Health costs surge despite weak inflation

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Ben Bernanke may be worried about deflation in the economy, but there’s certainly no chance of it in health care and insurance. Employers’ health plan premiums surged another 8 percent this year, according to results from a massive survey by Indianapolis-based United Benefit Advisors.

In 2009, employers sustained a 7.3-percent increase in their health plan costs, according to UBA, which is a network of 145 benefits consultants nationwide. This year, the network surveyed more than 11,000 employer health plans around the country, making its annual study the largest of its kind.

“In spite of passage of health care reform legislation, health care costs will continue to increase,” Bill Stafford, vice president of UBA, said in a statement. “There has been little coming out of Washington to date that addresses the underlying health care issues that can help control costs.”

Between December 2007, when the recession began, and July 2010, consumer prices are up a total of just 2.9 percent, including the 2008 run-up in commodity prices. After consumer prices dipped slightly in June, some investors began to worry about a trend of falling prices or deflation.

Bernanke, the chairman of the U.S. Federal Reserve, has been fighting against economic stagnation and deflation for the past two years by keeping interest rates low and using federal dollars to buy Treasury and mortgage bonds.

Meanwhile, since the recession began, the cost of of health insurance taken together with medical care has risen 8.1 percent—nearly three times as fast as the rest of consumer prices, according to figures from the U.S. Bureau of Labor Statistics.

So what are employers doing to handle their rising costs?

According to UBA’s survey, they raised employee contributions in 2010 by 6 percent for family coverage and 8 percent for individual coverage. Employees now contribute, on average, $5,300 a year for family coverage and $1,350 for individual coverage.

Also, employers continue to move employees into consumer-directed health plans, such as health savings accounts and health reimbursement accounts.

The number of such plans being offered grew by another 18 percent, although that was nearly half the growth pace recorded last year.

Consumer-directed health plans saved employers a small amount of money this year. Premiums on the plans rose only 7.3 percent this year, slightly less than the 8-percent average.

But for the first time, the number of employees enrolled in such plans declined—a sign of joblessness across America.

“The trend toward employee empowerment and participation continues in 2010 when it comes to health care,” Stafford said.

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