Firms Expect HMO Cost Hikes

As the cost of managed health care rises, small-business owners are preparing to pay a little more for their employees’ benefits if it helps them hold on to experienced workers.

After years of moderate price increases, several managed-care companies have announced larger increases for 1999. Meanwhile, Congress is working on consumer protection legislation that could give consumers more flexibility in their health plans, but at a higher cost.

Yet very few businesses--1% to 3% of the survey respondents--said they would eliminate coverage if costs increased. About 9% of the 800 executives who responded to the survey by the Kaiser-Harvard Program on the Public and Health/Social Policy said they would pass the entire cost on to employees.

About 35% said they would pass on some costs to employees, and 45% to 50% said they would absorb the entire cost. The responses varied depending on the expected premium increase.

“There’s a tighter job market,” said Catherine Hoffman, associate director of the Kaiser Commission on Medicaid and the Uninsured. “They must offer benefits in order to compete.”

Almost three-fourths of the respondents offer health insurance to at least some of their employees, and 55% offer it to all full-time employees. The survey defined a small business as a company with 100 or fewer full-time workers.

Not surprisingly, the study found that the companies that paid the best wages--white-collar firms such as brokerages and insurance companies--were more likely to offer health insurance than blue-collar businesses such as construction companies and factories.

Also, the smallest businesses, those with one to three full-time employees, were least likely to offer coverage.

Larry Levitt, a project director at the Kaiser Family Foundation, said that instead of eliminating coverage, companies may lengthen the waiting period for new employees to join health plans or cut coverage for part-timers.

The survey, designed by the Kaiser Family Foundation and Harvard University, involved 800 heads of small businesses. The margin of error is plus or minus 5 percentage points.

Kaiser Family Foundation, a nonprofit organization, is not related to the health-maintenance organization Kaiser Permanente.

Lawmakers this spring began work on a range of legislation that could improve patients’ access to medical specialists among other reforms. At a minimum, Congress could enact a law to make health providers offer more information about how they operate.

Health-care analysts expect even a minor change to add $1 to $5 to a company’s monthly share of an individual premium.