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Cost Control?
Peter Fendler, President
Norton Financial Services

The 300-pound gorilla in the benefits arena is health insurance. It not only dictates most employers’ benefits decisions, it represents one of the largest line items in corporate budgets. Employers are now in a similar place with health insurance as they were 15 years ago with workers’ compensation insurance – the breaking point. It took getting to that point before employers started to take action by developing and enforcing policies and procedures to reduced work place accidents.

We are now at the breaking point with health insurance because of the impending claims of the baby boom generation. The irony is that because of medical technology we are wearing out, but not dying. So, there are simply going to be too many aging Americans, demanding too many medical services, to think that cost is going anywhere but up. Regardless of who is working on it—the government, private insurers or the medical community—this freight train is a reality that cannot be stopped.

So what are employers to do? They can’t just toss in the towel. The employment market demands they provide benefits to attract and retain staff. We are advising our clients to develop short, intermediate and long term strategies. To date, most companies have been relying on a combination of a competitive market and reductions in benefits to help keep health insurance costs down. This is an effective short-term strategy that will continue to play a role, but because employees have a threshold for out of pocket expenses and because the baby boom freight train is coming, a new paradigm is unfolding. Employers now have to become more involved.

Successful companies will get away from relying solely on a short term strategy and will develop intermediate and long term strategies that will foster cultural changes within the company, among your employees and their families. The intermediate strategy is fostering a spirit of partnership with your employees in attacking a common enemy, the cost of health care. One tool in this approach is “consumer driven health care.” The increasing popularity of HRAs and HSAs is evidence that more employers are taking action. The intermediate strategy has to get the end-user to understand the cost associated with health care.

Finally, employers must implement long-term strategies. Affecting long-term strategies requires two steps that employers have not previously wanted to take. The first of these is to better understand the claims of their employees. Most employers haven’t wanted to delve into claims detail. Even if they had, insurance carriers frequently resisted or were unable to provide useful reports. However, because claims are the single largest variable in determining premium, simply accepting whatever comes at you is not a strategy. To begin to develop long-term strategies you need to be able and willing to analyze your claims data in a way that allows you to identify problems areas. We are seeing more employers not only willing to do this analysis; they are demanding HIPAA compliant access to the data. And, established brokers have invested in the software to help their clients extract and analyze the data they need.

The other requirement in a long-term strategy is a commitment to invest in a wellness policy. The key word here is “investment.” Many look at the cost of a wellness program as an expense. But remember, this is part of a long-term strategy, which is to say that the ROI will not be overnight. That said, there are ample case studies that prove that the return on investment is significant. There are many approaches to wellness, but the end goal is to foster behavioral changes and to develop awareness that the lifestyle choices people make affects a larger community than themselves. Wellness is a broad topic that I can’t do justice in this article, but I encourage you to investigate. A good place to start is www.welcoa.org.

We cannot change the inevitable surge of the boomers, but being complacent is not the answer. Having a strategy is the key. The combination of proactive claims analysis and a wellness program provides employers with the information and process necessary to bring about real and sustainable change in behavior. What is your plan?

This article appeared in the April 2007 New Hampshire Healthcare Handbook.


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