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Employer Healthcare Costs Expected to Rise 9% in 2011

June 16, 2010
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According to the annual Behind the Numbers report published by PricewaterhouseCoopers LLP (PwC) Health Research Institute, the nation’s employers can expect medical costs to increase by 9% in 2011, a decrease of 0.5% from the 2010 growth rate. The biggest inflators of the medical trend in 2011 will be hospital and physician costs, which make up 81% of premium costs.

One main contributor to these costs is the investment of billions of dollars in certified electronic health record systems, spurred by stimulus funding that begins in 2011 and Medicare penalties that begin in 2015. While many hospital systems had plans to implement EHRs in the near future, the government's new regulations condensed their timelines to invest in technology, IT staff, training and process redesign. Healthcare CIOs surveyed by PwC said they will make their largest investments to meet the new EHR regulations in 2011.

Other contributors to rising costs include hospitals shifting costs from Medicare to private payers and employers, and the increase of provider consolidation, expected to strengthen their bargaining power.

The report also outlines three primary deflators that will help employers hold down medical costs in 2011, including the movement toward pre-managed care benefit design by increasing deductibles and replacing co-pays with co-insurance, drug costs being tempered by generics, and that COBRA costs are expected to return to normal levels.

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