Human Resources: More Companies, Workers Adopt Consumer-Directed Health Plans

WASHINGTON, D.C., March 13, 2008 – The number of companies that offer a
consumer-directed health plan (CDHP) is rising, and the number of workers
who enroll in the programs has nearly doubled over the last two years.
Furthermore, health cost increases for companies with high CDHP enrollment
are roughly half those facing companies offering only traditional health
coverage, according to an annual survey conducted by Watson Wyatt and the
National Business Group on Health.

Nearly half (47 percent) of the 453 large U.S. employers that participated
in the survey currently offer a CDHP, an increase from 39 percent in 2007
and 33 percent in 2006. By 2009, 54 percent of companies plan to offer a
CDHP. A CDHP is a high-deductible plan offered with a personal account that
can be used to pay a portion of medical expenses not covered under the plan.

As adoption rates climb, employee enrollment also continues to rise.
Fifteen percent of employees at organizations that offer CDHPs are
currently enrolled in such plans, up from 8 percent in 2006 and 10 percent
in 2007. Only 6 percent of companies report 100 percent enrollment in a
CDHP, but that number is expected to rise to 9 percent in 2009.

“A CDHP offers a way for companies to control costs while increasing
employee accountability for health care decisions,” said Ted Nussbaum,
Watson Wyatt’s director of group and health care consulting in North
America. “The participants in a consumer-oriented model must be more
familiar with the system and have a deeper understanding of their options.
But encouraging employees to adopt healthy behaviors and manage their
health proactively is no easy task.”

CDHP enrollment and adoption rates are rising

Year Median CDHP employee
enrollment (%) Companies with 100%
enrollment (%) Companies adopting a
CDHP (%)
2006 8%
5%
33%

2007 10%
5%
39%

2008 15%
6%
47%

The survey found that companies with at least half of their workforce
enrolled in a CDHP had a two-year median cost trend of 3.6 percent, almost
half that of companies without a CDHP. Overall, companies with a CDHP
experienced a two-year cost increase trend of 5.5 percent versus 7 percent
for companies without a CDHP.

Companies with 20 percent or more of their workforce enrolled in a CDHP are
more likely to offer employees resources to manage their own health than
non-CDHP companies. Health care cost management education is the tool most
often offered by companies with a CDHP (77 percent versus 55 percent
without a CDHP). Internet tools for side-by-side provider coverage
comparisons are more prevalent among companies with a CDHP (76 percent
versus only 49 percent). Almost three-quarters (74 percent) of CDHP
companies offer tools to help workers make health care provider and service
decisions, compared with only 43 percent of companies with no CDHP.
Personalized reminders for preventative procedures are more common as well
(60 percent versus 47 percent).

“As popularity of the consumer-driven approach grows, companies will be
able to better manage costs and workers will take a more active interest in
their own health care,” said Helen Darling, president of the National
Business Group on Health. “Actively involving more workers in their health
care and giving them the resources to make educated decisions can be a
challenge, but it should be embraced. The end result can be a mutually
beneficial system for both companies and their workers.”

Other findings:

Companies spent an average of $7,211 on health care per employee in 2007.
This figure is expected to increase to $7,620 in 2008. In 2007, the average
annual cost increase for health care was 6 percent. This is a drop from 8
percent in 2006. However, costs are expected to again increase by 9 percent
in 2008 and 8 percent in 2009.
Health risk appraisals are offered by 83 percent of companies this year, an
18 percentage- point increase from 2007.
Today, 27 percent of companies offer CDHPs with a health savings account
(HSA), while 24 percent offer a health reimbursement account (HRA).
Notably, employers are three times more likely to add an HSA in 2009 (9
percent) than an HRA (3 percent).

To view the 13th annual National Business Group on Health/Watson Wyatt
Report, visit www.watsonwyatt.com/purchasingvalueinhc.

About Watson Wyatt Worldwide

Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the
world’s leading organizations on people and financial issues. The firm’s
global services include: managing the cost and effectiveness of employee
benefit programs; developing attraction, retention and reward strategies;
advising pension plan sponsors and other institutions on optimal investment
strategies; providing strategic and financial advice to insurance and
financial services companies; and delivering related technology,
outsourcing and data services. Watson Wyatt has 7,000 associates in 32
countries and is located on the Web at www.watsonwyatt.com.

About the National Business Group on Health

The National Business Group on Health is the nation’s only non-profit
organization devoted exclusively to representing large employer’s
perspective on national health policy issues and providing practical
solutions to its members’ most important health care and benefits related
issues. Business Group members, primarily FORTUNE 500 companies and large
public sector employers, include the nation’s most innovative health care
purchasers who provide health coverage for more than 55 million U.S.
workers, retirees and their families. The Business Group fosters the
development of a safe, high quality health care delivery system, works to
achieve transparency and make scientific evidence of effectiveness the
standard for care, and shares best practices in health benefits, health and
productivity, related paid time off and work balance issues. For more
information about the NBGH, visit www.businessgrouphealth.org.