Employers' reluctance to move their employees into HMOs will cost them next year in terms of spending on healthcare benefits, a study released last week suggests.
The annual report on employer healthcare costs prepared by Foster Higgins, a New York benefits consulting firm, said employer spending per employee inched up just 2.5% last year. However, that's expected to rise to 4% this year, the company said.
The report is based on data from more than 3,200 surveyed businesses across the country.
Specifically, the survey found that employers spent an average of $3,915 per employee on healthcare benefits last year compared with $3,821 the year before.
Large companies, defined as those with 500 or more employees, saw their costs per employee climb 3.6% to $4,332, while companies with fewer than 500 employees enjoyed a 2% decrease in spending to $3,380.
Foster Higgins principal John Erb said the reason is that smaller companies are moving more of their employees out of indemnity coverage.
"There's a shift in smaller employers toward managed care. They were somewhat behind the larger companies in that movement," Erb said.
At large companies, some 31% of employees were enrolled in HMOs last year, the same percentage as in 1995. HMO enrollment at small companies also was flat at 20% both years.
Employees at small companies, meanwhile, migrated away from traditional indemnity coverage. The percentage of those employees with indemnity coverage dropped to 23% last year from 31% in 1995. Most of those employees moved into point-of-service plans.
Erb attributed the flat HMO enrollment to several factors, including an anticipated jump in HMO premiums and publicity surrounding such issues as "drive-through" maternity stays and mastectomies.
Employer spending on HMO-enrolled employees dropped 2.2% last year to an average of $3,185 per employee. By comparison, spending on employees in point-of-service plans and PPOs rose 2.3% and 3.9%, respectively.
Some consumer groups are concerned that the findings could motivate companies to begin herding all their employees into HMOs.
"A lot of healthcare decisions made by employers are purely cost-driven, and some of the other important issues, such as comprehensiveness of care, access and exclusion problems, can be overlooked," said Jeanne Finberg, a senior staff attorney for Consumers Union who heads the organization's health group.
Erb disagreed: "I think rather than a wholesale movement into HMOs, the plans themselves will rethink their product, because all of the managed-care growth has been in point-of-service. They're more likely to make their in-network product friendlier."