The affordability gap — that is, the difference between workers’ earnings and active employee health care costs — continues to increase. Health care costs have increased more than 150% over the past eight years, while employee wages have risen only 37%.

For two decades, Towers Perrin has been tracking health costs in the U.S. On this 20th anniversary of its health cost survey, the benefits consulting firm finds that an individual retiring at age 60 will need $250,000 saved to pay health care premiums and out-of-pocket costs. 20 years ago, that same retiree needed $40,000 in savings to fund health care premiums and out-of-pocket costs.


These findings are published in Towers Perrin’s 2009 Health Care Cost Survey, The Health Dividend: Capturing the Value of Employee Health.

The $250,000 nest-egg required for retiree health costs is consistent with previous calculations by the Employee Benefits Research Institute (EBRI).
Employees’ average monthly share in these costs will be $273 per month for family coverage. Retirees will pay 54% of the premium for family coverage.

The graph above illustrates the growing affordability gap between growth in workers’ earnings and cost growth for active employees.

The survey was conducted between August and September 2008 among 609 employers, primarily Fortune 1000s.

Health Populi’s Hot Points: As Helen Darling, President of the National Business Group on Health, has said, “Workers have been giving their raises to the health care industry.”

So the affordability gap grows and grows.

This survey was completed just before Wall Street crashed in September 2008 and massive employer layoffs hit fourth-quarter labor statistics.

Companies surveyed by Towers Perrin said they expected to provide employee health benefits for the foreseeable future, while keeping their contributions to health level. That would place more health finance responsibility on workers.

As the Commonwealth Fund has sorted out what defines a High Performing Health System, Towers Perrin has identified the factors behind High Performing Employers when it comes to health benefits. One of the key elements for employers who successfully manage health costs is a commitment to several strategies: among them,

  • Motivating employees to manage their health purchases responsibly
  • Identifying and managing health risks and conditions in the employee population
  • Supporting employees’ capability to make sound health decisions.

Thus, employer-sponsored health care must go beyond health benefit plan design; it must morph into creating a culture of health in the organizations. To learn more about how to enable a culture of health, take a look at the role models of Hannaford, Safeway, Pitney-Bowes, and CIGNA’s Healthy Communities initiative.

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