Employees Struggle with Health Care Affordability Gap

Risk-averse employees are willing to pay more for predictability in their health care costs

By Stephen Miller Nov 15, 2010

As health care costs continue to significantly outpace the rate of inflation and increases in compensation, an affordability gap is placing increasing pressure on employees and eroding satisfaction with their health plans, according to an employee survey report by consultancy Towers Watson.

The survey, conducted in May and June 2010, elicited responses from full-time U.S. employees. Towers Watsons' analysis looks at the data from 3,099 respondents for a subset of questions concerning employer-provided health care programs.

Higher Costs, Increased Stress

Nearly three in four employees (72 percent) indicated that their employer had asked them to pay more for their health care benefits as employer health care costs for active employees are projected to rise 8.2 percent (after plan changes), to an average annual cost of $10,730 in 2011.

More broadly, employee satisfaction and comfort with health care benefit plans is declining on several fronts:

64 percent of employees are satisfied with their health care plans, down from 69 percent in 2007.

Only 45 percent are satisfied with the cost of their health care plan in 2010, down from 53 percent in 2007.

26 percent believe that health care spending has increased their stress levels.

Predictability Sought

Another sign that higher health care costs are weighing on employees is that many are becoming increasingly risk-averse, a possible side effect of recent economic uncertainty. For example, the number of employees who would pay more for predictable health care costs has doubled since 2009, to 42 percent. Nearly one-third of employees (30 percent) are even willing to get smaller compensation increases today if they could ensure lower, more predictable health care cost increases tomorrow.

“The health care affordability crisis has become much more than an issue of managing costs: It is driving the loss of productivity,” said Harlan Levine, a physician and senior health care consultant with Towers Watson. “Over time, the creation of insurance exchanges and new private coverage options spurred on by health care reform will create further challenges to employer efforts to engage employees as active consumers of health care services and participants in their own health management. As employers rethink their approach to health care, this may be the perfect opportunity to refine those strategies.”

Another View

A survey by Mercer, conducted in May and June 2010, found that 90 percent of U.S. employees who receive employer-provided health coverage said these benefits were as important as getting a salary. Moreover, 83 percent said that the out-of-pocket expenses they pay probably or definitely are worth the cost, up significantly from 73 percent in 2008. “It stands to reason that as a result of the recent global recession, high unemployment and general uncertainty, employees have such positive feelings about their employer-sponsored health plan coverage,” said Suzanne Nolan, a partner in Mercer’s outsourcing business (see the SHRM Online article "Employees value Health Benefits, Skeptical About Health Care Reform.")

Promoting Healthier Behavior

“The growing health care affordability gap is a very real problem that employers must consider as they rethink their total rewards program and approach to health care subsidies,” said Ron Fontanetta, a senior health care consultant with Towers Watson. “The key to future success is a well-designed plan with creative and meaningful consumer and wellness incentives to slow cost inflation and improve employee health and productivity.” In fact, the positioning of incentives is a key focal point of employer health care strategies in 2011.

But survey results highlight the difficulty in making behavior change a reality: The percentage of employees who have not taken any action to reduce their health care costs actually increased from 14 percent in 2007 and 2008 to 21 percent in 2010. Although close to three in five employees (57 percent) are taking better care of themselves, this number has dropped compared to 2009.

In addition, only 11 percent talk to doctors about more affordable treatment options, and just 7 percent look for less expensive health care providers.

Employees: Have you taken any of the following steps to reduce your health care costs?



Tried to take better care of myself



Went to the doctor only for more serious conditions or symptoms



Delayed going to the doctor



Saved additional money in an account that can be used only for medical expenses



Skipped a recommended doctors visit



Used programs offered by my company that help me do things like lose weight, stop smoking etc.



Did not fill or skipped doses of prescribed medications



Talked to the doctor more carefully about affordable treatment options



Looked for less expensive health care providers



Negotiated a lower price with the doctor



None of these



Source: Towers Watson.

Stephen Miller is an online editor/manager for SHRM.​

Job Finder

Find an HR Job Near You
Post a Job


Find the Right Vendor for Your HR Needs

SHRM’s HR Vendor Directory contains over 10,000 companies

Search & Connect