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Employers Plan Aggressive Response to Shifting Health Care Landscape, Towers Watson/National Business Group on Health Survey

  Employers Plan Aggressive Response to Shifting Health Care Landscape, Towers
  Watson/National Business Group on Health Survey Finds

Health care costs increase at lowest rate in 15 years

Business Wire

NEW YORK -- March 7, 2013

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

The 18th annual Towers Watson/NBGH survey, Reshaping Health Care: Best
Performers Leading the Way, found that employers expect average total costs
for active employees to reach $12,136 in 2013, up 5.1% from $11,457 in 2012 —
the lowest cost increase in 15 years. Despite the relatively moderate, stable
cost increases of the last few years, employees contribute 42% more for health
care 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 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.
However, with the opening of health care insurance exchanges in 2014, some
employers may find cost-effective alternatives for their retirees.

“Employers are redefining their financial commitment to health care, in part
to avoid the potential payment of an excise tax in 2018. Yet they are also
mindful of a growing affordability gap for employees as health care costs take
their toll on take-home pay,” said Ron Fontanetta, senior health care
consultant for Towers Watson. “To combat these challenges, we expect employers
to take more aggressive action, using emerging strategies to improve delivery,
cost management and employee accountability.”

Reshaping Health Care and Delivery

Over the next five years, the vast majority (92%) of employers anticipate at
least modest change in health care, while nearly half of employers expect a
significant or transformative change. More specifically, 49% expect more
health care price transparency, and 45% expect to see new access points for
health care delivery such as telemedicine, e-visits and data-enabled kiosks.
And 39% are expecting providers to be reimbursed based on improvements in
quality, efficiency and health outcomes.

Employers are also looking at new options such as exchanges for active
employee and retiree populations. 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.

“Now that the Supreme Court decision and 2012 elections are behind us,
employers are moving forward with new supply-side strategies for the
post-reform world,” said Helen Darling, president of the National Business
Group on Health. “While employers look to integrate the development of
exchanges, new networks and vendor performance into their strategies, they
must also keep their focus on employee accountability, engagement and health.”

Accountability and Engagement

Currently, 66% of respondents offer an account-based health plan (ABHP), and
that number is expected to increase to 79% in 2014. Nearly 15% of respondents
with an ABHP now use a total-replacement ABHP, up from 7.6% in 2010. Over the
same period, median enrollment in ABHPs nearly doubled, surging from 15% in
2010 to nearly 30% in 2013. These enrollment patterns underlie a fundamental
evolution in ABHPs as employers increasingly use them to embed incentives and
align with postretirement strategies.

Nearly two-thirds of respondents offer employees financial rewards to
encourage participation in health programs, but tougher requirements are on
the way. Today, 16% 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.

“Companies recognize the need to create value-based benefit designs and
develop a supportive workforce culture to engage employees in their own
well-being,” said Fontanetta. “In fact, our study identifies a group of
best-performing companies 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. And they provide instructive lessons for other companies to
follow.”

The best performers had an average health care cost increase of 1.7% in 2012,
less than half the median increase and roughly in line with the general
inflation trend. In 2013, this group took a number of significant steps to
improve the efficiency of their health care programs. They:

  *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 health care
    decisions, leveraging popular culture technology like social media to make
    sure they have the best information on health care 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

About the Survey

The 18th annual Towers Watson/National Business Group on Health Employer
Survey on Purchasing Value in Health Care tracks employers’ strategies and
practices, and the results of their efforts to provide and manage health
benefits for their workforce. The survey was completed by 583 employers,
between November 2012 and January 2013, and reflects respondents’ 2012 and
2013 health program decisions and strategies and, in some cases, their 2014
plans. Respondents collectively employ 11.3 million full-time employees and
have 8.5 million employees enrolled in their health care programs, equating to
a collective $103 billion in total health care expenditures.

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services
company that helps organizations improve performance through effective people,
risk and financial management. The company offers solutions in the areas of
benefits, talent management, rewards, and risk and capital management. Towers
Watson has 14,000 associates around the world and is located on the web at
towerswatson.com.

About the National Business Group on Health

The National Business Group on Health is the nation's only nonprofit
membership organization of large employers devoted exclusively to finding
innovative and forward-thinking solutions to their most important health care
and related benefit issues and to being the voice for large employers on
national health care issues. The Business Group, whose 364 members include 66
of the Fortune 100, identifies, develops and shares best practices in health
benefits, disability, health and productivity, and related paid-time-off and
work/life balance issues. Business Group members provide health coverage for
more than 55 million U.S. workers, retirees and their families. For more
information, visit businessgrouphealth.org.

Contact:

Kwittken + Company
Elliot Schimel, +1 646-747-0142
towerswatson@kwitco.com
or
Towers Watson
Binoli Savani, +1 703-258-7648
binoli.savani@towerswatson.com