Employers know that action is urgently needed. But with recruiting and retention challenges staring them in the face, they hesitate to make changes that will be unpopular with employees. As the economy slows, however, these employers need to enhance productivity, grow profits and increase employee compensation. The market won't allow significant increases in the price of products. There are no easy fixes.

While these challenges are real, there are ways to manage the change. Begin by asking some questions:

• What causes increases in health benefit costs?
• What solutions would be cost-effective?
• What components lead to a successful solution?

Root Causes
One of the ways to manage health benefit costs is to treat preventable medical conditions. Watson Wyatt's analyses show that 30 to 40 percent of our clients' medical claims are associated with such conditions¹. Our calculations show that 10 to 12 percent of those claims could be avoided by implementing health management programs that address the top preventable conditions.

Cost-Effective Solutions
Ever increasing evidence shows that investments in health and health management can decrease the number of absences, control benefit costs and improve performance at work. Best-practice programs in most areas of health management can be cost-effective if provided to the right people at the right time, under the right circumstances. The majority of research studies reviewed over the past 15 years indicate favorable health and cost outcomes.

Successful Solutions
A recent study by The International Benchmarking Clearinghouse (a service of the American Productivity and Quality Center and seven sponsoring organizations) identified several components of successful health management programs:

• A focus on high-quality initiatives
• Links to organizational business objectives
• Top management support
• A supportive workplace environment
• Effective program communications
• Effective incentive design
• A strong program evaluation component

• A population-based health improvement focus
• Data-driven opportunities and direction
• Interventions based on risk and readiness to change
• Solutions tailored to individual and organizational needs
• Solutions designed to demonstrate a return on investment
• An integrated approach among employer, employee, health plans and community

¹ McCarthy, Robert. "Target your health dollars to the root causes," Business & Health, December 1999, p. 23.