As we work closely with our clients and their employees, we often hear the same concerns: How are companies like mine managing rising healthcare costs? What part does employee health education play in the benefits package? In response to your inquiries, we wanted to take the time to review how your peers and the industry as a whole is managing these issues.

Sharing the Financial Burden of Health Coverage
Maintaining quality health benefits continues to be of great concern for our clients and all employers that strive to offer competitive employee benefits - and it's likely to remain a challenge for HR executives for some time. The recent trends indicate companies can attain some cost relief by making small, yet significant changes that require employees to share more of the cost burden of health benefits. Below are three programs we have seen in industry publications and in use by some Fortune 100 organizations but have found them to have met considerable opposition within small to medium size businesses.

Spousal surcharges, typically a monthly fee ranging from $50 to $200, is one option that is added to an employee's premium when the employer is asked to cover a spouse that is otherwise entitled to healthcare coverage through his or her own employer. While studies have shown this method to be marginally successful in saving corporate funds, it also increases administrative tasks, requiring the company to actively supervise this policy, and often leads to a backlash from employees.

Tiered drug programs that offer a flat co-pay or fixed percentage payment are another option gaining popularity, mostly for the program's ability to increase awareness of true health care costs among employees - something that encourages more judicious healthcare spending overall. A recent article from HR Magazine indicates "that the use of these programs has risen 10%-15% in the last four years and that employers who have instituted this system have seen an increase in employees opting for generic drugs." The employees are more conscious of spending when the costs directly affect their pocket book. Setting maximums for individual drug benefits and instituting a deductible for prescription benefits have also gained attention.

Salary based premiums, also known as 'tiered premiums,' is a system where higher-paid employees pay more for the same health coverage than lower-paid employees. This system works well to encourage loyalty among lower-paid employees, but naturally causes some unrest among higher paid workers. This method seems to work best when upper management has complete buy-in to the program. Wachovia Corp. recently switched to this method and has indicated a positive response, however some companies do meet considerable resistance.

Education Drives Smarter Spending
Employee education plays a major part in the battle over reducing healthcare costs. As previously mentioned, new benefits programs are forcing the average consumer to become more aware of the true costs for medical treatment, therefore making employees more careful in their spending. Likewise, decisions regarding health benefits are increasingly putting the employee in the driver's seat. Health education is important for all types of plans, however the employee's responsibility is even greater in a consumer-directed benefits plan. These are high-deductible plans that enable employees to determine exactly how their health budget is spent. According to a recent article in HR Magazine "many employers with consumer-directed plans provide education resources through health plan providers or third parties and even those without these plans are providing these resources to encourage better health spending habits among employees." Even benefits attorneys have indicated that if employees make poor decisions related to their healthcare, employers could find themselves in breach of ERISA fiduciary responsibilities for failure to 'educate.'

Additionally, HR Magazine suggests "that nearly 90 million people are having difficulty obtaining and using information to make health care decisions, which then results in billions of dollars of avoidable medical costs." This is a reason why a typically marginal investment in education can be so effective. Simply put, companies greatly benefit in the long-term from covering an informed employee. Health illiteracy is costly and drains more resources, both financial and human, than needed. Education now, regardless of your company's coverage type, makes you a better steward for your employees' well-being, creates better consumers and can prepare employees for possible consumer-directed programs down the road.

RPG Benefits is happy to discuss the findings delivered in this article, how these approaches may work for your company, or any other questions you may have. Contact Laura Berens.