Corporate Health Care Costs Continue to Rise

Employers are expected to subsidize 78 percent of next year’s premium costs, with employees covering the remaining 22 percent, the same split as last year. But cost increases and other plan changes will result in employees paying more for less coverage.

Plan design changes will force employees to pay more out-of-pocket costs, an estimated $200, in addition to the increased premiums. The combined result is that in the last five years, employee out-of-pocket costs for health coverage have essentially doubled. The increased costs will be most difficult for low-wage workers to absorb, as employee salary increases are averaging between 3 and 4 percent per year.

There is some good news, particularly for “high-performing companies.” Companies that actively and effectively manage their health care programs will pay about $1,500 less per employee, a significant advantage in today’s competitive markets.

High performers are employing a broad range of strategies to hold the line on costs for their company and employees. They share the following characteristics:

• Commitment to employees. High-performing companies support their employees’ ability to make sound health-care decisions, manage health care purchases properly, and manage health risks and conditions.
• Managing by measuring. High performers invest time in developing and documenting their health care strategies, especially program costs.
• Ensuring critical success factors are in place. High performers are committed to the involvement of senior management, support from managers and supervisors, and disciplined execution processes.
• Increasing accountability. High performers design their programs to ensure that employees know the total cost of care and are accountable for decisions they make at the point of care.
• Engaging employees. High performers require employees to be more accountable for their decisions. They expand communication to build employee awareness and action.
• Building a culture of health. High performers are much more likely to say that they’re building a culture of health in their organizations and report that employee education efforts are succeeding.

–“2008 Per-Employee Health Care Costs to Exceed $9,300; Wide Disparities Foreseen,” by Stephen Miller, Society for Human Resource Management (SHRM) Online’s Compensation & Benefits Focus Area, October 2007.