America’s Health Care Crisis
Over the past decade medical insurance costs have risen at a steady pace. This is taking a toll on the bottom-line of corporations, cutting into earnings, limiting growth and forcing a reevaluation of a once sacred employee benefit system. According to a projection by McKinsey & Co., at the present rate, by 2008 health benefits will eclipse earnings at the average Fortune 500 business.
Companies, through private medical insurance corporations, are the leading provider of medical services in the U.S.. In 2004, 59.8 percent of American citizens were covered by a business-based medical insurance program, accounting for 88 percent of all private medical insurance. Yet the growing costs of Health Care, ever-increasing prescription prices and a steady rise in chronic illnesses have brought the corporate world to a breaking point.
For many corporations the growing burden has become too difficult to carry. Over the past five years medical insurance premiums have raised an average of 11.6 percent each year, more than four times the average rate of inflation and employee earnings over that time.3 Not surprisingly, this exponential growth in costs has caused the number of corporations offering Health Care services during that time to drop from 69 percent to 60 percent.4 In addition, in 2005, medical insurance premiums jumped 9.2 percent, 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 progressive ways to mitigate the rising costs of Health Care coverage. Seemingly, the easiest strategies to accomplish this goal would be to cut benefits coverage or pass on arising burden to employees 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 sizable corporations are likely to increase the amount employees 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 medical care. To make a lasting and meaningful impact on costs and overall health, corporations need to look beyond a old-school reactive-based approach.
