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Companies Trim Health Benefits for Many Retirees as Costs Surge

U.S. Companies to Give Workers More Responsibility for Health Care Benefits

By: Ed Emerman

Watson Wyatt Worldwide, May 15, 2002

U.S. workers can expect to take on more responsibility for their own health care needs and costs as companies re-evaluate how they manage and administer their benefits programs, according to a survey of large employers conducted jointly by Watson Wyatt and the Washington Business Group on Health.

More than 70 percent of the 292 large employers surveyed indicated that they made major changes in their health care strategy in the past year. Furthermore, with health care costs expected to rise 14 percent this year, only one-third (34%) of respondents say they are willing or able to fully absorb cost increases, far fewer than the 50 percent who said they could or would absorb increases the previous year.

"There has been a clear shift in employer attitude and approach to containing health care costs within the last year," says Maureen Cotter, global practice director of group and health care consulting at Watson Wyatt. "Employers are indicating that promoting individual responsibility for their own health care is a critical goal of their overall program. Increasingly, they are informing and empowering workers to make cost-effective decisions about the type and amount of health care that is right for them."

Indeed, 43 percent of employers expect to increase the level of "consumerism" in their health plans in the coming year, compared with 19 percent that currently have such systems in place. Moreover, the percentage of employers that are providing employees with access to health care information is expected to double over the next year.

“While some equate so-called 'defined-contribution health plans' with consumerism, it is clear that employers see it more broadly - more as a commitment to a philosophy or approach than simply to a particular health plan design," said Helen Darling, president of the Washington Business Group on Health. "As our survey shows, there is considerably more momentum around providing critical health care information and decision support tools to employees than around providing them with direct access to purchasing insurance."

The survey noted that most employers are optimistic about consumer-driven approaches to health care, but acknowledge some trade-offs, as shown below:

"Employers are addressing concerns that employees may forgo care to save money by encouraging preventive care and providing employees with access to information and tools to help them take control of their own care and become better consumers of healthcare," Cotter said.

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