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Small Business Digest


Survey Finds Little Relief From Health Benefit Cost Increases Expected

Employers do not expect a decline in the rate of health benefit cost increases any time soon. Meanwhile, they continue to invest in on-site medical clinics, call-in medical help lines and employee health appraisals to control those costs. These are among the major findings of a forthcoming survey conducted by Watson Wyatt Worldwide and the National Business Group on Health.

The survey of 573 large employers reveals that annual median increases for health care costs will remain at 8 percent in 2007. What's more, employers expect cost increases to stay at 8 percent through 2008. While costs remain high, they have become more predictable in recent years. Eighty-two percent of employers also said their health care costs came in at or below budget in 2006, as did 84 percent in 2005.

             Little Change Expected in Health Care Cost Increases
            (median percentage cost increase for active employees)
                       Year       Percent Increase
                       2003       13.0%
                       2004       10.6%
                       2005       8.5%
                       2006       8.0%
                       2007       8.0% (projected)

  1. 8.0% (projected)

"The rate at which health care costs are increasing may be stabilizing, but it is still three times higher than the annual rate of inflation overall," said Ted Nussbaum, director of group and health care consulting at Watson Wyatt. "With no reduction in cost increases, it becomes even more important to engage employees to carefully consider health care choices and make the most of health care dollars. And while investing in education programs, communication and infrastructure will not change behavior overnight, it will produce returns in the long run."

Many employers are implementing creative solutions in an effort to improve employee health and stem costs long-term. More than three out of four of the surveyed companies (78 percent) offer a nurse line, while 72 percent offer health risk appraisals. Additionally, 42 percent are implementing programs that focus on reducing obesity among employees. Some employers are seeking to improve employee health by also providing easy access to health care. For example, 23 percent have opened on-site clinics at some locations, and 14 percent have opened on-site pharmacies.

"It goes without saying that easing access to health care and encouraging employees to choose healthy lifestyles are beneficial to an organization as a whole," said Helen Darling, president of the National Business Group on Health. "But employers need to go beyond mere implementation to see results. Communicating clear information about these programs and providing incentives that motivate employees to take the necessary steps to improve their own health are also necessary while we move from being a country of very unhealthy lifestyles to one with much more attention to better eating habits, much more physical activity, less tobacco use and other health improvement and disease prevention activities."

About the Survey

The 12th annual Watson Wyatt/National Business Group on Health Survey is based on responses from 573 large employers that collectively employ 11 million full-time workers. Copies of the survey report will be available in mid-March.

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