July 2004

Cost — not outcomes — decide healthcare benefit coverage

Cost — not outcomes of treatment — is the primary deciding factor when companies determine healthcare coverage options for their employees, according to a nationwide survey of 373 randomly selected employers by the Society for Human Resources Management (SHRM).

Though only three percent of U.S. organizations have considered eliminating healthcare coverage for employees, 75 percent have changed their healthcare plan design in large part to the unmanageable cost increases in recent years, according to the 2004 SHRM Healthcare Survey.

Only 14 percent of companies decide coverage by evaluating the outcomes of treatment. Overwhelmingly, cost is the number one factor in evaluating healthcare plans with 93 percent of organizations using cost as a prime piece of data in health care evaluation. Contrast this to just 44 percent evaluating their health plans based on quality of treatment and only 7 percent evaluating provider availability. The data indicates that the focus has become what a company can afford to offer and what employees can afford to pay.

The number one reason why adjustments are made to employee healthcare packages is because of cost, with 87 percent reporting cost to employer as the reason for making plan changes. The report shows 46 percent of employers report making plan changes due to cost to employees.

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