The New Rules for Employee Health Insurance
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“We will also see employers move away from traditional defined-benefit health care plans, just as we did in the pension area, because of similar financial pressures,” Sperling said during a panel discussion titled “Employee Benefits/Employer Challenges: Managing Employer Health Care Costs Under Health Care Reform and in a Competitive Global Environment,” presented at the University of Miami Global Business Forum, held Jan. 12–14, 2011. “Employees will be more responsible for making health-related decisions.”
William Werther, a professor of management in UM’s School of Business, noted that it has become increasingly difficult for companies to provide comprehensive health care benefits in today’s global marketplace. “It’s important to take a proactive approach when dealing with high costs as well as the impact of health care reform legislation,” he said.
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Panelists (L-R) William Werther, Professor of
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Jack Bailey, senior vice president of public and private institutional customers at GlaxoSmithKline, said businesses — and the American public — should understand that in the biggest category in health care spending is caring for people with chronic diseases like obesity, diabetes and congestive heart failure. “The key question is, How do we manage and navigate chronic diseases to get better quality care, ensure access to care and reduce costs? That’s a target of ours both from a business and a company perspective,” he said.
Noting that total health care spending in the U.S. was $2.5 trillion in 2009, Bailey said only about 10 percent of that total cost comes from pharmaceuticals. From polio to leukemia and HIV/AIDS, pharmaceutical innovation has saved lives and reduced the cost of care, he said. “Now, as we tackle Alzheimer’s disease and other chronic conditions, we have to make sure to maintain the incentives for research and development of new medications.”
For employers, one of the most challenging questions is how to change unhealthy behaviors in their employees. Sperling said different strategies are needed in different populations. “In some cases a $50 gift card or a $50 a month reduction in premiums can serve as a reward,” he said. “In other cases, you might need to penalize unhealthy actions in order to change employees’ behaviors.”
As an example, Sperling cited a Las Vegas casino’s successful weight management program for its dealers. “No one wanted to get on the scale individually,” he said. “So the supervisors formed teams of five people and weighed them together on a truck scale in the loading dock. The dealers looked at it as a competition. They had a lot of fun with the contest and literally lost tons of weight.”
But how do you balance an individual’s rights with the employer’s need to manage costs? “You can set strict limits against smokers in the workplace,” Sperling said. “But you can go to jail if you refuse to hire someone because she’s pregnant. But there is a gray area in between. Employers may need to weigh an individual’s health care costs against the value that person brings to the organization. But you should not let health issues encroach into hiring practices.”
Whatever its flaws, the employer-based health care system is unlikely to go away. “Our employer-based system is an anachronism dating from World War II’s wage and price controls,” Bailey said. “But it’s now locked in as the predominant mechanism for any company with more than 200 employees. The real question today is how you level the playing field for the individual purchaser.”
Sperling added that it’s unlikely that flexible benefit programs — popular in the 1970s and ’80s — will return. These plans offered employees a menu of benefits, including health insurance, and allowed them to pick the ones they wanted or were willing to pay for. “The reason is simple,” he said. “No one has leftover money for their health care bills, so there’s no reason to trade off one set of benefits for another.”
To that end, the federal government must set the tone for cost reform, Sperling asserted. “Lasting reform has to start with Medicare and Medicaid, since the government purchases about half the health care in the country,” he said. “Once they make a decision, the private sector will follow along.”
By Richard Westlund
