Chase Cautions on ICN’s Royalty Outlook; Covering Viagra
Employers doled out more in 2000 to provide healthcare for their workers, according to a new survey from healthcare consultant William M. Mercer. And Orange County businesses felt a bigger share of the cost bite.
Mercer’s National Survey of Employer-Sponsored Health Plans 2000 showed that the total Southern California health benefit cost for firms with active employees jumped 7.8% in 2000, to an average of $4,357 per worker. Most firms surveyed were in Orange County, according to Mercer. The local findings covered 127 employers with 500 or more employees.
While costs grew faster in Southern California last year, the region came in just below the national average for 2000 health plan costs, which went up 6.6% to an average of $4,604. The West region’s increase was 5.2%, to an average of $4,578.
Dale Macrae, a Mercer consultant, said the higher jump in Southern California costs could be attributed to the area’s heavy concentration of managed healthcare. Mercer also found that 91% of Southern California employers offered a health maintenance organization plan, compared to 62% in the West region and only 51% of employers nationally.
Mercer’s Southern California region “felt more pushback this year from providers in the area of capitation,” Macrae said. Under capitated contracts, a health plan pays a set amount of money per member per month to providers for healthcare services.
Orange-based St. Joseph Health System’s paring of its network to five “partner health plans” that it said will practice cost sharing in pharmaceuticals and other areas is an example of provider pushback. Macrae said the Southern California situation is “indicative of what can and will be going on in other parts of the country.”
Overall, Mercer’s study said, most employers simply absorbed the higher costs in 2000, because of concerns about attracting and retaining workers in a tight labor market. But Mercer said that 2001 may be another story,the average expected increase is 11%, and 13% of responding employers faced cost hikes of 20% or more.
“Attraction and retention of employees is still a big issue,” Macrae said. “But in companies where shareholder demands and the pressures of global competition are driving the bus, controlling runaway expenses takes priority.”
As for possible cost-shifting strategies, Mercer’s study showed that 40% of employers planned to increase employee contribution levels in 2001 and 17% would raise deductibles, co-payments or out-of-pocket maximums. By comparison, only 21% of employers surveyed in the previous year said they would increase employee contributions in 2000, and only 9% said they would shift costs to employees through higher deductibles, co-payments or out-of-pocket maximums.
Weighing In on ICN Royalties
Chase H & Q; issued a research report on ICN Pharmaceuticals Inc., Costa Mesa, in which it gave the stock a “buy” rating but raised concerns about the performance of Schering-Plough Corp.’s Rebetron. ICN makes the ribavirin component of Rebetron, which is used to treat hepatitis C, and receives royalties from Schering-Plough.
Chase H & Q; said it was concerned that November prescriptions for Rebetron were down 8% from the year before, and projected flat prescription growth for the drug. Because of that, Chase wrote that it lowered its estimate of ICN’s royalty revenue from Rebetron to $49 million from $53 million.
Chase also expressed concern about ICN’s consensus fourth-quarter earnings estimate of 54 cents a share being too high. But it maintained a buy rating because the drug maker is trading at only half the price-earnings ratio of its peer group average.
The brokerage also noted that Rebetron’s near-term performance and ICN’s delayed restructuring could prompt continuing weakness in the company’s shares.
Feds Rule on Gender, Insurance
Attention, Orange County employers: Are you considering covering Viagra, Pfizer Inc.’s popular male sexual-dysfunction drug, in your healthcare benefits? Better expand that to female prescription contraceptives too.
The U.S. Equal Employment Opportunity Commission said late last month that it’s illegal for employers to exclude contraceptives from their health plans when other sex-related treatments are covered. The commission specifically said that excluding contraceptives was a violation of the 1978 Pregnancy Discrimination Act, which requires equal treatment of women affected by pregnancy, childbirth or related medical conditions in all aspects of employment, including benefits.
Debate over contraceptive coverage erupted in 1998, when Viagra was introduced in the U.S. Women’s groups had argued that it was not fair that some insurance companies reimbursed their male subscribers for Viagra while not covering birth control.
Bits and Pieces:
Blue Cross of California, which has around 107,000 individual health insurance customers in Orange County, received regulatory approval for its PlanScape individual coverage program, which officially starts this week. Blue Cross of California is an operating subsidiary of Thousand Oaks-based WellPoint Health Networks Inc. … Kaiser Permanente gave a $35,000 grant to Latino Health Access, Santa Ana, to fund health education for children and adults with asthma.
