Major corporations, faced with a second year of double-digit increases in the cost of providing health care for their employees, are deeply worried about how much more they can absorb--and many are starting to fight back.
In California, more than a third of the businesses that belong to a key insurance-purchasing alliance say they will drop or freeze enrollment next year in health plans that do not offer improved care and service along with the higher prices.
And an alliance of businesses in the upper Midwest is even experimenting with eliminating health plans altogether, contracting directly with physicians and hospitals for patient care.
"This is the beginning of the employer reaction," said David Lusk, a health care expert at the accounting firm Deloitte & Touche. "The employers are not just going to absorb the increases."
The results could be ominous for the 160 million workers and their dependents who get their coverage through their employers. Some companies are planning to pass the price increases on to their workers. Others may drop expensive plans altogether, forcing employees to find new--and sometimes less inclusive--coverage, or they may require workers to pay more for prescription drugs.
"I have no clue what I'm going to do," said Bernard Reisberg, chairman of Goodin Co. Minneapolis, a wholesale distributor of pipes, valves and heating and air conditioning equipment. His firm of 220 employees was part of a business group unable to reach an agreement to renew its contract with a major health plan. Now he's fearful about the rates for health care for the coming year.
The dilemma for companies is that health care is a popular and vital benefit to keep and attract workers. With unemployment at the lowest levels in a generation, many firms don't want to impose a new financial burden on their employees.
At Ryder Systems, a major transportation firm based in Miami, managers were shocked when health maintenance organizations submitted proposals for rate hikes of 10% to 15% for the year 2000.
"We can't sustain these increases and we can't pass it to our employees--they can't afford it either," said Stephen Karp, vice president of compensation and benefits.
"We're looking at all alternatives," he said. These could include dropping HMOs, perhaps in favor of a national network of preferred providers who would be willing to offer discounts. Or Ryder could seek direct negotiations with doctors and hospitals.
