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Employer Interest in Consumer-Directed Health Plans Growing, Watson Wyatt/National Business Group on Health Survey Finds

Posted on: Thursday, 16 March 2006, 12:00 CST

WASHINGTON, March 16 /PRNewswire-FirstCall/ -- A growing number of U.S. employers are implementing consumer-driven health care plans to help control rising costs. The employers that are most successful at controlling cost increases are implementing a wide variety of programs to encourage consumerism rather than relying solely on high-deductible or account-based health plans. These are among the major findings in an annual survey conducted by Watson Wyatt Worldwide and the National Business Group on Health.

The survey of 585 mid-sized and large companies found that the number of employers offering a high-deductible health plan (HDHP) with a health savings account (HSA) or health reimbursement account (HRA) is increasing. Twenty- nine percent of employers now offer such plans, and another 33 percent plan to do so in 2007. Two years ago, fewer than one in 10 companies offered a high- deductible plan. Median employee enrollment in HDHPs, which are usually offered as an option to employees, is currently 7 percent.

Year Percentage of employers offering high-deductible plan with any type of reimbursement arrangement 2006 29% 2005 13% 2004 7%

"The combination of high-deductible plans and savings accounts can help employers encourage employees to become more discerning health care consumers," said Helen Darling, president of the National Business Group on Health. "Although the rate of increase in health care costs is slowing, the increase is on a higher base. Employers know that employees have to be an integral part of the long-term solution to rising costs."

Overall, the vast majority of employers (80 percent) find consumer-driven health plans (CDHPs) to be at least somewhat effective at increasing employee involvement in health care decision making. However, significantly fewer -- 59 percent -- find such plans to be somewhat effective at controlling health care cost increases. "This is not surprising," said Darling, "given the complexity of the health system and how many cost-driving forces exist in health care."

"Health care consumerism is about more than high-deductible plans," said Ted Nussbaum, Watson Wyatt's director of group and health care consulting in North America. "The best-performing companies are using various tactics to engage employees and lower cost trends because they recognize that all employees may not be driven by financial incentives alone."

Best Performers Successfully Control Costs

Best-performing companies -- those with a median two-year average cost increase in the lowest quartile -- are keeping cost increases to just 3 percent over the two-year period. Conversely, poor-performing companies -- those in the highest quartile -- are experiencing an 11.5 percent increase. The median two-year cost increase for all companies is 8 percent.

According to the survey, best performers are more likely to incorporate the following four factors into their health care programs: quality, health improvement and productivity, data/evidence and appropriate use of health care services. Best performers are 32 percent more likely to focus on quality of care (e.g., paying a differential to higher-quality providers) and 24 percent more likely to have programs that assist employees in managing their own health than their poor-performing counterparts. They are also 23 percent more likely to use data and hard evidence and 16 percent more likely to provide incentives and information to use health care services appropriately.

"The 8.5 percentage-point gap in cost increases between a best-performing and a poor-performing company is very significant," Nussbaum said. "Through focused initiatives such as building data warehouses and using hard-dollar ROI calculations, best-performing companies lower cost trends, minimize employee absence and earn higher rates of employee satisfaction with their programs."

The survey also found that merely increasing employee accountability or sharing costs with employees does not reduce overall cost increases. In fact, the degree to which organizations have adopted programs that share more costs and financial risks with employees was found to be almost completely unrelated to performance.

"Employers should not focus on employee accountability alone," said Darling. "When used in combination with promoting quality care, health management, use of data and appropriate use of care, companies are able to achieve significantly lower cost trends."

Other findings from the survey include: -- Relatively few respondents are significantly increasing point-of-care cost sharing (26 percent), employee premium contributions (24 percent), deductibles (22 percent) or employee copayments (21 percent). -- Forty-four percent of employers plan to shift from regional to national health plan providers, while 25 percent will consolidate medical vendors and 10 percent will change medical vendors. -- Employers are using incentives to encourage employees to complete health risk appraisals (53 percent), improve personal health (43 percent) and use lower-cost providers (21 percent). Copies of the report are available at http://www.watsonwyatt.com/. About Watson Wyatt Worldwide

Watson Wyatt 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. The firm has 6,000 associates in 30 countries and is located on the Web at http://www.watsonwyatt.com/.

About the National Business Group on Health

The National Business Group on Health, representing more than 240 large employers, is the nation's only nonprofit organization devoted exclusively to finding innovative and forward-thinking solutions to large employers' most important health care and related benefit 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, primarily FORTUNE 500 and large public sector employers, provide health coverage for more than 50 million U.S. workers, retirees and their families.

Watson Wyatt Worldwide; National Business Group on Health

CONTACT: Ed Emerman, +1-609-452-5967, eemerman@eaglepr.com, for WatsonWyatt Worldwide and the National Business Group on Health; or Emily Rieger,Watson Wyatt Worldwide, +1-703-258-7634, emily.rieger@watsonwyatt.com

Web site: http://www.watsonwyatt.com/

Source: PRNewswire-FirstCall

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