Employers Can't Afford Health-Care Increases

January 14, 2003 (PLANSPONSOR.com) - Employers in a recent survey said their health-care costs should jump 15% in 2003 - far ahead of the 8% they say they can afford.

Not surprisingly, the Hewitt Associates survey found that 94% of the respondents’ chief executive officers, chief financial officers, and chief human resources officers have major concerns about the health-care cost increases. Nine out of 10 were also significantly concerned about the impact on their employees.

To combat the stepped-up health costs, 46% of the executives were interested in consumer-driven health plans with a health reimbursement arrangement as a replacement plan or a supplement to a traditional plan.

According to Hewitt, respondents were also interested in implementing custom design plans, which allow employees to customize their benefit options and levels for physician, hospital and pharmacy benefits in the same way they select their automobile coverage. Some 72% of companies are interested in offering custom design plans if it meant costs decrease by 10%, while 37% are interested if annual costs remain the same.

Another emerging cost-cutting measure in the marketplace is multi-tier hospital coverage in which employees can select from a variety of hospitals similar to what they do in existing multi-tier drug programs. Hewitt said two-thirds of participating companies are interested in offering this type of plan if it meant costs decrease by 10%, while 31% are interested if annual costs would remain the same.

Role of the Government

While more than eight in 10 of the participating employers are against a universal health care system, executives say the government still has a role to play in health care, including:

  • mandating quality reporting by hospitals and physicians, 83%
  • restricting patent extensions for brand name drugs, 75%
  • requiring providers to disclose prices publicly, 62%
  • mandating uniform provider data and payment reporting procedures if long-term savings outweigh upfront costs, 61%
  • making Medicare available to retirees age 55 to 64 at their own cost, 58%
  • curbing managed care regulation and coverage mandates, 47%
  • giving US consumers the ability to purchase prescription drugs from foreign countries, 43%.

Hewitt’s survey included more than 500 major US organizations.