Health-Care Costs Increase 6% in 1998

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Byline: Dan Culloton Daily Herald Business Writer

After keeping pace with and sometimes beating inflation for about five years, health care costs jumped about 6 percent last year, almost twice the medical portion of the consumer price index, a survey released Monday by a consulting firm showed.

Some in the health-care industry called last year's increases a correction that made up for a period of intense competition in which plans fought pricing pressure to keep premium increases low.

Don't expect premiums to fall again after insurers recoup, though, because the baby boomers are entering their fragile years and drug companies still are bent on discovering and aggressively marketing the latest wonder drug, said Blaine Bos, a consultant with William M. Mercer Inc. and one of the authors of its 13th annual National Survey of Employer-Sponsored Health Plans.

"Those two things are going to drive costs for the next two or three years at least," said Bos, noting the study also found more than 70 percent of the 4,181 businesses polled expect their health-care costs to rise this year by an average of 9 percent.

The Mercer study said per-employee health care costs for Midwestern employers rose by 5.7 percent last year. Nationwide, costs of employer health-care plans grew by 6.1 percent, the survey said. At the same time, the medical component of the consumer price index, which includes the cost of things beyond health insurance such as over-the-counter remedies, rose 3.4 percent. Overall, the consumer price index rose less than 2 percent.

In the Midwest, costs rose the quickest at traditional indemnity plans, which posted a 5.6 percent increase. Midwest HMOs, preferred-provider organizations and point-of-service plans followed with increases of 3.5, 3.0 and 2.1 percent respectively.

Nationally, HMOs posted the smallest percent cost increase at 1.6 percent, while indemnity plans reported the biggest jump at 7.6 percent. Costs at PPOs and point-of-service plans rose 5.2 and 2.6 percent, respectively.

After years of keeping the lid on prices, health plans last year respond to mounting inflationary pressure from hospitals, drug makers and doctors.

"It's not a question of managed care trying to stick it to consumers at all," said Chris Hamrick, spokesman for the Naperville-based Illinois Association of HMOs. …