Business Health Care Costs Stagnant in 1997

Article excerpt

WASHINGTON -- Business health costs rose just 0.2 percent last year after a surge in enrollment in managed-care health plans, a study said.

These plans, though, reeling from years of absorbing rising medical costs to win customers, are expected to raise premiums sharply this year to combat declining profits, according to the study released Monday by the consulting firm, William M. Mercer Inc. Businesses are budgeting this year for an average increase of 7 percent in their health benefit costs, the Mercer study said.

"HMOs and managed care organizations paid dearly for competitive pricing in 1997. Many lost money and margins were slim for most of the rest," said John Erb, the study's chief author. Rising medical costs have reduced profits for insurers such as Cigna Corp. and Aetna Inc. Yet the industry still reports rapid movement by businesses away from traditional fee-for-service coverage into managed-care health plans. Enrollment in managed-care plans such as health maintenance organizations rose last year to 85 percent of U.S. employees who get coverage through their work from 77 percent a year earlier, the Mercer study says. These health plans "are expanding into suburban and rural areas and garnering a bigger and bigger share of the market," Erb said. Managed care is a catchall term for health plans that control patient access to doctors and health services to reduce unneeded care. This type of coverage has largely replaced fee-for-service insurance policies that paid out medical bills with few restrictions on access to the health-care system. Still, with consumers upset about limits placed on their access to doctors, many businesses are offering employees coverage in the least restrictive types of managed care policies. For example, about 35 percent of employees are enrolled in preferred provider plans, compared with 30 percent in HMOs. Unlike HMOs, preferred provider plans don't require patients to see a primary care doctor such as a family physician to win referral to more specialized services. …


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