Reversing the Healthcare Cost Curve

With the passage of the Affordable Care Act, employers will not be required to provide health insurance for employees by 2014. Not providing employee insurance will have other costs, however, and CEOs need to start outlining their plans now. Here are three tips for controlling your healthcare costs.

August 19 2011 by Bob Fabbio


Every industry, from manufacturing to the services, is facing the strain of rising healthcare costs. CEOs cite rising healthcare costs as the greatest financial pressure on U.S. businesses of all sizes, and costs are projected to increase by nine to twelve percent this year alone.

In addition to these increases, healthcare reform will only continue to increase costs; employers will face compliance regulations, additional taxes, and indirect costs. By 2014, as insurance exchange systems are established, providing health insurance for employees will be an option for employers, not a requirement. Due to the continually rising healthcare cost curve, employers (particularly larger employers with shareholders to answer to) may no longer provide health insurance, directing employees to use the health insurance exchange systems instead. When this happens, employers will face backlash and a major employee morale issue.

Healthcare costs drown bottom lines, restrict a company’s ability and motivation to grow, and can also potentially affect employers’ decision to provide health coverage for employees. It is time we approach the costs associated with healthcare as more than just an employee benefit, but also a business problem that, left unchecked, becomes a matter of survival.

Recent studies indicate that the two most common strategies that employers use — with input from their brokers or benefit consultants — to try to lower their healthcare costs are:

  • Plan redesign to shift more of the cost to employees, and
  • Wellness/preventative programs to try to lower the utilization.

When you boil it down, employers are hoping that their employees and dependents seek medical care less and less. And when they do seek it, they are pushing most of that cost onto them.

In spite of all the time and effort that employers spend on an annual basis with their brokers or benefit consultants, most employers’ healthcare cost trends continue to rise. History has shown that the cost trend has continued to rise by double-digit growth over the last five years with no end in sight. It is time to reverse the healthcare cost curve, and lower the cost of keeping employees healthy, without putting additional financial strain on them.

We must start by addressing preventable expenses — and yes, there are enough preventable expenses to make a significant impact on healthcare costs. I’m not suggesting we reduce the quality of healthcare; rather, we need to be smarter about the kind of care we make available, and how we manage the consumption of healthcare.

For example, every year, Americans spend billions on urgent care visits to hospitals and clinics. Most of those visits are for routine care concerns, but there is nothing routine about the cost of those visits. These visits happen when your employees’ child has a painful ear ache at 4 p.m. on a Saturday, or your vice president has a sinus infection on Thanksgiving, and they have no choice but to pursue more expensive forms of care.

There are more cost-effective alternatives — such as urgent care centers, or medical practices that provide care seven days/week or offer extended hours — but we must continue to drive innovation if we truly want to change the healthcare cost curve as it impacts our businesses.

In March, Deloitte published a study on the hidden cost of healthcare for consumers, and its effect on our economic recovery. “The ability of the U.S. economy to recover will be affected in part by how much consumers have in their pockets to spend; the more spent on health, the less is available to boost other sectors, including financial services,” said Andrew Freeman, executive director of the Deloitte Center for Financial Services.

As CEOs, we must refuse to settle for the status quo. There are steps you can take now to help take control of your healthcare costs:

  1. You don’t have to live with the continued growth of your healthcare cost trend. Organizations that view healthcare costs as a business problem can take steps to break the cost trend.
  2. Be proactive — implement employee wellness/prevention programs, online or mobile adherence alert systems, reward programs, and explore eMedicine and mobile healthcare providers.
  3. Don’t just depend on your broker — educate yourself about new solutions, and how they could impact your business. The real change will come through game-changing innovation.

The cost of healthcare is a very real impact on businesses, and we need to prioritize this in our own offices, not just the Oval Office.