Health care costs continue to rise substantially faster than inflation and wages. In fact, they now account for 16 percent of the nation’s economic output. There are a number of factors behind the soaring costs, but so far, few solutions.
As a result, many businesses have struggled to maintain the level of health care benefits that they’ve provided in the past. While the increased premiums are hard to avoid, steps can be taken to mitigate health insurance costs.
Perhaps the best strategy, says Stephen J. Peck, president of Kapnick Insurance Group’s Benefits Division, is educating employees about how they can best use their programs. “Employee communication and education is critical,” he explains.
Smart Business spoke with Peck about why health care costs have risen, steps to help control mounting insurance costs and the importance of open communication and employee education.
What are some of the factors behind the rising costs of health care?
The obvious factor is that we’re all getting older, and the older we get, the greater the need for health care. These needs are being filled with wonderful new advancements in medical technology and pharmaceuticals, but each of these advancements, generally speaking, is more expensive than what it replaced.
Other factors that contribute to the rising costs of health care are the impact of the uninsured and underinsured, the cost of malpractice insurance, hospitals and physicians practicing medicine defensively, and inefficiencies in the health care system. The lifestyle choices that we make like sedentary lifestyles, poor diets, smoking, not wearing seatbelts and drinking too much also play a large role in the escalating costs.
What strategies can be implemented by businesses to help control health insurance costs?
Businesses have to start looking beyond just cost shifting to employees and downsizing benefits. They have to start addressing and, more importantly, impacting how their employees use health care programs. If an employer can decrease the utilization of its health care program, then costs will ultimately fall.
A number of employers are addressing employee lifestyle choices through education, implementing health risk appraisals, wellness programs and disease management programs.
How should an employer communicate with employees about health care plans?
First and foremost, if an employer is making any plan design changes, it needs to be open and honest in its communication. This is crucial for a change to be successful and for employees to embrace the change. Employees are very adept at seeing through any type of smoke and mirrors that an employer might be putting out there.
Beyond that, employees need to understand what benefits they do have in order for them to effectively use the resources available. To achieve this familiarity, many employers are looking beyond employee communication at open enrollment and implementing a multi-pronged education program that touches employees throughout the year. Some of the methods include ‘lunch-and-learns,’ employee newsletters, spousal meetings (as opposed to just employee meetings), posters and payroll stuffers.
Why is it important to provide employee education so they know how to best use their programs?
Most employees get their benefit information at open enrollment. But that’s the last time they really look at that information. It sits in their inbox or in a folder somewhere. There needs to be ongoing education and ongoing information distributed to employees. A great example is providing employees with the information of the generic equivalents available to substitute for brand-name prescription drugs. It is important that employees are aware of what their benefits are so they can use and access their plans in the most efficient way possible.
What is your forecast for health care costs?
All indications are that there will be no significant decreases in health care costs in the next couple of years. I wish I had a crystal ball to answer this question more completely, but that is about as far as anyone can really look into the future.
If employers and employees can work together to positively impact utilization through lifestyle choices, disease management and health management programs, then hopefully this strategy will work to create a downward trend in costs. Employers need to properly motivate and incentivize employees to make healthy choices, and employees have to realize the impact both positive and negative of their lifestyle choices.
STEPHEN J. PECK is president of Kapnick Benefit Services. Reach him at Steve.Peck@kapnick.com or (888) 263-4656 ext. 1147.