The High Rise of Healthcare
Tri-City Clectric Co. director of human resources Sherry Rodriguez is proud of her company’s role in such landmark projects such as the Figge Art Museum, Davenport. However, like many Quad city area businesses, Tri-City faces skyrocking healthcare costs affecting the company’s bottom line and employees’ pocketbooks.
“Rising healthcare costs affect our business and our employees every day,” agrees Kirby Zam, CFO of Tri-City Electric, one of the Quad Cities’ oldest companies. Founded in 1895, Tri- City employs between 400-450 people. It’s known for its high profile projects like the Figge Art Museum and the new Jumer’s Casino in Rock Island. And it’s an organization that has found itself in the middle of skyrocketing costs with fewer palatable options to consider.
“Health care costs are simply out of control,” adds Zam. “They go up 15-30 percent every year for the past five or six years and it becomes a Catch-22 for us and our loyal employees. We don’t want to cut benefits. We need to stay competitive. We can’t grow if we continue to absorb the costs, and we don’t want to pass on these costs to our customers.”
Everyone is feeling the impact, including the employees. At Tri-City, employee deductibles have risen substantially for the past five years. While 300 of its employees are covered under a union agreement, the remaining 55 employees are covered under the Tri-City plan. “Ten years ago the deductible was $100 for an employee,” explains Tri-City Director of Human Resources, Sherry Rodriguez. “In 2001 it went up to $500 and four years ago it doubled to $1,000 an employee. Our employees also now pay a portion of the premium.”
Why have healthcare costs skyrocketed?
Companies like Tri-City and its employees are a local example of what’s occurring across the country. According to the US Government Accounting Office (GAO) on employer sponsored health and retirement benefits, the costs of health care and health-related benefits have been increasing for decades. Several factors explain the rise in costs, including increasing demand for services, advances in expensive medical technology, and an aging population.
The Kaiser Family Foundation’s annual Health Research and Educational Trust Employer Survey found that between 2001- 2006, annual premium costs for single and family coverage rose by about 60-63 percent – nearly twice the rate of wages. “Every year health insurance becomes less affordable for families and business,” says Kaiser President and CEO Drew Altman, PhD. “Over the past six years, the amount families pay out of pocket for their share of premiums has increased by about $1500.” Everyone has only so much cash to go around. “People and businesses are going to have to become very informed about the health care choices they are making,” predicts Alison Beardsley, an insurance industry expert who works at the Davenportbased Mississippi Valley Surgery Center. “We see families and patients with deductibles as high as $10,000. That means they will be paying a substantial amount for their own treatment right out of their pocket. Combine higher insurance deductibles with increased food, fuel and housing prices, and no one can afford to just call the doctor for procedures or surgeries without asking some pretty tough questions about the cost or exploring more affordable options for treatment.” What can employers and employees do to fight health care costs?
“In the past, employers carried a larger part of the health care expenses for employees,” explains Ms. Beardsley. “Today, though, patients are shouldering a greater share of the burden and are being held accountable for healthier lifestyles. “Quad Citians will also have to become savvy about choosing providers based on cost and quality,” she explains. “Fortunately, right here in the Quad Cities, there are better, more cost-effective choices for all kinds of treatments, procedures and surgeries that both businesses and employees need to be aware of.” The Mississippi Valley Surgery Center is an example of a growing trend and opportunity in health care to often bypass expensive hospitalization. In recent years as surgical techniques have improved, more procedures are being performed at Ambulatory Surgery Centers (ACS).
In the Quad Cities, the Mississippi Valley Surgery Center has been in operation since 1996 and has become a viable alternative to traditional hospitalization for certain outpatient procedures; from total joint replacements to carpal tunnel surgery (see story on page 14.) The advantages are many including: lower exposure to diseased patients found in traditional hospitals; better operational efficiency which can mean reduced healthcare costs; and quicker recovery because patients are encouraged to be ambulatory (or to move) and recover at home.
Studies have shown that procedures performed at an ASC cost significantly less than the same procedures performed in a hospital setting, according to a November 2006 US GAO Congressional Committee’s report on Medicare. “At the Surgery Center, we and our partners with the Mississippi Valley Health Network represent a wide range of specialties that can ensure employers and employees have access to the right specialty at the right time, so that health issues can be treated and employees are back to work quickly and economically,” Ms. Beardsley adds.
Ms. Beardsley says many businesses are starting disease-management programs to help employees quit smoking, lose weight, or manage a number of ailments that can affect productivity. There are also new kinds of consumer-driven plans that mean people will have greater control in health care purchases.
At Tri-City Electric, employees can take advantage of a quit-smoking program, and executives have discussed a health assessment program to provide employees with a heads-up on risks such as high blood pressure, high cholesterol, or other factors that can lead to serious illnesses unless they are controlled early. Also, like many businesses, there other options to consider including a new kind of benefit called the Health Care Savings Account (HSA).
New trend in health care savings accounts
These consumer benefit plans are going to be a major change for employees used to letting company benefit plans take care of health-care costs. The Kaiser Family Foundation reports that right now an estimated 3 million workers are enrolled in consumer-driven plans, about equally divided between high-deductible plans that qualify for Health Saving Account (HSA) and plans with a Health Reimbursement Arrangement (HRA). These plans feature high deductible and tax-preferred savings options, from which employees can pay for their out of pocket medical expenses. Such plans mean people pay directly for a greater share of their health care and have an incentive to minimize the cost.
Outlook for the future
Each year, the Kaiser Foundation asks employers what changes they plan to make to their health plans. Among those that offer benefits, large percentages of firms report that in the next year they are very or somewhat likely to increase the amount workers contribute to premiums, increase deductible amounts, increase office visit cost sharing or increase the amount employees have to pay for prescription drugs. On the upside, few report plans to drop coverage or limit eligibility.
In general as health care costs increase and the political debates heat up, experts predict that employees and their families will need to take greater responsibility for their lifestyles and the costs associated with illness. As one Forbes health care expert put it, “Companies are going to encourage employees to look after their own health and will use the lever of insurance…if you want to smoke and eat a surgary diet, go ahead, but insurance coverage will kick in at a higher level.”
Here in the Quad Cities, employers such as Tri-City Electric want to maintain their commitment to employees and the community. Tri-City CFO Kirby Zam sums up the challenge of spiraling health care costs. “Our century of success is based on loyal employees, customers and projects the entire Quad City community can be proud of.
“Moving forward, the challenge will be finding a balance and sharing responsibility for these costs among our stakeholders – but to do so without compromising the health of our employees or the future of our business.”
