Both utilization and price increases in excess of inflation continue to contribute to health care spending increases. Some of the contributors to this real growth are systemic and difficult to influence (e.g., aging, technology), but many factors can be influenced with concerted and coordinated efforts by the stakeholders in the system. This is particularly critical when considering the significant amount of health spending that does not improve outcomes and promote value.

The Factors Fueling Rising Health Care Costs
Price Waterhouse Coopers

Gaining clarity and agreement on purpose and expectations is a big conversation in every organization. When it comes to employee benefit programs, the many voices engaged in the conversation often have very different things to say about purpose and expectations.

For instance, when it comes to cost sharing, the views of the CFO can be notably different from those held by the CEO and HR Director¦ and perhaps wildly different from those of the employees. For instance, suppose the CFO sees perfect logic in asking employees to share in paying for cost increases. This could leave the CEO worrying about the impact on his leadership effectiveness, and the HR Director with a declining ability to attract top quality talent. The employees? Well, they may simply see yet another arbitrary, unfair burden cutting into their income.

Short-term cost sharing tactics can lead to significant onetime savings of 5 to 10 percent but most employers are reluctant to shift more than 25 percent of the cost of health benefits to employees. Once you reach your high-water mark, what comes next?

Cut benefits? Negotiate more aggressively with providers? Push employees toward preferred-provider or "closed" networks?

While effective in the short term, particularly for an organization not yet managing costs proactively, these tactics rarely go far enough. Given projected health care cost increases, even an aggressive attack on costs may not be sufficient to protect the health of your bottom line. To make matters even worse, ignoring the other voices in the conversation to achieve short-term savings can have long-term consequences. You could actually end up alienating employees and discouraging them from getting preventive care for complications associated with chronic diseases. And, while higher co-pays and deductibles can be a powerful way to influence employee demand for health care services, they may discourage some from taking necessary medication and cause them to hesitate in getting needed medical care.

What is the answer?

We have learned that in order to answer these questions, you need to engage all the voices in your organization in a big conversation about the purpose for and expectations of your employee benefit program. That`s why we developed The Benovation Breakthrough.

If you would like to learn more about how to encourage and profit from such a conversation, give us a call or e-mail us your questions and coments.

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