People look at the overall health care situation in America the same way they look at how to run their local highway department. Everyone has a better idea. Everyone has a different approach. But no one has a solution.

Like the potholes in the roads that never seem to get filled, health care costs and challenges always seem to be there. The litany of issues is well known: prescription drug prices; higher co-pays; employees contributing more from each paycheck. And rearing its potentially ugly head down the road are retiree benefits, or lack thereof—not to mention dependents of covered employees receiving less medical coverage than only a few years ago.

Is it hopeless? Is the only answer never to get sick and everything will be fine? It may not be as bad as all that.

Linda Ruth, senior health care strategist for Hewitt Associates, an outsourcing and consulting firm based in Lincolnshire, Ill., works with and advises companies on health care expenses and related issues. She agrees that health care is a common lament from most of the companies with whom she interacts.

"Cost, cost, cost," is how Ruth describes employers' concerns on the issue. "They'll say 'I can't compete in the global economy with my health care costs going up 12 to 15 percent a year. What can I do about it?'"

In INDUSTRIAL DISTRIBUTION's 58th Annual Survey of Distributor Operations, 85 percent of the distributors who responded said their health insurance costs grew the previous year (by an average of 17 percent). Increasing their employees' share of their contribution to health care coverage was the most frequently taken approach, with 45 percent of distributors doing so. In addition, 39 percent said they increased their employees' deductible amount; 29 percent said they changed providers in efforts to manage health care insurance costs.

Many employers and business owners she works with are applying some form of cost-shifting, as Ruth describes it.

"What some employers are struggling with is how to control their total health care spending without passing it all along to their employees. And that's a tough issue when you have costs going up at the rate they are going up," Ruth says.

In terms of cost savings, companies are trying a handful of approaches to keep the costs of health care insurance from rising too rapidly, at least. But some of these are not without problems of their own. One such example is the increases in employee contributions to their health plans from each paycheck.

"We're seeing increases in [employee] contributions," Ruth confirms. "More importantly, we see increases in deductibles and co-pays. Employers are raising those costs enough so people will think before they 'just' go to the doctor."

Skip Jewett, president of Applied Products, in Minnetonka, Minn., has had to deal with health care and its many problems and ramifications.

"We've raised the deductible," he admits. "The employees, of which I'm one, have to make a decision about whether to be going to the doctor for every little issue there is."

It is that decision-making process that most experts agree has to be addressed for any health care savings to result. Encouraging patients to make more informed decisions, Ruth says, is receiving greater emphasis. For example, some insurers are charging a higher co-pay for those who go to a specialist right away, as opposed to going to the primary care physician first, which a surprising number of patients still do.

Getting good information about prescription drugs is another example. Ruth says there are still some physicians who will dispense prescriptions without thinking about generic.

"There is more interest in recommending generic drugs, [which might feature] a five dollar co-pay," Ruth says, instead of "maybe a 40 percent co-insurance for a brand name."

Coverage for employee dependents is an area that also has been impacted in recent years, Ruth explains. Many companies have put limits on how much they will pay towards such coverage. Some health plans find the employer subsidizing the employee at 80 percent, while subsidizing the dependents at around 70 percent.

"With costs going up, only a certain amount of employers can pay for health care. So many employers ask 'What's my responsibility to my employees versus their dependents?'" Ruth says.

Spousal surcharges also are becoming more common, Ruth says, where the working spouse will have to pay more to take their respective spouse's plan.

"Employers don't want to be paying 80 percent of another employer's responsibility," Ruth says. "In fact, some employers are saying that if you have coverage elsewhere, you can't take theirs."

A fairly new and potentially innovative approach to health care is receiving more attention these days. Health Savings Accounts were instituted as part of the Medicare Reform Act passed in early 2004.

With an HSA, both employers and individual employees can set aside pre-tax dollars for medical expenses. The money is held in an account, which can be invested. Any gain on that investment is also tax-free. In addition, if an employee changes jobs, the account goes with him, and the employee is allowed to transfer, or roll over, the balance of the fund to his new job.

Advocates of this approach to health care point out that an HSA can pay for the larger medical bills people need help with while the less costly, more routine treatments will be covered by patients out of their own pockets.

HSA advocates hope that under that form of coverage, people will view health care as a consumer, rather than as a patient. With the co-pay for an annual physical at $10 or $20, some think there is minimal consumer concern as to just what that check-up actually costs. HSA supporters argue further that many doctors are themselves unsure what to charge since, in many cases, they get a different amount from each managed health care company they're signed up with.

