Purchasing Value in Health Care

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15th Annual National Business Group on Health/Towers Watson Employer Survey

Raising the Bar on Health Care: Moving Beyond Incremental Change

Amid heightened cost pressures brought about by the prolonged economic downturn, companies are assessing their health plan programs to control costs and build healthier and more productive workforces.  Despite their efforts, however, employers remain frustrated by employees’ poor health habits and the difficulty in motivating behavior change. Additionally, they are uncertain about the potential for health care reform legislation to increase their financial and administrative burdens.

Results from the 15th Annual National Business Group on Health/Towers Watson Employer Survey on Purchasing Value in Health Care find that companies are taking aggressive actions to overcome these obstacles but their results vary widely. The most successful companies are building a record of consistent performance that uses a combination of tactics – appropriate financial incentives, effective communication, health and productivity programs, metrics and initiatives to improve quality – to hold the line on cost increases while engaging employees to improve their health habits. The health plan strategies set by these consistent performers offer valuable guidance as companies wrestle with year-after-year higher health care costs at a time when they can least afford it.

Key Findings

• Sharply rising cost curve stabilizes. Health care costs increased 7% in 2009, compared with 6% in 2008, a pace significantly above the historic rate of inflation. Cost trends are expected to be 6.5% in 2010.

• Best and consistent performers flatten trend. Median cost trends over the last two years for employers with the lowest health care costs (our best performers) was 0.3%, compared with 6.5% for all respondents. The median trend for employers that have maintained cost increases at or below the NBGH/TW median for the past four years (our consistent performers) was 2.1%, compared with 6.8% for all respondents.

• Employers resist significantly greater cost shifting. Even in this difficult economy, employers do not look to be shifting the bulk of cost increases to employees. On average, employees paid 20% of total premium costs in 2009. Employees’ share of premiums will increase slightly to 21% in 2010.

• Employers are frustrated with low levels of employee engagement. Employees’ lack of interest in or reluctance to participate in health and wellness programs is the No. 1 obstacle to changing health behaviors. Further, nearly two-thirds of respondents say the biggest challenge to maintaining affordable health care coverage is employees’ poor health habits.

• Employers take action. Persistently high health care costs have motivated many employers to make significant changes to their health care programs. In total, 83% of companies have or plan to change their strategy compared to 59% in 2009.

• Companies continue to invest in the health of their employees. Ninety-three percent of companies have no plans to eliminate their health promotion programs, and 83% expect to continue with their existing strategy and will not delay or cancel plans to add new health and productivity program offerings.

• Employers consider raising the bar on financial incentives. As companies struggle with low levels of employee engagement and face limited budgets for financial incentives, there is growing interest among employers to impose tougher requirements for members to receive financial incentives around health engagement activities.

• CDHPs become more popular. Today, 54% of companies have a consumer-directed health plan (CDHP) in place, with another 7% of respondents planning to add one by 2011. Total-replacement CDHPs increased to 7.6% compared with 5.4% last year — an increase of more than 40%.