Employers are not expecting a decline
in the rate of health care cost increases any time soon. That is according to a survey of 573 large employers conducted
by Watson Wyatt Worldwide in conjunction
with the National Business Group on
Health. The survey cited an expected average annual increase of 8 percent.
This news is even more disappointing
when factoring in that the number of
employers offering consumer-directed
health care plans (CDHP) continues to
grow. In the same survey, the number of
companies offering high-deductible health
plans increased from 33 percent in 2006 to
38 percent in 2007.
A bright spot in the survey was the revelation that some firms are beating the odds
and reducing the rate of increase from an
average of 8 percent to 2.5 percent. Watson
Wyatt Worldwide explored how these
firms had gone about achieving that result.
“The best performing companies in the
survey were more likely to implement programs that go beyond employee cost sharing,” says Dean Hatfield, senior benefit
consultant for the Group Healthcare
Practice at Watson Wyatt Worldwide.
“They have involved the use of financial
incentives, effective information delivery,
efficient quality of care, maximum health
and productivity, and decisions based upon
data and metrics.”
Smart Business spoke with Hatfield
about how the best performing companies
are achieving better cost management
results through comprehensive solutions.
What are the best companies doing to curb
the rate of health care cost increases?
One of the most efficient ways for companies to curb their health care trend is by
improving quality. When employers looked at
the outcomes from medical facilities such as
hospitals, they began steering employees
toward hospitals and physicians that specialized in the employees’ needs for procedural or
condition-related treatments. Consequently,
the patients had fewer complications and
lower mortality rates.
Rather than shopping for the lowest rate,
employers looked at the available data and made decisions based upon medical outcomes. Not only were results better, but
costs were lowered.
What other types of data should CEOs look at
to help reduce health care costs?
The best companies looked at the data
surrounding their employees’ health issues,
such as employee absenteeism and the
effect of employee wellness on productivity, to help structure their health programs
and didn’t just focus on the aggregate
cost of their health program.
For example, firms have found that obesity is the cause behind many illnesses and
subsequent rising costs, including lost
time. So now they are doing a better job of
instituting programs that promote behavior changes. They are creating customized
communication pieces tailored to defined
employee segments with relevant and
meaningful messages that teach employees the health conditions that can be
improved or even avoided.
How important is employee education for
achieving cost reduction?
It’s absolutely vital. The survey results
show that most employees don’t understand key terms in their health plans like ‘co-insurance’ or ‘formularies.’ Because
they don’t understand how their health
coverage works or how they might benefit
from selecting cost-effective health care
services, employees are not effective cost
Merely cost-shifting to employees is
clearly not enough. You have to educate
them so they can become better managers
of their own resources and their own
health. The data also show that only about
50 percent of the employees read all of the
materials provided them about their medical coverage and the other 50 percent only
read the enrollment insert or plan changes.
What is the best way to provide information
The survey says that the most effective
way to communicate with employees is by
sending information in printed format to
their homes (69 percent). Other effective
means include providing information in
printed format at work (67 percent), via the
Internet (62 percent) and in face-to-face
meetings (44 percent).
Research is key to making communication messages relevant and meaningful.
Face-to-face education sessions are the
most effective communication method, and
different marketing techniques can maximize the attention spent on health care.
Teaching employees about not just the
cost of care, but the value of changing their
health behavior, is more effective if the
education sessions are live and interactive.
Most employers are focusing on plan
design and cost-sharing. It is effective in
the short run but not in the long run. The
best savings in the long run are being
achieved by providing personalized, tailored programs and resources that inspire
employees to take action; keeping health
improvement behaviors on track; and
boosting individual accountability through
employee education and promotion of best
DEAN HATFIELD, CEBS, is a senior benefit consultant for the
Group Healthcare Practice at Watson Wyatt Worldwide. Reach
him at (415) 733-4100 or [email protected]. For
more information, visit www.watsonwyatt.com.