C-Suite (Still) Looking for Healthcare Rx

December 2, 2003 (PLANSPONSOR.com) - As another year of double-digit health-care cost increases loom, plan sponsors are employing a variety of approaches to deal with the challenge.

A new survey of 650 large US companies by human resources outsourcing and consulting firm Hewitt Associates reveals that those firms can only afford to absorb a 9% increase in health care costs – but anticipate a 14% increase in those costs in 2004. The growing gap has the attention of the so-called “C-suite” – where nearly all (96%) of CEOs and CFOs say they are either critically or significantly concerned with corporate health-care costs. Workers can perhaps find some solace in the knowledge that 91% of those executives say they are similarly concerned with the impact of health-care costs on employees.

One of the hottest strategies over the past two years has been the emergence of “consumer-driven” health programs – programs that seek to encourage a more direct involvement by workers in selecting cost-effective healthcare alternatives (see The Bottom Line: Reining in Costs ). Hewitt’s data found that the most common consumer-driven models currently in use or planned for 2004 are customized design plan, which allows employees to customize their benefit options, levels and contributions for physician, hospital and pharmacy benefits, utilized by 13% of companies surveyed, and health accounts plus high deductibles, which were employed by 12% of the survey respondents.

Additionally, 6% have chosen to implement consumer-driven health plans that combine a health reimbursement account with PPO coverage after a bridged deductible – and another 6% will add that option in 2004.

Consumer “Reports”

Current efforts to control costs and drive consumerism include:

  • 39% – using a coinsurance approach with caps to avoid catastrophic out-of-pocket costs
  • 29% – adopting a low copay for generic and a coinsurance for brand names drugs
  • 25% – supporting a prescription benefit manager’s (PBMs) Web site (see The Online Pharmacy And More ) that includes drug pricing and lower-cost treatments (however, nearly as many employers believe that the current pharmacy benefits delivery model increases their costs (34%) as those who believe it decreases their costs (43%))
  • 24% – promoting Web sites or print materials that list common conditions, treatments, drug prices and effectiveness
  • 23% – implementing step therapy programs

Hewitt’s survey also showed interest in multi-tier hospital coverage networks – networks that allow employees to choose from a variety of hospitals with small, moderate and steeper copays at the point of service. Five percent of employers will have this option in place by 2004, according to the survey.

The average employee contribution for self-coverage will be 23% in 2004, up slightly from 21% this year. Dependent coverage contributions will average 27% next year, compared with 25% in 2003.

Employer respondents say that their primary methods for influencing dependent coverage selection in 2003 and 2004 include:

  • 34% - implementing a higher cost for dependents than employees
  • 25% - providing flexible credits for opting out of coverage
  • 10% - requiring that employees pay an additional amount if working spouses do not accept coverage from their employer
  • 9% - requiring that working spouses elect coverage from their employers.

Whether or not the results bear it out, employer confidence in employees' taking greater responsibility for making health care choices is growing, with more than eight out of ten companies reporting that they are either somewhat or extremely comfortable with employees' ability to evaluate and select health plans (83%) and benefit coverage levels (82%).


Employers do seem to be looking to for some assistance in dealing with spiraling healthcare costs. Nearly half (47%) say that consumers should be allowed to purchase prescription drugs from foreign countries, for example (see Springfield, Mass. Pushes Canadian Drug Order Program ). Also on that "wish list", according to the Hewitt data were:

  • 85% - mandating quality reporting by hospitals and physicians
  • 70% - requiring providers to disclose prices publicly
  • 64% - mandating uniform provider data and payment reporting if long-term savings outweigh costs

More than half of all respondents (58%) say that the federal government should make Medicare available to retirees ages 55 to 64 at their own cost.

Nearly three-fourths of employers will offer condition management programs to their employees in 2004, while more than one in five of those who will have condition/disease management programs in place by 2004 will offer incentives for any employees who participates in wellness or other health-related programs. Ten percent will provide incentives for at-risk individuals to participate in programs or comply with recommended therapies.

Half of all respondents feel that cost incentives should be provided to those who make a reasonable effort to manage their chronic conditions, while one-fourth feel that those not making a reasonable effort to manage their health should pay more.

Copies of the Hewitt survey findings, Health Care Expectations: Future Strategy and Direction, are available by contacting the Information Desk at Hewitt Associates, 100 Half Day Road,,, (847) 295-5000 or infodesk@hewitt.com