The new competitive edge--salaries are now second to healthcare.

The new silver bullet--healthcare! In a recent 2003 Hewitt Associates study, employees found healthcare ranks as the most important benefit, outscoring compensation by a margin of two to one, but proposed insurance premiums for 2004 are expected to rise 17.7 percent. The situation has reached a crisis point for benefits managers, who must choose between limiting benefits, raising employee costs or mixing both into an unpopular solution that has left employees and companies at a loss. HMO's haven't solved the problem and, in some cases, companies have simply stopped offering coverage areas once considered basic. Others have turned to consumer-driven defined-contribution plans (also known as "go-find-your-own" healthcare reimbursement arrangements, or HRAs) that set high deductibles and allot a set amount of money to each employee. Other employers are looking at prevention and wellness as a way to lower costs. Whatever the uniquely crafted formulation, health benefit design has become a forefront issue, and we open the controversy for some discussion by our experts. Contact: [e-mail]

Jeffery S. Wells

Sr. VP Human Resources, Circuit City Stores, Inc.

Circuit City's cost increases for healthcare have been less than the norm, while offering one of the best policies in the retail industry. Ask yourself: "What is your healthcare strategy?"

At Circuit City, we have a four-part answer: 1) competitive; 2) protect against the financial burden of catastrophic illness; 3) affordable; and 4) the costs of treatment are a shared employer/employee responsibility. The largest determining factor in healthcare cost increases is the 1/2% of those covered that are responsible for 20-25% of the cost.

At Circuit City, we focus on the biggest obstacle to providing quality healthcare that doctors face: incomplete information. Doctors frequently find themselves having to make critical decisions based on incomplete information either about the patient or the medical literature. We engage the services of a third party to make sure our members get the best possible care. They do this by merging the four main silos of personal healthcare data (doctor's visits, lab results, pharmacology and treatments) into a confidential common data warehouse. Unlike most benefit plans, ours performs daily updates, providing continuous clinical review. Every time a new claim is received on a covered person, his/her entire claim history is exposed to thousands of clinical rule sets, using the most respected published medical standards. An example of this is the use of Metformin by diabetics. According to a study letter in the May 15, 2002 issue of the Journal of the American Medical Association (JAMA), approximately 25% of diabetic patients using Metformin in the U.S.-about 6 million individuals--are on the medication despite the fact that they have renal dysfunction or congestive heart failure--both absolute contra-indications for this medication. Metformin can cause a buildup of lactic acid in the blood that is fatal in about 50% of cases. This is just one of the many algorithms. Situations like these are identified in about 4% of the employees and family members we cover. The doctor is notified of the specific health issue and is able to make the appropriate change in care for the patient. We want to prevent these people from becoming part of the 1/2% that we referenced earlier. While we expect to control our health plan costs through these efforts, the greater benefit is that the consequences of serious illness are eliminated or minimized, and Circuit City employees and their dependents enjoy a higher quality of life because of it. Contact: [e-mail]

John Boland

Consultant

Lockton Companies, Healthcare

The days of employees getting the "entitlement" of $10 physician co-pays and $5 prescription co-pays are quickly fading. Employers are seeking more choices. They need to be able to choose between me traditional co-pay plans, as well as plans that lower premiums and encourage better "consumerism."

Employers need to educate their employees about the true cost of medical care and prescription drugs through plan design. One option that has worked for our clients is to offer a high-deductible medical plan, along with a healthcare reimbursement account, or an HRA approach. This lowers premiums and empowers employees to become consumers of healthcare, like any other item one purchases. Under this arrangement, an employer might contribute $1,000 to the employee for medical expenses during the year. If the employee exhausts that amount, however, he or she must pay the next $1,000 in costs before the insurance benefits begin. The idea is to get consumers, long shielded from the true cost of care, to think about their choices.

Employers should also implement both a wellness and disease management program in the workplace. Wellness programs promote, measure and reward healthy living and stop large claims from occurring. Disease management programs identify insureds with certain life-threatening diseases and work with those individuals to tailor a plan of care. Contact: [e-mail]

Welcome to my column "Manage your Assets," a series of business topics in which senior executives, analysts and consultants share their best advise on the subject. Readers can continue the dialogue on their own by contacting the contributors directly. I encourage reader response and participation. Please contact me directly at [e-mail] (photo may be required if chosen).

Jim Madden has been a corporate consultant for over 20 years and is currently the CEO of Exult, Inc. (www.exult.net). Exult, Inc. (Nasdaq: EXLT), the innovator and leading provider of HR-led business process outsourcing (BPO) for Global 500 corporations.