Although there are many moving parts in the equation (especially around the health care reform package making its way through the US Congress currently), health insurance premiums, which doubled in the last decade, are on track to repeat that feat over the next ten years. From 1999 to 2008, premiums increased by a reported 119%. The average employer-sponsored insurance premium in 2008 was approximately $12,300, however based on current growth rates this figure is expected to be almost $24,000 by 2020. Some experts are forecasting even steeper growth, predicting an increase in excess of 150% over the next decade. If this growth continues at its current and/or projected pace, it will place an increasingly large burden on both families and employers. Employers have traditionally paid the majority of the premiums and will face tough decisions as to whether they are willing to primarily carry the load.

With the projection of increased insurance premiums, companies will have to make tough decisions in terms of the portion of the premiums they are paying, and how much of the increases they will pass on to their employees. Based on current growth rates, it is expected that most companies will switch a larger portion of cost to employees. As these costs continue to rise, large companies will focus more closely on their benefits administration and management services.

Prudent buyers should work with their current providers to develop creative solutions and work to reduce costs, while maintaining employee satisfaction with the overall benefit program. This can either be done through sourcing efforts or direct collaboration initiatives with incumbents.

Endre Støgård is a Category Manager for Services in Ariba’s Global Services Organization (GSO). In this role he provides commodity knowledge and strategic sourcing direction for a wide range of categories within the corporate services area, including Finance, Human Resources and Travel.