Health Care Coverage in the ‘90s

A recent survey of 13 metropolitan areas across the nation showed that the costs of employer-sponsored health benefits are rising. In California, total benefit costs increased 11.3% in 1992, compared to 10.1% nationally. In Orange County, the least expensive health plan is HMO, followed by indemnity and preferred provider.

The Plans

There are four major kinds of health care plans:

Indemnity: Subscriber chooses own physician or clinic. Insurance plan generally reimburses 80% of billed charges.


Preferred provider organization: Subscriber has incentive to use physicians and hospitals contracting with the plan to provide services at reduced costs. Subscribers may choose physicians and hospitals not under contract, but reimbursements are not as great.

Health maintenance organization (HMO): Subscriber must use physicians and hospitals contracting with the plan. No benefits payable outside the network.

Point of service: Subscriber has choice between HMO-type plan or regular indemnity at the point of service, rather than selecting one plan during open enrollment period.

Plan Comparison

San Francisco, Los Angeles and Orange counties, respectively, had the most expensive preferred provider plans in the nation. New York’s indemnity plans are among the most expensive in the nation; and Cleveland has the costliest HMOs. Minneapolis-St. Paul and Seattle had the least expensive plans across the board. In annual costs per employee: California Costs: San Francisco PPO: $4,459 Indemnity: 4,531 HMO: 3,092 Los Angeles PPO: $4,457 Indemnity: 4,350 HMO: 3,189 Orange County PPO: $4,315 Indemnity: 4,276 HMO: 3,124

Nationwide Rates: New York metropolitan PPO: $3,871 Indemnity: 4,852 HMO: 3,448 Seattle PPO: $3,114 Indemnity: 3,554 HMO: 3,092

Minneapolis-St. Paul PPO: $3,121 Indemnity: 3,347 HMO: 2,969

HMOs Hold the Line

HMOs did the best job of controlling rising rates nationally last year. Their costs rose 8.1% from 1991 to 1992, compared to a 14.2% jump in the cost of indemnity plans.

1991 1992 Indemnity $3,573 $4,080 PPO 3,355 3,708 Point of service 3,291 3,566 HMO 3,046 3,313

Costs Rise Steadily Since 1985, health care costs have more than doubled nationwide. In dollars per employee: 1985: $1,724 1986: 1,857 1987: 1,985 1988: 2,354 1989: 2,748 1990: 3,217 1991: 3,605 1992: 3,968 Note: Includes employer and employee costs for indemnity and managed-care plans, dental and vision-hearing plans and prescription drugs.

Benefit Facts

Health benefit expenditures were equivalent to half of corporate net earnings in 1991, up from 45% in 1990.

Almost nine in 10 employers offer dental benefits; 22% offer vision or hearing care.

Two out of three employers had a smoke-free workplace last year.

Self-insured medical plans grew from 59% in 1990 to 67% in 1992.

Source: Foster Higgins 1992 Health Care Benefits Survey. Researched by DALLAS M. JACKSON / Los Angeles Times