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In
1996, health care costs were the primary concern of
small businesses. The same was true in 2000 and again in
2003. Clearly, the cost of employee healthcare is
placing a burdensome tax on small business - especially
those operating in a competitive environment.
In
a recently published survey of 350 businesses sponsored
by Wells Fargo Bank consisting of mostly private held
midsize employers (101 - 1,500 employees), the weighted
increase in healthcare costs in 2003 rose 15% when
compared to 2002 - five times the rate of inflation. The
average cost of a single benefactor in a Preferred
Provider Organization PPO - by far the most popular plan
- was $3,750 for an individual, and $9,900 per year for
a family.
This
is a big problem. In 2003, healthcare costs represented
an amazing 15% of the U.S. GDP. Unfortunately there are
a number of reasons for this increase, so there is not a
silver bullet to cure the problem.
The
cost of bringing a single new drug to market has risen
to about $1.7 billion, calculates the Boston consulting
firm Bain & Co. That's up from $1.1 billion during
the 1995 to 2000 period. New technology - from
diagnostic devices to surgical techniques - accounts for
more than half the rise in total healthcare spending in
the past three years according to economist Andrew
Tilton at Goldman Sachs, an investment bank in New York.
Costs
of modernization are only part of the story. For the
medical industry, sales and marketing costs are equally
huge. In fact, drug companies spend roughly as much on
advertising and promotion - $20 billion a year - as they
do on research and development of new drugs. In addition
to advertising and promotion, drug companies still
operate with a fleet of direct sales people. American
pharmaceutical firms employ one sales person for every
physician in the country. These sales people also pick
up the tab for doctors to attend seminars promoting
their products, which happen to take place in desirable
locations, such as Florida and the Caribbean.
What
are American businesses doing about this? They are not
sitting idle and most are considering multiple
strategies.
Redesign
your health plan: Eighty-six percent of employers
are considering some redesign of their health care
plans. The National Committee for Quality Assurances
provides evaluations of various plans. You can get price
quotes at http://www.ehealthinsurance.com.
Increase
cost-sharing: The majority of respondents planned to
increase health care cost sharing by employees through
increases in deductibles, co-pays, co-insurance and
out-of-pocket maximums. Thirty-three percent of
employers indicated that they planned to increase the
amount their employees pay for health care by at least
ten percent.
Institute
disease management programs: Since a substantial
portion of health plan costs can be attributed to
participants with chronic illnesses, employers are also
paying attention to disease management
and wellness programs to offer significant potential
cost savings. Fifty-seven percent of employers indicated
that they are considering implementing a wellness
program with employee financial incentives for
controlling health care costs.
Communicate
the problem to employees: In the Wells Fargo study,
eighty-six percent of respondents indicated that their
employees do not have a reasonable idea of the true cost
of their health care benefits, yet 53 percent of
respondents agreed that most employees have a good
working knowledge of their health and other benefits
choices. Over 75 percent of respondents were neutral or
did not agree when asked if they were comfortable using
the Internet for enrollment and their health care plan
transactions, meaning that most companies should stick
to traditional communication strategies such as group
meetings and one on one meetings for now. |
