Increase in Health Care Costs Expected to Decrease

February 15, 2006 ( - For the fourth consecutive year, the rate of increase in the cost of providing health care benefits to US workers slowed as companies stepped up their efforts to control rising costs, according to the forthcoming results of a survey conducted by Watson Wyatt Worldwide and the National Business Group on Health.

Employers expect health care benefit costs to increase a median 8% this year, down from the 10% increase they expected in 2005, according to a news release on the survey. Eighty-six percent also said their health care benefit costs came in at or below budget in 2005. Employers expect costs to increase about 8% again in 2007.

As for strategies to better manage their health care benefit programs, 32% of the survey respondents said that in the next one to two years they will start encouraging workers to use health care services wisely while 30% said they plan to increase accountability of employees to manage their own health. About one-fourth of employers plan to focus on ways to improve their workers’ health.

“Despite slower increases and better budgeting, health care costs remain a financial burden for most US employers,” said Ted Nussbaum, Watson Wyatt’sdirector of group and health care consulting in North America, in the release. “Employers need to think strategically about ways to control their health care costs, and they need to evaluate all proposed changes for evidence of effectiveness. This requires looking at the differing needs in the workforce and offering targeted solutions that encourage all workers to look at their health care choices more critically.”

Employers (47%) are currently auditing or reviewing who is eligible and who enrolls in their health care plans, or plan to begin doing so this year, in order to determine the best cost management strategies. Forty-two percent said they would absorb any cost increases rather than pass them on to workers.

The 11th annual Watson Wyatt/National Business Group on Health Survey is based on responses from 585 large employers that collectively employ more than 13 million full-time workers. Copies of the survey report will be available in mid-March.