NCPA - National Center for Policy Analysis

Employers Face Higher Health-Care Costs

May 17, 1999

Following several years of flat or even declining rates for workers' health-care premiums, employers this year and next will be confronted by a substantial surge in rates.

  • Analysts expect rates to rise by 7 percent to 11 percent for large companies this year and in 2000.
  • Premiums for midsize firms may rise some 20 percent this year.
  • The increases are reportedly being driven by rising drug prices, reduced competition in the health care field due to consolidations, and insurers playing catch-up after initially setting low rates to gain market share.
  • A survey by Hewitt Associates detects growing employee dissatisfaction with managed care firms -- jumping 5 points to 22 percent of those surveyed last year.

Consumers are primarily dissatisfied with the inability of their plans to solve problems. Also, they cited lack of timeliness, professionalism and accuracy. Cost increases were also a source of displeasure.

Some 29 percent were discouraged by complex referral rules in point-of-service plans -- which allow patients to see outside doctors for a fee.

At 17 percent, health maintenance organizations had the lowest proportion of dissatisfied customers.

Source: Julie Appleby, "Health-Care Premiums on Rise Again," USA Today, May 17, 1999.


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