Employer costs for health insurance grew 6.1 percent nationally in 1998 -- the largest increase in five years -- and 4.3 percent in the Baltimore-Washington area, according to a survey released yesterday by William M. Mercer Inc., a national benefits consulting firm.
Costs are rising more than they have for several years because of "backlash against managed care," causing some employees to shift into less restrictive, but more costly, insurance plans, said Tracy Cassidy, health benefits practice leader for Mercer's Baltimore and Washington offices.
Increases in the Baltimore-Washington market have run below national trends, she said, because of high penetration of HMO plans here. About 75 percent of employees are in health maintenance organizations or point-of-service plans (an HMO that provides some benefits for treatment by doctors outside the HMO network) in the metropolitan area, compared with 47 percent nationally.
That trend may end, Cassidy said, as HMOs consolidate in the area. While the combination of the Maryland and District of Columbia Blue Cross plans and the acquisition of NYLCare and Prudential by Aetna U.S. Healthcare have not yet shown up in prices, "I definitely think we'll see the cost impact this year," she said. "With all the market consolidation, employers won't have the same kind of leverage."
The Mercer survey of 4,200 employers tracks other national estimates of health cost increases, but is the only survey with Baltimore-Washington data.
Other national studies have projected increases in HMO premiums from 5 percent to as much as 13 percent.
Brian Bark, an associate benefits consultant in the Baltimore office of Buck Consultants Inc., attributed the rise to pricing strategies by HMOs.
"For a while, competition was so great that they kept rates artificially low," Bark said. "Now, they've lost money, or they expect to lose money, and they want to get ahead of the curve."
Cassidy and Bark also pointed to increases in prices of prescription drugs as driving up costs.
Karen Ignagni, president and chief executive officer of the American Association of Health Plans, an HMO trade organization in Washington, also said of the increases, "We're now seeing the tangible costs of mandates at the state and federal level," such as a required two-day stay for women giving birth.
Ignagni said the "first wave" of cost savings from managed care came from negotiating discounted rates with doctors and hospitals. Now, she said, the plans are shifting to "disease management" efforts that will allow savings through more efficient care.
Pub Date: 1/26/99