The U.S. Medical Care Crisis

Over the past several years healthcare insurance premiums have risen at a steady pace. This is taking a toll on the bottom-line of employers, 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 employer. Organizations, through private healthcare insurance employers, are the leading provider of medical services in America. In 2004, 59.8% of American citizens were covered by a employer-based healthcare insurance program, accounting for 88% of all private healthcare insurance. Yet the escalating costs of Medical Care, ever-increasing prescription drug prices and a steady rise in chronic diseases have brought the corporate world to a breaking point. For many employers the increasing burden has become too difficult to bear. Over the past five years healthcare insurance premiums have increased an average of 11.6% each year, more than four times the average rate of inflation and employee earnings over that time.3 Not surprisingly, this exponential growth in premiums has caused the number of employers offering Medical 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 employers need to discover innovative ways to stem the increasing costs of Medical Care coverage. Seemingly, the easiest strategies to accomplish this goal would be to lower benefits coverage or pass on agrowing burden to staff members and retirees. More than 80% of employers have chosen one or both of these cost saving measures in the past few years and almost half of all large employers are likely to increase the amount staff members pay in 2007.5 Nevertheless, these methods do nothing to mitigate the primary causes of increasing premiums, one of which is a population that requires increased healthcare. To make a long-term and substantial influence on premiums and overriding health, employers need to look beyond a antiquated reactive-based approach.