The Employer's Role in Reforming the U.S. Health Care System

Kenneth L. Sperling

Journal of Applied Corporate Finance, 2006, vol. 18, issue 1, 108-116

Abstract: In 2005 large U.S. employers spent an average of almost $7,400 per head on health care benefits, a 73% increase in the last five years. If the current trend continues, American companies may find it difficult to compete in a global marketplace where international competitors provide labor with heath care at a fraction of U.S. costs. This article argues that effective reform of the U.S. health care system will require major efforts from all major “stakeholders,” starting with the federal government and state and local governments and including insurance companies and the “consumers” of health care services. By far the important role, however, is reserved for private‐sector employers, which have been the incubator for recent innovations in American health care and are in the best position to coordinate and drive health care reform. But incremental steps in cost‐sharing, small‐scale pilot projects of consumer‐based designs, and employee awareness campaigns will not be enough. Employers need to take radical steps to break through the inertia that has built up among all stakeholders over the past 50 years. Chief among the author's proposals for employers are the following: • In choosing a health care plan for employees, use value‐based purchasing criteria that consider more than just the price and access to services. • Help consumers by demanding information from providers and insurers about the cost and efficacy of health care services, and of alternative treatments, before the choices are made. • Encourage “consumerism” by setting up benefit plans that have a Health Reimbursement Arrangement (HRA) or a Health Savings Account (HSA) component. As the author states in closing, “Let these reforms begin with employers as the organizing force to drive needed change across the system. That may very well be the only way to save our employment‐based model.”

Date: 2006
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