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Health costs stable in 1996
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January 28, 1997: 12:17 a.m. ET
But some analysts predict double-digit health care inflation by 1998
From Correspondent John Defterios
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NEW YORK (CNNfn) - The good news is the cost of health care barely budged in 1996.
Health care premiums rose just 2.5 percent at the companies surveyed by consulting firm Foster Higgins.
But the bad news is, things will probably get worse.
Some health care analysts predict a return to double digit health care inflation by 1998.
"Switching workers into managed care from traditional insurance plans has kind of been the low hanging fruit, I think, for employers to save money," Foster Higgins principal John Erb said. "All that fruit has been picked now."
Although 75 percent of U.S. workers are now in some kind of managed care, last year, for the first time in a decade, enrollment in traditional HMOs ground to a halt.
Most employees are now choosing hybrid plans that allow visits to out-of-network doctors for a fee. These plans are cheaper than old-fashioned, unrestricted health insurance, but cost more than traditional HMOs.
And although the HMOs have been holding down premiums to gain market share, it's at the expense of earnings. Health care analysts say the companies have had enough, and that HMO premiums will go up this year.
Some analysts also predict similar prices hikes from doctors and hospitals.
"Physician incomes have come down in the past year. Hospital incomes are down," Karen Davis, president of The Commonwealth Fund, said. (WAV 105K) (AIFF, 105K)
So one solution for hospitals is to demand bigger payments from health care insurers. And with hospitals merging and doctors forming their own groups, they're in a much better position to do that.
The only problem is, the insurance companies will then pass on the increases to employers - hiking health care premiums even more. 
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