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Hewitt: More Companies Look To Cut Health Care Costs

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Most large U.S. employers are still making large long-term investments in programs to improve the health and productivity of their workforce, a new survey by benefits consultant Hewitt Associates Inc. finds.

Cost pressures, however, along with political changes in Washington, could prompt some employers to reconsider their future role as a health care benefits provider, says Hewitt, Lincolnshire, Ill. Its recent annual survey covered more than 340 employers representing over 5 million employees.

The number of companies focused solely on cutting annual health care costs increased from 15% in 2008 to 31% in 2009. Hewitt also found 65% are continuing to make major investments in improving the health and productivity of their workforce despite the distressed economy. Nevertheless, 4% said they are taking steps that would allow them to stop providing health care benefits altogether.

While 75% of companies plan to focus on improving employee health and productivity in the next 3 to 5 years, 19% said their strategy is to move away from providing health care benefits directly, up from 4% in 2008.

Health care reforms being discussed by the Obama administration in Washington may be allowing these employers to see exiting health care as a more feasible choice than it used to be, Hewitt says.

“In today’s environment, employers are under pressure to cut health care expenses, but they realize that short term cost-management tactics do not address the underlying drivers of health care cost,” said Jim Winkler, head of Hewitt’s North America health management consulting practice. “This leaves them with two options: making a long-term commitment to improving the health of employees and their families, or exiting health care altogether. Most companies believe that investing in the long-term health of their population is the most effective way to mitigate costs and create a more productive and engaged workforce.”

According to the survey, 52% of companies said the economic downturn will have an impact on their 2010 health care programs. It found that 65% plan to shift more costs to employees, and 49% expect to cut the number of benefit plans they offer. In addition, 33% plan to increase their focus on wellness programs, and almost 40% plan to increase the prevalence of consumer-driven health care plans.