After a period of relatively low health care inflation during the 1990s, health care costs increased sharply in 1999 and 2000,

After a period of relatively low health care inflation during the 1990s, health care costs increased sharply in 1999 and 2000, and similarly high increases are estimated for 2001. The news for employers providing health insurance and their employees is worse: data indicate that increases in insurance premiums exceed the increases in the cost of care. Finally, whereas employers might have absorbed most or all of the increase in the tight labor environment of recent years, the current economic downturn has made it more likely that increases will be passed on to employees—or employers will move to benefit designs that impose more cost sharing in the form of deductibles and co-pays. This brief reviews the literature on recent health care cost trends and examines some of the underlying factors driving costs. We then review the relationship between costs and health insurance premiums, and the recent experience of employers in firms of varying size.