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Employers Not Eager for Systemic Overhaul to Bring Down Health Costs

October 10, 2005
Related Topics: Health and Wellness, Featured Article, Compensation
At a time when premiums are rising inexorably and General Motors cites health care costs as a primary reason that it is hemorrhaging red ink, American companies could be forgiven for trying to find someone--the government, for instance--to shoulder the burden of health care benefits.

    But, wary of any reform that might also impose mandates on private industry, few companies are seeking systemic change in the U.S. health care system.

    Instead, companies like Starbucks, Verizon and Pitney Bowes are advocating market solutions. At a recent Capitol Hill health care cost summit sponsored by CNBC, company leaders called for innovation, improved quality, greater transparency and empowered consumers as the best solutions to the health care cost crisis.

    "We have to put the power in the hands of the people," said Ivan Seidenberg, chairman and CEO of Verizon Communications. "Consumers will change the system and they will cause the alignment of the providers and the government and everybody else."

    David Cote, chairman and CEO of Honeywell, said disparate results within the health care system add to rising costs. "A lot of benefit ... could come from focusing on quality outcomes," he said. "I’d like to see more of a sustained effort by businesses and the government to have better-quality data on hospitals, better-quality data on physicians and, as we put more of a burden on employees, give them the opportunity to have that consumer data."

    One business leader asserted that a preoccupation with the financial aspects of the issue is misguided. "We have to deal with health rather than health care or insurance," said Michael Critelli, chairman and CEO of Pitney Bowes. "If we have a healthier population, then we will have lower costs."

"A moral obligation"
    Although their solutions may differ, the fact that corporate executives are coming to Washington to address health care is a welcome development, says Howard Schultz, chairman and chief global strategist for Starbucks Coffee Co.

    "I’m encouraged that the business leaders and CEOs that I speak to with regard to this issue recognize the crisis this country is in with regard to health care, and recognize the responsibility that we collectively have for our employee base," he says. "If you poll your people, this is an issue that’s no longer on the back burner. It’s front and center."

    As he makes his rounds on Capitol Hill to talk to lawmakers, Schultz emphasizes that providing health care benefits doesn’t have to ruin the bottom line. He points to Starbucks’ comprehensive health coverage and its strong profits.

    "This is not a zero-sum game," he says. "Business should recognize that we have a moral obligation to do the right thing. And in doing so, it makes for good business."

    Schultz says that the "humanity of the country is at stake" when more than 45 million people lack health insurance. But providing coverage is an increasingly expensive proposition.

    A recent survey by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust found that premiums for employer-sponsored health insurance rose by 9.2 percent in 2004, a lower increase than the two previous years but a rate at which health costs outpaced inflation and wage increases. The average annual premium for a worker with single coverage is $4,024, with the employer contributing $3,413; for family coverage, the premium is $10,880, with the employer paying $8,167.

    The survey also showed that the emphasis on consumer-centered health care hasn’t lowered company bills because too few workers have signed up for personal accounts. About 20 percent of employers offer high-deductible health plans, which require deductibles of $1,000 for a single account and $2,000 for a family, but only 3.9 percent also make a contribution to health care reimbursement accounts or health savings accounts.

A Kaiser official is pessimistic that such accounts--or any other health care reform idea--will produce much savings.

    "I don’t think we have an answer as a country," says Drew Altman, president and CEO of the Kaiser Family Foundation. He asserts that Americans have rejected strict managed care and that heavy government regulation of the health care system is politically untenable.

    "So we’re stuck with a bunch of halfway measures that could have some impact at the margins, but only at the margins," he says. "If we could shave a point or two off the rate of increase, we would be doing very well."

Legislative inaction
    When it comes to health care reform, Congress is in the mood to tweak rather than to overhaul. Memories of the crash of President Clinton’s national health legislation linger in the minds of most members. Many analysts attribute the health legislation debacle to the Republican takeover of the House of Representatives in 1994.

    Bills percolating on Capitol Hill today target improving health care information technology and quality as well as promoting healthy lifestyles. The House passed a bill in July that would enable small businesses to purchase health insurance as a group through associations, increasing their leverage to negotiate prices with providers.

    Congressional quiescence on health care frustrates at least one labor union official. "The fact that neither the minimum wage nor health coverage has been a big issue for either the federal administration or the leadership in Congress is a direct statement about where we are today," says Gerry Shea, assistant to the president for government affairs at the AFL-CIO.

But Congress doesn’t have to make substantial health care changes to achieve significant savings, argues Kate Sullivan Hare, executive director of health care policy for the U.S. Chamber of Commerce. Electronic health records that can be accessed at any medical facility in the country would curtail duplicative tests and help doctors quickly determine the best treatment.

These improvements would be especially helpful in addressing major illnesses like heart disease and chronic conditions like diabetes. Those patients "are the ones who are consuming 85 percent of the costs," Hare says. "That’s where the savings come. You shave 10 points off that, and you’re adding some real value to the system."

There are some businesses, however, that are advocating systemic changes to U.S. health care. In May, the National Coalition on Health Care released a report stating that employers would save $195 billion annually by the 10th year after system-wide reform, which could include a universal government-funded program and employer and individual mandates. Safeway, AT&T, Pfizer, Lucent, Giant Food, Qwest and Verizon are among the 90 members of the coalition. A Verizon spokeswoman stresses that the company believes in the consumer-driven approach to health care and is reviewing the coalition’s recommendations.

Focused approach
    In the meantime, most companies are approaching the issue through a narrower prism--like motivating employees to take better care of themselves. Pitney Bowes is focusing on prevention, such as providing first-dollar coverage for colonoscopies and subsidizing healthy food in the cafeteria. Over the past year, health care costs have risen between 7 percent and 8 percent. That is just slightly less than the average found in the Kaiser study.

    "It’s a lot of little things; it’s not a big thing," says Jack Mahoney, medical director at Pitney Bowes. "You can stretch your preventive dollars a long way. I’m not sure we’re going to get huge savings as much as we’re going to get accountability around health care."

    Aetna is attempting to change the behavior of its employees by investing

    $1 million in a healthy-lifestyle initiative. The insurer distributed 14,000 pedometers at no cost and pays workers for exercising, joining weight loss programs and taking health risk appraisals. The company saw a reduction of $28 per month in health care claims by employees who worked out regularly in their fitness center. Overall, health care costs have risen by about 9 percent over the past year.

But the program isn’t driven by bottom-line savings. Employees "are healthier and more productive," says Jane Hopkins, director of benefits at Aetna. "That’s our whole goal."

Workforce Management, October 10, 2005, p. 53-57 -- Subscribe Now!

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