The rate of increases in healthcare benefits costs slowed dramatically in 1994, a new survey shows.
But to employers who have battled rising benefits costs for several years, the slowdown could be just a temporary respite from sticker shock.
According to Towers Perrin, the New York-based benefits consulting firm, 1994 marks the most dramatic slowdown in healthcare cost increases since the firm began tracking annual cost changes five years ago.
This year's survey results, obtained in advance by MODERN HEALTHCARE, will be released this week. A total of 202 companies, mostly large Fortune 1000 companies, participated in the survey.
For active employees in traditional indemnity plans, PPOs and point-of-service plans, health benefits costs rose just 6% in 1994. The survey found a 5% increase for workers in HMOs and 6% for dental plans. Towers Perrin said the increases are about half as large as those reported last year.
And it's the first time in years that healthcare costs have remained in step with the annual increase in medical prices, the consulting firm said. From January 1993 to January 1994, the medical component of the Consumer Price Index rose 5.4%. The overall CPI rose 2.7% in 1993.
The survey also measured rates of increase in retiree benefits. For active employees and retirees 65 and older, the average increase dropped into the single digits.
For example, the survey found an average increase of 9% for retirees with family coverage through an indemnity or other non-HMO plan. That's a loss of four percentage points from last year. HMO coverage costs rose 5%.
Richard Ostuw, a principal and chief actuary, said the restraint in cost growth is partly due to cyclical economic factors and intensifying competition in healthcare. But he said it remains to be seen if the trend will continue. "Today's low growth rate is somewhat below average for the past 20 years. We may be reaching a point in the cycle where the rate of increase begins to accelerate once again."
In another study, researchers concluded that the slower growth in healthcare expenditures during the early months of this year was attributable to the recession several years ago, not providers' fears of national healthcare reform.
The study was released last week by the Philadelphia office of Milliman & Robertson, the national actuarial and consulting firm. In developing a model to predict healthcare spending growth, the firm said it found a historic three- to four-year lag between declines in real income growth caused by recessions and smaller increases in healthcare spending.