The Rising Cost Of Healthcare: What Is Causing It And What Can Your Business Do To Cut These Costs?

Published October 2010

Health care costs have been increasing in the United States for the past several years. However, the severe increase in healthcare lately has been forcing employers to pass the burden onto U.S. workers. The average worker with a family plan pays virtually $4,000 a year, which is a 14% increase from 2009 according to a survey conducted by The Henry J. Kaiser Family Foundations and the Health Research and Educational Trust. During these economic hardships it is important that businesses find ways to cut health insurance costs for their employees.

The Kaiser Foundation has provided information on what is causing these health care costs to rise so rapidly in the past several years. The amount of money that is spent on new medical technology and prescription drugs has been referred to as a leading contributor to the increase in overall health spending. It has been said that the availability of more expensive and state-of-the-art-technological services and new drugs stimulates health care spending. The price to develop these products is high and they also generate high consumer demand for the best, newest, and not to mention most costly services. A lot of the new products and services being developed are not cost-effective and are not even necessary for medical progression.

Chronic diseases such as diabetes, heart disease and cardiovascular disease have been on the rise and require costly, long-term treatments, which places a high demand on the health care system. It is estimated that health care expenses for chronic disease treatment account for over 75% of the United States health expenditures. Research has also shown that lost work productivity and costly treatments related to alcohol and drug abuse costs the United States an estimated $276 billion each year, which in turn causes employers to raise premiums, co-payments, and deductibles drastically.

One cost effective approach that is rising significantly amongst businesses is company-wide wellness programs, which rewards employees for maintaining their health. Many chronic diseases have been known to be interrelated with obesity, smoking, and diet. Workers that engage in healthy lifestyles could be offered financial incentives for preventing these chronic, long-term and costly diseases. A poll conducted by Medco on prescription benefit management showed that in 2009 nearly 76% of the organizations polled offered wellness programs for there employees. The poll also showed that 60% of wellness plan sponsors point to these prevention plans as the single most effective way to reduce healthcare costs amongst employees.