff reporter


NEW YORK (CNNMoney.com) -- Companies that offer health plans will see their costs jump 9% in 2011, and most employees will pay higher deductibles as a result, said a report released Monday.

Employers will try to offset cost increases by requiring their workers to shell out more cash before coverage kicks in, according to a survey of 700 employers by PricewaterhouseCoopers.

By 2011, more than 50% of workers will have a deductible of $400 or more. In 2008, only 25% of companies said they had plans with deductibles that high.

In 2010, 13% of companies said their primary plans were those with high-deductibles -- generally considered to be $1,100 or more. That's more than double the level of 6% in 2008.

The report's authors said predicting 2011 costs was "especially challenging," since the past year has brought major changes not only to the health care industry but to the economy as a whole.

The overall 9% cost jump expected in 2011 is slightly smaller than the 9.5% increase that PWC had forecast for 2010, but "the small decrease hides a more complicated set of forces," the report said.

Inflators and deflators: The combination of the recession's impact and sweeping health reform is a mixed bag for employers' bottom line, the report said.

One major issue for companies: Cash-strapped hospitals and health providers will likely push more costs to employers. Hospitals are facing Medicare rate cuts, while more health providers are merging -- which means they'll be able to negotiate higher rates.

On the other hand, some changes are driving employers' health expenses down.

For example, the cost of providing COBRA coverage -- which lets some workers who quit, are laid off or otherwise leave their jobs to extend their health plans -- should return to "more normal levels" in 2011, saving employers money.

Also, several major brand-name drugs, including Lipitor, will lose their patents in 2011, opening them up to competition from cheaper generic versions. To top of page

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