Content area
Full Text
Abstract: The cost of health care u increasing at an alarming rate and controlling it has become a major concern for employers and advisers alike. This article discusses the primary drivers in health care cost and the near-term expectations for cost increases, as well as trends and strategies to control cost. Will employers embrace a new paradigm for managing benefits? Will financial service professionals lead the way?
Introduction
The cost of health care is increasing at such an alarming rate that controlling it has become the No. 1 priority, up from No. 2, among Human Resource professionals, according to a recent Mercer survey.1 Furthermore, controlling health care costs was cited by 84% of employee benefit specialists as their No. 1 priority, up from 71% in the prior year.2 Many employers now believe that our country is in a full-scale health care crisis. According to USA Today, "Insurers blame rising drug costs. Drug companies blame HMOs and hospitals. Doctors blame lawyers. And, it seems, everyone blames consumers."3
Without a new paradigm for controlling cost and managing quality, the bottom will eventually fall out of the employer health care bucket, creating a mess that the government will attempt to clean up. Financial service professionals have a unique and challenging opportunity to create this new paradigm and lead the charge to gain widespread acceptance and implementation by employers. The purpose of this discussion is to review the cost trends in employer health care, based on a review of benefit industry research as well as legislation over the past 5-10 years, offer some insight into potential future cost, and outline cost-control techniques that can serve as components of an evolving new paradigm that may ultimately be shaped by financial service professionals. These components, and others being developed, may provide executives at organizations having 100 or more employees with a long-term strategy to control cost and offer attractive benefits in spite of cost constraints. (The under-100 employee market faces enormous pressure that is beyond the scope of this essay.)
The Current State of Affairs for Employer Health Care Cost
The cost of employee benefits is a major expense for American employers. According to a U.S. Chamber of Commerce survey, benefits cost an average of 37.5% of payroll in...