WASHINGTON, April 24, 2006 - A disproportionately large share of companies´
health care costs stem from the treatment of a small group of employees and
dependents who have chronic or catastrophic illnesses, according to an
analysis by Watson Wyatt Worldwide, a global human capital firm. As a
result, companies that focus solely on providing financial incentives to
encourage plan participants to be more discerning health care consumers are
apt to realize only limited cost savings.
According to the analysis of health benefit plan expenditures, the 4
percent of participants with serious health conditions account for nearly
half of health benefit spending in any given year. This group is unlikely
to be won over by financial incentives or plan design features, such as
high-deductible health plans paired with health savings accounts, which
allow employees to save for health care expenses on a tax-advantaged basis.
Such plans are likely to be attractive only to healthier employees.
Those who are not as sick - the roughly 25 percent of participants in the
early stages of chronic conditions or with acute health episodes - account
for 40 percent of spending. In contrast, those who are healthiest - 72
percent of participants - account for just 11 percent of health care
spending.
Average health care cost per individual
Percentage of plan participants
Percentage of 2004 health care costs
< $1,500
72 percent
11 percent
$1,500-$9,999
24 percent
40 percent
> $10,000
4 percent
49 percent
"This analysis makes clear that efforts to create better health care
consumers must involve more than high-deductible health plans," said
Sylvester J. Schieber, U.S. director of benefits consulting at Watson
Wyatt. "It´s up to employers to understand the varying needs of employees
and to respond with targeted consumerism - an approach that uses different
strategies to engage different segments of the population covered by health
benefit plans."
For example, employers can find health care savings among participants with
chronic and catastrophic conditions through case management, by ensuring
that those who do not need intensive treatment find other care and by
designing health plans to encourage use of centers of excellence, i.e.,
high-quality, cost-effective treatment facilities.
"Rather than using financial incentives to encourage seriously ill hospital
patients to reduce plan spending, directing them to high-quality delivery
centers will be far more effective in making them better consumers and
controlling plan costs," said Ted Nussbaum, director of Watson Wyatt´s
group and health care consulting services in North America. "In some areas
of the country, using high-quality care centers may cut plan expenditures
for the most expensive cases in half."
"Convincing plan participants in all segments to think more critically
about their health care spending requires a combination of tactics,"
Schieber said. "Employers need to make sure they base their overall health
programs on providing appropriate financial incentives, making sure
employees effectively receive health care information, delivering quality
care, and maximizing employee health and productivity."
About Watson Wyatt Worldwide
Watson Wyatt (NYSE: WW) is a leading global human capital and financial
management consulting firm. The firm specializes in employee benefits,
human capital strategies, technology solutions, investment consulting, and
insurance and financial services. Watson Wyatt has 6,000 associates in 30
countries and is located on the Web at www.watsonwyatt.com.
Contact
Ed Emerman, 609/452-5967, eemerman[at]eaglepr.com
Emily Rieger, 703/258-7634, emily.rieger[at]watsonwyatt.com