Mid-sized employers report single-digit increase in health benefit cost during 1992 - Issues & Trends

The cost of providing health care benefits at mid-sized employers moderated in 1992 to just under 10%, according to a new report by Johnson & Higgins, benefits consultants in New York.

The report, "Mid-sized Employer Health Plans," says total health benefit costs at companies with fewer than 1,000 employees increased 9% in 1992 to an average of $3,865 per employee (see "Mid-sized employer health plan costs" October). While the average traditional indemnity plan cost per employee rose 11.4% in 1992, average PPO costs rose only 7.4%, and HMO costs rose only 7.9%. The report says the reasons for the smaller increase in costs are a strong performance by managed care plans and more employers shifted costs to employees in 1992 than in the previous year. In 1991, the total costs per employee rose 15.2%.

The report was based on responses from 1,144 employers. Respondents include private and public organizations nationwide. Combined, their plans cover 429,604 employees.

In 1991, health benefits costs as a percentage of net earnings for mid-sized employers reached 65%, compared with 38% for larger companies. In an attempt to defray these costs, employers increasingly turned to managed care options such as HMOs, PPOs, and point-of-service (POS) plans.

The number of small and mid-sized employers offering PPOs increased sharply, from 26% in 1991 to 35% in 1992. For 16% of these employers, a PPO is the only health plan offered.

PPO cost per employee rose from $3,413 to $3,664. Employers with fewer than 500 employees had the lowest average cost increase (3.3%) among companies that offer PPOs. For comparison, the average cost increase for companies with 500 to 999 employees was 14.9%.

The cost per employee for HMOs rose from $3,102 to 3,348, however this type of plan showed the lowest average cost of the four major plan types--HMOs, PPOs, POS plans, and traditional indemnity plans.

Despite the indications of cost savings reaped by offering a managed care plan, one third of mid-sized employers offer no such options, compared with only 15% of larger employers. Instead, following severe cost increases in 1991, many mid-sized employers responded by shifting more costs to employees. In 1991, the median deductible for traditional indemnity medical plans was $150; in 1992, the median was $200.

COPYRIGHT 1993 A Thomson Healthcare Company
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