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Nearly Half of Employers Now Have CDHPs, Watson Wyatt/National Business Group on Health Survey Finds

WASHINGTON, D.C., March 13, 2008 – The number of companies that offer a consumer-directed health plan (CDHP) is rising, and the number of workers who enroll in the programs has nearly doubled over the last two years. Furthermore, health cost increases for companies with high CDHP enrollment are roughly half those facing companies offering only traditional health coverage, according to an annual survey conducted by Watson Wyatt and the National Business Group on Health.

Nearly half (47 percent) of the 453 large U.S. employers that participated in the survey currently offer a CDHP, an increase from 39 percent in 2007 and 33 percent in 2006. By 2009, 54 percent of companies plan to offer a CDHP. A CDHP is a high-deductible plan offered with a personal account that can be used to pay a portion of medical expenses not covered under the plan.

As adoption rates climb, employee enrollment also continues to rise. Fifteen percent of employees at organizations that offer CDHPs are currently enrolled in such plans, up from 8 percent in 2006 and 10 percent in 2007. Only 6 percent of companies report 100 percent enrollment in a CDHP, but that number is expected to rise to 9 percent in 2009.

“A CDHP offers a way for companies to control costs while increasing employee accountability for health care decisions,” said Ted Nussbaum, Watson Wyatt’s director of group and health care consulting in North America. “The participants in a consumer-oriented model must be more familiar with the system and have a deeper understanding of their options. But encouraging employees to adopt healthy behaviors and manage their health proactively is no easy task.”

CDHP enrollment and adoption rates are rising

Year	Median CDHP employee enrollment (%)	Companies with 100% enrollment (%)	Companies adopting a CDHP (%)
2006	8%	5%	33%
2007	10%	5%	39%
2008	15%	6%	47%

The survey found that companies with at least half of their workforce enrolled in a CDHP had a two-year median cost trend of 3.6 percent, almost half that of companies without a CDHP. Overall, companies with a CDHP experienced a two-year cost increase trend of 5.5 percent versus 7 percent for companies without a CDHP.

Companies with 20 percent or more of their workforce enrolled in a CDHP are more likely to offer employees resources to manage their own health than non-CDHP companies. Health care cost management education is the tool most often offered by companies with a CDHP (77 percent versus 55 percent without a CDHP). Internet tools for side-by-side provider coverage comparisons are more prevalent among companies with a CDHP (76 percent versus only 49 percent). Almost three-quarters (74 percent) of CDHP companies offer tools to help workers make health care provider and service decisions, compared with only 43 percent of companies with no CDHP. Personalized reminders for preventative procedures are more common as well (60 percent versus 47 percent).

“As popularity of the consumer-driven approach grows, companies will be able to better manage costs and workers will take a more active interest in their own health care,” said Helen Darling, president of the National Business Group on Health. “Actively involving more workers in their health care and giving them the resources to make educated decisions can be a challenge, but it should be embraced. The end result can be a mutually beneficial system for both companies and their workers.”

Other findings:

• Companies spent an average of $7,211 on health care per employee in 2007. This figure is expected to increase to $7,620 in 2008. In 2007, the average annual cost increase for health care was 6 percent. This is a drop from 8 percent in 2006. However, costs are expected to again increase by 9 percent in 2008 and 8 percent in 2009.
• Health risk appraisals are offered by 83 percent of companies this year, an 18 percentage- point increase from 2007.
• Today, 27 percent of companies offer CDHPs with a health savings account (HSA), while 24 percent offer a health reimbursement account (HRA). Notably, employers are three times more likely to add an HSA in 2009 (9 percent) than an HRA (3 percent).

To view the 13th annual National Business Group on Health/Watson Wyatt Report, visit www.watsonwyatt.com/purchasingvalueinhc.

About Watson Wyatt Worldwide
Watson Wyatt (NYSE, NASDAQ: 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 7,000 associates in 32 countries and is located on the Web at www.watsonwyatt.com.

About the National Business Group on Health
The National Business Group on Health is the nation’s only non-profit organization devoted exclusively to representing large employer’s perspective on national health policy issues and providing practical solutions to its members’ most important health care and benefits related issues. Business Group members, primarily FORTUNE 500 companies and large public sector employers, include the nation’s most innovative health care purchasers who provide health coverage for more than 55 million U.S. workers, retirees and their families. The Business Group fosters the development of a safe, high quality health care delivery system, works to achieve transparency and make scientific evidence of effectiveness the standard for care, and shares best practices in health benefits, health and productivity, related paid time off and work balance issues. For more information about the NBGH, visit www.businessgrouphealth.org.

Contact

Ed Emerman
609-275-5162
eemerman@eaglepr.com

Steve Arnoff
703-258-7634
steven.arnoff@watsonwyatt.com