Spiraling health care costs have become a fact of doing business, with an expected 13 percent rise in the bill to employers this year, according to a survey by human resources consulting firm William M. Mercer Inc. And this comes after an 11.2 percent increase last year.

Causes are numerous: increased consumer demand for top care, high-priced advanced medical technologies, expensive prescription drugs, growing needs of an aging population, and administrative costs associated with regulatory requirements. Losses growing out of fraudulent health claims and costs of litigation also play a role.

Whatever the reason, the costs get passed along to consumers and eventually to their employers. Understandably, many employers are looking for ways to shift some of the increases to their workers, but you can only go so far along that path, especially if you want to keep top employees. Other strategies that refocus workers’ approach to health services can pay off in cost savings and improved health care.

Prevention
Smarter use of health services, geared to prevention rather than treatment, can bring substantial savings, especially if you can change the habits of employees who turn to emergency rooms for simple complaints.

Employees need to understand that emergency room care costs two to three times as much as a doctor visit and that an emergency room is not the best place to treat most ailments. Education on this issue alone will improve the quality of health care for your work force along with spending levels.

Wellness
An important focus of health education is wellness — steps employees can take to avoid the need for health services. To encourage these steps, consider investing some of your health spending in programs to help employees stop smoking or to improve diet and exercise. Some insurers offer discounts on health coverage to employers who offer such programs, and a healthier work force pays off in higher productivity, fewer sick days, and reduced extraordinary medical costs.

Learning Tools
Health fairs and informational brochures can help employees understand their options as health care consumers and show them how to monitor indicators such as blood pressure and cholesterol readings. Increasingly, Web-based health education programs are offering guidance on assessing individual health status, recording and tracking personal health information, developing health improvement programs, and obtaining prevention and treatment for specific conditions.

Telephone services staffed by nurses prepared to answer questions on an as-needed basis can put information in the hands of employees at critical decision points and help prevent needless emergency room visits.

Cost Shifting
Cost shifting doesn’t mean simply transferring health costs to the employee. Instead, it involves ways to restructure health plans to provide employees with incentives for frugal use of their medical plans.

In one such approach, often referred to as a "defined contribution" health plan, lump sum medical accounts are assigned to employees at the beginning of the year, to be used as they see fit. If the account runs out, the employee picks up all costs up to the next defined threshold. Once that threshold is reached, the plan kicks in again to pick up all or part of future medical expenses. Another new tactic is a tiered health care plan, explained in the accompanying article.

Pooling of Interests
Professional industry associations or state-sponsored organizations sometimes offer small businesses the opportunity to pool their interests and take advantage of group discounts. Professional employer organizations, or PEOs, offer another avenue to the lower premiums that come with a larger pool.

Due Diligence
Be sure that the same rigorous policies followed in purchasing supplies or services are applied in choosing a health plan. Some companies find it worthwhile to change providers annually. At the least, you need to take a close look at all the alternatives once a year.

Employee Feedback
Examine health insurance claims for patterns, and talk to employees to find out what health services matter most to them and the best way to provide them. For a basically healthy work force, a plan with low administrative costs, such as a preferred provider organization, or PPO, may be the most appropriate. Higher-risk employees may be better served by a plan that manages medical services more closely, such as a health maintenance organization, or HMO.

Tiered Health Plans
Hospital charges have replaced prescription drugs as the fastest growing segment of health care costs, according to a recent study by the Center for Studying Health System Change, a nonpartisan policy research organization.

In response, tiered health care plans are beginning to appear in some regions and are expected to spread rapidly in the next few years. Hopes are that the plans will reduce annual premium costs by encouraging consumers to make more cost-conscious decisions in choosing health care providers.

Under tiered health care, insurers negotiate with health care providers for the price of the service and classify hospitals and doctors in categories based on the rates they charge. In a pattern similar to that followed in prescription drug copayments for brand name versus generic and mail order medications, patients who choose high-priced providers will have higher copayments.

Tiers are based on price alone, not quality of service or reputation, according to the insurers offering this coverage.