Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, February 14, 1995 TAG: 9502140109
SECTION: NATIONAL/INTERNATIONAL PAGE: A-1 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The average firm with 10 or more workers spent $3,741 per employee on health benefits, down from $3,781 in 1993, the benefit consulting firm Foster Higgins reported Monday.
Companies with more than 500 employees had the most success. Their health bills fell by 1.9 percent, to $4,040 per employee.
Companies with fewer than 500 employees, which generally offer less generous coverage, saw their costs climb by 6.5 percent, to $3,452.
But small or large, businesses are rapidly shifting their workers into managed-care plans that seek to lower costs by emphasizing primary care and imposing restraints on which physicians and hospitals their workers use.
Foster Higgins surveyed 2,097 firms and found that 63 percent of covered employees were in managed-care plans - health maintenance organizations, preferred provider organizations and point-of-service plans. That was up from 52 percent in 1993.
For years, health costs have been rising at two or three times the rate of inflation. But that spiral slowed dramatically in 1994 while Congress debated, and eventually discarded, President Clinton's proposal to make all employers and employees buy health insurance.
Another private firm, KPMG Peat Marwick, has estimated that overall private health insurance premiums increased 4.8 percent in 1994.
The Clinton administration last week sharply lowered its estimate of the future costs of Medicare and Medicaid, but said health costs still were rising too rapidly.
While health cost inflation has eased, 41 million Americans, or 16.1 percent of the population, are uninsured, and the number is rising.
John Welch, with Foster Higgins' Washington office, said, ``Employers that have embraced and moved to managed care have been rewarded. They really saw the results come through for them for the first time.''
Employer health costs increased 8 percent in 1993.
Employers can lower costs by slashing benefits or forcing workers to pay more out of their own pockets.
Welch said, however, that ``We didn't see much evidence of cost-shifting to employees.''
Most of the growth in managed care was in point-of-service plans, which encourage patients to choose from a network of doctors and hospitals, with the option to go outside the network by paying more.
Fifteen percent of employers offered a point-of-service option in 1994, up from 4 percent in 1993.
Employers for the first time induced a significant number of retirees to join HMOs, particularly in the West.
``Retirees have traditionally been very reluctant to leave their own doctors and join HMOs,'' said Dave Rahill, also a Foster Higgins principal. ``Getting this high-cost population into low-cost plans will have a big impact on employers' health care liability over the long term.''
In the South, 58 percent of covered workers were in managed care, up from 57 percent in in 1993. Employers' costs rose 3.9 percent, to $3,389.
In the Northeast, 63 percent of covered workers were in managed care, up from 34 percent in 1993. Employers' costs declined 9.7 percent, to $3,851 per employee.
In the Midwest, managed-care enrollment grew from 51 percent to 60 percent while costs rose 0.7 percent, to $4,048. In the West, managed-care enrollment grew from 72 percent to 80 percent, and costs rose 2 percent, to $3,693.
In Virginia last year, employers' health care costs increased 3.7 percent - from $3,576 in 1993 to $3,710. Statewide, 78 percent of the employees in surveyed businesses belonged to managed-care plans.
by CNB