Health Care: Cut Your Costs with These Simple Steps

Don't stand by while health care costs keep rising -- an estimated 8% this year and next for most companies, about three times the cost of inflation. Employers and workers are finding that an aggressive, proactive approach can limit annual increases to about 2.5%.

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What can you do? There's no magic bullet, no single step or trick that will work right away for all employers or workers. But a series of small, incremental steps can make a big difference, according to a recent survey by Watson Wyatt Worldwide of businesses that have limited cost increases in recent years.

Keep these basic principles in mind:

• Prevention is crucial. Be aggressive in persuading employees to get regular checkups and enroll in disease management programs. Getting workers to care for their illnesses will lower the odds of expensive complications later on.

• Give wage earners a stake in lowering costs. Financial incentives are a smart investment if they reduce the number of costly illnesses.

• Pay attention to those most at risk, such as employees who smoke, are overweight or who have chronic problems, such as diabetes or heart conditions.

More specifically, many companies are finding that it pays to provide free prevention services, such as flu shots and mammograms. Some also cover the entire cost of drugs for low-income employees with chronic illnesses so they're more likely to take medicines that can control their disease. Marriott International pays for many generic drugs and cuts the cost of many brand-name medicines in half.

Other businesses reward pregnant women for joining prenatal nutrition programs. A premature birth with complications can cost a firm millions of dollars. Fiserv Inc. offers savings bonds to women who go for regular checkups and attend classes, with a big gift certificate when the baby is born.

Also popular are plans that offer incentives for weight-loss, fitness and stop-smoking regimens. IBM, for example, pays up to $300 a year to participants. Employers should be careful, though, to reward all workers for healthy lifestyles. Otherwise, they could inadvertently create morale problems and prompt complaints of unfair treatment.

The key to all efforts is making sure workers have the tools they need, including access to information. Provide specific data on the quality and cost of doctors in your area so employees can be smart consumers. Internet-based systems let them compare the prices and success rates of specific health care providers.

Another option is to charge for spousal coverage if the spouse works and is eligible for other insurance. A typical surcharge is $100 a month.

Health Savings Accounts are also effective in cutting costs. They're tax deductible when combined with a high-deductible insurance policy.

Most of these ideas will work for all businesses, but big firms have additional options. Some provide on-site clinics to make preventive care convenient, and many mine claims data for trends on illnesses. The data can help determine which disease management plans are needed.