Deductibles could be making a comeback

In a bid to contain benefit costs, a shift in employer mindset may be on the horizon

Deductibles could be making a comeback
Late last month, management consultant firm William M. Mercer released its Fearless Forecast for 2001. Specialists on some of HR’s most pressing issues made a number of predictions for the year ahead.

If employers don’t act soon to control escalating benefit costs, within five years they could find themselves paying double what they are now.

“For many employers, health costs are increasing at a faster rate than all other benefits. Expect a 15 per-cent increase in 2001,” said Maureen Premdas, of Mercer’s health care and group benefits consulting group.

As for the additional $21 billion government dollars slated to return to the health-care system — don’t expect that to defray any of the costs of your current health-care benefit program. Much of the that money will be likely be used to hire more nurses, doctors, develop home care and new technologies. It is unlikely any of it will go toward covering new drugs or expanding services currently provided, she said.

If anything employers should be taking action now to clearly define what their benefit plans will cover. It is often the case now that anytime the government delists something it automatically falls to the employer. “Changing the focus to defining what is covered by the private plan puts plan sponsors in the driver’s seat if, and as, future government cost shifting occurs.”

Another solution to escalating benefit costs may be to revisit not only what employees are offered but the notion that the benefit is covered from the first dollar spent.

Given that one of the key components of rising costs is drugs, employers should revisit their own philosophy for drug coverage, including what drugs they should offer, she said. The introduction of new drugs has been the main driver of increasing health-care costs. Between 1991 and 1998, 83 new drugs were introduced to the Canadian market but in 1999 that number jumped 33 per cent to 111.

New drugs like Enbrel which is used to treat rheumatoid arthritis is expected to be approved for sale in Canada in March. The treatment is expected to cost about $17,000 per person per year. The human genome project will result in the development of new drugs both for treatment and prevention and will almost certainly spell higher drug costs.

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