Prognosis: Negative

Rising health-care premiums have companies shifting costs, pushing "wellness," and punishing unhealthy behavior.

But containing that angst will require trickier trade-offs in the years ahead. If government estimates are on target, health-care spending will nearly double by 2017, leaping from $2.4 trillion in 2008 to $4.3 trillion. Companies won’t be able to easily absorb that increase. Nor will they simply be able to pass it on to workers using the time-honored tradition of raising deductibles and co-pays. The average family premium has already risen by 78 percent between 2001 and 2007, according to the Kaiser Family Foundation. At SAP America, the North American division of the German software giant, the 8,000 employees saw their premiums rise yet again in 2008. “We’ve asked employees to pick up a greater share of the cost over the past five years,” says CFO Mark White, adding that this year, “I’d like to have the employees not paying any more.”

For some companies, the only way to avoid passing on the sizable cost increases to employees will be to rethink the very nature of their health plans. “Employers are going to be bearing down on costs like never before,” says Phil Litos, president of The Bostonian Group, a benefits-consulting firm. “They may be looking at significant reductions in revenue and restricted access to capital. If that’s the case, then they’re going to have to take a hatchet to their benefit plans. The question is, How draconian will they get?”

Health-plan Activism
In a 2007 study, Towers Perrin found that companies that aggressively manage their benefit programs and try new approaches can cut their per-employee spending by about $1,500. Actively managed plans with teeth (not to be confused with dental coverage) are already gaining traction among large employers, and smaller ones are starting to take notice, Ripperger reports. “These plans hold employees accountable,” says Blaine Bos, a partner at consulting firm Mercer. How so? “By creating a link between healthy behavior and coverage,” as Ripperger puts it.

That link can take many forms. Three years ago, Douglas Machine, which makes packaging equipment for the food and beverage industry, began to reimburse workers for joining a health club — as long as the club could provide documentation showing that the employee actually appeared there four times a week.

Companies that have established medical-spending accounts (health savings accounts, or HSAs) for their employees as part of a broader shift to consumer-directed care may use them to influence behavior. HSAs allow employees to sock away pretax dollars that they can spend on health-related services. Because employers can also contribute to the accounts — a fact that employees welcome, given that the average deductible for a consumer-driven plan is more than $1,000 — companies can use the size of their subsidy as leverage. An employer that wants every worker to fill out a health-risk questionnaire, for example, may entice them to do so by offering to beef up the accounts of those who cooperate. Combined with claims information, the answers are used to construct a robust portrait of the employee’s health (or lack thereof).

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