Employee benefit costs represent a company's third-largest expense, and health insurance is the fastest-growing component. Unless something changes, it will overtake profits within five years.

It's no secret that health care benefit costs are rising quickly—but few executives may realize how quickly. Without cuts in expenditure or an economic boom, by 2008 the average Fortune 500 company may be spending as much on health benefits as it earns in profits.

Executives have tried to rein in these costs, but programs at many companies are too fragmented to be coordinated effectively. Benefits managers must develop a comprehensive—and, where possible, centralized—approach to the plans. Some companies have also enjoyed success offering incentives to providers that help keep their employees healthy.

For more on handling the high cost of health care, read "How to control health benefit costs."