Companies that Actively Manage Health Plans Enjoy Lower Cost Increases

September 28, 2007 (PLANSPONSOR.com) - New data from Towers Perrin indicates companies that take an active role in managing their health care benefit programs will see lower cost increases in 2008 than companies who do not.

A press release about Towers Perrin's annual Health Care Cost Survey says "high-performing companies" will see annual per-employee costs of about $1,500 less than low performers in 2008. While nearly a quarter of the survey respondents continue to struggle with double-digit cost increases, nearly half of the high performers are managing to get their increases much closer to the medical CPI of about 4%. Among high performers, 45% have cost increases of 5% or less.

Employees at high-performing companies will pay significantly less than employees at low-performing companies - approximately $1,836 per year (on average) versus the $2,256 employees at low-performing companies will pay in 2008.

Towers Perrin divided respondents into three categories - low-performing, average-performing and high-performing companies. Performance designations are based on relative costs and cost increases, as well as whether an organization is meeting its health benefit objectives in such areas as efficient purchasing, employee engagement, and managing health risks in the employee population.

High-performing companies are not just shifting costs to their employees to keep their costs low, but are employing a broad range of tactics and strategies to hold costs down for both the company and employees, according to the release, including:

• Commitment to employees - High-performing companies support employees' ability to make sound health care decisions, taking steps to motivate employees to manage their health care purchases responsibly and working to manage health risks and conditions in the employee population overall.
• Managing by measuring - High performers are far more rigorous than low performers in developing and documenting their health care strategies. The vast majority of high-performing companies conduct extensive measurement of program costs versus less than half of the low-performing group.
• Ensuring critical success factors are in place - While the 2008 data shows all companies are doing more than ever to ensure that critical success factors such as senior leadership involvement, support from managers and supervisors, and disciplined execution processes are in place, high-performing companies are much more committed to these program pillars.
• Increasing accountability - High-performing companies design their programs to make the true costs of care visible to employees, and hold employees accountable for the decisions they make at the point of care using, for example, coinsurance rather than copays to share costs with employees
• Engaging employees - High-performing companies require employees to be more accountable for their decisions, and take steps to help employees do that by expanding communication initiatives and providing a variety of tools and resources to support employee awareness, understanding, and action.
• Building a culture of health - High performers are much more likely to say they are committed to building a culture of health in their organizations and to report that their employee education efforts are succeeding. A majority of the high performers say employees accept their roles and responsibilities under their health plan, are comfortable with the level of risk under the plan, and understand and use decision support tools.