More employers share medical pain
04/15/2003
Jill Elswick
Employee Benefit News As health care cost trends worsened for the third year in a row, financially strapped employers last year responded by passing on more costs to employees, providing targeted health interventions, and reducing or eliminating coverage. These findings of the Eighth Annual Washington Business Group on Health/Watson Wyatt Survey were unveiled at WBGH's annual summit on employer-sponsored health care in March. The 434 employers surveyed in the final months of 2002 each have 1,000 or more employees and represent all major industrial sectors and U.S. geographic regions. "The survey found that health care costs, no surprise, are out of control and that companies are less willing and less able to absorb the increases," says Helen Darling, president of WBGH. "The survey also found that employers lack confidence in their ability to manage cost and quality, and are unsure about what the future of benefits holds for them." Only 32% of employers reported being willing or able to absorb cost increases, down from 52% in 2000. After three years in the 14-15% range, the average health care cost trend is expected to remain as high in coming years, says Darling. Just 18% of employers said they feel "very confident" in their ability to manage health care costs in the next year. Yet the survey also identified a slim subset of "high performers" that managed to keep health costs under budget without sacrificing employee satisfaction. These companies tend to take a long-term view of health benefits and a phased approach to implementing changes, particularly in the area of increasing "consumerism" in their plans. Cost sharing emphasized Four tactics to control rising health care costs showed marked increases from 2001 to 2002. - Eighty percent of survey respondents in 2002 said they plan to increase employee co-pays and cost-sharing, up from 65% in 2001.
- Eighty-three percent said they would increase employee premium contributions, up from 72% a year earlier.
- Targeted interventions to help employees manage specific health conditions gained favor among 56% of survey respondents, up from 40%.
- Thirty-three percent of employers said they would reduce or eliminate coverage, up from 22%.
"Three of those four tactics really have a lot to do with dialing back on the level of contribution on the part of the employer," notes Maureen Cotter, global practice director for Watson Wyatt's Group and Health Care Practice. Vendor and supply chain management activities remain popular but "insufficient" tactics, and "in this environment, with a lack of any solution you can drop into your environment, it's really been basic blocking and tackling and just cost-shifting to employees." In the upcoming year, however, more surveyed companies are joining the broad "movement toward consumerism," says Cotter. - Thirty-three percent say they will "emphasize consumerism" in their health plans, joining 24% that already do.
- Seventeen percent plan to provide employees with information on health care quality, while 16% currently do this.
- In addition to the 6% of companies that already offer a health reimbursement account in conjunction with a high-deductible health plan, 14% plan to do so this year.
- While just 4% of employers provide employees with information on unit prices of health care services, another 10% plan to.
These actions "represent big jumps forward in terms of companies planning to take on new activities, not incremental increases," observes Cotter. Yet only 3% of survey respondents said they were "very confident" consumer-oriented solutions would help control health costs. Just 14% expressed the same level of optimism for improving employee involvement in health plans. In a particularly stunning finding, only 43% of employers reported being "very confident" they would still have the ability to provide health benefits 10 years from now. "If this were a consumer confidence rating, it would probably be at an all-time low," says Cotter. "Confidence is so low, and the root cause issues are so severe, that I think employers, for the first time, are seriously questioning whether or not they'll be in the game long-term." High vs. low performers Roughly 45% of survey respondents experienced health care costs higher than they had budgeted for. Forty-one percent came in at budget, while 13% achieved costs below budget. Survey analysts separated out the "high performers" from the "low performers" relative to health care budgets. High performers represent companies that met or came in below their health care budget last year and expect this year's increases to be around 10%, among the lowest. Roughly 21% of survey respondents fall into the category of high performers. Sixteen percent of respondents, in contrast, are low performers, whose costs came in over budget for 2002 and who expect the highest cost increases for 2003 - about 21%. "Not only are high-performing companies achieving lower trends than the overall average of 15%, but they're really beating the trend by a significant margin," observes Cotter. "And when you look at the difference between high performers and low performers, low performers have health care cost trends double those of the high performers: 21% versus 10%. In the competitive business environment we're in, that can make a huge difference in profit margins and operating costs." High performers, moreover, were less likely to report that quality of care or employee satisfaction suffered as a result of beating cost trends. Many actually reported improvements on these counts. Ninety-two percent of high performers, for example, felt that employee understanding of the problem of rising health care costs had remained the same or improved. "These companies have been very open in communicating with their employees about what the deal is, why it's changing, why health care costs is expensive, what employees can do about it, and what the company is doing about it," says Cotter. "It really takes that kind of open communication and giving people an honest answer about what the future is likely to hold and what they need to do as a result." Change is not a "product" High performers take a different approach to health care consumerism than do low performers, says Cotter. "They view consumerism as a change management process, not as a product. It's changing behavior over the long haul, and changing human behavior is a tough thing to do." Greater cost sharing at the point of care, in the form of higher co-payments or coinsurance arrangements, distinguishes the high performers' approach to consumerism, says Cotter. Low performers, on the other hand, tend to simply raise premiums. The high performers "start with financial tension and giving people a reason to care," she notes. They follow up financial incentives with education and decision support tools to help consumers make good choices. "In contrast, the low performers did more of their cost-sharing through premium increases. That can help you control costs, because you know what you're going to get out of the payroll deductions, but you lose every opportunity [to change behavior at the point of care]. You capture their attention at open enrollment, but what about the other 364 days of the year?" Many low performers also provided employees with health education and decision support tools, assuming they would become better consumers absent strong financial incentives. "Guess what? It doesn't happen," says Cotter. The "build it and they will come" approach, she cautions, simply doesn't work. Low performers, likewise, are likely to "drop in a consumer-driven health plan and hope that it's the solution," she says. "They're counting on the product to do what really requires a process and putting in that financial tension at the point of care, which they have not done yet." High performers, moreover, tend to have a longer time horizon for strategic planning. "They don't view this as an annual cycle. In this environment, if you stay in that annual cycle, you'll get creamed. You have to take a longer view of what it will take to bring about sustained change, what's in your span of control, and what you can do." Ultimately, says Cotter, employers should focus their attention on how they want health care to be delivered and financed in the United States. "We all know the status quo is untenable. It isn't very likely that there will be a government takeover of health care. So what is it we want to work toward? And how should this work? That will provide some context and short-term actions that you can take, and we can build a path that will get you there over time." - J.E.
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