|
Healthcare costs shoot up
|
 |
January 28, 1999: 3:39 p.m. ET
As insurance prices rise, businesses turn away from traditional indemnity plans
|
NEW YORK (CNNfn) - The price of healthcare costs climbed at the fastest rate in five years in 1998, according to a new study, with many business owners predicting even larger costs in the future.
Total spending on employer-sponsored health plans jumped 6.1 percent last year, according to a new survey by employer consulting firm William M. Mercer Inc. Most employers predict their costs will rise even faster in 1999, with nearly 72 percent of the 4,200 employers surveyed anticipating cost increases of about 9 percent.
The average cost of covering both active and retired employees topped the $4,000 mark for the first time, rising to $4,164 per employee from $3,924 in 1997. Health benefit costs rose nearly twice as fast as the Consumer Price Index, which gained 3.4 percent.
Characterizing the increase
The rise in healthcare costs was not limited to a certain type of plan, although traditional indemnity plans saw the biggest increase at 7.6 percent. Preferred provider organization (PPO) costs rose by 5.2 percent, while health maintenance organization (HMO) costs climbed 1.6 percent, the first increase since 1994. Point-of-service (POS) plan costs rose 2.6 percent.
The surge in prescription drug costs also helped drive healthcare costs up, as employers reported average increases of 13.8 percent.
Non-indemnity plans rise in popularity
The rise in healthcare costs in 1998 reflects the end of a five-year trend, during which many employers switched from traditional indemnity plans to managed care options.
"The one-time cost reduction employers experience as their workers move into less expensive plans has been masking the underlying cost trend," says Blaine Bos, a Mercer consultant in Chicago and one of the study's authors. "Migration out of indemnity plans slowed to a trickle last year, so we're finally seeing real trend reflected in the national cost figures."
PPOs were the most popular in 1998, as enrollment in these plans jumped from 35 percent to 40 percent, capping a four-year enrollment increase of 60 percent.
"It's too early to tell whether the decline in HMO/POS enrollment is a short-term phenomenon or -- more ominously -- a sign that these managed care plans may not become the centerpiece of the nation's health care delivery system after all," Bos said.
Regional differences
The study revealed sharp regional differences in cost trends, with the Northeast significantly more expensive than the rest of the country.
The average cost for active employees reached $4,340 per employee in the Northeast, followed by $3,900 in the Midwest, $3,626 in the West, and $3,438 in the South. Costs rose fastest in the Northeast, at 8.8 percent, as enrollment in relatively high-cost PPO plans grew from 23 percent to 31 percent.
Employers in the West, where HMO enrollment grew slightly to 43 percent from 41 percent, reported the lowest cost increase of 2.3 percent.
Metropolitan areas demonstrate these regional differences even more clearly.
"In New York, where providers operate very independently and generally belong to a number of overlapping managed care networks, average cost is a whopping $4,743 per employee," Bos said. "But in Los Angeles, another big and expensive city, HMOs are very effective, and cost is only $3,375." 
|
|
|
|
|
 |
|
