Many managed-care plans are raising their rates after five years of stable prices. They argue that higher demand is the cause. In addition, plans are more expensive where they have merged and there is less competition, or where plans have been making losses.

Some companies are increasing the premiums or out-of-pocket costs that workers pay, in effect reducing the subsidy given. Some are increasing the co-payments on drugs, the prices of which are rising fast. One type of drug plan charges more for name-brand drugs than generic drugs. Others are adopting more restrictive health plans, limiting further which providers are covered, especially for rank-and-file employees. Yet others are encouraging employees to use health care less, such as through smoking cessation programs, or face higher premiums.

However, there is a great deal of variation. Where the employers are afraid that workers might quit as a result, such as among skilled workers or in the hi-tech sector, they are more reluctant to increase employee contributions. Large companies are also more likely to absorb health-care cost increases.

(Updated January 1, 2000)