Many Employers Uncertain About Providing Health Benefits

By Staff Report

Mar. 13, 2009

Employers are losing confidence that they will be able to continue providing health benefits to their workers 10 years from now, according to a survey released Thursday, March 12, by Watson Wyatt Worldwide and the National Business Group on Health at the NBGH’s 2009 Business Health Agenda in Washington.

Just 62 percent of employers reported being “very sure” that they will continue to offer health care benefits 10 years from now, down from 73 percent last year, according to the 14th annual NBGH/Watson Wyatt Employer Survey on Purchasing Value in Health Care.

Moreover, even though increases in health care costs are expected to hold steady at 6 percent in 2009 because of recent events in the U.S. economy, 60 percent of employers either already have or are planning to revamp their health care strategy, the survey found.

“This is the first time that trends are stable, yet there’s been a significant drop in confidence, and I have to believe that is directly related to the uncertainty of the economy and concerns about potential health reform,” said Ted Nussbaum, North America director of group and health care consulting at Watson Wyatt. “They’re saying now with the economy and its effect on their businesses, they’re uncertain they can afford to continue to offer benefits.”

The survey of 489 large U.S. employers, conducted in January, also identified a group of 53 employers that have maintained a consistent track record of lower increases in health care costs than those of their peers over the past four years.

“If you take their trend and run it out for some period of years, the difference between what they pay and what the others pay [for health care benefits] is tens of millions of dollars,” Nussbaum said.

This group, whose median two-year trend was 2.4 percent compared with 6 percent for all employers participating in the survey, have outperformed other employers in five key areas: They offer employees financial incentives to participate in health promotion activities; they have more effective benefits communications; they are more likely to offer centers of excellence and high performance provider networks; they are likely to have a data warehouse and measure outcomes in addition to processes; and their focus is on overall improvements in employee health and productivity.

“They are much more likely to be providing employees with tools and resources to help them know how to best impact their own health status,” Nussbaum said.

Other findings of the survey include:

• More employers are conducting eligibility audits to cut benefit costs. While 47 percent did so in 2007, that number increased to 54 percent in 2008 and 61 percent this year.

• Employers are more likely to offer health savings accounts than health reimbursement arrangements. Thirty-four percent of employers offer HSAs, but that number is expected to increase to 43 percent by 2010. By comparison, while HRAs are offered by 21 percent of employers today, only 3 percent plan to add one next year.

Retiree medical coverage for pre-Medicare-eligible retirees continues to erode, with just 23 percent of employers offering it in 2009, down from 24 percent in 2008. Supplemental coverage for Medicare-eligible retirees also is declining, with just 20 percent of employers providing it in 2009, down from 23 percent in 2008. Only 12 percent of employers provide traditional retiree medical coverage to new hires, down from 15 percent in 2008.

Sixty-seven percent of employers say the biggest challenge to managing health care costs is employees’ poor health habits. In addition, 42 percent said they also struggle with employees’ underuse of preventive services, while 36 percent are wrestling with the high costs of catastrophic cases and end-of-life care.

To view the 14th annual NBGH/Watson Wyatt survey report, visit

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail

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