Newspaper article THE JOURNAL RECORD

Businesses May Face Higher Employee Health Costs in `97

Newspaper article THE JOURNAL RECORD

Businesses May Face Higher Employee Health Costs in `97

Article excerpt

WASHINGTON -- Businesses will see modest increases in their employee health costs this year, possibly signaling the start of a steady climb in their health care spending.

Economists and industry analysts say managed-care health plans are poised to raise premiums after keeping them low over the last couple of years to boost enrollment growth.

Health maintenance organizations, which now cover 60 million Americans, are expected to raise premiums by 2 percent to 5 percent in 1997 after being held to virtually no increase in 1996, according to industry analysts. Just this week, United Healthcare Corp., which covers more than 13 million Americans through its health plans, said its premiums will increase more than 5 percent this year. To be sure, the nation's biggest employers are still negotiating tough deals on health care premiums and are passing on more costs to employees. The premiums of major corporations are expected to rise on average between 1 percent and 3 percent this year, according to William Falk, a principal at Towers Perrin. The benefits consulting firm will release a survey of Fortune 1,000 company health care costs in the next few weeks. Smaller employers, however, may not do as well. They don't have as much bargaining clout when negotiating with health plans. And some companies, large as well as small, are experiencing premium increases after seeing their costs decline as their employees were moved into HMOs over the last couple of years. "Because HMOs wanted their business, they may have cut (premiums) to the bone; they don't have room to do that anymore," Falk said. Indeed, many companies have already reaped their big savings by moving all their employees out of fee-for-service coverage and into managed care plans. "Most of the low hanging fruit has been picked, so that one-time savings has gone away," said John Erb, a principal at Foster Higgins. The benefits consulting firm will also release a survey of employer costs in the next few weeks. That may mean health spending will start to accelerate as early as next year. "You've seen some very substantial bargaining down of payment rates and cutting out some inefficiencies in the system," said Ken Thorpe, a former Clinton administration economist who now directs Tulane University's Institute for Health Services Research. "At some point, growth will start to go up. …

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