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Health Cost Errors Found

A poll finds that 45% of the companies responding say they miscalculated medical premiums amid a rapid escalation in prices.

March 07, 2003|From Reuters

A hefty percentage of major U.S. companies failed to accurately predict the cost of health insurance in 2002, and most see the spiral of health-care inflation becoming more dire in coming years, according to a poll released Thursday.

Of the 434 employers polled, 45% said they miscalculated the escalating costs of employee health care last year despite heightened publicity about soaring prices, according to the Kaiser Family Foundation survey.

"It is so hard to be able to predict as costs spiral," said Doris Powers, a spokeswoman for health benefits at General Motors Corp., the biggest private U.S. buyer of health care, with 1.2 million employees and their dependents and retirees to cover.

Companies point to greater use of expensive technologies and rising prices of drugs and hospital care.

GM, for example, spent $4.5 billion on health care last year -- $1.4 billion of that on prescription drugs.

"With companies' costs increasing even higher than anticipated, and little confidence they can do much to stem the rising tide, most employers are relying on short-term" fixes, said Helen Darling, president of the Washington Business Group on Health, a nonprofit organization that focuses on heath issues faced by 165 companies.

Short-term fixes includes jacking up co-payments and cutting benefits, she said.

Health-care costs have emerged as a hot-button issue between companies and employees, setting off a series of disputes at General Electric Co., Hershey Foods Inc. and Lucent Technologies Inc., among others.

About 25% of the companies polled said they are not at all confident or not very confident in their skills at taming costs.

Some employers are taking consumer-oriented approaches to help solve the problem, the report said.

Xerox Corp. offers one such plan. It has set up savings accounts from which workers can withdraw money for medical care. About 3,000 employees signed up this year.

Larry Becker, director of benefits for Xerox, said a big part of the cost dilemma stems from a lack of disclosure of data so insurers and patients can rank hospitals and doctors by quality.

"It's the culture" of hospitals and doctors to oppose such efforts to disclose information, Becker said.

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