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July 07, 2004
Costs Force 3 in 4 Employers to Rewrite Health Plans

Rising costs have forced three-quarters of U.S. employers to change the design of their healthcare plans at least once since 2002, and those changes have usually meant transferring a bigger share of the costs to employees, a survey by the Society for Human Resource Management (SHRM) shows.

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In its 2004 Health Care Survey, SHRM randomly selected HR professionals from its membership rolls and polled them early this year on their their organizations' healthcare plans. A total of 373 HR pros participated.

Almost all of the participants (99 percent) said their organizations offer some type of healthcare coverage. Fully 75 percent said changes were made in the design of their plans in 2002 or 2003. The number one reason for the changes: cost, with 87 percent specifically citing employer costs as a factor. Employee costs were a factor for 46 percent.

And what kinds of changes were made to these plans? Participants said they most often involved asking employees to shoulder a greater share of the costs:

Increased copays and/or coinsurance - 69%

Increased amount plan participants pay for prescription drugs - 68%

Increased participant cost - 65%

Increased deductibles - 52%

Switched providers - 31%

Changed pharmacy providers - 21%

Shifted to or enhanced consumer-driven health plan offerings (i.e., flexible spending accounts, medical savings accounts where the consumers, not the company or insurance provider, determine how and where to spend their money) - 21%

Increased scope of benefits - 17%

Introduced tiered networks for doctor visits and/or hospital stays - 10%

Changed provider facilities based on performance (e.g., measurement of outcomes, customer satisfaction, medical errors, ability to meet national averages, safety citings, etc.) - 9%

Decreased scope of benefits - 9%

Decreased amount plan participants pay for prescription drugs - 6%

Decreased participant cost - 4%

Restricted participant eligibility for coverage - 4%

Decreased copays and/or coinsurance - 3%

Decreased deductibles - 2%

Other - 9%

Overwhelmingly, SHRM reports, cost is the number one factor in evaluating health care plans; the survey found that 93 percent of organizations use it as a prime piece of data in health care evaluation. In contrast, just 44 percent evaluate their health plans based on quality of treatment. Only 14 percent evaluate the outcomes of treatment, and a mere 7 percent evaluate provider availability. SHRM says the data indicates that the focus has become what a company can afford to offer and what employees can afford to pay.

Faced with the challenge of providing health care to employees while keeping costs down, organizations are finding alternative ways to approach the problem.

Many are looking to preventative measures--in fact, 67 percent provide participant incentives to encourage healthy behavior. To do this, 76 percent of respondents report using Employee Assistance Programs to promote healthy lifestyles. In addition, 52 percent use educational programs to inform employees on how they can take steps to improve their overall health.

Some companies (16 percent) are partnering with other organizations to purchase health care coverage collectively to receive discounted group rates. Grouping together is helping some smaller organizations leverage their buying power to get rates that were only available to large organizations. Seventy-four percent of survey respondents support legal changes to allow employees to band together to purchase health care coverage.

"Health care costs have increased by double-digit percentages year after year, forcing employers to grapple with the consequences. Employers know the value of offering health care as a powerful recruitment and retention tool and as an important measure to maintain a healthy workforce," said Susan R. Meisinger, SPHR, president and CEO of SHRM. "To retain the value of an attractive benefits package, HR professionals are diligently working to find the balance of health care plans that are affordable and beneficial."

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