More than 80 percent of employees in the Baltimore-Washington area, and nearly that many nationally, are covered by some form of managed care plan, according to an annual survey by Foster Higgins, the national benefits-consulting firm.
The survey found only 23 percent of employees nationally covered by traditional indemnity health insurance -- compared with 52 percent just five years ago.
Despite a steady growth in managed care, indemnity insurance will not disappear altogether, said John Welch, a principal in the Washington office of Foster Higgins. "There will always be an interest in choice," Welch said, "but it will come at a price."
Not only is traditional indemnity insurance more expensive -- $3,739 per year per employee nationally, compared with $3,185 in health maintenance organizations -- but the cost is increasing faster. According to the survey, the cost of indemnity insurance increased 2.4 percent for all employers and 6.6 percent for employers with more than 500 workers. For HMOs, costs declined 2.2 percent overall and dropped 1.8 percent for large employers.
The cost difference, he said, stems in part from HMOs using "gatekeeper" physicians to control use, but also in part from their ability to negotiate discounts with doctors and hospitals. "Whoever is left in indemnity," Welch said, "that's where providers can charge retail -- and they will."
Welch predicted that the cost moderation of the past few years -- costs actually declined in the 1994 survey and were up between 2 percent and 3 percent in each of the past two years, after double-digit jumps from 1988 through 1992 -- may be ending. "Our observation is that there's a real push to have the costs go up," he said.
In the survey, employers said they expect costs to increase an average of 4 percent this year. Welch said managed care insurers have been holding the line on prices the past few years because of competition, but rising medical costs have cut profit margins, causing many to seek increases this year.
Another factor adding to costs is "managed care backlash," he said, in which federal and state legislation require additional benefits, such as minimum hospital stays for childbirth.
In part, Welch said, costs have been kept down over the past few years as employers moved workers from indemnity to managed care plans, but "there aren't many left to migrate."
Pub Date: 1/21/97
