Employers Concerned About Mounting Health Costs

December 17, 2001 (PLANSPONSOR.com) - A new study conducted by Hewitt Associates found that employers are concerned about the negative business impact of health care costs, interested in emerging consumer choice models and uncertain about the impact of pending legislation.

The survey of more than 700 US organizations found that with double-digit health care cost increases and no clear solutions on the horizon, employers are extremely concerned about the current health care environment.

For example, half of the survey participants said that the maximum added annual cost they can absorb over the next five years for health care benefits is 8% or less. Still, companies are expecting to receive annual health care cost increases of 13% to 14% over the next five years, leaving a 5 to 6 percentage point gap between what employers report that they can afford to absorb and what they expect.

Also, nearly all employers (99%) reported being “significantly or critically” concerned about health care costs. Seventy-five percent were concerned that employee dissatisfaction with health care benefits was impacting attraction, retention and engagement. Sixty-eight percent of the companies reported being concerned about health care quality and productivity issues, while 61% were monitoring liability and regulatory issues. Sixty percent were concerned about benefits delivery and administration problems.

Cost Control Strategies

  • 43% of employers’ primary methods for controlling health care costs included increasing employee premium contributions
  • 37% implemented employee plan design cost sharing
  • 47% of the respondents were moderately interested in employing condition/disease management programs
  • 37% were considering moving to different health plans
  • 36% were considering inputting new delivery systems and purchasing models.

However, while companies demonstrated apprehension about health care costs, they recognized the importance of health care benefits to employees in their total compensation package and employment decisions.

Other findings:

  • 96% of employers expected the current Patients’ Bill of Rights proposals to create higher health care benefit costs
  • 95% expected the bill to increase employee cost sharing while 80% expected it to reduce the number of employees with access to health care benefits due to increased employer liability.
  • 80% of the respondents were interested in emerging health care models it they reduced the total cost of health care benefits or they substantially reduced out-of-pocket costs by encouraging employees to go to the most cost-efficient providers with high quality scores.
  • 49% of organizations did not require health plans to be accredited, when evaluating health plans.