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May 24, 2005
Tips for Controlling Your Healthcare Costs
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rong>By Susan Prince, J.D.

Employers these days can never get their hands on enough ideas for controlling ever-increasing healthcare costs. Karen Roberts, senior vice president of AON Consulting, and Jeff Shovlin, vice president of benefits at Harrah's Entertainment, Inc., pitched in Tuesday with "50 Ideas for Controlling Health Costs and Maximizing HR Resources" at WorldatWork's Annual Conference & Exhibition in New Orleans.

Roberts and Shovlin began by pointing out that 27 percent of the employee population accounts for 85 percent of healthcare costs. Why is this? There are certain lifestyle triggers that are causing increased healthcare costs for employers. These include smoking, poor diet, obesity, stress and lack of exercise. In fact, these excess risk factors account for 25 percent of medical costs. About 50 percent of all disease, injury, and premature death is preventable by avoiding these, and other, risk factors, the speakers said.

So how do employers control their health care costs? Roberts and Shovlin offered a variety of ways, including making changes in the areas of plan design, financing, purchasing, vendor management, care management, pharmacy, and retiree medical. For example, many companies are moving away from co-pays, because when employees pay only $20 for a visit to the doctor, they often fail to understand the true cost of health care. Employers are moving towards co-insurance, rather than co-pays, to further share costs and enhance employee understanding of the burden of health care costs on employers.

Roberts and Shovlin maintain that many companies are implementing health savings accounts, which are a cost-effective way to co-fund healthcare costs in addition to furthering employee education on the true cost of health care.

Roberts and Shovlin also recommended high performance networks where experts analyze cost and practice patterns, weeding out specialists from the network who are costing much more than other specialists. High-cost specialists tend to order more tests and require more doctor visits than other specialists. By removing them from the network, the total cost of health care for employers decreases.

Dependant surcharges are when companies charge an additional amount to employees who cover their working spouse under the company's plan, when this working spouse could be covered by his or her own employer. The surcharge creates an incentive for the employee's spouse to switch to his or her own company's plan.

Joining a coalition of employers and leveraging volume to purchase health coverage on a group basis can also help employers reduce healthcare costs. Volume purchasing power when negotiating with community providers leads to lower overall costs.

Roberts and Shovlin recommended opening on-site primary care clinics and pharmacies because by doing this employers can provide medical care at a lower cost than outside providers, provide easy access to high quality medical care to improve the health of employees, and ultimately improve employee morale and relations.

There are many more ways for employers to reduce health care costs. Using only one method will not reduce costs drastically, but implementing a variety of methods, such as those mentioned above, will, in the aggregate, help employers reduce costs over time.

More coverage of WorldatWork's 50th annual conference and exhibition is available in our special section.

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