Health Handouts : The United States Health Care Crisis

During the past several years medical insurance premiums have risen at a steady pace. This is taking a toll on the bottom-line of companies, cutting into earnings, limiting growth and forcing a reevaluation of the employee benefit system. According to a projection by McKinsey & Co., at the present rate, by 2008 health benefits will eclipse earnings at the average Fortune 500 business.

Organizations, through private health insurance companies, are the leading provider of medical services in the United States. In 2004, 59.8% of American citizens were covered by a corporation-based health insurance program, accounting for 88% of all private health insurance. Yet the increasing costs of Medical Care, ever-growing drug prices and a steady rise in chronic illnesses have brought the corporate society to a breaking point.

For many companies the growing burden has become too difficult to bear. During the past five years health care insurance premiums have raised an average of 11.6 percent annually, more than four times the average rate of inflation and employee earnings over that time.3 Not surprisingly, this growth in premiums has caused the number of companies offering Healthcare services during that time to drop from 69 percent to 60 percent.4 In addition, in 2005,  health care insurance premiums jumped 9.2 percent, more than three times the rate of inflation – and that was the lowest increase in the past five years.

In this environment employers need to find innovative ways to stem the increasing costs of Health Care coverage. Seemingly, the easiest strategies to accomplish this goal would be to cut benefits coverage or pass on arising burden to staff members and retirees. More than 80% of employers have chosen one or both of these options in the past few years and almost half of all large employers are likely to increase the amount staff members pay in 2007.5

However, these approaches do nothing to mitigate the fundamental causes of increasing costs, one of which is a population that needs increased medical care. To make a long-term and meaningful impact on costs and central health, employers need to look beyond a old-school reactive-based approach.