INSURANCE: Companies Shuck Health Insurance Costs

Joseph Catanese

“Additionally, 93 percent of U.S. companies offer programs that try to improve or maintain employees' health. This is compared with 88 percent in 1994 … Seventy-two percent of companies now offer employees some education seminars, workshops or counseling about lifestyle habits that can contribute to chronic or acute conditions.”

Like corn in Iowa on a summer's day, health insurance premiums are steadily rising. And although prices don't grow six inches per day, the average plan costs companies approximately $4,707 per employee, an expensive proposition.

Despite the high price tag, employer-sponsored health insurance covers two out of three Americans. Few businesses are willing to forego providing healthcare for fear of losing talented employees or recruits.

This leaves many companies in a tough spot. According to a survey conducted last year by Hewitt Associates, Lincolnshire, Ill., U.S. employers may be hit by healthcare cost increases of between 10 percent and 13 percent this year.

There are many reasons for the hikes. For instance, costs for prescription drugs, new medical procedures and treatments are increasing. Also, Health Maintenance Organizations (HMOs) want to increase their profitability.

Unfortunately, these expenses are being passed onto employers and then employees. Consequently, businesses are working to:

Decrease costs for prescription drug plans. Many businesses are keeping prescription drugs affordable by adopting tiered plans where employees pay less for a generic drugs and more for brand-name drugs.

Tighten up managed care plans. Employers are increasing co-payments for doctor visits and providing more penalties for people who use a physician who is out of the company's network.

Eliminate “cost-inefficient” plans. Businesses are carefully reviewing all aspects of their health plans, including cost-efficiency and how well the plan meets employees' needs.

Move toward PPO plans. Preferred Provider Organizations (PPOs) offer lower administrative fees, competitive discounts and more freedom for employees. Consumers have direct access to specialist physicians without securing a referral from a primary care “gatekeeper,” whereas HMOs don't typically support this option.

Enter negotiations well-prepared. HMOs and other healthcare providers are tough negotiators. Therefore, companies are comparing costs and market data. To obtain the most effective and efficient plan, businesses are willing to change plans or providers.

Look at new options. Many companies are moving toward a “defined contribution” approach, in which employees are allotted a fixed amount to buy their health insurance and can choose one of the several coverage options. Monies that aren't spent can be used for extra healthcare services, such as dental visits or eye care. The defined contribution approach is similar to switching from pension or retirement plans to 401Ks.

Additionally, 93 percent of U.S. companies offer programs that try to improve or maintain employees' health. This is compared with 88 percent in 1994, according to another Hewitt Associates study. The study also states:

Businesses know that employees are among its most valuable assets, so keeping them healthy is a priority. Fortunately, many employers are striving to do this while capping healthcare costs.