Half of Health Care Costs Stem from 4% of Workers

Just 4% of employees and dependents account for 50% of total medical costs in any given organization, according to a new Watson Wyatt analysis (as reported in the April 27th Benefitnews.com article). 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, so those tactics alone can't curb health inflation. Employers will be disappointed if they rely solely on employee incentives and consumerism to rein in health inflation.

"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."

"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.

As health care costs continue to increase, it is imperative for your organization to look for creative and pro-active solutions. Please contact Orion Risk Management should you have any additional questions.