Study: Mass. healthcare costs are 4th-highest

Massachusetts faces a dose of double trouble when it comes to controlling healthcare costs: It has among the highest such costs of any state, and they are increasing at a faster rate than in most other states.

Those are the findings in a survey by Mercer Health & Benefits, a large consulting firm, to be released today.

Average healthcare costs for an individual employee, including medical, dental, dependent coverage and worker premium contributions, reached $9,428 this year. That is the fourth-highest in the nation, after Alaska, New Hampshire, and Wisconsin.

The figure also represents an increase of 8.2 percent over 2005, the ninth-highest rate of increase in the country. Nationally, the aggregate benefit costs for individual employees increased 6.1 percent, compared to 2005.

"Traditionally, healthcare costs in Massachusetts have been much higher than other parts of the country, because of all the teaching hospitals in Boston and because we have such a high standard of healthcare," said Deborah Wozniak , a principal in Mercer's Boston office and a coauthor of the study.

At the same time, Massachusetts has been slower than many states in adopting so-called consumer-directed health plans, the latest strategy to slow the growth of healthcare spending. Consumer-directed plans typically require members to pay a hefty upfront deductible before benefits kick in.

"We've lagged behind the curve in the adoption of consumer-directed health plans," Wozniak said. "We've been slower to migrate to plans that require members to contribute to the first dollar of cost."

Nationally, membership in consumer-directed health plans tripled in 2006, from 1 percent of all covered employees to 3 percent. Though a small part of overall coverage, such plans have significantly lower costs than more traditional types, such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs).

Nationwide, health benefit cost increases have moderated after reaching a 12-year peak of 14.7 percent in 2002. The increase in each of the last two years has been 6.1 percent, which although considerably higher than the rate of inflation, is considered something of a triumph in healthcare circles.

Healthcare costs in Massachusetts have increased by at least 10 percent in each of the past six years. For 2007, the major health insurers are predicting premium increases of between 8 and 13 percent, depending on the type of health plan. Employers can reduce those increases by trimming benefits.

Massachusetts employers expect that healthcare costs per employee will increase by 6.6 percent per worker in 2007, according to the Mercer study.

"We're in the process of surveying our members to draft our legislative agenda, and the biggest concern on their minds is the cost of health insurance," said Richard C. Lord , chief executive of Associated Industries of Massachusetts, the state's largest business lobby. "After healthcare comes the costs of energy and the availability of workers."

Lord added, "We need to do something about this or it threatens the viability of our new healthcare reform law." The law includes requirements for individuals and businesses and is intended to bring healthcare insurance to all.

Ed Kaplan , national health practice leader for The Segal Co. , a New York consulting firm specializing in benefits and human resources, said many factors make Massachusetts a high-cost state.

"Labor is strong, so benefits tend to be rich," he said. "High-end providers such as teaching hospitals have higher unit costs for surgery. And there are many insurance benefits mandated by the state."

Kaplan's advice to employers: Negotiate. "If you're a sizable company with enough lives to insure, you've got to really push back on that HMO. You'll see a point or two shaved off the increase." He said the strategy is unlikely to work for employers with fewer than 50 workers.

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