It was great while it lasted.


That might be the refrain of Spokane employers, who this year are being hit with health-care plan rate hikes averaging 8 percent to 12 percent after several years of shrinking, stable, or modestly rising premiums.


Representatives of a couple of the Inland Northwests larger health plans blame the jump on heavier utilization of services by members, more aggressive marketing by pharmaceutical companies, and the need of health-plan vendors to restore operating margins after an extended period of financial losses.


Its a much larger increase than weve seen in the recent past, says Sharon Fairchild, vice president of Spokane-based Group Health Northwest.


Health-care premiums are believed to have risen an average of about 4 percent here last year, which appears to have been higher than the national average increase.


A survey released last month by human-resources consultant William M. Mercer Inc. found that health-care costs for all active and retired employees in the U.S. inched up just 0.2 percent in 1997, compared with 2.5 percent the previous year. Average costs increased 0.9 percent for larger employers (those with more than 500 employees) last year, but fell 0.7 percent for smaller employers, according to the survey, which is a widely followed barometer of employer health costs.


Many of the premium increases being implemented by health-plan vendors here took effect Jan. 1, but some will be felt later in the year, as insured groups reach their annual renewal dates.


Given current market uncertainties, local health-plan representatives are reluctant to make such projections on rate changes in the next couple of years, but The Wall Street Journal recently quoted one industry analyst as asserting it will be another decade before businesses again see rate growth as flat as it was last year.Group Health NorthwestGroup Health Northwest, the Inland Northwests largest health-maintenance organization, says its rate increases this year will range mostly from 4 percent to 12 percent, with a probable overall average of about 8 percent.


Fairchild says Group Health noticed a jump in its members use of services over about the last year and a half, which she says is contributing to the higher premiums. The HMO also has seen very dramatic increases in the cost of prescription drugs, she says.


I feel this is coming from a real change in how health care is being delivered. With new procedures and new technologies (reducing hospitalization time), were starting to see a switch from hospital cost to pharmaceutical cost, Fairchild says.


Meanwhile, pharmaceutical companies have become more aggressive about advertising their products directly to consumers, which has prompted consumers to demand new and specific drugs from their doctors, she says.


Group Health Northwest, which is based in Spokane, has about 160,000 members in Eastern Washington and North Idaho. It dropped about 30,000 Central Washington customers in December because of cost overruns, and announced then that it also would be cutting about 100 jobs, or about 10 percent of its work force, over the next six months to reduce operating costs.Medical Service Corp.Spokane-based Medical Service Corp. of Eastern Washington, which offers a variety of health-plan products, expects its average rate increase this year to be about 10 percent, says MSC spokeswoman Robin Valaitis-Heflin.


Since last year, Weve seen our health-care costs outpace our premiums, she says.


One of the steps that MSC is taking to combat those cost increases is implementing health-management programs for members with certain chronic diseases, such as diabetes and asthma, Valaitis-Heflin says. The purpose is to help people manage their disease so they stay healthy, she says.


MSC also is preparing to introduce a new quarterly newsletter focusing on health and wellness for its members. The purpose of that is educating members to make healthy lifestyle choices and how to use specific health plans, she says.


MSC has about 275,000 members, all in Eastern Washington, which is an increase of about 20,000 members from a year ago.QualMed Washington Health PlanInland Northwest members of QualMed Washington Health Plan Inc. will see average rate increases of 8 percent to 12 percent, says Chris du Laney, the companys Bellevue-based president.


Youre looking at a medical inflation trend that is around 5 percent, and all of the carriers in the state have lost significant amounts of money in operating income (over the last year). You cant keep losing money, du Laney says.


Cost increases from hospitals and health-care providers have been relatively modest, but prescription drugs have been a big factor in the escalating costs, he says, echoing Fairchilds observations. One example, he says, is Imatrex, a new drug that is effective at treating migraine headaches but costs $10 a pill.


Another big reason for this years cost increases, he contends, is the fierce competition for market share that has been playing out over the last couple of years. We, as carriers, have all been underbidding ourselves. We have been underestimating costs, and now are having to recoup some of that revenue, he says.


Current membership figures for QualMed were not available. However, the company reported to the Journal last fall that it had about 52,500 members in Eastern Washington, up from about 34,500 at the end of 1996.Mercer/Foster Higgins studyThe nationwide survey of employer-sponsored health plans done by Mercer found that U.S. employers total health-benefit costs averaged $3,924 per employee last year, up from $3,915 in 1996.


It attributed that minuscule increase partly to an unexpected surge of workers into lower-cost managed-care plans, which include HMOs, preferred-provider organizations (PPOs), and point-of-service plans (POSs).


The survey showed that 85 percent of American workers with health insurance now are enrolled in some form of managed care, which is a much higher percentage than just a few years ago. That migration away from traditional indemnity plans has allowed employers to hold down their cost increases over the short term. However, with that nationwide shift now almost complete, most employers no longer have the option of moving workers to lower-cost plans and instead will have to worry about actual year-to-year cost changes on plans theyve had.


On a regional basis, the West had the second lowest average health-benefit cost per employee last year, at $3,797, which was higher than the South, at $3,505, but lower than the Midwest and Northeast, at $4,047 and $4,453, respectively, according to the survey.


More than two-thirds of the nearly 4,000 employers who participated in the survey said they were expecting higher health-benefit costs in 1998, and were budgeting for an average increase of 7 percent.


So what has happened to the once-ballyhooed health-care reform movement, here and nationally, and its supposed cost-containment benefits? They appear to be losing ground to Americans continuing insistence on freedom of choice.


Enrollment growth in traditional HMOs, which are believed to hold the greatest promise for long-term cost control, has not been nearly as strong over the last five years as in PPO and POS plans, which are less restrictive on members, survey figures show.


Otis Gillaspie, a health care consultant in Mercers Seattle office, says, Americans clear and continuing appetite for provider choice may be slowing the progress of managed care in reshaping our health-care delivery sy