ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Saturday, April 12, 1997 TAG: 9704140029
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
DATELINE: NEW YORK
SOURCE: ASSOCIATED PRESS
Health care costs are expected to grow between 3 percent and 5 percent this year, and up to 10 percent in 1998.
Judie Howard, who owns Hosica Laboratories Inc. in New Jersey, has been hit with such high increases in health insurance premiums that she sometimes considers not renewing her policy.
``I think of it, but it's too scary,'' she said. ``With one cancer or one massive coronary, you'd lose everything.''
Howard runs one of the many tiny businesses that are supposed to be picking up the employment slack from corporate downsizing. But her ability to add to her six-person payroll is severely hampered by health insurance costs.
After suffering a 20 percent increase in private insurance premiums in 1995, she switched to Blue Cross Blue Shield of New Jersey. Her new plan saves Howard that 20 percent, ``but we lost a lot'' in coverage.
Even with the cheaper plan, it costs her about as much to insure herself and her staff as it would to hire another person.
The problems that Howard and other employers contend with are growing more difficult. While the rise of managed care slowed health care inflation in recent years, some experts believe those costs are about to rise again as insurance companies and care providers find it increasingly difficult to wring more savings out of the system.
Last year ``brought disquieting signs that the recent pause in health care inflation is about to end,'' writes John Erb, a principal at the benefits consulting firm A. Foster Higgins & Co. Inc.
Health care costs are expected to grow between 3 percent and 5 percent this year, and as much as 10 percent in 1998, compared with 2.5 percent in 1995 and another 2.5 percent in 1996, a Foster Higgins study concludes.
They are rising on the back of higher technology and prescription costs, a backlash among consumers and legislators against managed care and the increased cost of caring for an aging and sicker population.
Small businesses like Howard's could get the worst end of this reversal of fortune, the experts say, because small employers spread the claims risk over fewer people and have less bargaining power with insurance companies.
``Historically, small businesses have always borne the brunt of higher costs,'' said Vicki Caldera, a lobbyist for the National Federation of Independent Business.
In some areas, small businesses are organizing to increase their clout with providers and insurers. The Associated Oregon Industries is forming AOI HealthChoice, a healthcare buyers cooperative.
But the ability of even organized buyers to drive better deals can only go so far, said Kevin Earls, AOI's director. ``There is a cost to some of the insurance reform [legislation] that we have implemented'' in Oregon, Earls said. ``There also is just a natural increase in cost that is the result of industry trends.''
Many health care experts believe companies big and small have already seen the most dramatic one-time savings from managed care. The easiest cost cuts have already been made and further savings will be more difficult to achieve.
Expensive new technology has driven costs higher, and prescription costs have risen three times faster than other components of medical care, according to Foster Higgins. Cutting-edge health care may be better, but it also costs more.
Insurers may have no choice but to raise premiums.
``The whole profit margin squeeze of managed care has not been acceptable'' to the managed care companies, said John Welch, a benefits expert at Foster Higgins. ``They have to raise prices.''
LENGTH: Medium: 72 lines ILLUSTRATION: GRAPHIC: Color chart by AP.by CNB