The Devil in Containing Health Care Costs
There's some cheering news on health care: Cost-cutting is working, driving annual increases for employer-provided health insurance into single digits for the first time since 2000.

There's some cheering news on health care: Cost-cutting is working, driving annual increases for employer-provided health insurance into single digits for the first time since 2000. Increases will average 9% in 2007 and should dip by a percentage point or more in the following years.
But keeping that momentum up will be tough, with the aging population and relentless costs of technical and medical advances exerting constant upward pressure on costs. Savings from higher deductibles and copays, making workers more prudent about doctors' visits and tests plus greater reliance on generic drugs and fewer hospital stays have helped, but those savings will go only so far.
Continued savings depend on helping employees make better choices

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
about their health care treatments and providers as well as their lifestyles and health regimens. Capturing the savings will require spoon-feeding information to workers, making sure they get and grasp facts about treatment options, their results and trade-offs plus quality ratings for hospitals, doctors and other care providers.
- Ratchet up preventative care and education. Every dollar spent on such programs saves nearly $3.50 in health care costs and about $5.80 in reduced absenteeism. The cornerstone of prevention programs: individual health risk assessments. Health care professionals evaluate the condition of each insured person and recommend an appropriate ongoing health program. For those with chronic conditions such as diabetes or high blood pressure, it might include disease management and routine monitoring. For others, it could include help with weight loss, smoking or instituting an exercise program.
For now, getting employees on board may take serious encouragement. Johnson & Johnson, for example, gives workers a $500 break on premiums for taking part in an assessment and subsequent coaching program. But in four or five years, once these programs take root, many businesses will get tougher. "Employers will require employees to take a health risk assessment or participate in a wellness or disease management program as a condition of coverage," says Camille Haltom, a consultant with Hewitt Associates.
- Be aggressive with incentives, putting cash in the pockets of employees who exercise regularly, watch their weight, don't smoke, etc., or who participate in programs to help them curb unhealthy behavior. Take care, though, to steer clear of potential discrimination charges. Human resources experts, such as Seth Serxner, with Mercer Human Resource Consulting, point out that the law is not clear on whether or not employers can penalize unhealthy behavior—putting a surcharge on premiums for unrepentant smokers, for example. "If you give incentives to smokers to quit, what about the nonsmokers?" You can make it fair to everyone, Serxner says, by discounting premiums for everyone except unrepentant smokers, paying both nonsmokers and those willing to join a program to help them quit. Down the road, the government is likely to change the rules governing Health Savings Accounts, allowing employers to selectively contribute funds. Employees who make sound health choices may benefit from an extra little something, while others won't.
- Steer wage earners to the best care. Increasingly, insurers are ranking hospitals, doctors and other providers for quality of care. Picking up more of the tab for workers who opt to use those at the top of the list will wind up saving both you and the employee in the long run. Some employers and insurance plans even pay to transport sick workers to top-notch hospitals. For now, rankings are likely to be specific to each insurer or health care management company. But look for the development of a national system for gauging quality, with agreed-upon standards, in three to five years.
Just as employees will need help coping with this new and sophisticated level of information and decision-making, most employers will need help, too. Most will turn to all-in-one insurers who will provide not just coverage and information, but care managers, health coaches and the like.
For weekly updates on topics to improve your business decisionmaking, click here.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

-
The $33,000 Retirement: One Man's Surprising Path to Financial Freedom at 61
Forget what society tells you, even with less than $1 million, you can be happy in retirement.
-
The Best Aerospace and Defense ETFs to Buy
The best aerospace and defense ETFs can help investors capitalize on higher government defense spending or hedge against the potential of a large-scale conflict.
-
AI’s Rapid Rise Sparks New Cyber Threats
The Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
Blue Collar Workers Add AI to Their Toolboxes
The Kiplinger Letter AI can’t fix a leak or install lighting, but more and more tradespeople are adopting artificial intelligence for back-office work and other tasks.
-
AI Goes To School
The Kiplinger Letter Artificial intelligence is rapidly heading to K-12 classrooms nationwide. Expect tech companies to cash in on the fast-emerging trend.
-
What To Know if You’re in the Market for a New Car This Year
The Kiplinger Letter Buying a new car will get a little easier, but don’t expect many deals.
-
Will Lower Mortgage Rates Bring Relief to the Housing Market?
The Kiplinger Letter As mortgage rates slowly come down here's what to expect in the housing market over the next year or so.
-
Car Prices Are Finally Coming Down
The Kiplinger Letter For the first time in years, it may be possible to snag a good deal on a new car.
-
New Graduates Navigate a Challenging Labor Market
The Kiplinger Letter Things are getting tough for new graduates. Job offers are drying up and the jobless rate is increasing. Are internships the answer?
-
When's the Best Time to Buy a Domestic Flight? The Kiplinger Letter
The Kiplinger Letter A new study by CheapAir.com has crunched the numbers.