Best Performers Embracing Strategies to Control Healthcare Costs

HR & Safety

Employers remain committed to providing active employee healthcare benefits in the near future, according to an annual survey by Towers Watson/National Business Group on Health (NBGH), but are responding to changes influenced in part by healthcare reform with more aggressive actions to improve healthcare delivery and manage rising costs of care.

The 18th annual Towers Watson/NBGH survey, Reshaping Healthcare: Best Performers Leading the Way, was completed by 583 companies and reflects 2012 and 2013 health program decisions and strategies, and in some cases, 2014 plans. Among participating companies, a group of best-performers emerged with much lower cost increases over the last four years than the median respondents.

These companies have achieved critical success in cost reduction and improvements in workforce health and productivity, says Towers Watson. And they provide instructive lessons for other companies to follow. Among the steps these best performers took:

  • Consolidated vendors to improve delivery and coordination of health management programs, while also taking steps to incent providers to invest in new technologies to improve the coordination of care
  • Focused more on communication to help employees make smarter healthcare decisions, leveraging popular culture technology like social media to make sure they have the best information on healthcare providers available
  • Stepped up emphasis on transparency in provider prices as well as quality and results
  • Invested in case management to more proactively and effectively manage their high-cost cases Placed more responsibility on employees, tying financial incentives to measurable improvements in their health, and extended incentives to spouses
  • Started implementing new payment methods to providers, placing greater responsibility on them to deliver high-quality, efficient care.

The report also noted that employers expect average total costs for active employees to reach $12,136 in 2013, up 5.1% from $11,457 in 2012. Employees are contributing 42% more for healthcare than they did five years ago, compared to a 32% increase for employers. The total employee cost share, including premiums and out-of-pocket costs, has climbed from 34% in 2011 to 37% in 2013.

In the coming years, more than 80% of survey respondents plan to continue to raise the share of premiums paid by employees, including rethinking their subsidy strategy for dependents. Subsidies for retiree medical coverage have declined, too, with only 15% of companies offering them to newly hired employees today. With the opening of healthcare insurance exchanges in 2014, however, some employers may find cost-effective alternatives for their retirees.

Nearly 30% of employers are already facilitating access to an exchange-based solution for retirees in 2013, with another 36% planning to do so over the next three years. The outlook for active employees is a bit different. Eighty-two percent said it is not at all likely that their organization will direct active employees to an exchange without a subsidy in the next five years, and 60% said the same, even with a subsidy.

Nearly two-thirds of respondents offer employees financial rewards to encourage participation in health programs. Sixteen percent of companies align their rewards/penalties to specific biometric targets (other than tobacco use), and another 31% are considering this strategy for 2014. There is also growing interest in expanding financial incentives to include spouses; 59% of respondents anticipate doing so by 2014, up from 23% that did so in 2012.

Respondents collectively employ 11.3 million full-time employees and have 8.5 million employees enrolled in their healthcare programs, equating to a collective $103 billion in total healthcare.

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