Towers Watson, NBGH Survey on Value in Health Spending

By August 17, 2011Commentary

Health care, as we often say, is full of crazes, and one of the biggest right now is getting “value” for our spending.  Towers Watson and the National Business Group on Health teamed up to inventory current employer moves in this area and published the results.   (TW Report) The survey focuses on large employers with over 1000 employees, who tend to be in the vanguard on health benefits issues.  Collectively the 588 companies who responded to the survey employ 9.2 million full-time employees.  In 2010 they spent an average of $10,387 per employee on health care and they expect to spend about $11,176 per employee in 2011, or almost an 8% increase.  While these employers are paying 36% more for health care than they did just five years ago, their employees have seen a 45% increase in the same time period.  So the burden on employers is growing more rapidly than inflation or economic growth but it is even worse for employees.

Interestingly, there is a fair amount of variation in the cost trends for employers.  While the overall average has been about 6% for the last two years, a low-performing quartile has seen 10% growth and a high-performing one only 1%.   A group of 50 companies showed consistent good cost management, with annual growth over the last four years of only 1.8% versus the median of 6.3%.  Without knowing details of demographics, etc., it is difficult to know exactly why this is so, but it appears that it is possible for an employer to get better control of spending, and even keep it close to the rate of general inflation.  Some of the tactics preferentially used by the group with good cost trends include renegotiating PBM financial arrangements, rewarding enrollment in healthy lifestyle activities and changing plan options.

Some of the 2012 steps that employers anticipate taking include differentiated cost-sharing for use of high-performance providers or centers of excellence, rewarding employees for healthy behaviors based on biometric outcomes, value-based benefit designs and auditing claim payments.  Employers believe that the reform law will impose substantial burdens on them in coming years.  There is particular concern about the excise tax, which is logical since many of these large employers have relatively rich plans.  Interestingly for the debate on how many employers will potentially drop the health insurance benefit, only 38% have high confidence that they will be offering health insurance ten years from now, which is almost a 50% drop from the peak in 2007.  Employers view employees’ poor health habits as far and away the leading cause of excessive spending.   High deductible plans continue to grow in popularity, as does availability of worksite health services, like clinics and pharmacies.

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