Benefits and Compensation

Survey Identifies Four Factors that Control Healthcare Cost Increases

A recent survey of 585 businesses identified major growth in companies offering high deductible healthcare plans, and noted four ways to restrain cost increases.

Once upon a time, if you worked for a good company and you got sick, you went to any doctor, hospital, or pharmacy and handed them your health plan card. That … and maybe a five dollar co-pay … was all it took to get all the treatment you needed, hopefully, to live happily ever after.

Well, we all know that fairy tale is over.

Stung by double-digit annual increases in healthcare plan costs, employers have looked to new types of plans, collectively known as Consumer-Driven Health Care (CDHC), to ameliorate the problem. What these plans have in common is that they place greater responsibility on employees to use health services sparingly, and to pay more of the cost when they do.

Now, according to a survey of 585 mid-sized and large companies by the consulting group Watson Wyatt Worldwide and the National Business Group on Health, one of these plans, the combination of high deductible coverage with an attached reimbursement or health savings account, has experienced explosive growth. In 2004, only 7 percent of companies surveyed offered such plans. That number has now increased fourfold to 29 percent, with 33 percent more intending to offer this type of plan in 2007.

Four Healthcare Cost Control Success Factors That Seem to Work

Additionally, the survey identified four factors that seem to hold cost increases down. The companies that implemented these elements at a higher-than-average rate experienced only a 3 percent a year rise in healthcare costs in each of the last 2 years, while their poorer-performing brethren suffered an 11.5 percent per year increase.

The factors were:

  • Focusing on the quality of health care. Companies with this focus were willing to pay a differential to higher quality providers.
  • Offering programs that assist workers in managing their own health care.
  • Using data mining and ROI analysis to make healthcare program decisions.
  • Providing information and incentives to employees to use healthcare services more appropriately.

“The 8.5 percentage-point gap … is very significant,” said Ted Nussbaum of Watson Wyatt, “… the best-performing companies lower cost trends, minimize employee absence, and earn higher rates of employee satisfaction with their programs.”

Helen Darling, president of the National Business Group on Health, added her comment:

“Employers should not focus on employee accountability alone,” Darling said. “When used in combination with promoting quality care, health management, use of data and appropriate use of care, companies are able to achieve significantly lower cost trends.”

Watson Wyatt is offering the survey, titled Delivering on Health Care Consumerism: Strategies for Employer Success: 11th Annual National Business Group on Health/Watson Wyatt Survey Report 2006, for purchase.

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