As a business owner, you’ve come to expect big increases in your employee health insurance premiums of late. Employer-sponsored health insurance premiums increased an average of 11.2 percent in 2004, and this was the fourth consecutive year of double-digit growth, according to the recent Annual Employer Health Benefits Survey released by the Kaiser Family Foundation.

That’s about five times the rate of inflation nationally, and probably significantly higher than the price increases your company has imposed on its products and services in the same time frame.

The reasons for these increases are not mysterious. The largest share of the ongoing increases track to increased utilization of advanced medical technologies – new diagnostic and preventive screenings, and other high-tech therapies and medical hardware – the majority of which are delivered at hospital on an inpatient or outpatient basis.

Prescription drugs also continue to play a major role in the rising cost of health care, owing to the higher prices of new formulations, the wider application of combination therapies and greater consumer demand for, and need of, medications in all areas of prevention and treatment. About the only area that has seen relative stability is physician costs.

Such increases, when they are part of the costs of running your business, are naturally cause for concern. It only makes sense that employers who want to continue offering their employees access to quality health care become more knowledgeable about how well their money is being spent by the health care carrier they choose.

For example, did you know that virtually all carriers in Florida spend roughly the same percentage of your premium dollars on medical claims – which works out to a medical loss ratio of 76 percent to 80 percent? They also spend about the same percentage, 10 percent to 12 percent, on administering your plan (processing claims, providing customer service functions, covering fixed costs).

And most of the carriers factor in a 2 percent profit margin. The balance of your premium dollars go to the commissions, which carriers pay to the independent health insurance brokers who act as consultants. Brokers are, of course, a critical element in matching clients with carriers. Most small business employers don’t have the time or staff to determine the best package of benefits for their group, shop the market for bids and compare product offerings carefully.

They depend on their broker to explore the different options, give them objective recommendations on the best choices and complete their applications. And brokers’ services may often continue after enrollment. It’s extremely valuable for employers to better understand where their premium dollars go. Don’t hesitate to ask questions to fully recognize why one health plan may be preferred over another.

Employers can exercise some control over their costs by finding a health benefits company that provides the best value for their company’s premium dollars. The way in which you shop a health plan can impact the price.

It’s the same as if your travel agent had a great deal for you – air, car, hotel and meals included. You tell your agent to book it. Coincidently, your neighbors just booked that same trip for $1,000 less through their travel agent.

One agent shopped for the best price, the other agent arranged the trip through his or her vendor of choice. Whether it’s a family vacation, buying a car or choosing a health benefits plan, how you shop can impact your cost.

So why are health care premiums different? Take a closer look.

Employers increasingly are realizing the value that worksite wellness programs deliver as an effective tool to improve employee health, increase productivity, reduce absenteeism and lower health care costs.

A 2003 report published by the U.S. Department of Health and Human Services (HHS) highlighted how important it is for employers to incorporate health promotion as part of their business strategy. The report asserts that preventable diseases place a heavy toll on business, including lower productivity and higher health insurance costs.

The HHS estimates that $1.66 trillion was spent on health care in 2003. and it attributes a majority of those costs to chronic diseases and conditions such as heart disease, diabetes, obesity and asthma. Sadly, the money allocated for preventing or controlling these conditions is negligible.

In a recent article, American Cancer Society CEO John Seffrin reported twothirds of cancer deaths in the United States could be prevented through lifestyle changes in diet, exercise, cancer screening and “especially” tobacco use. A well-designed worksite wellness program, provided by your health benefits company, serves the best interests of both employer and employee.

Bottom line return on investment
Ron Goetzel, a nationally recognized expert in the field of health management, data analysis and applied research, said in a recent interview that with an investment of $100 to $150 per employee per year in health promotion, an employer can expect an average return on investment of approximately $3 for every $1 invested ($300 to $450 savings per employee per year). Goetzel says, however, that these returns are not typically realized until two to three years into the wellness program.

