Health costs
In the fight to curb health costs ...
Many companies are making real headway, adopting policies that will set the standard for employer-based coverage for years to come.

Savings are significant for employers that actively manage workers’ coverage. These firms hold cost increases to 5% a year, compared with an average 12% jump nationwide. It’s mostly larger firms taking the initiative, but their approaches can be adapted to smalls.
The recipe combines several steps ... some of them new, others tested over time.

Key ingredients: Keep workers healthy.
Identify those at risk, encouraging early treatment and control. Johnson & Johnson, for example, gives $500 to employees who take a test to assess health risks and join appropriate disease management programs.
Subsidize fitness, helping staff pay for exercise classes, weight management, nutrition counseling, or smoking-cessation programs. About half of overall health costs are related to individuals’ behavior. Keep in mind that employers can reward workers who volunteer for such programs but can’t penalize those who choose not to participate. And basing incentives on achieving specific results risks costly lawsuits.

Watch out for counterproductive cost-cutting. Tread carefully before shifting more costs to employees. Pitney Bowes actually saved money when it raised the share it paid for asthma and diabetes drugs. It found that higher costs for workers led some not to take medications, increasing the incidence of hospitalizations and raising long-term costs. If enough employers adopt this policy, the cost-shifting trend will slow.

Favor treatments with proven results: “Evidence-based medicine.” Current health data show patients get such care only half the time. Consider cutting payments for treatments that are frequently performed but have questionable benefits, such as arthroscopic knee surgery.
Pay health care providers on the basis of quality and efficiency, with bonuses to those with consistently good results. Provide information to your employees on how individual doctors rate and what they charge.
Audit your insurance rolls more often to weed out dependents and others who are no longer eligible. And consider an extra premium to cover spouses who could obtain coverage through their own employers.
Cost savings won’t materialize immediately for most companies. It typically takes several years for claims to fall and for insurers to lower premiums. Self-insured firms might see gains more quickly.

The economy
Soft March jobs data don’t signal a weakening economy. The broad-based hiring slowdown likely was only a brief pause. The economy is still on track to generate 2.5 million jobs this year.
The job report does give the Federal Reserve breathing space before it decides whether to shift to bigger interest rate increases.
Expect another quarter-point hike when Fed officials meet May 3.

Business spending is off to a robust start this spring, setting the pace for an increase of 10-11% for the year. Firms are increasingly bullish about the economic expansion’s longevity.
One nice surprise: Solid investment in commercial structures ... factories, warehouses, offices, etc. ... and the equipment they require. For example, Cleveland-based Eaton Corp.’s control and power systems for buildings are in demand. Structures are 30% of business spending.
What’s driving it? Falling vacancy rates for industrial space and offices, notably for facilities with the most-up-to-date amenities. The office space overhang from the dot-com era is finally nearing an end. Factory capacity use is climbing fast, pushing businesses to expand.
Strong business spending will offset a small hit to consumption from high fuel prices, ensuring GDP growth of about 3. 75% this year.

Another victim of competition from China: Cardboard-box makers, located mainly in and around Chicago, in Wisconsin, and in the Southeast.
Total sales will fall to $30 billion this year from $32 billion last year. Aggressive expansion of output and exports by manufacturers in China has cut U. S. firms’ sales by one-third in the past five years.
U.S. manufacturers face higher costs and lower market prices. The cost of scrap paper used to make boxes will average $90 a ton this year, compared with $85 a ton last year and only $40 a ton in 2000. Though Chinese firms also pay more for scrap, their cheaper labor costs enable them to wrest business from U. S. makers through far lower prices.

Tech
The ultimate tools for road warriors are just a few years away.
All-in-one wireless communicators will combine the functions of a landline phone, cell phone, personal digital assistant, and PC. The gadgets ... notebook PCs or smart phones ... will operate seamlessly over expanded wireless networks in the same way cell phones do now.
And they’ll be money savers. Firms will pay smaller monthly bills for a discounted bundle of integrated telecom, Web, and data services.

New call-center technology can help head off customer defections. Software from Nice Systems monitors customer calls and will flag sessions in which a caller’s voice patterns or word use signals possible conflict. Managers review the tapes and call clients to smooth ruffled feathers. Call-management systems from Envision and others perform similar tasks.

© 2005 The Kiplinger Washington Editors, Inc.