HEALTH CARE BENEFITS: COSTS KEPT IN CHECK LAST YEAR

      While health care benefit costs were kept "at bay" last
 year, costs are expected to rise in coming years, according to a
 new William Mercer/Foster Higgins survey.   The Wall Street
 Journal reports that a "strong surge of workers into managed-care
 plans ... helped hold the increase in overall medical costs for
 active and retired employees to just 0.2%" (Winslow, 1/20).  The
 survey found that the percentage of people enrolled in managed
 care plans increased from 52% in 1993 and 77% in 1996 to 85% in
 1997 (Findlay, USA Today, 1/20).  That increase "has been at the
 root of corporate America's success in reversing several years of
 double-digit inflation in the late 1980s and early 1990s." 
 However, "it also means the days of holding down costs by moving
 employees to lower-cost health plans essentially are over" (Wall
 Street Journal, 1/20).   
      AVERAGE INCREASES
      Costs increased around four percent in companies whose
 health plans "were basically unchanged."  However, the shift to
 managed care helped keep overall cost increases to an average
 0.2%, or $3,924.  Costs increases were shared by employers and
 employees.  The New York Times reports that "[c]osts for active
 employees averaged $3,165 in HMOs, $3,321 in [PPOs], $3,481 in
 open-access HMOs and $3,521 in fee-for-service plans."  For early
 retirees, the average cost decreased 4.3% to $4,985, as "many
 employers pushed retirees into HMOs."  In addition, employers
 offering coverage to retirees under 65 dropped to 38% from 40% in
 1996 and 46% in 1993 (Freudenheim, 1/20).  Employers who shifted
 workers into managed care plans saw savings ranging from $40 to
 $356, depending on the type of plan.
      FUTURE INCREASES
      John Erb, a chief author of the study, said, "Now that they
 have driven all of their people into managed care, employers have
 to worry just where the costs go now" (Wall Street Journal,
 1/20).  According to Erb, employers expect a seven percent cost
 increase in 1998.  Tom Billet, a vice president of the Medstat
 Group, said his clients are expecting cost increases of between
 five percent and 10% in 1998.  He said, "A lot of the easy cost
 reductions have now been accomplished, through converting people
 from indemnity" plans (New York Times, 1/20).  In addition, the
 Wall Street Journal reports that many managed care companies
 "have offered such plans with aggressive prices that threaten
 profitability and other measures of financial health."  Managed
 care plans are now taking more of the high-cost members, which is
 "driving up the portion of premium revenues that the plans must
 spend on medical care."  The Journal notes that several large
 insurers, including Aetna U.S. Healthcare, Oxford Health Plans
 Inc., and Pacificare Health Systems Inc., have all "taken
 financial hits recently because they underestimated health costs
 and struggled with troublesome information systems" (1/20). 
 Other problems cited were merger costs and rising prices for
 medical services and prescription drugs.  
      AROUND THE NATION
      The Los Angeles Times reports that employers in California
 are concerned that the large "number of major mergers and
 acquisitions among California HMOs last year will lead to ... 
 increases in 1998 and beyond."  Mercer consultant Kirby Bosley
 said, "[E]mployers are concerned that the ... decline in the
 number of players in the marketplace will make their negotiations
 more difficult in 1998" (Olmos, 1/20).  The Mercer study found
 that "Atlanta led the country with an 8.6% hike in costs, while
 Cleveland tied with Philadelphia for second at 5.2% (Stark,
 Philadelphia Inquirer, 1/20).  Health costs in the Baltimore-
 Washington area dropped 2.3% in 1997, the Baltimore Sun reports,
 but costs in the region are already increasing (Salganik, 1/20). 
 In Atlanta, costs increased 8.6% to $3,978.  The Atlanta Journal-
 Constitution reports that according to Mercer analyst Lew Yeouze,
 most of the increases came from the popularity of point-of-
 service plans in Atlanta, which are more expensive than HMOs. 
 Although the South in general had higher average increases than
 the rest of the country, health care costs in the South are still
 the lowest nationally (Miller, 1/20).  The cost of health care in
 Tennessee remained lower than the national average, and
 enrollment in managed care is also lower in that area than in
 other regions (Campbell, Memphis Commercial Appeal, 1/20).  In
 Connecticut, large employers saw 2.2% decreases in the cost of
 health insurance in 1997 (Levick, Hartford Courant, 1/20).