Press Releases

WASHINGTON, March 11, 2004 – Enrollment in consumer-directed health plans will continue to grow in 2004 as employers search for innovative ways to control double-digit increases in health care benefit costs, according to a new study by the National Business Group on Health and Watson Wyatt Worldwide.

The establishment of Health Savings Accounts (HSAs) under the new Medicare law should also contribute to the implementation of high-deductible health plans. HSAs can be paired with high-deductible health plans to encourage employees to become more price sensitive when purchasing health care.

The survey results indicate that enrollment in consumer-directed health plans will grow to 478,000 in 2004, up from 169,000 in 2003. Nearly one-third (32 percent) of large companies expect to offer a consumer-directed health plan to workers next year, compared to 21 percent that currently offer such a plan. However, few employers offer them as the only option to their employees. A total of 159 large companies and 9 primary health plans providing consumer-directed health plans participated in the survey.

“We continue to hear from employers that they need to get their workers to take greater responsibility for making health care decisions if they are to be successful at reducing health care costs,” said Helen Darling, president of the National Business Group on Health, an association of 203 public and private sector employers.

Consumer-directed health plans allow organizations to give their workers greater flexibility in making decisions about their health care benefits coverage. Most plans include cost-sharing provisions, high deductibles, a health reimbursement account (HRA) or health savings account (HSA), and tools and resources to help workers become smarter health care consumers.

“With no apparent end to rising health care benefit costs on the horizon, employers have been aggressively looking at new ways of controlling costs,” said Ted Chien, global director of group benefits and health care consulting at Watson Wyatt. “Consumer-directed health plans appear to be drawing the most attention, as many employers believe they must increase individual accountability in order to put the brakes on rising costs.”

Although costs are primarily driving increased interest in consumer-directed health plans, employers cited various reasons for implementing a plan. One out of four (24 percent) respondents cited their confidence that a consumer-directed health plan would reduce overall health plan costs as their primary reason for offering a plan. Slightly fewer (22 percent) said increasing employees’ price sensitivity to health care decisions led them to implement a plan.

Most employers (76 percent) who offer a plan said employee enrollment in the first year of the program was either at or above the expected level. The remaining 24 percent experienced lower than expected enrollment levels. However, first-year enrollment levels, ranging from 1 percent to a high of 33 percent, were low relative to enrollment in traditional plans. The survey found that how well the plan was communicated was a primary determinant of enrollment levels. “Clearly, employers can introduce these plans with greater success if they communicate them effectively,” said Darling.

The survey also asked companies without consumer-directed health plans why they have not yet adopted one. Nearly three out of ten (29 percent) said there isn’t enough experience with these types of plans to demonstrate their effectiveness, while 20 percent did not think these plans would effectively manage costs.

"But with the creation of Health Savings Accounts, employers should take the time now to determine whether a consumer-directed health plan is right for their organization," said Chien. “HSAs may be the added ingredient that makes consumer-directed plans right for more organizations.”

About the Institute on Health Care Costs and Solutions of the National Business Group on Health

The Institute on Health Care Costs and Solutions was established in November 2001 by the National Business Group on Health, formerly the Washington Business Group on Health, to provide an intense focus on finding effective solutions to the health care benefits costs problems of large employers. The National Business Group on Health is the national voice of large employers dedicated to finding innovative and forward-thinking solutions to the nation’s most important health care issues. The Business Group’s members are 203 of the nation’s largest and most innovative private and public sector employers and provide health care coverage for more than 40 million U.S. workers, retirees, and their families. The Business Group also supports its members in the areas of disability, health/productivity, related paid time off and work/life balance issues.

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 capital strategies and related technology solutions. The firm is headquartered in Washington, D.C., and has 3,900 associates in 61 offices in the Americas and Asia-Pacific. Together with Watson Wyatt LLP, a leading Europe-based consulting partnership, the firm operates globally as Watson Wyatt Worldwide. Watson Wyatt Worldwide has more than 6,000 associates in 89 offices in 30 countries.

Contact

Ed Emerman, 609-452-5967, eemerman@eaglepr.com