Many firms have been trying to absorb most of the costs because of attraction and retention issues but are now realizing that they will have to pass portions of the costs on to their employees in the form of increased contributions or out-of-pocket expenses. Small businesses in particular face the critical decision to raise employee contributions or discontinue offering coverage altogether.
Firms are undertaking a variety of measures to help minimize the effect of rate increases on their organizations. The chart, right, shows results from the Towers Perrin TP Track "The Changing Face of Health Care: Balancing Employer and Employee Needs" survey regarding actions employers anticipate taking to manage health care costs.
According to the survey, employers are focusing on interventions that they deem effective in managing costs -- typically tactical, short-term approaches that shift costs to employees. It also found that employers tend to choose tactics they consider the most effective in controlling costs in the short term. For example, three of the most prevalent tactics were also cited as having the most impact on cost savings.
* Selective changes in co-payments or coinsurance for prescription drug plans. This approach is used or planned to be used in the future by 85 percent of respondents, and is reported as effective by 85 percent of respondents.
* Selective changes in co-payments or co-insurance for health plans overall. This tactic, designed to encourage cost-effective use of health care, is in use or planned by 80 percent of respondents and reported as effective by 72 percent.
* Selective changes in employee contributions. Employers use this intervention to encourage cost-effective selection of plans. It is in use or planned by 74 percent of respondents, and is considered effective by 72 percent.
The survey also indicates that while basic cost-shifting is a prevalent means for managing costs, there is evidence of a movement toward a more strategic approach that includes longer-term, consumer-oriented solutions. Companies that want to balance cost and employee relations are incorporating a more consumerist focus into their plans..
Employers are finding ways to make health care a shared responsibility and commitment between employer and employee by putting more decision-making power (and potentially cost-management power) into the hands of the employees. By providing appropriate tools and education, employers can help employees assume this responsibility.
More than one-third of the survey's respondents indicated they planned to introduce and expand wellness and preventive care programs. In addition, 36 percent plan to introduce or expand consumer-oriented elements within their traditional plans, while almost the same percentage will introduce or expand disease management initiatives.
One potential trend is the increasingly popular move toward using the Internet to help employees become more educated health care consumers. The TP Track survey found that most employers are using Web-based solutions to implement consumer-oriented elements into their traditional plan designs. Many companies are providing Web-based employee health portals, often as part of an overall human resources portal, to support preventive care and wellness initiatives.
Which solution is right for you? Should you pass costs on to employees at the risk of losing some of them? Or, should you try to manage costs in some other way? It is a decision you need to come to through thoughtful and detailed analysis of your plans, and with the advice of your broker-consultant.
Below are questions to address to begin developing an effective strategy that is right for your organization.
* Is our program structure, plan design and pricing appropriate?
* Do we have the right vendors, services, contracting and funding in place?
* Are our employee communication efforts appropriate and effective?
* Do we have the right disease and case management programs for our employees?
* Do our pricing and plan design features encourage cost-conscious behavior on the part of our employees?
* Do our employee communication efforts and resources motivate our employees to become educated and effective health care consumers?
Jessica Galardini is COO of the Chambers of Commerce Service Corporation and Executive Vice President and COO of HRH Affinity Marketing Group. Reach her at (412) 456-7012.