Board of Economists: Business, Heal Thyself

Like it or not, just about every U.S. company is in the health-care business, one way or another. Employer-sponsored health plans are a treasured benefit for American workers and, for their bosses, a valuable tool for luring the best people. But double-digit growth in health-care costs, coupled with an uncertain economic future, has pushed many businesses to look for new ways to cut their health-care costs.

Strategies vary, but the result is to shift more of the direct costs to employees. This year 9% of large employers, including Ford and Sears, announced that they would scale back health benefits for retired workers. Many employees already pay more for family coverage; one small technology firm recently offered a cash bonus to employees for switching to their spouse's plan. Xerox once tried adjusting its health-care allowance so single workers would get more and those with families a bit less. "After three years, we killed it," says Helen Darling, a former benefits manager for Xerox and now president of the Washington Business Group on Health. "All the people who were in the family category screamed miserably: 'I wouldn't have had all these children if I knew you were going to cut our family allowance!'"

Health-care premiums have risen 12.7% between spring 2001 and spring 2002, far outstripping inflation and wage growth, and things aren't getting any easier. According to a recent survey by the Kaiser Family Foundation, 78% of companies with 200 or more workers plan to increase the amount paid directly by their employees for health care. And the U.S. Census Bureau reported last week that the number of Americans without health insurance rose sharply last year.

TIME invited a panel of five experts to help make sense of the impact of rising health-care costs on business. Joining Darling were Drew Altman, president and ceo of the Kaiser Family Foundation; Uwe Reinhardt, a health-care economist at Princeton University; Gail Shearer, director of health-policy analysis for Consumers Union; and Gail Wilensky, an economist and senior fellow at Project HOPE, an international health foundation.

TIME: Health-care costs are of concern right now because of the state of the economy. But if the economy improves, will that change anything?

ALTMAN: The economy will not change the trajectory of health-care costs. Those are going up.

WILENSKY: When the economy is sluggish, it gets your attention. But if the economy were to rebound and be robust, you'd see more tolerance on the employer side and on the employee side for some additional increase in health-care costs.

REINHARDT: Cost containment in the employment system works only in recession. In a tight labor market, the quality of the health-insurance package is your come-on in the market, and that means no holds barred, no cost containment. We are facing a 20-year tight labor market in America. You may have spurts of recession, but we will have a booming labor market again, and this problem won't be solved.

SHEARER: We're really worried that as the recession goes on, more people are going to be uninsured and underinsured.

TIME: So what will employers do in the near term?