Legislative incentives
Sen. Tom Harkin (D-Iowa) has been an outspoken proponent in seeking legislative solutions for a strained health care system. “As a nation, we have a ‘sick care’ system that is focused on helping people after they get sick, rather than a ‘health care’ system which focuses on keeping healthy people healthy,” he says. Harkin introduced the Healthy Lifestyle and Prevention (HeLP) America Act of 2004. One of the initiatives under Title II – Healthier Communities and Workplaces, provides tax credits to businesses that offer comprehensive programs to promote employee health and grants for small business.

Worksite wellness, getting started
Implementing a worksite wellness program with your health insurance carrier can be accomplished with simple, lowcost strategies.

Offer incentives for participation.
Create a wellness campaign.
Schedule seminars on nutrition, diabetes and cholesterol.
Establish programs such as fitness, sleep diary, smoking cessation and injury prevention.
Offer chair massages or simple stretching exercises to do at the desk.
Change vending machine options to offer healthier, low-fat snacks and drinks.
Work with a health insurance carrier that can implement, manage and maintain your program. Actively promote employee participation.

A successful worksite wellness program can boost company morale, enhance productivity, reduce organizational conflict, attract superior workers and lower the rate of employee turnover.

The case for establishing a worksite wellness program is well worth the effort.

The cost of providing employees with health insurance coverage continues to increase at a double-digit rate. We’ve read a lot about cost drivers in health care – exorbitant hospital charges, rising prescription drug costs, expenses associated with developing new technologies and treatments, an aging population and litigation. Nurturing these factors is an environment in which the demand for health care seems to be increasing.

For the most part, there is little employers can do to control what is driving health care costs out of their reach. Health benefits companies can and do negotiate discounts, and while those help, the underlying costs continue to skyrocket. The increases created by these cost drivers flow through the health benefits companies and eventually trickle down to employers in the form of higher health insurance premiums.

In this soft economy, declining revenue is putting a squeeze on company expenses. It is likely that you will experience a 15 percent to 20 percent increase in your group health insurance when a renewal form lands on your desk.

Can you raise the cost of your company’s product or service as quickly as your health insurance premiums are increasing?
Probably not. However, there are steps you can take to gain some control over your health care costs.

Finding a solution

Employers can exercise some control over their costs by finding a health benefits company that provides the “best” value for their company’s premium dollars. The way in which you “shop” a health plan can impact the price. I’ll use an analogy. Your travel agent has a great deal for you – air, car, hotel and meals included. You tell your agent to book it.

Coincidently, your neighbors just booked that same trip for $1,000 less through their travel agent. One agent shopped for the best price, the other agent arranged the trip through his or her vendor of choice. Whether it’s a family vacation, buying a car or choosing a health benefits plan, how you shop can impact your cost. Make sure your insurance agent doesn’t “arrange” your health plan for you. How many providers are enough? The more participating providers a health plan has, the more you’re likely to pay in premiums. If you are considering a health plan that doesn’t include a few desired physicians, request that the carrier add them to its network.

Physicians participate in many different health plans and are usually willing to participate in one more. Don’t get caught in the trap of paying 10 percent to 15 percent more for your health insurance premiums because one or two doctors are notparticipating in the plan. It’s reasonable that an employee can find another physician out of the thousands on the plan.

The power of marketing

Living in the United States affords us exceptional opportunities and choices. Along with that privilege comes a barrage of communications designed to influence our decision-making. What we read in the papers, see on television, hear on the radio, see flashed across a billboard, get stuffed in our mailboxes or pops up on the Internet is designed to predispose us to a company or its product.

Marketing can be an effective tool, and depending on how much is spent, can be quite influential. What marketing cannot do, however, no matter how much is spent, is replace what it takes to come up with an affordable health benefits solution that works for you. Be sure to look for a health benefits company that is flexible, listens and is willing to roll up its sleeves to provide you with a package of health benefits that you can afford.