Health costs rising faster than average

The cost of healthcare benefits for Boston-area employers this year rose at a rate 44 percent higher than it did nationally, according to a study by one of the nation's largest benefits consultants.

Mercer Health & Benefits found that the amount employers paid for each worker's health benefits was $8,434 in Greater Boston, up 8.8 percent from last year. Nationwide, the average cost of health benefits was $7,089, up 6.1 percent.

The figures include premiums for medical and dental plans for employees and their dependents who also receive coverage, but exclude employees' out-of-pocket expenses.

Mercer's findings come at time when the Massachusetts Legislature is seeking to pass a broad healthcare reform bill that would greatly expand coverage to the state's approximately 500,000 uninsured residents.

''These results are disturbing because Massachusetts employers are already paying among the highest rates in the country for healthcare coverage for their employees," said Richard C. Lord, president of Associated Industries of Massachusetts, a business advocacy group.

Nationally, the survey found the rate of increase in healthcare costs slowed for a third straight year, down from a 14.7 percent increase in 2002. Employers predicted a modest increase in the rate next year, 6.7percent. But it is expected to be higher in the Boston area, where Mercer's survey of 59 employers indicated they anticipate cost increases of 8 percent.

Peter Kilmartin, a principal in Mercer's Boston office, said healthcare costs are higher in Boston because of the area's reliance on world-renowned teaching hospitals for care. In addition, he said, employers offer better benefits than the national average.

''Massachusetts has historically been an HMO state," Kilmartin said, referring to health maintenance organizations, ''and the HMOs provide a richer benefit than other programs."

Health insurers have largely turned away from HMOs to so-called preferred provider organizations to deliver managed care. PPOs tend to have higher deductibles and copayments. Nationally, 61 percent of employees are covered by PPO-type plans, compared to 25 percent by HMO plans. Mercer did not provide those statistics for Massachusetts.

Dr. Thomas Lee, network president of Partners HealthCare Systems, a large network of hospitals, said healthcare is more expensive in the Boston area in part because the care is superior.

''We're doing a better job controlling blood pressure, heart disease and diabetes," he said. ''Better care does cost more."

Last year, employers surveyed by Mercer said they expected health benefit costs to rise by 10 percent in 2005, but that they planned to temper the increases by making changes to their benefit offerings. They succeeded, the survey found, mostly by shifting more costs to workers through such measures as increased deductibles and copayments.

However, that strategy may be falling out of favor. Employers said they were less likely to scale back benefits or shift costs than in previous years. Instead, they are considering strategies that include providing beneficiaries with cost and quality data, which they hope will lead them to make more affordable healthcare purchases. In addition, employers said they would explore care management programs, in which employees provide detailed health information to their health plans and receive advice on how to have healthier lifestyles.

Also, more companies give employees small cash awards or inexpensive gifts to encourage them to participate in voluntary care-management programs.

Vincent Capozzi, senior vice president of sales and marketing at Harvard Pilgrim HealthCare, the state's second-largest health insurer, said Massachusetts lags in adopting some of those measures. The employers turning away from cost-shifting are mostly large, he said, but small and midsize companies are still passing more costs on to workers.

Harvard Pilgrim has been a strong proponent of providing consumers with more information about cost and quality. Lord, the head of the industry group, said he wants the healthcare bill now under consideration to require greater disclosure of such data.

One bright spot in the survey was the continued decline in the rate of increase in prescription drug benefits. Hikes in drug spending peaked in 2000 at 18 percent, but for 2005 large companies said their prescription spending increased 11.5 percent. Tiered copays that give consumers financial incentive to buy generic drugs accounted for some of the moderation, according to the survey.

The survey also found that more companies are offering health coverage to same-sex domestic partners. Over half of employers with at least 20,000 employees now offer such coverage.

Jeffrey Krasner can be reached at krasner@globe.com.