Human Resources: Employers With Broad Health Strategies Better Able to Control Costs

WASHINGTON, March 15, 2007 – The number of employers offering consumer-directed health plans continues to grow. However, those companies that are most effective at controlling health care costs are combining these plans with other health-related tactics. Those are among the major findings in an annual survey conducted by Watson Wyatt Worldwide and the National Business Group on Health.

In the survey of 573 large companies, the portion of companies offering a consumer-directed health plan (CDHP) increased from 33 percent to 38 percent in the last year. As of five years ago, only a handful of companies offered such plans, which generally include a high-deductible plan coupled with a personal savings account such as a health savings or health reimbursement account (HSA or HRA). Forty percent of employers now offer or plan to offer an HSA, and 26 percent offer or plan to offer an HRA.

More Employers Adopt Consumer-Directed Health Plans

Year
Percent of Employers Offering

2002
2%

2003
5%

2004
11%

2005
21%

2006
33%

2007
38%

“Curbing health care cost increases is a puzzle for employers, and consumer-directed health plans are only one piece,” said Ted Nussbaum, Watson Wyatt’s director of group and health care consulting in North America. “Employers can offer these plans, but it takes more than that to get employees to enroll. Filling in the missing pieces of quality, health management and education will not only help employers solve the puzzle, but also make these plans more attractive to employees.”

“The experience of companies successfully implementing CDHPs offers hope for improving our health care system,” said Helen Darling, president of the National Business Group on Health. “Focusing on prevention, early intervention, disease management and quality outcomes not only can help employers control health care costs, it can make employees healthier and more productive. It is truly a win-win situation.”

However, employee enrollment in CDHPs remains low at 8 percent, an increase of only one percentage point from 2006. This comes despite the fact that CDHPs usually involve lower health insurance premiums for employees. Nonetheless, broader participation in CDHPs is linked to lower health care cost increases. Employers with 10 percent or more of their covered population in a CDHP are holding health care cost increases to a lower level — 6.5 percent average — than other employers. Some employers are also driving enrollment by offering CDHPs as their only option. Currently, 5 percent of employers are offering CDHPs on a total replacement basis, and another 4 percent will do so in 2008.

In addition, employers that implement CDHPs as part of a broader health improvement strategy have made greater inroads into controlling health cost increases. One-fourth of respondents experienced median health care cost increases of 2.5 percent in the last two years, compared with an 11 percent average for the poorest performers and an overall average of 8 percent.

Companies that are best at controlling costs are more focused on adopting approaches that involve quality, health improvement and productivity, data and evidence, and the appropriate use of health care services. For instance, best performers are 17 percent more likely to offer compelling financial incentives to encourage employee education and participation and 11 percent more likely to effectively deliver health care information.

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 6,000 associates in 30 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, membership organization of large employers devoted exclusively to finding innovative and forward-thinking solutions to their most important health care and related benefits issues. The Business Group identifies and shares best practices in health benefits, disability, health and productivity, related paid time off and work/life balance issues. Business Group members provide health coverage for more than 50 million U.S. workers, retirees and their families. For more information about the Business Group, visit www.businessgrouphealth.org

Media Contact:
Ed Emerman
609-452-5967
eemerman[at]eaglepr.com