Rising healthcare costs, the genie put part way back into the bottle by employers and insurers in the past few years, are again making news. U.S. employers expect their benefits spending to climb 9.7% this year, compared with 7.5% in 1998 and 1999, according to a recent survey by Watson Wyatt Worldwide.
Experts attribute the bigger increases to an array of factors, including new drugs and medical technology, an aging population, price inflation and legislation.
For years, employers have tried to keep healthcare costs in check by controlling the supply of medical services available to workers, mostly by changing coverage, switching vendors or cutting back on benefits. But in today's tight labor market, few companies risk losing valuable employees by becoming chintzy on health coverage.
As a result, a growing number of employers are now trying to manage healthcare demand, by providing workers with self-care guides, health-related World Wide Web sites, and 24-hour access to hotlines staffed by nurses. The idea is to reduce unnecessary hospitalizations and doctor visits by giving employees the information they need to make wiser healthcare decisions.
"Traditionally, if an employee had an ailment, the first thing they would do is go to the emergency room, and the employer would pay the claim," says Jess Eberdt, president of MyDailyHealth.com, a Web site that licenses personalized, daily health information for corporate intranets.
"But now companies are realizing that if employees are better-informed, they won't rush to the emergency room and can avert a very expensive and unneeded health event."
Just how much fat could potentially be trimmed from the demand side?
According to a study funded by the Agency for Healthcare Research and Quality, half of all emergency-room visits remain nonurgent, and as many as 60% of doctors' office visits are for information and reassurance rather than treatment. "False alarm" heart attacks alone result in 240,000 unnecessary hospitalizations each year, at an annual cost of $85 million.
Typically, 15% of a company's work force accounts for 80% of its healthcare costs, and more than 70% of these costs are related to chronic diseases. Many large firms already have outreach programs designed to teach these high-use employees techniques to successfully manage their diseases.
But there are advantages to having all employees embrace such proactive behaviors. Ideally, demand management can heighten employee awareness of health issues, lower absentee rates, improve productivity and boost satisfaction with the employer's benefits program, Eberdt says.
Dow Chemical Co., for example, reported that, after implementing a health decision support hotline in 1995, 15% of its employees used the call-in service. More than 40% of the callers said the service kept them from making an unnecessary trip to the doctor, and almost 30% claimed the support line prevented the loss of at least one workday.
"It isn't about gatekeepers or keeping people away from doctors, it's about appropriateness of care. It's having people take a more active role in their own health," says Steven Richter, senior consultant with Watson Wyatt in Los Angeles. "It's helping employees become informed consumers, and informed consumers use fewer unnecessary services."
The idea is catching on. Though 70% of employers say they still plan to pass on the rising cost of healthcare, many are attempting to cushion the blow by adopting demand-management techniques.
According to Watson Wyatt's survey, 63% of employers are moving toward greater use of the Internet to distribute healthcare information; 62% are educating employees about self-care; and 44% are acting as information brokers through, for example, adding links from their corporate intranets to healthcare Web sites.
"It's all about empowering the employee," Richter says. "When you give people access to information, they'll make better choices."
Demand-management programs are relatively cheap--about $3 to $15 per employee annually. But do they actually save employers money?
Consider Hannaford Bros., a New Hampshire supermarket chain with 16,000 covered lives. After Hannaford introduced a nurse hotline for its employees in 1993, it reported a near 20% reduction in its $20 million healthcare budget, most of which it attributed to the call-in service.
More often, though, the results are subtler, Eberdt says.
"If you have someone reading about healthy lifestyles on a daily basis, some of that is bound to rub off," he says. "And if a company with 50,000 employees gets just 100 of them to quit smoking, that's a return on investment right there."