Consumers know best

Health care cost increases are rising at
twice the rate of inflation for many
companies, but not all. Watson Wyatt’s 13th Annual National Business Group on
Health Study regarding employer-sponsored
health care benefit programs reveals that the
median two-year health care cost increase
(for 2007 and expected for 2008) for all 453
surveyed employers in 2007 is 6.2 percent.
While the poorest performing companies
have a cost increase of 10 percent among the
survey’s participants, the best performing
companies experienced a two-year median
cost increase of only 1 percent. What’s their
secret? Consumer-directed health plans
(CDHP) and programs that encourage employees to take control of their health.

“Employers can sustain a low cost increase
trend by combining programs such as
CDHPs with effective employee communication and appropriate financial incentives,”
says Moji Saavedra, consultant for the Group
and Health Care Practice at Watson Wyatt
Worldwide. “Our research definitely shows
that skeptics who are standing by on the sidelines and not adopting these strategies are
missing out on significant cost savings.”

Smart Business spoke with Saavedra
about how companies can benefit by adopting a consumer-oriented health care model.

What are other key findings from the survey?

What makes the survey results so significant is that the data continue to reinforce the
findings from prior studies and the results are
pretty compelling in terms of documented
cost increase stabilization. The information
shows that both CDHP adoption and enrollment rates are increasing; 47 percent of companies will offer a CDHP in 2008, which is up
from 39 percent in 2007, and 42 percent of the
companies offering a CDHP now have at
least 20 percent of their employees enrolled
in the plan. This trend is producing more stability in cost increases. In addition, the best
performing companies are offering employees lower premiums for choosing CDHP
plans, which is driving increased enrollment.

Why are CDHPs so effective?

A CDHP usually features a high deductible,
such as $1,200 for employee-only coverage, along with a personal savings account that
can be used to pay a portion of the medical
expenses not covered by the plan. But, it’s
not just the higher deductible that’s generating the cost increase control; the key is that
the plans encourage employees to take
responsibility for their own health and
become better health care consumers by
scrutinizing the treatment proposed by
providers and making better informed
choices. Many employers provide 100 percent coverage for preventive care before deductibles are met and go even further to offer
financial incentives that encourage employees to proactively manage their health.

Are there compatible resources that drive
CDHP effectiveness?

If employers want to realize the savings
from a CDHP, it’s vital that they provide
employees with the tools they need to be
accountable for their own well-being.
Offering a high deductible plan without the
other components just isn’t as effective — it’s
like giving someone with no driving experience a car but no driving lessons.

Your first goal is to have employees maintain their health, and your second goal is to have those with chronic diseases manage
their conditions. CDHP companies offer
high-performance networks or tiered provider networks, based on price and quality,
and online quality comparison tools that
direct employees to high-quality providers.
One of the interesting findings in this year’s
survey was the increase in employers that
offer on-site health centers, which help coordinate care and promote greater productivity.

The bow that ties up the consumer-directed
package is effective communication. The
best performing companies are clearly communicating goals, benefits, program information and educational resources to their
employees through an ongoing communications program that uses multiple mediums.

Are financial incentives effective?

All incentives are effective, and they are a
vital component to a results-driven consumer-oriented health care model. Consider
offering incentives for smoking cessation
and weight management programs or cholesterol reduction plans. The incentives can
be customized to fit the culture of each company, so whether you structure the incentive
as a contest or offer cash or gift cards for
everyone who achieves his or her goal, there
is data to show that they are all effective.

What else do you suggest?

Use data to document your return on
investment. Certainly, you want to begin by
measuring your internal rate of return as you
migrate toward a consumer-oriented health
model, but also consider benchmarking
against other companies by sourcing information from data warehouses. You’ll be able
to compare your company’s key metrics,
such as CDHP employee adoption rates, and
expose where your savings opportunities
might lie. The data now exist to prove that
consumers can effectively manage their own
health care when given the right tools and
incentives. So CEOs should pay attention to
the results because this might just be the long
awaited health care cost management tool
they’ve been seeking.

MOJI SAAVEDRA is a consultant for the Group and Health Care Practice at Watson Wyatt Worldwide, San Francisco. Reach her at (415)
733-4210 or [email protected].