If you’re running a business, then you already know the current situation with health insurance: health care costs are pushing premiums ever higher, making it increasingly difficult for companies to provide adequate benefits to their workers while at the same time maintaining a healthy bottom line.
“Historically, consumers used to be responsible for all of their family’s health costs,” says Michael Taylor, executive director of marketing and communications at UPMC Health Plan in Pittsburgh. “That changed after World War II, as employers in a rapidly-expanding economy began offering health insurance as a way to attract workers.”
Smart Business spoke with Taylor about how those companies can better deal with rising health care costs:
Why are employers getting hit so hard with rising health care costs right now?
It may seem that way because today, employers are not only offering group health insurance, they are also paying an ever-expanding percentage of the premiums. While it is true that employees pay more than they previously did in dollar terms, the percentage of their responsibility is falling. Employee contributions, on a percentage basis, are less than half what they were in the 1970s.
At the same time, costs continue to soar. Americans are now spending roughly $2 trillion a year on health care expenses, representing more than 15 percent of the gross domestic product. On average, total family-coverage premiums have increased 73 percent since 2000.
How is this affecting the American worker?
Largely because of these rising costs, about 44 million Americans are uninsured. One survey pegged the percentage of workers receiving health care coverage from their employers at 61 percent, down from 65 percent in 2001. A contributing factor is a decline in the number of small firms that offer health insurance. And demands on the health care system continue as life expectancy rises (from 70 years in 1960 to about 77 years now), and patients insist on access to expensive new medical and pharmaceutical discoveries — even as they live increasingly sedentary and unhealthy lifestyles.
According to an article in The New York Times, the average family premium in 2005 was $2,800, a 27 percent rise over two years. And the Los Angeles Times reported recently that family coverage costs are now beginning to surpass wage costs for a minimum-wage employee.
How can an employer avoid getting overwhelmed by these costs?
The first step is to understand that solutions can only come from a partnership between insurer, employer and employee. A new era of “consumerism” has arrived in health care, and all three parties need to be part of the process. Ideas are still emerging, but there are things employers can start doing right now. When choosing the right insurer, employers should ask a few important questions:
- What is the health plan doing to activate consumers to take a more active role in their health care? Robust tools and programs that enable members to better manage their own health care spending is a great start.
- What are the insurer’s administrative costs? The national average is about 11 percent. In general, more efficient health plans have lower administrative costs.
- Is the insurer accredited by a national organization like the National Committee for Quality Assurance? NCQA’s highest rating is “excellent.”
- What is the insurer doing to allow consumers to select higher quality hospitals and doctors? Getting sick members to better facilities — where they get appropriate care — can directly result in long-term savings.
What other steps can an employer take to manage health care costs right now?
Look closely at whether the health plan is monitoring physicians through consistent data analysis of their practices, and find out what type of communication procedures exist between the health plan and providers. Such reports identify physicians who fall outside their peer group for any one parameter.
Also examine what the insurer is doing to manage prescription drug costs. The health plan should offer integrated management of medical care and drugs for its members, and it should effectively promote generic drug utilization and adherence to maintenance medications.
How can an employer get its employees involved in reducing health care costs?
Again, this has to be seen as a partnership between insurer, employer and employee. The latest trend in insurance is to offer robust health promotion and preventive care programs. It’s not unusual for these programs to find a sizeable percentage of employees who are at risk even though they thought they were perfectly healthy. Smoking and obesity, for example, are common risk factors.
MICHAEL TAYLOR is executive director of marketing and communications at UPMC Health Plan in Pittsburgh. Reach him at (412) 454-7534 [email protected].
