ent in 1993, 4.8 percent in 1994. By 1996, premium growth was at an extreme low of 0.5 percent. However, with the changing trends of health care costs because of changing benefits of cost sharing, the costs of health care continued to rise at 2 percent annually. Because of the lag in accounting for costs, the changes in the premium growth did not adequately reflect the increase in costs. Consequently, the health insurance industry hit a major crisis. In 1994, nearly 90 percent of all HMOs were profitable. However, this number was reduced to 49 percent. Thus, premiums began to increase to counter the rise in the costs of health plans (Gold, 1999, p. 5).
Currently, the premiums are beginning to rise to counterbalance the rise in costs. In 1996 employees paid approximately 30 percent of the premium for family coverage and 22 percent of the premium for single coverage. These figures are an increase compared with the respective figures of 26 percent and 10 percent (Gold, 1999, p. 5). Furthermore, employees are bearing a greater burden of their health insurance costs. From 1992 to 1996, the dollar contribution to employee cost sharing increased at an average annual rate of 7.2 percent, while premiums increased at a rate of 3.8 percent. Therefore, employees are faced with a growing expansion of insurance costs through deductibles, along with higher copayments and co-insurance (Gold, 1999, p. 6).
As a result, there was an increasing move towards managed care, which lead for the forging of network-based arrangements of health benefit products, such as health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) arrangements, including the provider. However, the move towards managed care did not necessarily lead to the decrease of the costs of health plans. In 1995, 80 percent of the employees continued to subsidize more expensive health plans, thus eliminating the incentive for employees to...