Healthcare costs for active and retired populations now exceed 8% of payroll. In the 1990s, the Financial Accounting Standards (FAS) Board enacted its rule #106, formalizing the accounting for retiree medical costs and creating unfunded liabilities for employers. Before FAS 106, 66% of firms with more than 200 workers sponsored retiree health care. That figure in 2007 was 33%. So where is retiree health care headed next?
Michael Watson says the reasons dependents remain on a company's eligibles databases vary from misunderstanding to carelessness to a sense of entitlement on the part of an employee. That's why he suggests a two-pronged approach to cleaning up the mess.
High deductible health plans (HDHP) and health savings accounts (HSA) have shown evidence of providing a partial cure to rapidly rising healthcare costs. Employers are taking notice, with the majority seriously considering offering these new plans. Most employers understand how to access HDHPs; however, gaining access to HSAs is less clear.
With the rising cost of health care, some employers strive to save money by cutting back on coverage for preventive care and raising co-payments on prescription drugs. Pitney Bowes, Inc., a Stamford, Connecticut-based provider of advanced mailstream solutions, has taken an entirely different approach.
The numbers suggest that more companies are taking on the
risk of providing their employees with health insurance—without the security
of purchasing a fully insured insurance product, says Karin Landry of the Spring Consulting Group.
When Eddie Curry accepted the position as chief financial officer at cleaning franchisor JanPro, he knew that the company lacked health insurance for its employees. He also realized the importance of offering health insurance as a way of attracting and retaining quality people. Curry explored his options and found a new idea: defined contribution health care.
In recent years, the drive toward encouraging consumerism in employee healthcare plans has gained strength. As they realize that they must take steps to rein in costs, companies implement health reimbursement accounts, raise deductibles, and utilize any and all of the other cost-shifting techniques being touted by experts.
Employer-sponsored disease prevention programs not only show employees that the company cares about them, such programs can also help employers manage spiraling health care costs. That's the goal behind GE Energy's voluntary cardiovascular risk assessments and diabetes prevention program.
The Medicare Prescription Drug Improvement, and Modernization Act of 2003 became
effective January 1, 2004. The provision of the Act that added Section 223,
Health Savings Accounts, to the Internal Revenue Code (IRC), received, at first,
very little attention. In the ensuing months, however, it was given major media
scrutiny.
