Human Resources: Communication, Information Tools Critical to Success of Consumer-Directed Health Plans

WASHINGTON, August 7, 2007 – Most employers that offer a consumer-directed
health plan say communicating with workers about these plans is their
greatest challenge. Additionally, most employers are not pleased with the
availability of information on provider cost and quality, according to a
new study conducted jointly by Watson Wyatt Worldwide, a leading global
consulting firm, and the RAND Corporation, a non-profit research
organization.

Nearly all of the respondents – 90 percent – cited employee communication
as their greatest challenge in introducing the consumer-directed health
plan (CDHP) and during the plan’s first year. Employers, on average, began
communicating information about the new plan to workers four months prior
to open enrollment. The study was based on 42 large employers that offer a
CDHP to their workers.

“The ‘consumer-driven’ part of consumer-driven health plans means that
workers need to be engaged, and that can’t happen without effective
communication,” said Ted Nussbaum, North America health care practice
director at Watson Wyatt. “These plans are different from those that most
employees previously had, and it’s not a simple task to encourage employees
to carefully review their options and learn how consumer-directed plans
work.”

Employers concur that getting employees to enroll in these plans can be
difficult when they also have more traditional health plan options. The
study found that employers were most likely to achieve high levels of CDHP
enrollment when they devoted additional time and resources to
communication, forced employees to make an active choice at open enrollment
and offered financial incentives in ways that enhanced the appeal of the
CDHP.

Another challenge that employers face when offering a CDHP is providing
workers with information they need to help make good decisions about health
care cost and quality. The study found that employers are generally pleased
with Web-based, out-of-pocket cost calculators for employees. However, they
find that specific resources needed to help workers evaluate the cost and
quality of care from specific providers are often lacking. Just 2 percent
rated cost information about health care providers as excellent, and 5
percent rated it as good. Only 10 percent rated information on the quality
of care as good; none rated it as excellent.

“Provider cost and quality tools that help employees make smart,
cost-effective decisions need to be part of the consumer-directed health
plan package.” said Melinda Beeuwkes Buntin, co-director of RAND’s Bing
Center for Health Economics and co-author of the study. “Better information
tools would promote employee engagement and help workers select the health
plan that is best for them.”

“Employers have high expectations for CDHPs,” said Roland McDevitt,
director of health research at Watson Wyatt and co-author of the study.
“While their early experiences are favorable, the success of the plans will
ultimately hinge on whether employers can provide employees with decision
support tools that will empower them as engaged consumers.”

The multi-year study is jointly funded by the California HealthCare
Foundation and the Robert Wood Johnson Foundation. The RAND Corporation is
the lead organization, with Watson Wyatt serving as a research partner.
Copies of the research brief, “The CDHP Implementation Experience with
Large Employers,” are available at www.watsonwyatt.com/cdhp.

About Watson Wyatt Worldwide

Watson Wyatt (NYSE: 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 6,700 associates in 31
countries and is located on the Web at www.watsonwyatt.com.

About RAND Health

RAND Health is a research division of the RAND Corporation, the first
organization to be called a “think tank.” For 60 years, RAND has been
working to improve policy and decision making through research and
analysis. RAND Health continues that tradition, advancing understanding of
health and health behaviors and examining how the organization and
financing of care affects costs, quality, and access for Americans and for
citizens of other countries. More information can be found at our website
www.rand.org/health