L.A. health costs still outpacing inflation.

L.A. businesses won't get any relief in 2007 when it comes to the costs of employee health care.

Local employers expect to get hit with an average 7 percent rise in health care premiums--following a 7 percent rise this year and a 7.5 percent rise in 2005, according to the latest survey by the Mercer Health & Benefits consulting firm.

The bottom line: once again businesses are facing health care costs that exceed the general rate of inflation.

That's causing employers to take a second look at how their employee health plans are structured, with many offering more "consumer directed" plans that can include health savings accounts employees spend down as they see fit. The idea is they will spend the funds carefully, though critics say the overall benefit can be less than traditional health plans.

What employers are not doing, the survey shows, is making employees pick up a bigger share of the health care bill, as they have done in years past.

"It can get to the point that if you raise the employee's share too much it negates whatever salary raise you also gave them," said Laura Baker, a principal in the Los Angeles office of Mercer, a unit of Marsh & McLennan Cos. Inc., the world's largest insurance brokerage.

The annual survey, which pinpoints business health costs for the current year, estimates the average cost of health benefits in Los Angeles was $6,824 per employee in 2006, which includes the employee's own share of the premium. In comparison the national average in 2006 was $7,523, a 6 percent increase; California was $7,195, up an average 7.6 percent.

Los Angeles workers also continued to choose more restrictive but lower cost health maintenance organization plans at a significantly higher rate than the national average in 2006. That reflects the state's traditionally stronger and more competitive HMO market. HMO enrollment in Los Angeles was 68 percent compared to 62 percent statewide and 24 percent nationally.

The average employee contribution in Los Angeles in 2006 was $57 a month for HMO plans and $113 for preferred provider plans, the choice of 25 percent of workers. Nationally the average was $95 a month for HMO members and $98 for PPOs.

The rate of growth in health benefit costs hit a national 12-year high of 14.7 percent in 2002, but slowed to 6.1 percent in 2005 as employers raised employee premiums and introduced consumer-driven health plans with higher co-payments and deductibles.

Mercer's survey covered 3000 public and private employers ranging in size from 10 employees to more than 500. The survey includes 90 Los Angeles businesses. The averages include the cost of all medical and dental plans, for employees and all covered dependents.

BY DEBORAH CROWE

Staff Reporter