Employers Change Health Benefits to Cut Costs, Alter Behavior

Median health care costs expected to increase 6.5 percent in 2010

By Stephen Miller Mar 1, 2010

A sluggish economy is forcing more U.S. employers to take aggressive measures to control rising health care costs and motivate workers to improve their health, according to a survey by consultancy Towers Watson and the National Business Group on Health (NBGH), an association of large U.S. employers.

The 15th Annual Purchasing value in Health Care Surveywas conducted from November 2009 through January 2010 among 507 U.S. employers with 1,000 or more employees. The survey found that 83 percent of companies have already revamped or plan to revise their health care strategy within the next two years, up from 59 percent in 2009. These moves come at a time when median health cost increases continue at more than twice the rate of inflation. Costs are expected to increase 6.5 percent in 2010, down slightly from 7 percent in 2009.

“The downturn has amplified the pressure on companies to find ways to support effective health management programs under budget constraints,” says Ron Fontanetta, senior consultant at Towers Watson. “For employers, the current environment is a clarion call to adjust their health plan strategy, reassess vendor relationships and aggressively address the challenge to encourage workers to become better advocates for their own health.”

Revamping Health Benefit Programs

Have taken action and plan further action in next two years

Have not taken action but plan to do so in next two years

Have already taken action, no further action planned

No action planned

Revamp health care strategy





Replace ineffective medical plan administrators





Adopt a consumer-driven health plan (CDHP)





Consolidate health and productivity programs with a single vendor or health plan





Increase/add spousal surcharges





Percentages have been rounded.

Source: Towers Watson

Poor Health Habits Raise Costs

Employers continue to be concerned about their workers’ poor health habits. Nearly two-thirds (67 percent) identify employees’ poor health behavior as a top challenge to maintaining affordable benefit coverage. Among the biggest obstacles to changing employees' health habits are:

Lack of employee engagement (identified by 58 percent of employers).

Lack of sufficient financial incentives to encourage participation (31 percent).

Lack of an adequate health management program budget (30 percent).

Employees who are not engaged are those not interested or unwilling to participate in programs designed to change health behaviors. To address this, the survey found, employers increasingly are adopting programs to help employees change their behavior and become better-informed health care consumers. In 2010, more employers plan to:

Offer incentives for employees to complete a health risk appraisal (66 percent).

Offer health coaches (56 percent).

Offer on-site health centers (26 percent).

“Even in tight times, employers will continue to encourage healthy behaviors with financial incentives and other initiatives,” says Ted Nussbaum, senior consultant at Towers Watson. “However, there are challenges to changing employee behavior that extend beyond budget constraints and employer-sponsored programs. Inspiring workers to be actively involved in their own health remains an uphill battle for most companies.”

Vendor Issues

Employers recognize that there is considerable room for improvement with regard to vendor programs designed to change employees' behavior. Specifically:

67 percent of companies feel that vendors fall short with programs designed to drive workers to use health care services more efficiently.

66 percent say vendor programs intended to drive workers to make healthier lifestyle decisions are not effective or only slightly effective.

57 percent consider vendors not at all or only slightly effective at driving health care to high-quality providers.

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

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