Aggressive Measures Can Cut Health Costs

March 8, 2002 ( - Companies had better start moving aggressively to cut health care costs with help from their employees or they could face a doubling of those costs within five years, a new study found.

The problem is acute: The Watson Wyatt Worldwide study found the median health care costs rose by 14% this year – up from a 10% hike last year. Researchers found that human resource officials who move aggressively on health costs enjoy a slower increase at 12.9%.

Just trying one approach won’t work, the Watson Wyatt researchers warned. Companies have to implement a mix of approaches including:

  • giving employees more control over how their benefit dollars are spent. Nineteen percent of respondents were already taking this step while 43% said they planned to implement it in coming years.
  • The report notes that those who oppose employee-directed health programs fear workers might forgo needed treatments to save money.
  • buying disease management programs separate from the health plan. Five percent already did it; 15% planned it.
  • analyzing benefit options with Return On Investment measures. Eight percent did it; 15% had it in the plans.
  • direct contracting with health providers such as doctors and hospitals. Eight percent said they did it; 11% planned it.

In support of their calls for aggressive health care cost cutting, the Watson Wyatt researchers said that aggressive managers tended to work for financially healthy companies – more than 33% of aggressive managers versus 17% who are more cautious.

Watson Wyatt conducted the survey during November and December of 2001 among almost 300 companies with at least 1,000 workers who collectively provide benefits to ten million workers and dependents.