Medical Premiums Could Soar In 2003

By John S. McClenahen Even as there's more talk from economists about a deflationary U.S. economy -- one in which prices keep dropping -- there's galloping inflation in at least one sector. Medical premiums rose an average of 14% this year and employers expect them to increase as much as 20% in 2003, according to the Hay Group, Philadelphia. One apparent reason is that companies increasingly are using a Preferred Provider Organization (PPO) in place of HMOs. PPOs can be more expensive since they reimburse employees for care outside their networks and do not require that a primary-care doctor make referrals to specialists or for tests, Hay explains. In addition to passing along the higher costs of medical premiums, many companies are increasing the amount of an employee's co-payment for a doctor visit. Health-care plans with co-payments of $15 or more rose 47% this year from 33% in 2001, says Hay. The data come from the 2002 Hay Benefits Report, a survey of more than 1,000 U.S. companies.

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