Companies Work to Lower Health Care Costs

October 7, 2013 ( – Companies will continue using health and productivity programs in an effort to lower health care costs and keep employees healthy, a survey found.

According to Towers Watson and the National Business Group on Health, employers will have to address lifestyle risk issues, improve employee engagement and articulate a strategy to establish a workplace health culture.

The firms’ 2013/2014 Staying@Work Survey found respondents in nearly all of the countries or regions that participated in the global version of the survey reported the same three lifestyle risks as the biggest work force issues—stress, obesity and lack of physical activity. These risk factors were found to result in increased employee illness, higher medical costs and lost productivity due to unplanned absences and decreased efficiency at work.

Nearly eight in 10 (77%) employers view a lack of employee engagement as the biggest obstacle to changing behavior. Despite offering a variety of health and productivity programs, employers report that actual program participation is low.

“Companies have long maintained that a healthier work force is a more productive work force, and many are considering innovative tactics to improve employee health and well-being,” said Shelly Wolff, senior health care consultant at Towers Watson. “But along with the urgency of health care reform and the coming excise tax, there is a realization that companies need to manage these programs more effectively and encourage employee participation and engagement. An essential part of increasing engagement and success is for companies to link a health and productivity strategy to their overall employee value proposition.”

Incentives and Penalties

The survey found that seven in 10 U.S. companies identify developing a workplace culture where employees are responsible for their health as being necessary and understand its importance as a top priority of their health and productivity programs. Employers are increasing use of financial incentives, specifically penalties and outcome-based incentives, to hold workers more accountable and to improve health.

In 2014, nearly four in 10 (36%) U.S. companies will use penalties such as an increase in premiums and deductibles for individuals who fail to complete the requirements of health management activities—a figure expected to jump to 61% for 2015/2016. Outcome-based incentives that reward or penalize employees based on tobacco use will grow from 54% next year to 71% in 2015/2016. Rewards or penalties for other biometric outcomes—e.g., health-contingent targets such as BMI, blood pressure or cholesterol level—will also increase, from 26% in 2014 to 68% in 2015/2016.

Need for a Strategy

According to the survey, nearly half of U.S. respondents (49%) believe health and productivity programs are essential, and 84% plan to increase support of these programs over the next two years. However, only three in 10 responded that they have effectively communicated a strategy and value proposition.

Driven by the imperative to have a high-performing health care program that is cost-effective, that avoids the 2018 excise tax and encourages a healthy work force, companies are beginning to understand the importance and value of an organized approach. Virtually all employers (94%) plan to articulate a health and productivity strategy with stated objectives in the next three years.

Health Management and Behavioral Changes

In the U.S., highly effective companies—i.e., where employees are more engaged in their health and well-being—have a differential in annual health care costs of more than $1,600 per employee. According to the survey, these companies are:

  • Gaining the commitment of senior leadership;
  • Developing a comprehensive strategy;
  • Implementing employee engagement strategies;
  • Engaging managers as role models;
  • Communicating frequently to employees;
  • Reducing employee stress;
  • Providing easy access to high-quality health care services; and
  • Understanding health and productivity outcomes by establishing metrics.

The survey was conducted between May and July in North America, Latin America, Europe and Asia with a total of 892 employers. In the U.S., Towers Watson and the National Business Group on Health jointly sponsored the survey. Of the 199 participants in the U.S., 59% are public, 22% are private, and 19% are nonprofit or government agencies.

More information about the survey can be found here.