Responses include paring coverage, HMOs, "wellness" programs

RISING COST OF HEALTH INSURANCE IS HURTING BUSINESS' BOTTOM LINE

October 08, 1990|By Michael Enright | Michael Enright,Special to The Sun

It's a startling fact: about $600 billion is spent on health care each year in the United States, the highest percentage in the FTC world by far, a health care expert said recently at a conference at the University of Maryland-Baltimore County.

Yet, according to Dr. Uwe Reinhardt, professor of political economy at Princeton University, a recent survey found that 90 percent of Americans believe the country's health care system needs to be overhauled.

The problem has become so acute that businesses that once considered "socialized medicine" anathema are beginning to say the nation needs to at least discuss the efficacy of a national health care program.

"We have done about all that creativity has allowed us to and we still have to say, 'Gee, we're real happy our health benefit costs are only going up 10 percent a year,' " said Burke Stinson, a spokesman for American Telephone & Telegraph Co. "[A national health care program] is an option to be explored at this point and there won't be any answers to this question unless there is a full exploration" of the issue.

Skyrocketing health insurance costs, particularly for small business owners, has become the key issue in the boardroom when discussions of hiring new employees arises. A survey by the National Association of Manufacturers last year found that small business owners considered rising health costs "the greatest threat to their economic vitality and ability to compete."

Chrysler Corp. has estimated that its health costs amount to $6,000 for every worker it employs, and that for every vehicle it builds it spends roughly $700 on employee health care.

Dr. Reinhardt received a rousing ovation from participants at the Greater Baltimore Medical Center's 25th anniversary conference late last month when he stated that the well-heeled insurance industry has a "stranglehold" on businesses, health-care providers and legislators.

"The industry literally now seems on a path of self-destruction," Dr. Reinhardt said. "Probably its best hope for the long run is survival under very tight public regulation of prices and underwriting standards."

In the short term, however, Dr. Reinhardt said he believes insurers should be required to pay providers 85 cents out of each dollar spent and be given two years to offer affordable health insurance rates to all American businesses.

"If they don't, then we should pay insurance executives not to sell insurance," Dr. Reinhardt said facetiously. "We pay farmers not to grow food, so why not? We'd be better off."

But businesses know better than to wait around for that day; many have implemented less comprehensive health insurance programs or offered employees other options to curtail health care costs.

Just last week, Bell Atlantic Corp., with 12,000 Chesapeake and Potomac Telephone Co. employees in the Baltimore-Washington area, implemented a managed-care program that seeks to cut costs by limiting access to doctors and hospitals for those workers who don't want to pay part of the medical costs. Although the program is unique today, health-care experts say it is part of a growing trend in the business world.

Bell Atlantic's insurer, The Prudential Co., will pick the hospitals and doctors who will provide services to employees for a specific price and Bell Atlantic will cover all the costs. Workers can still choose other medical providers but it will cost them much more.

Baltimore Gas & Electric Co., where the average employee health cost rose from $1,667 in 1984 to $3,700 in 1990, is attempting to stem the surge in

health costs by providing employees with free on-site medical attention for routine illnesses like colds and flu, said Linda Miller, BG&E's manager of staff services.

This program is separate from an employee's regular health plan at BG&E and there is no requirement that a worker use the service.

The Baltimore utility is also looking to reduce its 12 percent annual rise in health costs to 10 percent by offering stock bonuses through its employee incentive program when that goal is reached. Ms. Miller says the company hopes to make employees "better consumers" of medical care packages while also becoming more health conscious.

Other companies have turned to preferred provider organizations, or PPOs, for relief. PPOs are networks of fee-for-service providers who agree to grant larger companies price discounts in return for insurance contracts that direct employees toward these networks.

Along these same lines is the health maintenance organization, or HMO, which is obligated to provide employees with all the medical care they need during the contract period in return for an annual prepaid lump sum for each worker.

Although they usually result in lower costs for both employee and employer, the main drawback to PPOs and HMOs is that they limit a patient's medical choices and sometimes underserve the insured.

A number of larger companies have turned to "wellness programs" for some relief, encouraging employees to lose weight, kick the smoking habit, or join a company fitness program.

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