More employers adopting health management

National Business Group on Health/Watson Wyatt Survey Also
Finds Growing Interest in Health Savings Accounts

With health benefit costs still rising at double-digit rates, more employers are adopting health management and consumer-directed health care programs to help control costs. And some employers keep increases remarkably low by getting employees involved in health care decision making. These are among the major findings in the 10th annual survey of large employers conducted by Watson Wyatt and the National Business Group on Health.

The survey found that health care cost increases moderated this year, from a median increase of 12 percent last year to 10 percent this year. Additionally, more employers are doing a better job budgeting for health costs. Nearly four of 10 employers (38 percent) reported that their costs were below budget last year, nearly double the 20 percent in 2003. Conversely, fewer than one in five respondents (18 percent) were over budget last year, down from 41 percent in 2003. A total of 555 employers with at least 1,000 workers participated in the survey.

Employers are realizing that to get to the root of the health care cost problem, they must take a more active role in managing the health of their employees, says Helen Darling, president of the National Business Group on Health. Programs that focus on managing specific diseases and help workers make lifestyle behavior changes aimed at weight management, exercise and smoking cessation can go a long way toward slowing rising costs over the long term.

Nearly seven of ten respondents (69 percent) are using disease management programs through a health plan this year, a 50 percent increase over last year. Similarly, the number of employers adopting lifestyle behavior change through a health plan doubled to 40 percent this year. Additionally, 32 percent offer obesity reduction programs, compared with just 14 percent in 2004.

The survey found that employers that are doing the best job of controlling health care cost trends have a much greater focus on health management than those with higher cost increases. They also tend to set their health care strategy on quantitative analysis and rely on evidence to confirm their approach to health care benefits.

The best-performing companies - those with a two-year average cost increase in the lowest quartile - kept cost increases to a remarkably low 5 percent over a two-year period. Conversely, poor-performing companies - those with a two-year average cost increase in the highest quartile - experienced a 15 percent increase.

This yearís best-performing companies are succeeding across the board - not only doing a better job at managing costs, but also improving employee satisfaction and increasing individual accountability, says Ted Chien, global director of group and health care consulting at Watson Wyatt. These successful companies are more willing to try different approaches and are much more likely to be early adopters of many tactics. They also hold off drawing conclusions about their effectiveness until there is evidence of results.

HSAs Gaining Momentum
The survey also found that 8 percent of employers now offer health savings accounts (HSAs), and another 18 percent plan to offer them in 2006. Additionally, 47 percent are considering offering the accounts. Established in December 2003 as part of Medicare reform legislation, HSAs allow enrollees to carry unused account balances forward from one year to the next and retain ownership of the funds after they leave their place of employment.

HSAs and high-deductible health plans (HDHPs) are grabbing attention partly because they are new and they attack some of the drivers of health care costs - frequent use of health services paid for by others. HSAs and HDHPs, in contrast, provide incentives for employees to become more active in their health care decision making, says Darling. However, despite the advantages of HSAs, employers have some concerns and are waiting to see whether HSAs will help lower overall health care costs.

Three out of four employers (75 percent) agree that HSAs are effective vehicles to engage employees more in managing their health; 60 percent also agree that HSAs will expand options for employees. However, about half of the respondents (49 percent) arenít sure whether HSAs will help lower health care costs.

While HSAs offer great promise, employers cannot rely solely on HSAs and high-deductible health plans to solve health care cost problems, says Chien. Employers also need to provide employees with information, tools, financial incentives and lifestyle behavior programs. Employers that adopt this type of broad consumer-directed approach will be better positioned to effectively engage employees and control costs.

Other survey findings include:
Employers appear somewhat more willing than in previous years to absorb health cost increases rather than pass them along to employees. Forty-one percent say they are willing to absorb costs in 2005, compared with 29 percent last year.

A growing number of employers are changing their relationships with health plans. Nearly one-half of employers (49 percent) have moved to a national health plan from a regional one, up from 29 percent in 2004.

The number of employers providing employees with information on specific health issues (71 percent) nearly doubled between 2003 and 2005 while the number of employers providing employees with provider quality information more than doubled.

Distributed by HRmarketer.com