INVESTMENT OUTLOOK : BEYOND THE TRADITIONAL : Getting Smart On Benefits : Workers to Face More Choices, Pay More for Health Plans

Forget stocks, bonds and pork bellies. As one decade gets traded for another, consumers will be faced with a new and increasingly intricate and expensive investment that strikes very close to home--their health care.

Unlike the 1980s, when all kinds of health-care benefits were taken for granted by many employees, the 1990s will push a growing number of employees to become smart health-care shoppers. This may mean more decisions, fewer benefits and higher costs.

“The ‘90s are going to force employees to be consumers of (employers’ health benefit) plans; in the 1980s, they were users of the plans,” said Wade Olson, president of Fringe Benefit Planning, a Newport Beach consulting firm to small- and medium-size businesses.

It’s already happening at some large companies such as aerospace giant Lockheed, where employees of the Calabasas-based company can select among several health plans--a traditional insurance program and three health maintenance organizations--all providing different coverages at a variety of costs.

“Employees will have to take a more active role in the whole process,” said Philip J. Schneider, a principal in the Los Angeles office of Mercer-Meidinger-Hansen, a benefits consulting firm. “There’s going to be a lot of turmoil and a lot of people are not going to like it.”

The culprits, experts agree, are soaring medical costs and the inability of cost-cutting programs to put a dent in the problem. As a result, employers of the 1990s will be searching for new programs and variations on the old to control costs while maintaining high-quality care and keeping workers relatively happy.

In the 1980s, “managed care” was the buzzword, and it became a catch-all term for a variety of steps that companies and insurers have taken to try to hold down costs.

For some traditional health insurance plans that reimburse for specific services performed by doctors, managed care translated into requiring second surgical opinions and pre-hospitalization reviews, among other things.

The managed care banner also includes health maintenance organizations, or HMOs, and preferred provider organizations, or PPOs.

HMOs are usually clinics or hospitals that are paid a set fee no matter what services are performed. PPOs are hospitals or loose networks of doctors that negotiate discount rates with an employer or insurer in exchange for a high volume of patients. Under HMOs and PPOs, patients generally have less freedom to choose a doctor than with traditional fee-for-service insurance plans. The freedom of the traditional plan will also end up costing employees more.

But even though such programs proliferated in the 1980s, they failed to hold down costs.

The next decade will find employers and insurers revisiting the benefit plans of the ‘80s but with some variations, fine-tuning and tougher price negotiations between companies and health-care providers, experts said.

“The rapid escalation of health-care costs is the biggest problem today that the health-care industry faces,” said Russell Nash, a consultant on health care and insurance for the McKinsey & Co. management consulting firm in Los Angeles. “The challenge that (employers) have is to balance their cost and employee satisfaction.”

That balance has been tricky to achieve, and health benefits were a key bargaining point in several labor strikes this year.

Nevertheless, in the 1990s, many companies are expected to ask employees to share more of the cost of their health care, paying a higher percentage of their health insurance premiums or, in some cases, paying part of the premiums for the first time, experts said.

Many companies are expected to raise deductibles, the amount workers pay before insurance coverage kicks in, or co-payments, a non-reimbursed fee that some employees pay each time they visit an HMO or PPO. Some firms will drop or reduce coverage for dependents and will eliminate some benefits such as vision plans or drug counseling.

More employers could shift to flex or cafeteria plans, where employees can choose among different benefits or different health plan options.

For example, employees may be allowed to trade off certain benefits beyond the basics, perhaps forgoing eye care for dental. Or in the extreme, employees could opt out of their dental plan in return for a company car or other perk.

“The larger employees will be the ones that tend to offer more choice,” Nash said.

But it will be choice within limits--perhaps several packages of benefits, he said. “It’s unlikely you will get a menu with say 25 choices and the cost next to them and you check the one you want.”

Schneider predicted that few traditional plans will remain in five years. “Probably less than 5% of the employee population will have total freedom,” he said.

As a result, employees “are not going to be able to go to the doctor as much as they do now” or they will have to wait for an appointment for non-emergency visits, he said.

The ‘90s will also bring an increase in so-called reimbursement accounts, where an employee can designate that a certain amount of pretax dollars be removed from each paycheck. That money can then be used to pay health expenses, including deductibles. The same sort of account can be set up for child-care expenses.

The next decade could see more employers trying to head off medical problems by introducing “wellness programs” that encourage employees to stop smoking, exercise or follow a nutritious diet. Some health-care plans could even offer discounts to employees who don’t smoke, have normal blood pressure or maintain recommended weight and cholesterol levels, Nash said.

Support is growing for some sort of government solution, perhaps national health insurance similar to Canada’s plan, to hold down costs and provide for the uninsured.

In fact, four powerful business groups last month asked Congress for help controlling skyrocketing health-care costs, an abrupt change from the traditional business resistance to government involvement in health-care issues. The urgent appeal could be the first step toward corporate support for some type of national health-care system.

“I think national health insurance is going to take care of the problem sooner than a lot of us would like,” Earl Mink, Lockheed’s employee benefits director, said.