Insurers Promote Consumer-Driven Solutions to Rising Health Care Costs
Carter, Ray, THE JOURNAL RECORD
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 costs. …