A large company: stop the cost shifting.

Health-Care Cost Per Employee: $3,000

Gillette is a global consumer products company with 1993 sales of $5.4 billion. We have 33,400 employees worldwide, but only about 7,000 are in the United States, so we aren't one of the largest payors of national health-care costs. Still, we're concerned with the double-digit cost increases we've been experiencing.

That's why we aren't waiting for reform, although we watch the developments in Washington with great interest. Managed care has been part of Gillette's program for several years, initially in the form of health-maintenance-organization offerings. We've found HMOs very effective in controlling costs, and we've also observed that our newer and younger employees tend to choose an HMO plan. In fact, 62 percent of our California employees and 38 percent of our Massachusetts employees have selected HMOs.

However, this trend has adversely affected our indemnity plan, so in 1993, we redesigned the program to incorporate more managed-care features. The indemnity plan flow offers "high" and "low" options, which allow employees to choose the level of co-insurance they're comfortable with. Under the high-option plan, employees pay approximately 30 percent of the premiums, but their deductible is only $150, and most charges are completely covered. With the low-premium plan, employees pay only about 10 percent of the total premiums, but their deductible is $500, and most medical expenses are covered at only 80 percent. Ninety-six percent of our U.S. employees have chosen the high-option plan.

We've also eliminated indemnity-plan flaws that encouraged more costly treatments. For example, we used to have a higher deductible for doctor's office visits than we did for outpatient hospital services. That encouraged employees to go to a hospital for treatment, even if a physician could treat them just as effectively in an office. Now there's a small co-payment for doctors' office visits, while a cash deductible applies to outpatient treatment.

Gillette's in-house medical facility is an important part of our health-care program. This well-staffed center has helped us reduce our medical costs. For example, annual physicals allow us to detect problems early, before they become serious. Other preventive-care measures include mammograms and blood-pressure and cholesterol screening.

The medical department has also contracted with an outside vendor to provide a company-subsidized employee assistance program, which offers confidential counseling for diverse problems, including personal and family issues. This helps employees to better cope with stress.

Our indemnity-plan provider worked with us to establish performance targets, which we formally reviewed in 1993, after the plan year ended. The initial data for 1993 reflects encouraging results in containing costs, although some additional claims may still surface. However, cost shifting in the health-care system makes it impossible for us to completely stabilize the situation.

While we're trying to hold the line on costs, the debate continues in Washington on just what kind of health-care reform, if any, is the best solution. Even the business sector is somewhat divided on its approach to health-care reform. Small business opposes any employer mandate, but larger employers generally aren't as concerned about that point, since most already provide health insurance for their employees and contribute toward the cost. Larger employers are more interested in stopping cost shifting, and it may be that we can accomplish this only through universal coverage, which politically will require an employer mandate.

The Cooper-Grandy proposal has been cited as a workable alternative to President Clinton's health-care proposal. But Cooper-Grandy has serious deficiencies of its own. It calls for universal access, not universal coverage, and it does nothing to solve the cost-shifting problem. That's because Medicare wouldn't be part of the program, so the costs of health care would continue to be transferred from Medicare and from the uninsured to those who pay for health insurance. In our case, this means Gillette, its employees and retirees.

To make matters worse, the employer's tax deduction for providing medical coverage would be limited under Cooper-Grandy. Like President Clinton's program, Cooper-Grandy would rely too much on state bureaucracy and would add overhead costs to the health-care system.

by Lloyd B. Swaim Vice President and Treasurer The Gillette Co., Boston