Paying the price: several reasons for increased health premiums.

• Author: Held, Shari
• Position: EMPLOYEE BENEFITS

HEALTH-CARE BENEFITS are eating up employers' profits and employees' paychecks.

Our unhealthy population is certainly one driver of health costs. Hoosiers are not the picture of health any way you look at it. The state's major issues in 2007: Twenty-four percent of Hoosiers smoke (Indiana ranked 46th), nearly 28 percent are obese (Indiana ranked 41st) and the cancer death rate is 217.5 deaths per 100,000 people (Indiana ranked 45th).

"I think the other critical issue is the lack of competition in the marketplace," says Dan Krajnovich, CEO of United HealthCare Indiana.

According to Bryan Brenner, CEO and consultant at Benefit Associates, the escalating cost of large claims is another factor. "Where most people are paying day-to-day, health care is really not on the rise. People have gotten the idea that you don't go to the doctor unless you need to. But what used to be considered a large catastrophic claim is increasing at a much faster rate than the day-to-day utilizations, sometimes at the rate of 20 percent to 25 percent per year. That's the trend that people don't realize is out there."

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Robert W. Hillman, president and general manager of Anthem Blue Cross and Blue Shield in Indiana, says medical inflation is just part of the problem and other factors, such as an increased rate of utilization of health care by an aging population and the impact of chronic conditions, aren't letting up. Hillman says even though health-care cost trends have mitigated somewhat, based on his conversations with employers, the issue is still a concern. "I don't see that really mitigating in the near term," he says.

In the meantime, here several ways companies are working to control costs.

Shifting costs. "Early efforts to control costs were to try to shift some costs to the employee by increasing deductibles, increasing co-insurance and in some cases doing that in conjunction with increasing the premiums that they are charging the employees for their part of the health-care bill," says Gary Hinkle, director of marketing for Encore Health Group. "But those efforts did nothing to control costs."

Those tactics do provide businesses with immediate relief, and they continue to be part of many companies' strategies. But the latest trend in cost shifting, according to Brenner, focuses on dependents. "More and more employers are saying if spouses have coverage somewhere else they need to take it," he says. "Employers are willing to take care of...