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Most employers will see health care costs rise about 7% next year, the same as this year. While that's far better than the double-digit increases of a few years ago, it's twice the rate of inflation and taking a bigger and bigger bite out of business budgets and paychecks alike.
Some employers, though, will do far better -- holding their two-year median cost hike to about 1%, according to a recent survey by Watson Wyatt Worldwide and the National Business Group on Health. They're doing it by taking a multipronged approach, with programs to prod employees to take more responsibility for their health and to make more informed health care decisions.
The most successful employers are aggressively pushing consumer directed health plans (CDHPs), which put more control in the hands of workers, usually by combining a high deductible insurance policy with a tax advantaged health savings account. Some firms are setting the premiums for such plans at 30% below traditional plans to encourage participation, and it seems to be working. Employers that offer them as an option report that participation hit 15% this year, up from 10% in 2007 and likely to hit 20% next year.
Education is crucial to making the program work. Employers need to invest the time and energy to explain the details and how workers can save money. Land O'Lakes, for example, spent more than a year preparing its wage earners for a consumer directed plan before offering it as one of three options in 2007. Preparations included nationwide meetings and DVDs showing examples of how CDHPs compared with traditional plans. Employees also could contact a call center with questions before and during the enrollment period. The result of all that preparation: 72% of employees signed up.
Another way to save is to provide free drugs and supplies for chronic diseases, such as asthma, diabetes and high blood pressure, that are known to lead to costly complications. The goal is to get patients to stick to their treatment schedules. Employers using this strategy often tie the benefit to classes or coaching. A survey soon to be released from Hewitt Associates says nearly 20% of firms do this now, and 47% are considering doing so in the future.
Paying the full amount of common preventive services can also reduce costs. These include annual physicals, mammograms, prostate screenings, flu shots, colonoscopies and prenatal office visits.
Sending the sickest employees to the best doctors is gaining as a strategy among employers. Dubbed by some as a 20-20 approach, employers and their health plans are using data to identify physicians rated in the top 20% for effective treatments and matching them up with the 20% of employees who most need care. Employers provide financial incentives, such as lower copayments, to workers to use the top providers. Eventually, firms will try predictive modeling to identify who will be the sickest 20% so steps can be taken today to "get ahead of the curve," says Tracy Watts of Mercer Consulting.
Increasing financial penalties for those who poorly manage their health will become more popular with employers. While many companies will continue to reward workers who take health risk assessments and participate in health management programs, an increasing number will punish those who do not. For example, an employer may deny a worker access to one of the higher-benefit plans if he or she declines to participate in a wellness program.
On-site medical clinics are growing in popularity. Large companies often staff these clinics with their own employees while smaller firms tend to contract out the function to nearby clinics. The idea is to provide primary care to workers at low or no cost. With a clinic on-site, it also lessens the time employees spend away from work. On-site clinics are expanding to include rehab services, dentistry, X-ray and lab work. Some are even inviting specialists to come on-site and offer their services. These clinics are moving into more active management of workers' health conditions.
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POSTED BY: peter andrews (March 28, 2008 03:30 PM)
I don't know about the discrimination suits but one thing employers should do is pick a quality carrier who get substantial discounts from all providers so that employees are being given the wholesale and not retail costs of these services. They may pay a bit more for the insurance costs but they will recoup this additional cost through any claims due to the discounts that have been established.
POSTED BY: Deb Matz (March 31, 2008 08:41 AM)
These strategies make sense. The comment about discounts is naive. Historically, discounts have not lowered costs. Look at when medical costs starting increasing at a faster rate than inflation and when discounts became a standard of insurer's policies. Discount have NOT lowered costs! Maybe from an individual's perspective that looks good against an inflated list rate to cover for the discount.
POSTED BY: David McAtee (April 07, 2008 03:27 PM)
A very good article. I especially appreciate the references to Health Savings Accounts. I developed a website, www.HSAConnect.com that provides information and tools on the HSA approach to health insurance. And, I have found that the number one hurdle to individuals and businesses pursuing this approach is simply a lack of information. Therefore, I am grateful for articles like this that clearly explain the benefits.
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