Double-digit increases in health care costs are expected to
continue over the next few years, according to recent surveys,
including Towers Perrin's 2002 Health Care Cost Survey, Watson Wyatt
Worldwide and Washington Business Group on Health.
"The results of the majority of surveys I've seen give companies
a `heads-up' that health care cost increases will become a huge
issue," said Horton Insurance Benefits Specialist John C. West.
"Employers need to take a longer-term look at their benefits program
and set a plan for the future to control these costs. They need to
think two, three, four years out."
More than 158 million Americans receive employer-sponsored health
care benefits. According to the United States Health Care Financing
Administration, health care expenditures will have increased from
$700 billion in 1990 to an estimated $2.2 trillion by 2008,
consuming 16 percent of the Gross Domestic Product. Employers bear
more than 55 percent of these costs.
"With the slowdown in the economy, it has become imperative for
employers to seek cost-controlling measures," West said. "A focus on
employee benefits is one of those areas that must be addressed."
Programs that provide a quality level of benefits and reduce
administrative costs will most likely require additional funding and
involvement from company employees, officials said. According to the
Kaiser/HRET 2000 Annual Employer Health Benefits Survey, 13 percent
of employers are exploring the possibility of implementing consumer-
driven benefit plans to rein in costs and limit the potential
liability they may face as a plan sponsor.
Under a consumer-driven benefit plan, an employer would give each
employee a specified amount of money to spend toward a health care
product of his or her choice from several company pre-structured
benefit plans. The employees then make benefits decisions based on
their own individual needs.
West said companies are becoming more interested in consumer-
driven benefit plans.
"These plans are relatively new," he said, "but offer a method,
through new Web-based technologies, to increase efficiencies and
better control health care costs. By involving the employee in the
decision making process, that employee begins to understand the
financial dynamics involved."
As noted by economist Milton Friedman in his recent article, How
to Cure Health Cost, "nobody spends somebody else's money as wisely
or as frugally as he spends his own."
"There is not a simple solution, but we believe the consumer-
driven benefit plan is an excellent plan to meet the challenges of
projected double-digit increases in health care costs," West said.
"We still must customize the right benefit plan for each company,
find the best providers and assist with the process of educating the
employee to utilize the new program. The bottom line -- employers
must meet the challenge of controlling increases in health care