Health-care costs force changes to compensation


Spiralling health-care costs will force a growing number of American employers to adopt a "total compensation" approach to remuneration, paying employees a single amount that they allocate themselves as take-home pay, health benefits, retirement or savings plans, or non-health benefits.

With no solution in site to rising costs, employers will be forced to take radical steps, according to the first annual Employer Opinion Survey on Healthcare by United Benefit Advisors, an alliance of independent benefit advisory firms.

The survey elicited employer opinions regarding responsibility for health care costs, the desired role of the government in controlling costs, as well as employers' predictions regarding real change (if any) to health care delivery over the next five years.

"An astounding 99 per cent of all employers consider both company health costs and the impact of higher costs on employees either a critical or significant concern," said David LoCascio, UBA's Co-Founder.

"This level of concern following the lower, although still significant cost increases of the past two years implies little faith by employers that a real solution to the underlying drivers of healthcare costs has been found or implemented."

Although the most prevalent cost-containment strategies used by employers continue to be simply reducing plan benefits and/or increasing employee premium cost-sharing, employers are increasingly adopting a range of new strategies.

These include High Deductible Health Plans which incorporate HRAs or HSAs, wellness programs that incorporate individual health risk assessments, and expanded disease management programs to help employees manage chronic health conditions.

Three other clear trends also emerged from the survey.

First, fewer than a quarter (22 per cent) of employers believe the primary responsibility for controlling healthcare costs lies with the parties directly involved: the employees, the physicians, and the hospitals.

Almost all responsibility has been ceded to intermediaries: insurers/health plans, government, and employers.

Second, an overwhelming majority of employers believe the federal government has a definite role to play regarding health care: that of requiring all hospitals, physicians, and insurers/health plans to publicly disclose all cost and quality information.

"Employers are clearly fed up with being denied access to the cost and quality information that both employers and employees need and deserve in order to make informed health care purchasing decisions in advance of receiving care," said Mr. LoCascio.

"Everyone has been relegated to simply paying for health care rather than being allowed to purchase health care the same way they purchase a home, a car, or any other goods or services."

According to UBA, disclosure has the potential to simultaneously lower employer and employee costs through informed purchasing, reward higher quality providers, increase competition and allow consumer-driven health care to fulfil its promise.

Employers seem to agree, predicting that all hospitals, physicians, and insurers will soon be required to publicly disclose all cost and quality information in advance of purchasing care or purchasing insurance.

But the most significant trend as far as millions of Americans are concerned is the belief that employers will increasingly adopt a total compensation approach whereby employees will receive a single amount which they will use to allocate to health benefits, retirement or savings plans, or non-health benefits in any way they feel appropriate.

"The survey results clearly show that nearly all employers, regardless of size or industry, are determined to change the way employers and employees purchase health care," said Mr LoCascio.

"The days of intermediaries (the insurers, government, and employers themselves) being primarily responsible for health care costs are ending. Employees want and deserve far more control over how their money is allocated and which providers they use for care."