The new millennium will still look pretty much like the end of the 20th century for purchasers and payers.
That means the premium increases in the mid- to high single-digits that were commonplace in 1999 will likely recur in 2000, according to industry observers.
Some industry watchers are forecasting even steeper hikes: Lincolnshire, Ill.-based benefits consulting firm Hewitt & Associates predicts premium increases that may approach 10%.
Paul Ginsburg, president of the Center for Studying Health System Change in Washington, says the biggest factors driving premium increases include the mounting backlash against managed care, which is forcing HMOs to lift restrictions and fight litigation at both the state and federal levels, increasing their costs. The continued introduction of pricey new pharmaceuticals and technologies into the healthcare marketplace also will continue to pose cost-control challenges.
Physicians also wrote 7,899 prescriptions per 1,000 health plan members in 1999, compared with 7,046 in 1998, an increase of 12%, according to Seattle-based benefits consulting firm Milliman & Robertson.
Although more expensive drugs and savvier consumer marketing by their manufacturers have pressured premiums for the past several years, the effects of a managed-care backlash are a relatively new factor in the purchaser and payer area.
It appears inevitable that prices will rise because states like California have introduced sweeping reforms that expand coverage and patients' rights, class-action lawsuits have been filed accusing HMOs of unethical practices, and large HMOs such as UnitedHealth Group have lifted traditional restrictions from their managed-care coverage.
"With no clear answers to any of these issues, healthcare costs will continue to escalate, leaving companies to wonder how much longer they can afford to offer (coverage) to their employees," says Jack Bruner, Hewitt's national healthcare practice leader.
Ginsburg provides a more tempered picture, noting that employers are a much more sophisticated lot than they were a decade ago-when annual double-digit increases were common: "Employers put pressure on plans to hold down premium increases; plans, in turn, press providers for discounts. These pressures will continue to affect the rate at which costs grow," he says.
The result: Employees will continue to pay higher out-of-pocket costs, a trend that has persisted for much of the past decade.
Steve Cigich, a principal with Milliman & Roberston, says he believes employees will likely pay extra for pharmaceuticals. "If the . . . trend continues, it seems likely that companies will increase employee cost-sharing on prescription drugs in the future," he says.
According to Hewitt, employers will pass on at least 25% of their increases to their employees, meaning another $110 or so per year out of pocket.
Looming on the horizon are new purchasing concepts, such as Xerox's decision to provide employees with an annual stipend to purchase benefits, and a prototype program for health plans to auction their coverage on the Internet. However, most observers believe it will be years before such practices become widely accepted.