Corporate Wellness Blog

During the past several years medical insurance costs have climbed steadily. This is taking a toll on the bottom-line of corporations, cutting into profits, 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 profits at the average Fortune 500 organization.

Businesses, through private health care insurance companies, are the leading provider of healthcare services in America. In 2004, 59.8 percent of American citizens were covered by a company-based health care insurance program, accounting for 88 percent of all private health care insurance. Yet the increasing costs of Medical Care, ever-growing prescription drug prices and a steady rise in chronic illnesses have brought the corporate society to a breaking point.

For many organizations the growing burden has become too difficult to carry. Over the past five years healthcare insurance premiums have raised an average of 11.6% 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 organizations offering Health Care services during that time to drop from 69% to 60%.4 In addition, in 2005,  healthcare insurance premiums jumped 9.2%, more than three times the rate of inflation – and that was the lowest increase in the past five years.

In this environment corporations need to find innovative ways to stem the increasing costs of Healthcare coverage. Seemingly, the easiest strategies to accomplish this goal would be to cut benefits coverage or pass on arising burden to workers and retirees. More than 80 percent of corporations have chosen one or both of these cost saving measures in the past few years and almost half of all large corporations are likely to increase the amount workers pay in 2007.5

However, these methods do nothing to address the primary causes of rising costs, one of which is a population that requires increased healthcare. To make a lasting and substantial effect on costs and central health, businesses need to look beyond a old-school reactive-based approach.