Press Releases

Many Employers Lack Confidence to Manage Costs Although Some Are Successfully Minimizing Increases

WASHINGTON, D.C., March 6, 2003 – Despite significant increases over the past few years, health care benefit costs escalated even more than U.S. employers had projected in their budgets last year. And with few expressing confidence in their ability to control costs, most large employers are now resorting to traditional cost-sharing and other cost-control tactics, according to an annual survey report released today by Watson Wyatt Worldwide and the Washington Business Group on Health (WBGH).

The Eighth Annual Watson Wyatt/WBGH Survey found that nearly half (45 percent) of the employers surveyed reported that their health care costs exceeded their budget in 2002. Furthermore, health care costs are expected to jump another 15 percent this year, and fewer employers say they are able or willing to absorb these increases (32% in 2002 versus 52% in 2000). A total of 434 large employers representing more than seven million workers participated in the survey.

“Health care costs are hitting companies’ bottom lines hard, and the situation appears to be getting worse, not better,” said Maureen Cotter, Global Group and Health Care Practice Director at Watson Wyatt. “These rising costs are impacting companies’ balance sheets, eroding employee satisfaction and forcing benefit managers to explore new approaches to controlling costs. Unfortunately, for most employers, relief is nowhere in sight.”

According to the survey, one out of four employers (25 percent) said they are not at all or not very confident in their ability to manage costs, while 57 percent said they are just somewhat confident. Only 18 percent expressed strong confidence in their ability to control costs.

“With companies’ costs increasing even higher than anticipated, and little confidence they can do much to stem the rising tide, most employers are relying on short-term, cost-sharing tactics, partly to make up for not sharing cost increases during the bubble economy when recruiting and retaining employees were employers’ highest priorities,” said Helen Darling, President of the WBGH. “About eight of ten employers plan to increase employee copays and/or premium contributions, while one third plans to reduce health care coverage.”

Some Companies Beating the Trend

About 20 percent of the surveyed companies successfully met or came in below their health care budget last year and expect this year’s increases to be among the lowest – about 10 percent. These “high performing” companies also report that quality of care and employee satisfaction stayed the same or improved as a result of changes they made to their health benefits programs.

“High performing companies are achieving significant, measurable results with their health care costs and are laying a solid foundation for a different future,” said Ms. Darling. “They have gained their competitive advantage because of the way they view health care, communicate with workers, respond to the environment and plan for the future.”

The survey report details the efforts of the high performing companies and suggests their techniques and tools that may help other organizations in the battle against rising health costs. One key difference found among high performing companies is their staged approach toward health care consumerism.

“These companies view consumerism as a process and are increasing their use of cost sharing at the point of care to encourage employees to be better health care consumers,” said Ms. Cotter. “Low performing companies are also interested in consumerism, but instead emphasize premium increases. They also seem to view consumerism as a ‘product,’ not a longer term process.”

The report also found that high performing companies are more likely to use longer planning cycles, consider workforce demographics when setting strategy, emphasize employee self-service, carve out disease management and use targeted interventions.

Copies of the survey report, “Creating a Sustainable Health Care Program” are available by clicking here.

About Watson Wyatt Worldwide

Watson Wyatt & Company, the primary subsidiary of Watson Wyatt & Company Holdings (NYSE: WW), is an international human capital consulting firm that provides services in the areas of employee benefits, human resources technologies and human capital strategies. The firm is headquartered in Washington, D.C., and has more than 4,200 associates in 62 offices in the Americas and Asia-Pacific. Together with Watson Wyatt LLP, a leading European-based consulting partnership, the firm operates globally as Watson Wyatt Worldwide. Watson Wyatt Worldwide has more than 6,300 associates in 89 offices in 30 countries.

About Washington Business Group on Health

The Washington Business Group on Health (WBGH), representing 165 large employers, is the nation's only non-profit organization devoted exclusively to finding innovative and forward-thinking solutions to the nation's most important health care and related benefits issues. The Business Group also supports its members in the areas of disability, health/productivity, related paid time off and work/life balance issues. WBGH members, typically Fortune 500 and large public sector employers, provide health coverage for more than 39 million U.S. workers, retirees and their families.

Media Contacts

Ed Emerman, 609-452-5967, eemerman@eaglepr.com
Meredith Mazza, 202-715-7578, Meredith.Mazza@watsonwyatt.com