WASHINGTON--Employers with lower health care cost increases for 2004 more often encourage workers to take responsibility for their health care decisions, according to the 9th annual National Business Group on Health/Watson Wyatt health cost study. 

These companies expect a median 7 percent increase in health care costs this year. Conversely, companies experiencing high cost increases do less to engage workers in making cost-effective health care decisions and expect a median cost increase of 17 percent. 

"A difference of 10 percentage points is hard to ignore," said Ted Chien, global director of group and health care consulting at Watson Wyatt.  "The results of this study strongly suggest that employers with programs that encourage employees to be more responsible for their health care decisions are beginning to reap the rewards.  Also, the study shows that the years of attempting to control costs using traditional methods are over."

Overall, the study found that companies expect costs to increase by a median of 12 percent this year, down slightly from 13 percent last year. A total of 449 employers representing more than 8 million employees participated in the survey.

The study found that only 29 percent of the surveyed employers said they were willing to absorb increases in 2003, compared to 52 percent in 2000.  Additionally, the number of employers that are attempting to contain costs through changes in plans or vendors has dropped sharply.  Only one out of ten employers changed medical vendors in 2003, compared to three out of ten in 2002.  Similarly, fewer than one out of ten employers switched pharmacy vendors last year, compared with 23 percent the previous year.

"Employers are beginning to recognize there's a new reality that requires new choices," said Helen Darling, president of the National Business Group on Health.  "Employers and employees must work together to control health benefit costs.  The only viable way for employers to break the log jam may be to help workers become more educated consumers of health care."

One method employers are using successfully to change employee behavior is increasing financial tension, i.e., using plan designs and other mechanisms to increase price sensitivity among employees.  For example, one out of four employers said they significantly increased either premiums or cost provisions at the point-of-care.   There was also an increase last year in the number of employers that implemented a high-deductible health plan without a reimbursement arrangement.

"We are also seeing more employers providing employees with information and tools that will not only help them make better health care purchasing decisions, but also coach them in the use of the health care system and support them in their efforts to improve their personal health," said Darling.  "About four out of ten respondents provide employees with information on specific health issues, while 23 percent provide workers with information on provider and hospital quality."

"The timing for this new approach to controlling health care benefit costs couldn't be better, particularly with the approval of health savings accounts (HSAs) as part of the new Medicare law," said Chien.  "Because the funds deposited in HSAs belong to the employee, they will promote individual accountability.  In effect, HSAs offer employers an opportunity to revolutionize the way employees consume health care services and control future health care benefit cost increases."

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access