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U.S. Employers Less Confident in Future of Health Benefits
‘Consistent performing’ employers find five keys to health cost control

By Stephen Miller  3/16/2009

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. But the level of confidence has slipped from a year earlier because of economic concerns and uncertainty over the implications of potential health care reform, according to a new survey by consultancy Watson Wyatt and the not-for-profit National Business Group on Health (NBGH).

The survey of 489 large U.S. employers, conducted in January 2009, reveals that 62 percent are very confident they will continue to offer health care benefits 10 years from now, down from 73 percent in 2009. 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, speaking March 12, 2009, at the Business Health Agenda conference in Washington, D.C. “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.”

Dubious About Most Reforms

While more than two-thirds (68 percent) of employers are very or somewhat supportive of reforms that would advance the consumer-oriented model and emphasize greater individual responsibility, they lack enthusiasm for many other common health care policy prescriptions being discussed in Washington. 

Employers' support account-based (consumer-directed) health reform initiatives—and not much else

Initiative

Very/
somewhat supportive (%)

Not very/
not at all supportive (%)

Account-based plans—emphasize individual responsibility through high-deductible consumer-directed health plans linked to health savings accounts or similar financial incentives.

68%

32%

Status quo—continue current system without any fundamental changes in how health insurance is financed.

46%

55%

Private insurance—promote the private insurance market as an alternative to employment-based plans, allowing individual market plans to compete across state lines.

44%

56%

Individual mandate—require all individuals above a minimum income level to obtain health insurance coverage or pay a tax penalty.

36%

64%

Pay-or-play mandate—require employers to provide a minimum health care package or make contributions toward an individually purchased plan.

36%

64%

ERISA pre-emption—amend the Employee Retirement Income Security Act or allow ERISA waivers permitting state health care reforms.

25%

76%

Tax policy/refundable credits—eliminate the exclusion of employer premium contributions from employee taxable income for refundable credits to individuals.

12%

88%

Source: 14th Annual National Business Group on Health/Watson Wyatt Employer Survey on Purchasing Value in Health Care.

While a large majority (83 percent) of respondents said they are monitoring the debate on health care reform, only 6 percent said they are refraining from making major changes in their programs, and even these said they are proceeding with minor changes. "Employers are not waiting for Washington," Nussbaum commented. "After all, we have to manage our businesses while keeping tabs on what's going on."

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 of the 489 respondents as “consistent performing” companies that maintained health care cost trends at or below the median trend for each of the past four years.

These "consistent performers" achieved significant sustained cost savings by outperforming in five key areas:

  • Effective use of financial incentives.
  • Effective information delivery.
  • Emphasis on high-quality care delivered efficiently.
  • Use of data (metrics) and evidence-based medicine.
  • Maximizing health improvement (wellness programs).

"It's not about doing well in any one area; it's doing well in all of them that creates meaningful cost savings," said Nussbaum.

As regards financial incentives linked to participation in lifestyle management and wellness initiatives, the survey found that incentives between $51 and $100 can boost participating in smoking cessation and weight management programs and encourage completion of biometric screenings. But higher participation in health risk appraisals is associated with incentive amounts greater than $100.

Nussbaum commented that a threshold of $150 or higher was generally best for driving participation in these efforts. And while merchandise and giveaways branded to wellness initiatives have their place, "the short answer is that cash works better," he advised.

Plan Enrollment and Costs

On average, employers paid 20 percent of total medical premium costs in 2008 and reported that the share of premiums paid by employees will remain at 20 percent in 2009.

Employees enrolled in consumer-directed health plans (CDHPs) will pay less for their share of the premium, given that the costs for CDHPs are lower than those of other plan types. COBRA premium rates for terminated employees can be used to compare the relative costs of different play types, as shown by the survey findings, below.  

Plan Costs in 2009

COBRA premiums (medians) for employee and family coverage

Employee-only

Family

Preferred-provider organization (PPO) and point-of-service (POS) plans

$4,800

$13,906

Health maintenance organization (HMO) plans

$4,800

$14,110

Consumer-directed health plans (CDHPs)

$3,948

$11,760

Source: 14th Annual National Business Group on Health/Watson Wyatt Employer Survey on Purchasing Value in Health Care.

CDHP adoption and enrollment rates are increasing. The survey shows that 51 percent of surveyed companies had a CDHP in place in 2009—a nearly 9 percent increase over 2008—and 43 percent of these companies have at least 20 percent of their employees enrolled in the CDHP.

Health savings accounts (HSAs) were offered by 34 percent of companies in 2009, and that number is expected to jump to 43 percent in 2010. Health reimbursement accounts (HRAs) were offered by 21 percent, but only 3 percent plan to add one in 2010. (Some companies offer both an HSA and HRA option.)

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. In 2009, 61 percent of companies are conducting dependent audits.

  • Medical coverage for retirees under age 65 is offered by 23 percent of companies, down from 24 percent in 2008. 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.

Stephen Miller is an online editor/manager for SHRM.

Related Articles:

Curtailing Health Spending, Promoting Wellness, Remain Priorities, SHRM Online Benefits Discipline, March 2009

Use Madison Avenue Methods to Drive Health Behavior Change, SHRM Online Benefits Discipline, March 2009

COBRA Coverage Expansion: HR Action Steps to Take Now, SHRM Online Benefits Discipline, March 2009

Employers Take Closer Look at Who Is Covered Under Their Health Plan, SHRM Online Benefits Discipline, March 2009

Employers' Health Cost Increases to Stay Flat at 6% in 2009, SHRM Online Benefits Discipline, February 2009

Value-Based Insurance Design Sparks Increased Interest, SHRM Online Benefits Discipline, February 2009

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