Should something beyond "routine" doctor's visits be needed, though, there is still insured coverage, although the deductible could run fairly high, depending on the treatment needed and coverage the patient has signed up for.

Jewett says that HSAs are something he and his company are interested in although they have yet to offer them to employees.

He thinks that HSAs are "something we should all be exploring," he says. "You're buying catastrophe insurance, is what it boils down to. You can set X number of dollars aside each year, pre-tax, and that account is yours.... So you might build up enough so if you have the 'catastrophe' to deal with, then the large deductible may be there."

He agrees that health care and insurance coverage could well benefit from more proactive consumers who approach the issue the way they analyze the cost of automobiles or other major consumer spending decisions.

"It can make us more responsible as individuals for what the actual cost of our health care is," Jewett says. "We'd be dealing directly with the doctors and not with some insurance company."

Jewett thinks that insurance companies could be more assertive here about getting HSA-related information out.

"The insurance companies aren't suggesting HSAs [yet]," he says. "It seems that they, too, are taking a wait-and-see attitude."

From her perspective, Ruth thinks that while HSAs will become more common, the potential expense will not make them for everyone.

"The problem with HSAs is that they tend to be attractive to higher income individuals," she explains. "Lower income people see a [possible] $1,000 or $2,000 deductible and feel that's a risk they just can't take."

Ruth says Hewitt has a handful of clients who have implemented HSAs this year, but not many, adding that it's still early in the HSA game to get any definitive feedback on them.

"Right now, we have about 12 employers who have implemented them," she says, but anticipates that more companies will seriously consider offering them.

"The tax advantages to the employee are wonderful," she explains, "but, again, it's more attractive to a higher income person, someone who really doesn't have that much in medical expenses, and could pay them out of their pockets.... But over the next two or three years, I think [HSAs] will really evolve."

Employers realize that a health insurance plan is a necessity for keeping good people—in effect, a long-term investment in both their workers and the company itself.

Lee Slavinskus is vice president and co-owner of River Bend Hose Specialty, a distributor in South Bend, Ind.

"We make every effort we possibly can to offer the best quality health care to our employees," Slavinskus says. "Now when I say 'best quality plan' that doesn't necessarily mean the best price. But we really fight the battle of trying to balance the two."

Employees at River Bend qualify for medical coverage after their 90th day there. The company pays the entire cost, Slavinskus explains, and offers employees the option to buy coverage for their dependents.

"A concern I have is when you have new people at entry-level wages," he says. "When they hit the 90-day period, it reaches the point where it's almost cost prohibitive [for the employee] to go ahead and add the family coverage. It runs that high."

Over the years, Slavinskus says, the company has had little change-over in its personnel—something he attributes in part to its reliable health coverage.

"We try to absorb as much of the cost as we can," Slavinskus explains. "And that includes some of the dependent and family coverage, so 100 percent is not being passed [on]... But it's a major expense for the company and the employee."

The ramifications related to health care are evolving and changing rapidly. However, at this point, it would constitute a major cultural and behavioral shift, Ruth admits, for people to approach health care as they do other consumer issues. But she is encouraged that people will have more sources to tap for the important information.

"In general, we haven't always had the information available for people to make intelligent health care decisions," Ruth says. "They need to know the quality of the provider, and need to have some ability to compare costs. But the data out there is still pretty slender...Right now, we're taking baby steps, but in the next four to five years, we're going to see a huge, huge change in the amount of data that people will have available to them."

In her work at Hewitt Associates, Ruth has already seen examples of this. She has worked with focus groups consisting of employees from various companies. She says that when given relevant health care information, people become more confident and willing to ask their doctors more questions—both about treatment and the economics of their check-up.

"The fact that health care hits at one of our greatest needs, [means] it's never going to be like going to the store," Ruth explains. "But when people get information, they're then more comfortable with talking with their doctor about costs and treatment," Ruth explains. "We will then see people being able to make fact-based decisions about their health care that they have never either had to, or wanted to, before. We're seeing a move in that direction."

Companies are staying on top of developments and will be eyeing various approaches as they become available—like HSAs and other plans that may evolve.

"What we're seeing is a sea change in what employers are willing to try," she says. "Employers are sort of at their wits end in terms of what they can do... So anything they can do that will reduce total costs—which could be as simple as changing your health plan—is much more attractive than simply having the employees pay more."