NCPA - National Center for Policy Analysis

Employers Experiencing Substantial Health Cost Increases

March 19, 1999

After four years of minimal increases, health benefit costs for U.S. employers rose significantly in 1998, according to a survey by William M. Mercer, Inc. And for the first time in the 14 years that Mercer has conducted an annual survey of employer- sponsored health plans, there was a decrease in enrollment in Health Maintenance Organizations and Point-Of-Service plans, the most restrictive types of managed care.

  • Employers' health benefit costs rose 6.1 percent in 1998, to reach $4,164 per employee, following increases of only 2.1 percent, 2.5 percent and 0.2 percent in 1995, 1996 and 1997, respectively.
  • Nearly three-fourths of employers expect their health care costs to rise substantially in 1999, by an average of 9 percent.
  • Enrollment in HMOs and POS programs fell from 50 percent of all employees covered by employer-sponsored health plans in 1997 to 47 percent in 1998.
  • Specifically, HMO enrollment fell from 30 percent to 29 percent, and POS enrollment fell from 20 percent to 18 percent.

Meanwhile, enrollment in Physician Provider Organizations (PPOs), the least restrictive form of managed care, rose from 35 percent to 40 percent. Traditional, indemnity plan coverage also fell, from 15 percent to 13 percent.

Source: "Survey Show Health Benefit Costs on the Rise Again," Mercer Report, March 5, 1999.


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