Human Resources: "Consistent Performing" Employers Find Five Keys to Health Cost Control

WASHINGTON, D.C., March 12, 2009 — Despite rising health care costs and other economic worries, a majority of large U.S. employers remain confident they will continue to offer health care benefits to workers 10 years from now. However, the level of confidence has slipped from last year due to economic concerns and uncertainty over the implications of potential health care reform, according to a new survey by Watson Wyatt, a leading global consulting firm, and the National Business Group on Health (NBGH), an association of more than 300 mostly large employers.

The survey of 489 large U.S. employers, conducted in January 2009, also identified a group of “consistent employers” that have maintained a long track record of lower health care cost increases over the past four years. These employers have outperformed other employers in five key areas: appropriate financial incentives, effective information delivery, quality care, metrics and evidence, and maximizing health and productivity.

According to the survey, 62 percent of employers are very confident they will continue to offer health care benefits 10 years from now, down from 73 percent last year. The survey also found that, despite today’s economic uncertainty, roughly four in 10 employers (41 percent) are sticking with their current health care strategy, while the remaining respondents have either revamped their strategy or expect to do so this year.

“This is the first time in the 14 years that we have conducted this survey that employer confidence has declined, and it is not related to an increase in cost trends,” said Ted Nussbaum, North America director of group and health care consulting at Watson Wyatt. “This clearly reflects the uncertainty among large employers over the impact that the fragile economy is having on their ability to stay competitive in the face of health care costs that persistently rise at double the rate of general inflation.”

The survey found that employers do not support most of the commonly prescribed solutions to the issues that plague the health care system. More than two-thirds (68 percent) are very or somewhat supportive of reforms that advance the consumer-oriented model and emphasize greater individual responsibility. Respondents are least in favor of tax policy changes that remove tax deductibility of employer premium contributions, with only 12 percent supporting those proposals.

Consistent performers succeed at controlling costs
The survey found that companies continue to show dramatic differences in their ability to control health care cost increases. While the median two-year trend for all employers is 6 percent, the survey identified 53 “consistent performing” companies that have maintained health care cost trends at or below the median trend for each of the last four years.

According to the survey, consistent performers have strategies and programs in place that have saved them nearly $60 million since 2004. The survey noted that these employers have made great strides in five key areas, but especially in their use of financial incentives and by providing employees with essential information to manage their health.

“The track record of these performers clearly demonstrates that by taking a specific course of action it is possible to successfully control health care costs,” said Helen Darling, president of the National Business Group on Health. ”By building employee accountability for health care now, employers will be better positioned to weather the financial storm and to address potential health care reform on the horizon.”

Other findings from the survey include:

- Employers continue to monitor costs by conducting dependent eligibility audits. While 47 percent did so in 2007, that number increased to 54 percent in 2008. This year, 61 percent of companies conduct dependent audits.

- Health savings accounts (HSAs) are currently offered by 34 percent of companies. By 2010, that number is expected to increase to 43 percent. Health reimbursement accounts (HRAs) are offered by 21 percent today, and only 3 percent plan to add one next year.

- Medical coverage for retirees under age 65 is offered by 23 percent of companies, down from 24 percent last year. Coverage for retirees over the age of 65 has declined from 23 percent in 2008 to 20 percent in 2009. Only 12 percent of companies provide traditional retiree medical coverage to new hires, down from 15 percent in 2008.

To view the 14th annual NBGH/Watson Wyatt survey report, visit: www.watsonwyatt.com/2009nbghsurvey.