Press Releases

Regulations, Focus on Cost Control Will Drive Change

WASHINGTON, December 28, 2006 – Employees will continue to pick up more responsibility for choosing and financing their benefits in 2007 as companies address new regulations and focus on controlling costs, Watson Wyatt Worldwide, a leading global consulting firm, predicts.

Health care benefit trends that Watson Wyatt foresees in 2007 include:

• Increased focus on high-deductible health plans (HDHPs) coupled with a reimbursement arrangement (e.g., health savings accounts).  One-third of large employers surveyed by Watson Wyatt plan to incorporate an HDHP with a reimbursement account in 2007. However, few employers appear to be completely replacing their current plans with an HDHP.
• More benefits information and tools online.  Web-based systems allow employees to model the best choices for them, and many allow plan participants to pick the best provider by reviewing online report cards grading the quality of care.
• Moving beyond mandatory generic prescription drug plans. As more popular prescription drugs come off patent in the next three years and their prices are reduced, employers will loosen their requirements that employees use generic drugs whenever possible. 
• Greater integration between health care and absence management programs. Coordinating such programs will grow in popularity as employers seek to improve employee health and productivity.
• More on-site clinics in the workplace. To ease access to appropriate health care, more and more companies will open on-site clinics.

“The move to consumer-oriented health care programs will continue, and it will evolve to include more than just high-deductible health plans and health savings accounts,” said Ted Nussbaum, director of group and health care consulting at Watson Wyatt.  “Employers will take these efforts to the next level by targeting strategies at specific segments of health-care users and using data on provider quality to help employees effectively control health care costs.”

Watson Wyatt also anticipates the following retirement plan trends:

• Plan design assessments.  As the Pension Protection Act (PPA) and pension accounting rules (FAS158) are implemented, companies will consider new options. For many, that will mean taking another look at cash balance plans or other hybrid models, which the PPA authorized. 
• Investment strategy reviews. The move to approaches that better hedge long-term pension liabilities will continue.  More employers will also consider alternative investments such as private equity, hedge funds, infrastructure and real estate.

“There’s good news for pensions as the number of pension plan freezes slows and funding continues to improve,” said Alan Glickstein, senior retirement consultant at Watson Wyatt “After years of regulatory uncertainty and high volatility, plan sponsors are once again offering their employees a much more predictable future. And with the new plan design and investment options available, we can expect employers to continue assessing how to best match their plans with the company’s long-term goals.”

About Watson Wyatt Worldwide

Watson Wyatt (NYSE: WW) is the trusted business partner to the world’s leading organizations on people and financial issues.  The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services.  Watson Wyatt has 6,000 associates in 30 countries and is located on the Web at www.watsonwyatt.com.

Contact

Ed Emerman, 609/452-5967, eemerman@eaglepr.com
Emily Rieger, 703/258-7634, emily.rieger@watsonwyatt.com