Prognosis: Negative

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

Minor Cuts

Small changes to company health-care plans may forestall major surgery.

Don’t yank dental coverage — not yet anyway.

In the private sector, health-care costs have been declining since 2003. But now that they are heading north again, employers may be tempted to do something drastic. Private-plan premiums rose about 8 percent last year, but are projected to increase 9 percent this year. And though many companies may not realize it, they are in a position to absorb more of that increase than they have so far.

Employees will certainly be grateful. Almost a quarter of workers, who pay an average of $3,354 annually for a family plan, identify paying for health care as “a serious problem,” according to the Kaiser Foundation Employer Health Benefits 2008 Annual Survey. Ed Kaplan, national health practice leader for The Segal Co., advises executives to probe for cost savings by giving the plans a thorough examination. What behaviors does the plan encourage — or even reward? Here’s a clue: if the company cafeteria still specializes in meatball subs, then somebody hasn’t gotten the message. More commonly, you’ll find employees who are encouraged to take $20 pills that mask, say, hypertension symptoms, rather than addressing the underlying causes of high blood pressure through a wellness program.

To trim costs — and keep the employee deductible from rising more than about 2 percent — Kaplan advises CFOs to consider the following moves:

• Negotiate a multiyear contract with vendors, in return for a discount on administrative costs.
   Cut: 0.5 percent of plan costs

• Switch from brand-name to generic prescriptions.
   Cut: 1 percent of plan costs

• Raise ER co-pay.
   Cut: 1 percent of plan costs

• Enforce eligibility rules.
   Cut: 5 percent of plan costs— J.H.

Sites for Sore Eyes (among other symptoms)

Why on-site clinics may be one cure for rising costs.

Clinics that treat employees on-site are breaking out all over. One-third of Fortune 500 companies have already built them and more are in the works.

Two trends have converged to create this rash of interest. First, health-care costs show no sign of dropping, making a long-term investment worth reconsidering. Second, a fast-growing group of vendors who will build, manage, and help finance such clinics has emerged. These firms typically work on contracts that run for three to five years, costing anywhere from $250,000 to $500,000. The turnkey-clinic industry even attracted a big player last year. In May, Walgreen, the country’s largest drugstore chain, acquired two operators of worksite clinics, CHD Meridian Health Care and Whole Health Management.

Still, most CFOs aren’t going to budget to acquire on-site clinics until “they are convinced that these save money — and can see it in detail,” says David Beech, a health-care consultant specializing in on-site clinics, who estimates that savings can amount to more than 8 percent a year. Among the savings: a projected 2 to 5 percent rise in worker productivity, a 25 percent reduction in urgent-care services, a 35 percent drop in self-referred specialist visits, a 3 percent decrease in short-stay in-patient admissions, and a whopping 50 percent reduction in the cost of office visits. — J.H.

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