HEALTH COVERAGE COSTS SEEN JUMPING \ SURVEY: PPO PLANS TO SOAR 9 PERCENT TO 11 PERCENT

HEALTH COVERAGE COSTS SEEN JUMPING \ SURVEY: PPO PLANS TO SOAR 9 PERCENT TO 11 PERCENT

U.S. employers will be faced with a faster rate of employee health-care inflation come Jan. 1, 1999, with costs for some preferred-provider plans projected to rise at a double-digit pace, according to a survey of 448 U.S. employers issued today.

The survey, conducted by consulting firm Watson Wyatt Worldwide of companies with 500 or more employees, predicts a 9 percent to 11 percent increase in the cost of preferred-provider organization health plans.Over the last few years, many employers have been able to keep their PPO inflation at less than 10 percent. In January this year, for example, the cost of PPO plans rose 7 percent to 8 percent on average, it said.

Randall Abbott, consultant with Watson Wyatt, said that after having saturated the market, PPOs are now less willing to provide discounts to employers.

The expected acceleration in health-care inflation comes as U.S. companies face, on one hand, a resurgence in wage inflation, and on another, a competitive climate that makes price increases difficult.

Some economists say the resulting squeeze is one of the reasons after-tax corporate profits have declined over the past two quarters.

Employee health-care costs had been contained over the last few years by a mass switch-over among companies to managed care from higher-cost indemnity plans.

That switch, which resulted in a onetime savings for employers, did not put an end to long-term underlying trends, such as the cost of developing new technology and a demographic shift that has resulted in a greater proportion of elderly persons drawing on health-care resources, according to Abbott.

Another factor in medical inflation is the rise of so-called lifestyle pharmaceuticals, such as Pfizer's recently unveiled impotency drug Viagra.

The survey also forecast other trends in health-care prices. The cost of prescription drug cards, provided by some employers to employees, should rise 15 percent to 22 percent in 1999, after increases of 12 percent to 15 percent this year.

The cost of indemnity plans, which many companies have switched out of in recent years, should increase by 12 percent to 15 percent. Costs for those plans rose 9 percent to 11 percent this year, the survey said.

But health maintenance organizations are expected to keep a tighter lid on prices, with the cost of these plans rising an expected 5 percent to 7 percent next year - the same as in 1998, the survey said.