Health care has become a significant economic engine of the U.S. economy, closing in on 16 percent of the Gross Domestic Product. In Akron alone, the largest area employers are in the health care industry, which employs more than 14,000 people who live and spend money locally, creating a significant spin-off from this segment of the economy.
However the great paradox is that health care is also a significant and growing cost of doing business, according to Alan Bleyer, president and CEO of Akron General Health System. “Health insurance premiums doubled from 2000 to 2006, with the average employee premium rising from $5,000 to $11,000,” he says. “We all have a vested interest in doing whatever we can to stem the tide of rising health care costs.”
Smart Business spoke with Bleyer about the rising costs of health care and what employers can do to control their costs.
What drives health care costs?
A number of things, but probably the two most significant factors are the aging of the population and the explosion in the use of health care technology.
The aging of the population is like a tsunami that’s building steam and becoming bigger and more powerful, and we are seeing the early waves of that tsunami reaching shore. Our consumption of health care services increases dramatically as we age and we are experiencing the early impact of this increase, which results in higher costs.
The use of expensive health care technology has also grown exponentially in the last 10 years. We have many exciting things now that didn’t exist when most physicians were in medical school. While that’s gone a long way in improving health and quality of life, there are cost implications to the use of technology.
How do health care costs affect employers and the local economy?
Employers today are competing in the world marketplace, but many companies around the world don’t provide any health care coverage for employees. Therefore, the coverage that employers provide as a pre-tax benefit to employees puts them at a competitive disadvantage in some markets. This issue really comes to bear in the manufacturing industry where products can be made at a lower cost overseas, resulting in a loss of U.S. jobs.
What can businesses do to decrease their health care costs?
Focusing on prevention is probably the most significant thing, because it can keep employees healthy and working. Prevention won’t solve all of the health care cost problems, but if employees exercise and focus on nutrition and eliminate the use of tobacco products, employers will realize a reduction in their health care costs.
Can cost savings outweigh the additional costs associated with preventive health programs?
Investing money on the front end by investing in wellness programs or benefits that encourage healthy lifestyles can slow down that annual increase in health insurance and related costs. Our own experience as an employer that has focused on wellness, early detection and prevention has led to a significant slowdown in our rising annual health care expenditures. We practice what we preach, and the results speak for themselves.
How can employers encourage employees to live healthier lives?
Employers must get on board with encouraging their employees to adopt healthy lifestyles. Instead of just paying for health insurance coverage, employers should also include benefits such as subsidized memberships in health and wellness programs that focus on prevention through exercise and changes in unhealthy lifestyles.
Like many employers, Akron General Health System has implemented several employee health care prevention and wellness initiatives. One of the most exciting is the opening of a wellness center for our employees at the hospital that focuses on prevention through exercise. Other employers can adopt these same strategies, including providing on-site fitness centers and access to wellness programs.
I also believe it’s essential that the employee participate in paying for his or her own care. If the employer pays for everything, the employee will see it as a free benefit. Every single one of us must share in the costs of health care, and this can be done not only by charging employees a premium for their health care benefits, but also by instituting co-pays and deductibles. Once employees have a better understanding of the costs associated with their health care, they are empowered to make better decisions and to become active participants in managing those costs.
ALAN BLEYER is president and CEO of Akron General Health System. Reach him at (330) 344-7679 or firstname.lastname@example.org.