Upfront: Alternative to Cost-Shifting

Businesses have been shifting health-care costs to their employees for more than 20 years, and most of those moves have yielded only marginal decreases in employer expenses. Yet a new survey from Marsh Inc. finds that about 70 percent of businesses with revenues under $500 million still believe strategies to shift costs to employees represent the best way to manage benefits budgets. Many respondents plan to further increase employees' health-care contributions in the next year.

About half of companies with annual revenues between $10 million and $500 million, and 42 percent of $1 million to $10 million companies, plan to increase employee co-pays for physician visits. Half of the midsize employers and more than a third of the smallest businesses also plan to increase co-pays for prescription drugs.

What can companies do to control health-care costs without resorting to cost shifting? One solution is to establish health reimbursement arrangement (HRA) accounts for workers. The employer deposits money -- generally $750 to $1,500 per year -- into each covered worker's account, and the employee can draw on these funds for reimbursement for health-care costs. Once the account is exhausted, health-care expenses are usually covered by insurance, after a deductible of $500, on average.

The idea behind HRAs is that if employees have to manage the funds spent on their health care, they have an incentive to control spending. They may become better-informed medical consumers, which could translate into lower plan costs for employers.