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CCH® BENEFITS — 1/17/07

One-Third Of Large Employers Will Move To Consumer-Driven Health Plans In 2007, Cash Balance Plans Will Increase, Wyatt Predicts

from Spencer’s Benefits Reports: Targeting specific types of health care users and focusing more on health care data will be two of the characteristics of consumer-driven health plans in 2007, according to recent trends identified by Watson Wyatt Worldwide.

Employees will continue assume more responsibility for choosing and financing their health care benefits in 2007 as companies address new regulations and focus on controlling costs, according to Watson Wyatt, which also foresees the following developments for 2007:

• Increased focus on high-deductible health plans (HDHPs) coupled with a reimbursement arrangement (for example, health savings accounts). One-third of large employers surveyed by Watson Wyatt plan to incorporate an HDHP with a reimbursement account in 2007. However, few employers appear to be completely replacing their current plans with an HDHP.
• More benefits information and tools online. Web-based systems allow employees to model the best choices for them, and many allow plan participants to choose the best provider by reviewing online report cards grading the quality of care.
• Moving beyond mandatory generic prescription drug plans. As more popular prescription drugs come off patent in the next three years and their prices are reduced, employers will loosen their requirements that employees use generic drugs whenever possible.
• Greater integration between health care and absence management programs. Coordinating such programs will gain popularity as employers seek to improve employee health and productivity.
• More on-site clinics in the workplace. To ease access to appropriate health care, more and more companies will open on-site clinics.

“The move to consumer-oriented health care programs will continue, and it will evolve to include more than just HDHPs and health savings accounts,” said Ted Nussbaum, director of group and health care consulting at Watson Wyatt. “Employers will take these efforts to the next level by targeting strategies at specific segments of health care users and using data on provider quality to help employees effectively control health care costs.”

Retirement Plan Trends

Watson Wyatt also anticipates the following retirement plan trends:

• Plan design assessments. As the Pension Protection Act of 2006 (PPA) and pension accounting rules (Financial Accounting Statement 158) are implemented, companies will consider new options. For many, that will mean taking another look at cash balance plans or other hybrid models, which the PPA authorized.
• Investment strategy reviews. The move to approaches that better hedge long-term pension liabilities will continue. More employers also will consider alternative investments such as private equity, hedge funds, infrastructure and real estate.

“There’s good news for pensions as the number of pension plan freezes slows and funding continues to improve,” said Alan Glickstein, senior retirement consultant at Watson Wyatt. “After years of regulatory uncertainty and high volatility, plan sponsors are once again offering their employees a much more predictable future. And with the new plan design and investment options available, we can expect employers to continue assessing how to best match their plans with the company's long-term goals.”

For more information, visit http://www.watsonwyatt.com.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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