(PricewaterhouseCooper-NEW YORK) – Healthcare costs for the nation's employers are expectedto grow by another nine percent next year, according to a report byPricewaterhouseCoopers' Health Research Institute.

The nine percent projected cost increase is a slightly slower rateof growth than in previous years. Medical costs grew by 9.2 percent in2009 and 9.9 percent in 2008. Despite the modest slowdown, medical costincreases continue to significantly outpace inflation and wageincreases, according to the report.

The report identities the trend of American workers acceleratingtheir use of healthcare in anticipation of losing their jobs and -potentially their health insurance coverage - as one of the driversexpected to increase medical costs in 2010. Other factors driving upmedical costs include the rise of unemployment, which is resulting inan increase in the uninsured and underinsured population, a drop inmembership in commercial health plans and a higher percentage of thepopulation covered by Medicaids. These trends are offset by factorsexpected to drive down medical cost, including the longer-term promiseof health reform and potential for high deductible health plans andwellness programs to restrain costs, the report says.

In the last five years, health insurance premiums have increasedfour times faster than wages, a trend that the report says is expectedto continue in 2010. With their corporate profits pounded in 2009,employers told PwC that they will push more of the costs of healthinsurance to their workers in 2010 while expecting greaterresponsibility from workers for managing their personal health.

• Forty-two percent of employers surveyed by PricewaterhouseCoopers said they would increase employees' share of healthcare costs.
• Forty-one percent said they expect to increase medical cost sharing through plan design changes.
• More than two-thirds of employers are offering wellness and diseasemanagement programs; however, few said they are very effective atlowering costs.

"The recession is creating a tug of war between upward and downwardpressures on medical costs," said Jack Rodgers, managing director inthe health policy economics group of PwC LLP. "Healthcare organizationsare finding their revenue falling and are trying to increase prices.However, with most prices holding steady or falling, health plans willput pressure on providers to hold the line on medical costs."

According to PwC certain trends are helping to deflate health spending, including:

• Ongoing decrease in the growth rate of drug spending. Health plansreport they are seeing much smaller growth in drug spending with theincreased use of generic drugs. In 2010, five more blockbuster drugswill go off patent, and the number of patent expirations will increasein 2011 and 2012. According to the Centers for Medicare and MedicaidServices, 67 percent of all drugs were generic in 2007.
• Increase in wellness and disease management programs. Employers aremore focused on wellness and disease management programs, thoughparticipation among eligible employees remains low at around 40 percentfor wellness programs and 15 percent for disease management programs,according to PwC. Employers are looking to health plans to providegreater education and incentives to increase participation.
• Increase in high deductible health plans. A growing number ofAmerican workers are now in high-deductible health plans, which areexpected to lower utilization of health services, partly becausegreater awareness of medical costs could reduce demand for medical carebut partly because cash-strapped workers lack the resources to pay formedical procedures. Twenty percent of employers surveyed said theywould add a high deductible health plan as an option to their benefitplan design over the next two years.

"Higher medical costs are getting even greater scrutiny in this downeconomy, and employers are squeezing dollars out of their programs tosave money," said Mike Thompson, principal, PwC global human resourcesolutions group. "As the economy recovers, employers will refocus onmore sustainable longer term approaches to medical cost containmentbased on an increasingly shared interest between employers and theirworkers,"