Research Studies

"Containing Rising Healthcare Costs: Ten Innovative Strategies for Employers to Consider"

No author cited
Hay Group, November 2004.

Available Online

According to this Hay Group report, employer health care spending has risen at a faster than expected rate over the last four years. Between 1994 and 2000,
medical premiums experienced annual increases in the single digits. According to the 2004 Hay Benefits Report, however, the past four years have seen whopping double-digit annual rate increases, including a 10.5 percent increase in 2004.

The report gives several reasons for the rapid rise of health care costs, such as:

• The rise of prescription drug prices, particularly injectables.
• Employee preferences for Preferred Provider Organization (PPO) plans over the more restrictive and less costly Health Maintenance Organization (HMO) and Point of Service (POS) plans.
• Increased public pressure on insurers and health plans which limits managed restrictions on care.
• An aging employee population that requires more care.
• The declining health of the American population overall, particularly in the areas of obesity, diabetes, and heart disease.
• The rise of malpractice insurance premiums.

Hay suggests the following 10 steps to help curb the rise in health care costs:

1. Negotiate with insurers
2. Evaluate funding effectiveness
3. Evaluate administrative effectiveness
4. Consolidate plan offerings
5. Ask employees to share the burden
6. Redesign prescription drug programs
7. Redesign retiree medical programs
8. Actively manage employee health
9. Check out consumer-driven health plans
10. Promote smart employee consumerism through communication

The report cautions that not every strategy will work for every company and suggests that businesses align their approach with their culture.