Business, Heal Thyself

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TIME: Are there specific strategies that individual businesses have tried in an effort to respond to their cost pressures and the needs of their employees?

WILENSKY: The postal workers are going to now be offering something that Medtronic has been offering for a while, in which the employer puts in a block of money, there's a block of money which the individual is responsible for essentially a deductible and then above that cap regular insurance kicks in.

DARLING: There are about 200,000 people in these so-called consumer-driven health plans in the whole country. By 2003 there will probably be another eight companies planning to roll them out as options. It's extremely complicated. The winners are relatively low users, and the losers are going to be those who are higher users. The suggestion is that this plan will change people's behavior, so that the overall cost will be lower, but unfortunately it all depends on exactly how it's designed. If you don't do something clever with the cap, very quickly you will have more and more people going into the insurance. All the big companies Humana, PacifiCare, UnitedHealthCare, Cigna, Aetna have their own models.

SHEARER: We are really concerned about the potential to shift costs to sicker people. It's one thing for someone who is healthy to get $1,000 and put it in an account that can grow year to year. Great. But that's diverting dollars away from our health-care system to go to healthy people. We thought the health-insurance system was about spreading risk broadly among the healthy and the sick. If these plans start taking off, we will gradually shift to a system with everybody facing much higher deductibles.

REINHARDT: This shifting to the sick is absolutely there. There will be some overall savings, but there will also be a major redistribution of the financial burden of health care from the healthy to the sick, because the sick will, every year, have to pay the whole thing. Then the money that stays in those healthy employees' accounts no longer goes into the health system. Think of the health system as a hungry wolf. It will eat, and if it doesn't get it in this bowl of vittles, it will eat somewhere else: in the catastrophic policy.

ALTMAN: Good for some people, bad for the system.

WILENSKY: I don't think we should trash this quite so fast. What we are talking about is, is it unreasonable to have to pay for routine procedures, even if they're nontrivial? In all areas of our life, we have routine expenditures that we are expected to pay for. It is a very interesting idea, and people in the business community are considering it.

TIME: Isn't there a disincentive for employers to offer any coverage at all?

WILENSKY: The answer is yes, but that's O.K. Large employers are likely to offer health insurance because it is regarded as a benefit. What we want to do is allow for the existing system to continue but recognize that lots of small entrepreneurs, lots of individuals, are not going to get employer-sponsored insurance.

TIME: So where will the pressure come for the small businesses?

WILENSKY: Are you sure that's where you want the pressure? These are people who, if they're not providing health insurance, are giving higher wages to their employees.

DARLING: Some of the smaller firms got bigger hits in the past couple of years. I know last year in this country an awful lot of small employers were seeing 28%, 35%, 40% increases in health-care costs.

ALTMAN: Small employers are the most screwed. That's the plainest English I could make it.

DARLING: I had one very small manufacturing company in the Midwest tell me that the difference between its projected retiree medical liability for 2003 over 2002 was $32 million. How many widgets or whatever it makes is it going to have to sell to make up that difference?