Employee Benefit News

April 26, 2006

Half of health care costs stem from 4% of workers

Employers will be disappointed if they rely solely on employee
incentives and consumerism to rein in health inflation, according to a
new Watson Wyatt analysis.

"Efforts to create better health care consumers must involve more
than high-deductible health plans," says Sylvester Schieber, U.S.
director of benefits consulting at Watson Wyatt. "It's up to employers
to understand the varying needs of employees and to respond with
targeted consumerism, an approach that uses different strategies to
engage different segments of the population."

Just 4% of employees and dependents account for 50% of total
medical costs in any given organization, Watson Wyatt reports.
Those individuals make such an impact because they have
catastrophic and/or chronic diseases. The healthiest group, 72% of
participants, account for just 11% of health care spending.

The sickest employees are unlikely to be won over by incentives and
consumer-driven health plans, Watson Wyatt concludes, so those
tactics alone can't curb health inflation.

"Rather than using financial incentives to encourage seriously ill
hospital patients to reduce plan spending, directing them to
high-quality delivery centers will be far more effective in making them
better consumers and controlling plan costs," notes Ted Nussbaum,
director of Watson Wyatt's group and health care consulting services
in North America.