ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, January 30, 1996 TAG: 9601300095
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
SOURCE: The Boston Globe
MANAGED CARE GETS much of the credit in a survey that found just a 2.1 percent increase nationwide in employer costs in 1995.
Employers saw health care costs stabilize last year, driven by the continued migration of workers into managed care plans, according to a widely followed annual survey.
Nationally, employer health benefit costs rose just 2.1 percent in 1995, after declining 1.1 percent in 1994, according to Foster Higgins, a benefits consulting firm in New York.
The 1995 increase in costs is a far cry from the double-digit growth seen in the late 1980s and early 1990s. Employer health costs soared 18.6 percent in 1988 and continued to rise until 1994.
The survey - based on a national sample of 2,764 employers with 10 or more workers - suggested that three forces helped put the brakes on costs: the spread of managed care; low inflation; and the ability of employers to negotiate lower rates.
Smaller companies that employ 10 to 499 workers benefited the most from the relatively low cost increase in 1995, the survey said.
For instance, HMO costs decreased 3.8 percent overall, but smaller employers saw their costs drop 11.9 percent. With many larger employers having already made the switch to HMOs, insurers are now competing for the business of smaller companies by offering lower premiums, the survey said.
The survey also suggested that some employers are containing costs by discontinuing coverage, particularly for older workers. In 1995, the number of companies offering coverage to early retirees fell to 41 percent from 43 percent in 1994. Companies also dropped coverage for retirees who qualify for Medicare from 40 to 35 percent, the survey said.
Workers may also be paying in other ways, health care specialists said. While premiums may have eased, copayments have steadily increased and benefits have been reduced, said Alan Sager, a professor at the Boston University School of Public Health.
``Employers are eliminating dependent coverage,'' Sager said. ``All out-of-pocket costs - copayments, co-insurance and deductibles - have been increasing. The result has been a rapid rise in the number of underinsured Americans.''
Even for employers, health care cost specialists believe that the reprieve is not likely to last. Health care costs are likely to pick up as workers on average get older and as baby boomers march toward retirement during the next two decades, said David B. Friend, global director of health care consulting at Watson Wyatt Worldwide in Wellesley, Mass.
``The big problem is that the average work force is getting older; and as people start to retire in big numbers, this will put an even greater burden on employers,'' Friend said. ``That's going to throw prices into the stratosphere.''
Not all employers are benefiting from the leveling of health care costs. Because the survey does not include companies with fewer than 10 employees, the data may be somewhat skewed, said Mark Goldberg, a visiting professor at Yale School of Management.
``The smallest firms have historically been the hardest hit by any cost increases,'' Goldberg said.
On the other end, the largest employers have the most leverage in negotiating lower premiums.
``Smarter, more resourceful buyers are paying less,'' Friend said.
LENGTH: Medium: 67 linesby CNB