MANAGING EMPLOYEE BENEFITS

Managing Employee Benefits

Managing Employee Benefits

Introduction

Empowering employees to take charge of their healthcare decisions is a critical step in controlling escalating benefits costs and creating a market-driven healthcare system, according to Joseph Martingale, Watson Wyatt's national leader for healthcare strategy.

"While there are many important changes that can be made to health plans to produce savings, the system will remain inefficient until employees exert control," Martingale explained. Martingale, considered one of the nation's leading experts on health benefits, is best known for his work advising many of the nation's largest companies on healthcare costs and quality. "Empowering employees as healthcare consumers will begin to force health plans, health providers, pharmaceutical companies and other actors in the healthcare system into the kind of robust competition for market share that exists in other sectors of the economy. Competition for the attention - and dollars - of consumers should result in delivering higher quality services and greater efficiency," said Martingale.

Employers have a vested interest in encouraging employee involvement. Double-digit price increases have sent corporate America scrambling to find new ways to lower health benefit costs. With first-generation managed care at a saturation point, many companies are seeing price jumps of 12-15% for 2002 - and similar increases seem likely to continue. Despite these increases, most employees have been largely insulated from the true cost of healthcare due to both the introduction of managed care and an inflation rate that has outpaced health plan provisions.

Solving the problem requires transforming employees into educated, active healthcare consumers. One of the ways to accomplish this is by increasing employees' financial responsibility for their healthcare services. "Employees are not likely to become more prudent buyers without having more financial involvement," Martingale said. Examples of strategies to increase employee involvement include:

• Reintroducing deductibles and coinsurance

• Experimenting with personal health account plans coupled with high deductible PPO plans

• Implementing multitude benefits with higher co-payments for less efficient and effective physicians, facilities, and therapies.

But financial incentives alone are not enough. A second critical component of employee empowerment is education. "Employees shouldn't feel like they have to solve the healthcare system's problems entirely on their own," Martingale said. "Employers must play a role in providing workers with access to information that helps them select high-quality providers, better understand the cost of services, measure their health risks, and manage chronic diseases, among other things. These steps can have an immediate impact."

"The goal should be to help employees become better educated as well as more accountable, so that they are more selective when making healthcare decisions. In response, the players in the healthcare system will have to compete to attract employees' healthcare dollars, bringing much needed market-based reform to the healthcare system," concludes Martingale.

Watson Wyatt & Co., the primary subsidiary of Watson Wyatt & Co. Holdings (WW), is an international human capital consulting Law firm that provides services in the areas of employee benefits, human resources technologies, and human capital strategies. Nearly three-fourths of 300 employee benefits managers and chief financial officers surveyed by Cigna ...