Hewitt: Health Cost Hikes Drive Employers to Attack Root Causes

January 10, 2005 (PLANSPONSOR.com) - As the cost of workplace health-care continues spiraling, employers are increasingly relying on more direct cost-cutting methods than the traditional step of shifting health expenses to workers, a Hewitt Associates survey found.

That has resulted in continued emphasis on consumer-driven health plans and other direct steps to get workers to make the most cost-effective health buying decisions possible in an effort to further close the gap between an expected 12% expected increase and the 8% many say they can afford, according to a Hewitt news release. In fact, the survey shows some companies (7%) are shifting responsibility for health care strategy to finance and purchasing executives, a responsibility previously held by human resources.

“Increasingly, companies are recognizing that incremental changes are insufficient to attack the health care cost crisis, so they are moving beyond the more common methods for controlling costs to create more sustained and systematic changes,” said Jack Bruner, Hewitt national health care practice leader, in the news release.

“Employers are looking to tackle the root causes of inflation through consumer-driven plans, employee education, influencing positive employee behavior changes through condition management and wellness programs, and improving the amount and quality of data available on health care costs and quality,” Bruner continued. “To support needed behavior changes, companies continue to invest heavily in the decision support tools, communication and education that will result in better outcomes for employees, their families and their employers. Clearly, the message is that we’re all in this together and only by working together can we keep costs in check.”

The most common consumer-driven models are health account plus high-deductible coverage (used by 17% of employers), multi-tier networks (6%), defined contribution (5%) and customized design (4%). According to the survey, consumer-driven models are expected to enjoy lower increases than traditional PPO, POS and HMOs and the build-your-own/customized design option is expected to have the lowest cost hike at 7%. Employers are most aggressively encouraging enrollment in health account plus high-deductible coverage (73%) and customized design plans (63%), the survey found.

Few Firms Offering HSAs

Hewitt’s survey finds that most employers are not yet offering Health Savings Accounts (HSAs). Some 57% of employers are considering them, but only 3% plan to provide access and contributions for active employees in 2005. Slightly less than 2% will offer HSA access and contributions for retirees in 2005.

The number of companies (83%) using condition management programs has grown significantly in the past year from 73% in 2004. Forty-nine percent of companies profile chronic conditions prevalent in their workforce (up from 42%), 30% offer incentives to encourage employee participation in wellness programs (up from 21%) and 27% measure the health and productivity impact of disease management programs (up from 22%). Employers are also addressing the adverse effects of obesity, with 64% providing coverage for bariatric surgery and 56% offering weight management programs.

Employers are also looking to the government for help in this area, with 85% indicating that the government should mandate quality reporting. Roughly 70% believe the government should require that providers disclose prices publicly and mandate uniform provider data and payment reporting procedures.

Other findings include:

  • In 2005, the average contribution will be 22% of premium for employees and 26% for dependents. Twenty-one percent of employers will differentiate employee health care contributions based on pay in 2005 (up from 18% last year).
  • Employers are influencing employees’ choices by implementing higher cost sharing for dependents (31%), providing flexible credits for opting out of coverage (24%), requiring employees to pay an additional amount if working spouses do not accept coverage from their employer (7%) and requiring that working spouses elect coverage from their employer (8%).
  • Employers’ efforts to control costs and increase consumerism include three-tier design (77%), coinsurance (45%), step therapy (27%), mandatory generics (25%), mandatory mail order (22%) and therapeutic MAC/reverse copay (16%).

In addition to helping with transparency, roughly three-fourths of employers are looking to the government to restrict malpractice awards, restrict patent extensions for brand name drugs and allow employees to access their flexible spending accounts (FSAs) before HSAs to enable savings for retirement coverage. More than half feel that the government should make Medicare available to pre-65 retirees at their own cost and allow US consumers to purchase drugs from foreign countries.

Copies of the Hewitt survey, Health Care Expectations: Future Strategy and Direction, will be available through the Hewitt Information Desk in February 2005 at (847) 295-5000 or infodesk@hewitt.com .

Hewitt’s survey covered more than 500 major US employers covering more than six million employees and family members.