Firms’ healthcare costs rose, in the Healthcare column

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Employers doled out more in 2000 to provide healthcare for their workers, according to a new survey from healthcare consultant William M. Mercer. And Orange County businesses felt a bigger share of the cost bite.

Mercer’s National Survey of Employer-Sponsored Health Plans 2000 showed that the total Southern California health benefit cost for firms with active employees jumped 7.8% in 2000, to an average of $4,357 per worker. Most firms surveyed were in Orange County, according to Mercer. The local findings covered 127 employers with 500 or more employees.

While costs grew faster in Southern California last year, the region came in just below the national average for 2000 health plan costs, which went up 6.6% to an average of $4,604. The West region’s increase was 5.2%, to an average of $4,578.

Dale Macrae, a Mercer consultant, said the higher jump in Southern California costs could be attributed to the area’s heavy concentration of managed healthcare. Mercer also found that 91% of Southern California employers offered a health maintenance organization plan, compared to 62% in the West region and only 51% of employers nationally.

Mercer’s Southern California region “felt more pushback this year from providers in the area of capitation,” Macrae said. Under capitated contracts, a health plan pays a set amount of money per member per month to providers for healthcare services.

Orange-based St. Joseph Health System’s paring of its network to five “partner health plans” that it said will practice cost sharing in pharmaceuticals and other areas is an example of provider pushback. Macrae said the Southern California situation is “indicative of what can and will be going on in other parts of the country.”

Overall, Mercer’s study said, most employers simply absorbed the higher costs in 2000, because of concerns about attracting and retaining workers in a tight labor market. But Mercer said that 2001 may be another story,the average expected increase is 11%, and 13% of responding employers faced cost hikes of 20% or more.

“Attraction and retention of employees is still a big issue,” Macrae said. “But in companies where shareholder demands and the pressures of global competition are driving the bus, controlling runaway expenses takes priority.”

As for possible cost-shifting strategies, Mercer’s study showed that 40% of employers planned to increase employee contribution levels in 2001 and 17% would raise deductibles, co-payments or out-of-pocket maximums. By comparison, only 21% of employers surveyed in the previous year said they would increase employee contributions in 2000, and only 9% said they would shift costs to employees through higher deductibles, co-payments or out-of-pocket maximums.

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