Companies May Cut Costs Elsewhere To Pay For Health Coverage

Employers may start trimming budgets elsewhere in their organizations to compensate for increases in the cost of employee health insurance, a survey by the Society for Human Resource Management (SHRM) has suggested.

In the survey of 375 human resources practitioners, respondents were asked to report on the likelihood of adjustments being made in various organizational areas to cover employee health costs. The areas where cuts are most likely to occur, according to the survey, are in other employee benefits (29%), hiring new staff (28%), employee salary/raises (22%), employee training/professional development (19%), and technology investments (12%).

Companies may also resort to cost control measures if health care costs continue to rise, the survey indicated. Some 44% of respondents said expectations of employee productivity would likely rise, 29% anticipated an increase in the costs of consumer services and products, 19% said their company may explore the use of offshoring or outsourcing, and 15% said that downsizing and layoffs could occur.

"For years, health care costs have increased three to five times faster than the rate of inflation, and employers absorbed most of that cost," said Susan R. Meisinger, president and CEO of SHRM. "Employers want to provide health care coverage to employees; however, increasing health care costs are cutting into all areas of business, and that severely affects an organization's overall success and competitiveness."

In the administration of benefits, SHRM advocates reform based on a model that has built-in incentives to balance both quality and cost efficiencies. The organization calls upon employers and employees to become informed consumers of health care.