With the explosion in health care costs, senior financial executives have reason to question why their companies are offering benefits in the first place.

Overall health-care costs have already increased 10.3 percent in 2001, according to a recent survey by Watson Wyatt Worldwide, The Washington Business Group on Health, and the Healthcare Financial Management Association. The costs of providing prescription drug benefits increased 14.6 percent.

Still, only 14 percent of employers plan to cut or eliminate coverage for certain services.

According to the survey, which covered 360 employers, including 4.7 million full-time employees, most employers insist on retaining their role as the primary purchasers of healthcare.

But if health care costs are so high, employers might ask, “Why bother?”

The answer remains what it’s always been: to buttress your human capital. Mary Jane England, president of the Washington Business Group on Health, notes that many workers who have chronic illnesses and require intensive or special care on a regular basis remain productive. “If left to fend for themselves, however, these people may not be able to afford the kind of medical attention they need to continue working as efficiently as they had in the past,” she says.

Further, the tight labor market is hanging on, despite the plunging stock market. “Unemployment is still so low that providing benefits for your employees is still a key way of obtaining and retaining good workers,” says England. “You want to keep your employees healthy. They are an investment. Every time you have to train a new person, you’re adding cost and taking a risk,” she says.

Internet Eases Burdens

Seeking to cut administrative burdens as well as costs, employers are turning to the Internet to transfer a significant amount of decision- making responsibility and empowerment into the hands of employees, according to the survey.

According to the survey, employers are using the Internet for health benefits in these ways:

• As a resource for plan information. By putting their insurance handbook online, employers are enabling employees to access it when they have questions about their plan’s rules or restrictions, co-pays, or the selection of a physician within a network.

• To reduce administrative hassles. Many transactions, such as annual enrollment, renewals, premium payment, and the processing of claims forms can easily be conducted via the Internet. It saves time and money.

• To promote “E-health.” “Health promotion and wellness messages can be customized by age, gender, and even medical condition or health,” says England. “If you have a chronic disease such as diabetes, information can be forwarded to you regarding new techniques and medications.” Employees can also keep track of the last time they had a flu shot or routine physical exam.

By E-enabling health care information, employees can care for themselves and others on their own time, not their employers’. By having around-the-clock access to insurance information, employees will be able to focus more on their work at work… and their health — at home, the theory goes. And they’ll appreciate it, says England, because they will have more privacy.

So how does one E-enable benefit programs?

It’s similar to outsourcing, says England. “Employers work with vendors who sell them software packages and services to manage the transactions, such as benefit administration or health and wellness promotion programs.” Then they set “certain specifications and performance measures,” and contract with the health insurance provider of their choice.

Nonetheless, comprehensive health-benefit software packages are unavailable, says England. “The platform is still piece-by- piece, [with each supplier] owning a partial solution. But it will be easier when they all get their act together and integrate,” and they will, says England. “It is no different from the world prior to the Internet.”

But as of right now, England insists that using Web technologies as part of a health care benefits strategy not only “puts quality assurance in the hands of employees, but it is far more cost-effective to outsource, for example, than to try and do it themselves in-house.”

Nothing is as bad as paper-based transactions,” adds England. “The costs are so much higher. If things move to the Web, administrative costs may very well go down 3 to 5 percent instead of 12 to 14 percent.”