March 22, 2004—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.
“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,” said Ted Chien, global director of group and health care consulting at Watson Wyatt.
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 logjam 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.
