Emory Report
December 5, 2005
Volume 58, Number 13


Emory Report homepage  

December 5 , 2005
Dealing with the rising costs of health care

Katherine Hinson is director of communications for Human Resources.

In 2003, U.S. health care spending reached $1.7 trillion—about 4.3 times the amount spent on national defense—and total out-of-pocket spending on health care rose $13.7 billion to $230 billion.

Employer health insurance premiums increased by 11.2 percent in 2004, nearly four times the rate of inflation and marking the fourth consecutive year of double-digit percentage increases for all types of health plans, including health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-services plans (POS).

Emory’s own medical plan costs have risen about 11 percent per year, with the University traditionally absorbing about three-quarters of the cost while trying to keep employee premium increases to a minimum (averaging less than 3 percent per year). In all, Emory spent $46 million on its health plans in 2004, and this number is expected to rise to $54 million this year and to $59 million for 2006.

Policymakers and government officials agree that health care costs must be controlled but disagree on the best way to do it. Meanwhile, employers are taking action to address not only their own rising costs but also the impact on their employees.

The most successful organizations are taking a comprehensive, longer-term approach to cost management and actively engaging employees in the process. They look at all aspects of vendor relationships, efficiency and cost-saving. For example, these organizations are more likely to consolidate vendors or implement vendor-performance standards or service levels.

Many health advocates believe that if Americans adopted healthier lifestyles, health care costs would be more controllable. Many organizations are requiring employees to take more responsibility for their health care decisions—for example, by setting a higher differential between brand-name and generic drug co-pays.

Organizations also have begun to realize the importance of effectively communicating health care costs and providing online tools to help build a “culture of health” among their employees. In order to understand and support a health care strategy, employees must know the benefits of improved personal health and what it means to be an effective health care consumer. It’s also important for organizations to offer health risk assessments or improvement programs.

Another method is “consumer-driven” health care—if employees have to pay more of the costs themselves, they will shop for the best care at the lowest price. This approach has shown positive cost-control, especially as it discourages non-emergency visits to emergency rooms and encourages employees to search for cheaper generic drugs—two of the biggest costs in health care.

Emory has been regarded as a “healthy” place to work. In recent years, the University alternated between cost increases in insurance premiums and increases in co-pays or deductibles. Emory also takes a hard look at claims data to determine what is driving costs.

The focus on health and wellness through such programs as the Faculty Staff Assistance Program (FSAP), the Nurse Line and the Health Management Program give employees access to helpful medical information without incurring additional costs. Early identification and treatment of chronic conditions helps avoid hospitalizations for conditions that can easily get out of control.

Recent changes to our prescription drug tiers and provider networks give employees more options to make financially responsible choices for their health care. Additionally, the 2006 benefit plan changes include the addition of the Health Savings Account (HSA) and High Deductible Health Plan (HDHP), as well as the POS network change, giving Emory employees more flexibility in choosing coverage that best suits their needs.