Upfront: Winning the War Against Health-Care Costs

Health management programs are the latest antidote to burgeoning health plan costs.

Employers continue to make headlines about soaring health-care costs, drawing attention to their policies, which in some companies sanction smoking on the job and the sale of cigarettes in workplace vending machines. However, a growing number of organizations are attempting to rein in surging health-care costs by instituting consumer-directed and health management programs.

Human capital consulting firm Watson Wyatt Worldwide and the National Business Group on Health recently released their annual survey of large employer health-care benefit programs, which shows that more employers are offering consumer-directed health plans and health management plans. It also finds that employer costs continue to moderate this year, from a median increase of 12 percent last year to 10 percent this year. Additionally, more employers are doing a better job of budgeting for health costs. Nearly four out of 10 employers report that their costs were below budget last year, nearly double the 20 percent that forecast higher than actual costs in 2003. Conversely, fewer than one in five respondents were over budget last year, down from 41 percent in 2003.

Nearly seven of 10 respondents are using disease management programs through a health plan this year, a 50 percent increase over last year. Similarly, the number of employers that adopted lifestyle behavior change through a health plan doubled to 40 percent this year. Additionally, 32 percent offer obesity reduction programs, compared with just 14 percent in 2004.

The best-performing companies -- those with a two-year average cost increase in the lowest quartile -- kept cost increases to 5 percent over a two-year period. Lowest-performing companies -- those with a two-year average cost increase in the highest quartile -- experienced a 15 percent increase.

The survey also finds that 8 percent of employers now offer health savings accounts (HSAs), and another 18 percent plan to offer them in 2006. Additionally, 47 percent are considering offering the accounts.

Other survey findings show that employers appear more willing than in previous years to absorb health cost increases rather than pass them along to employees. Forty-one percent say they are willing to absorb costs in 2005 compared with 29 percent last year. And nearly one-half of employers are changing their relationships with health plans. Forty-nine percent have moved to a national health plan from a regional one, up from 29 percent last year.