New for employers: a way to control health-care costs

In a unique experiment that is drawing national attention, a California community is showing that escalating health-care costs can be controlled. Rather than pay an insurance company to cover the low cost of health needs, the Mendocino County Office of Education sets aside $500 a year for each of about 200 employees. That sum can be drawn upon to pay initial medical expenses (those above $500 still are paid for through a group plan), or be left in a fund that is paid as a "bonus" when the employee leaves the school district.

In the year since the program began, officials note several benefits. Markedly fewer employees are filing medical claims, and consequently the county's insurance premiums have leveled off and are expected to drop.

As the pool of set-aside money is invested and continues to grow, it is expected that the health insurance program will become self-sustaining.And that will mean more money for education, not a small consideration in the wake of Proposition 13 cutbacks in public spending.

In recent years, the cost of health care has grown faster than most other sectors of the economy. Businesses and public agencies, most of which cover medical expenses as an employee benefit, have been searching for ways to face this problem, if not help solve it. In Mendocino, officials think they have found one answer that can benefit all concerned.

"Everybody saves, including the doctors, who are paid faster," said Claudia Lynn of the country Office of Education, noting that this is because of the elimination of a fourth party -- the health insurance company -- in relatively minor cases. "Our premiums, which had been going up, will remain the same this year, and we expect them to drop."

For employees, Miss Lynn adds, the program "is an incentive to stay healthy" and shares with them the responsibility of holding down costs.

Blue Shield of California, which announced the Mendocino plan a year ago, now is offering a similar program in which employees each year are reimbursed for not filing unnecessary claims. Bank of America is beginning a pilot program of this type for 1,000 of its 63,000 employees.

More than 300 other companies and government agencies, including Burlington Industries, Dow Chemical, and the California State Assembly, have expressed interest.