A CEO is entrusted with the growth and prosperity of the company he or she leads. One critical element of company growth and prosperity is taking very good care of employees. Among other things, compensation, training, promotion potential, health care and retirement programs are key to reward and motivate employees. In an environment of uncontrolled, spiraling costs and government mandates, health care has become a central issue in terms of properly protecting employees while controlling costs. To complicate matters, health care issues can be incredibly emotional, placing its business aspects far out of focus.
Health care premiums are exorbitantly high and volitile because costs in the health industry are essentially out of control. Typically, a company shares health care costs with its employees because of these high premiums. A 50-50 cost sharing is not uncommon. Additionally, to keep health care premiums down for employees, the company will agree to pay substantial health care claims before liability to the insurance company comes into play. For example, a company will typically pay 50% of employees' health care premiums and the first $1 million or so in claims each year. Needless to say, a company's stake in its employees' health care is substantial and often unpredictable.
Unfortunately, a few excessively high claims will consume the company's co-pay share and cause the insurance company to pay large claims. The result is to substantially raise premiums or the company's co-pay. Whatever happens, the company's health care costs will soar. The options are simple for the company: share the additional health care costs with all employees by raising their premiums or absorb the additional costs and offset them by other austerity measures.
Please note that I have deliberately avoided placing a face on the "excessively high claims" I mentioned above. The decisions a CEO must make are strictly business in nature, doing what is best for all employees and for the company. The ice gets thin, however, when a CEO chooses to pay unanticipated costs for one benefit (health care) by curtailing another (retirement plan). In this case, all employees are still liable to pay the full price. In retrospect, the CEO needs to find a way to pay the costs of providing expected and fair benefits to all employees and absorbing unanticipated costs as they occur. In health care issues, it's pretty certain, claim and premium costs will rise yearly. The trick is to stay ahead of the trend and meet it head-on. That's what CEOs are paid to do.
