In the oft told tale of classical mythology, Damocles, courtier to Dionysius the elder, commented to his sovereign on the grandeur and happiness of rulers. Thereafter, Dionysius invited his courtier to a sumptuous banquet, which Damocles enjoyed until he looked upward and saw a sword hanging above his head, held by a single hair. As the legend goes, this was the sovereign’s way of telling the courtier that insecurity can threaten even those who appear fortunate.

Health care industry insiders say that those of us who for the last decade have been enjoying a sumptuous banquet of health care choices and services at relatively low cost, did so without noticing the swords poised above our heads. The question now seems to be not whether the swords will fall, but how deep the wounds.

It is a given that health care costs are going up by double digit figures in the coming year. Estimates range from a low of 10 percent to more than 20 percent, leaving employers and employees scrambling to make the best of a precarious situation.

A variety of factors have been cited for the rate increases, some controllable and some not.

“The biggest factor for rising costs is technology,” says Jeff Lazenby, vice president of marketing and business development for Sharp Health Plan, a health maintenance organization for more than 3,200 companies with 120,000 members. Some doctors and patients are demanding state-of-the-art diagnostic equipment.

Other factors include skyrocketing prescription prices (especially for brand-name drugs), hospitals having to meet expensive earthquake retrofit requirements, the mandate of lower staff-to-patient ratios, physicians wanting a bigger share of the pot, and legislation requiring coverage of additional medical conditions.

Adding insult to injury, the number of hospitals and medical groups have been shrinking in recent years. “When you lessen the pool and reduce the number of options, you put the power into the hands of physicians and hospitals,” says Linda Keller, senior vice president and manager of employee benefits for Marsh Risk & Insurance Services, the largest international brokerage firm in the world with more than 220 health care clients in San Diego.

The next few months will see many employers shopping around for the best health care deals, with a large percentage of health plans renewing the first of the year.

The Blue Light’s Not On

“There are no bargains out there right now,” says Madeline King, vice president of the employee benefits division of John Burnham Insurance Services. Of the more than 1,000 companies represented by John Burnham, King estimates at least 50 percent will renew Jan. 1.

And rising health costs seem to play no favorites, hitting HMOs and preferred provider organizations, even though the two types of providers take on health care from different philosophical starting points.

In HMOs, members have a primary physician who acts as a conduit to specialists, overseeing a patient’s overall health care. The emphasis is on prevention. “We want you to get to know your doctor personally,” Lazenby says. “We want you to go to the doctor and make sure you don’t get sick. We’re looking to control costs by keeping people healthy, not by limiting access to doctors.”

In a PPO, members can see the physician or specialist of their choice (as long as the physician is a member of the program), dealing with problems as they arise. “Patients can seek health care on their own terms versus an HMO where you have to go through a screening process,” says Robert Feeney, corporate executive officer of MedVantx, a small medical business which has been in operation for more than two years.

Many businesses offer employees a choice between an HMO and a PPO with the employee contribution a bit higher for the PPO, although the cost gap seems to be narrowing.

Knowing that fees are going up with no end in sight has every facet of the industry brainstorming ways to keep the banquet digestible, even as the swords fall.

Grace Larson, director of human resources for Clark Security Products, a wholesale distributor of hardware with 385 employees, begins each renewal period with a benefit survey, asking employees what they like and don’t like about the current health plan. These results are passed on to Arlene Lieberman, a human resources specialist at Barney & Barney, who starts shopping to meet those needs.

“There will be a sharing of costs more,” Larson says. She sees the process as balancing a fine line between how much of the medical burden employees are willing to bear before opting out of the program and going without insurance. “We make a whole presentation to management as well as employees. The managers know they have to make the package attractive enough for employees to participate and make sure they have coverage for their well- being.”

Lieberman often takes part in the education process, visiting companies to explain the current market to employees. “We focus on why costs are going up, giving tools to mitigate costs so employees can use the tools to make the best decision for their families,” Lieberman says. Education takes the sting out of rising costs. We give them statistics about the costs of drugs and MRI’s so when you ask employees to contribute they understand and realize their employer still has their best in mind.”

Keller agrees. “We’ve got to change our utilization patterns,” she says. “We’ve allowed ourselves to become a society where going to a physician costs less than a fast food meal. Just like going to McDonald’s, we don’t think twice about going to a physician.”

Another strategy for taking the bite out of rising fees involves adding new cost-effective benefits to make the health package more attractive. “While you’re delivering the bad news, put in some good news,” King says, “like you’re adding a life insurance plan or long-term and short-term disability.”

Or employers might think about adding voluntary products that employees can get at a reduced rate, like group home and auto insurance, Keller says. These cost the employer little or nothing, yet save employees money that can be used to offset higher contributions to health care.

Everyone seems to agree that rising prescription costs need to be addressed.

“Go for generic drugs first,” says Neil Crosby, director of business development for Lebherz Insurance Services Inc. and president of the San Diego Association of Health Underwriters, a professional organization that works on behalf of consumers. “There is lobbying going on to discourage pharmaceutical companies from advertising drugs on television,” Crosby says. “Those costs are passed on to consumers. By law, generic drugs have the same standards as brand-name drugs, so look for generics first.”

It benefits both employers and employees to learn the different nuances of health care plans, says Lieberman, who factors in prescription refills when figuring drug costs. “Kaiser, for example, refills prescriptions every 100 days, while other HMOs refill every 30 days,” she says. This can be a significant savings to employees, with the current trend to higher co-pays.

“Stay involved with your employees,” Lazenby says. “Promote good health in the workplace, offering exercise programs and encouraging employees to quit smoking.”

Employees can do their part in keeping costs in check, Lazenby says, by getting proactive about their health care. “It works best if a patient has a relationship with the primary care doctor,” he says. “Go in for regular exams and get immunizations for children.”

And don’t be afraid to let your employer know what you want in your health care package. “Ask your employer to put in a flexible spending account where an employee’s money comes out of pay before taxes,” King says. This money can be used for planned maintenance, such as regular chiropractic visits or eye care.

Keller also likes the idea of the flex account and suggests adding a flex debit card, which the patient can use for co-pays, eliminating the need for saving receipts for reimbursement.

In a further effort to keep the market in check, the health care industry has been forced to look around for creative ways to deal with the dilemma.

“Consumer-driven health care” or “defined contribution plans” seem to be new market trends. In both programs the employer establishes individual health care accounts with the employees deciding how to best use the money. These plans keep health care costs down because insurance isn’t tapped until the accounts are used up.

The plans are not popular with everyone, including Lazenby, who fears they will impact quality of care. “Patients won’t visit the doctor because it costs them more, or they’re afraid of using up their benefit allowance,” he says.

People need to think about the decisions they’re making, Keller says in summing up the current crisis. “If we want to still have jobs, we’ve got to realize the employer can’t continue to pick up 100 percent of rising health care costs. If we can all still have a job by contributing a little more, in the long run we all win.”