Can costs be controlled? Health care costs for businesses are rising despite efforts at reform, and the tide isn't likely subside anytime soon. In the meantime, there are specific steps companies can take to control cost increases and create a framework for future savings.

• Author: Slay, Jeff
• Position: Health Care

Regardless of the passage of legislation a year ago, the costs associated with health care continue to spiral upward faster than the rate of overall inflation. Though the Patient Protection and Affordable Care Act addressed the issues of access to care and removing preexisting conditions, critics believe that the legislation failed to deal with the underlying costs.

Unfortunately, the critics are being proven correct as medical inflation continues at an annualized rate of 9 percent to 11 percent. It is obvious that businesses can't afford to wait for politicians in Washington, D.C., to fix the problem.

The primary causes of escalating health care costs include advances in technology; cost-shifting from Medicare and Medicaid to private payers, including employers; the high cost of regulatory compliance; and unhealthy patient lifestyles. Attempts by employers to address the issue by getting competitive insurance bids, reducing benefits and increasing employee contributions have thus far had little or no measurable impact.

While businesses have little ability to impact most of these costs, they are nonetheless left paying the bills.

Controlling Cost: Steps to Take

Fortunately, there is something that can be done, by focusing on the two areas that businesses can influence or control: first, managing the costs associated with health care reform and regulatory compliance, and second, how to impact the cause of higher insurance premiums by influencing and reducing claim costs.

Companies are already paying a price for regulatory compliance relative to COBRA and HIPAA regulations, as well as mandatory benefits that had to be offered in corporate plans. The new law mandates additional benefits, prescribes new requirements and ultimately sets up potential financial penalties for employers with the advent of health care exchanges in 2014--even for employers that offer coverage.

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In brief, the health care exchange program allows employees to choose between the plan offered by their employers or obtain coverage through the exchange plan. If an employee chooses the exchange, the employer has to pay a penalty. Currently the penalty is $2,000 annually (per employee), though few believe it will not go higher. Since the government is subsidizing the cost, it will be more cost-effective for some employees to join this plan rather than remain on the corporate plan. Based on preliminary calculations, employees making less than $35,000 to...