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Health Care Benefit Cost Increases to Remain at 6 Percent in 2009

Move to Consumer-Directed Health Plans Continues, Watson Wyatt/National Business Group on Health Survey Finds

WASHINGTON, Feb. 19 /PRNewswire-FirstCall/ -- U.S. employers expect health care cost increases to hold steady at 6 percent and more plan to adopt consumer-directed health plans (CDHPs) in 2010 in an effort to control cost increases, according to a forthcoming survey by Watson Wyatt, a leading global consulting firm, and the National Business Group on Health, an association of more than 300 mostly large employers, including 64 of the Fortune 100.

The survey of 489 large U.S. employers found that the median rate of health cost increases is expected to remain at 6 percent in 2009, although this is still nearly twice the rate of inflation. The increase is the same rate that employers experienced in both 2007 and 2008. In 2006, health care costs increased by 8 percent.

"Cost increases have stabilized, but the financial crisis is causing many companies to reevaluate their health plan strategies," said Ted Nussbaum, group and health care practice leader at Watson Wyatt. "While large-scale changes appear unlikely, economic realities are leading companies to adopt strategies that emphasize greater personal health accountability to their workers."

Just more than half (51 percent) of companies now offer workers a CDHP, up from 47 percent in 2008. Another 8 percent are expected to adopt a CDHP by 2010. CDHPs are helping employers control costs -- companies with at least half of their workers enrolled in a CDHP have a two-year cost trend (4.6 percent) that is 25 percent lower than non-CDHP sponsors (6.1 percent). Still, challenges remain for employers trying to provide more affordable coverage to their workers.

Two-thirds of employers (67 percent) cite the poor health habits of their employees as a considerable challenge to managing their health care costs. Other challenges include underuse of preventive care services (42 percent), the high cost of catastrophic and end-of-life care (36 percent), and poor employee understanding of how to use the plan (30 percent).

While companies will be taking a close look at benefit offerings because of the recession, most do not plan major changes. A large majority of employers do not plan to delay or cancel their planned program offerings (86 percent) or changes to plan design (87 percent).

"Given the current economic climate, high costs are clearly top of mind for workers and their employers," said Helen Darling, president of the National Business Group on Health. "By promoting healthy habits for workers, companies can mitigate cost pressures and build a healthier, more productive workforce. Strong support from senior management and effective communication around these initiatives will help employees grow more comfortable taking greater responsibility for their health."

Other preliminary findings from the report include:

  • Nearly one-third of employers (30 percent) have revamped their health care strategy, with another 30 percent planning to do so in 2009. A smaller number of companies are working on contingency plans for midyear changes to benefit offerings (13 percent).
  • Employers' confidence in the health benefit system remains high, though market conditions have caused this sentiment to dip. Nearly two-thirds (62 percent) of employers are very confident in their ability to provide health benefits 10 years from now, down from 73 percent a year ago.
  • For employers, the average health care expenditure per employee in 2008 was $7,173 and is expected to increase to nearly $7,400 in 2009. Employees paid an average of 20 percent of their total medical premium costs in 2008, a number that will likely stay the same in 2009.

The 14th Annual National Business Group on Health/Watson Wyatt Report will be published in mid-March.

About Watson Wyatt

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 7,700 associates in 32 countries and is located on the Web at

About National Business Group on Health

The National Business Group on Health is the nation's only non-profit, membership organization of large employers devoted exclusively to finding innovative and forward-thinking solutions to their most important health care and related benefits issues. The NBGH identifies and shares best practices in health benefits, disability, health and productivity, related paid time off and work/life balance issues. NBGH members provide health coverage for more than 50 million U.S. workers, retirees and their families. For more information about the NBGH, visit

SOURCE Watson Wyatt
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