Employers Put Costs at the Top of Health Care Reform Priority List, According to Towers Perrin Survey

Employers Say They Will Not Absorb Any Additional Costs Resulting From Reform
STAMFORD, Conn.--(Business Wire)--
With health care reform efforts ramping up after the summer break, many of the
nation`s employers are focusing on the action in Congress and plan to adjust
their benefit strategies based on how final legislation affects their costs,
according to a survey of 433 HR and benefit executives from midsize and large
organizations conducted by professional services firm Towers Perrin. Employers
say they will not absorb any additional costs that result from reform and plan
to take actions to avoid doing so, including reducing benefits, raising prices
for customers and/or reducing head count.

Although not as outspoken in the reform process as many stakeholders in the
health care industry, employers are watching Washington closely, with 80%
monitoring developments. Nearly one in four companies (23%) in the survey are
currently rethinking benefit changes in light of possible reforms, and nearly
all (89%) plan to reexamine their health benefit strategies for active employees
in response to the passage of health care reform legislation. And while talent
management considerations such as productivity, workforce health, and recruiting
and retention remain important even in a tough economy, cost issues will
dominate employers` decision making in a post-reform world, according to the
survey.

"With employer health care costs rising more than 150% over the last decade,
it`s no surprise that 90% of employers list cost containment as the most
important health care reform goal," said Dave Guilmette, Managing Director of
the Towers Perrin Health and Welfare practice. " Many large employers, however,
feel that current reform proposals are focused on other health care issues -
such as expanding coverage and reforming certain insurance practices - and they
feel they have already addressed these issues within their own workforces."

In addition, employers do not expect that reform as currently proposed will
address some of the fundamental drivers of health care costs. For example,
nearly two-thirds of employers (65%) believe that health care reform will have
little or no impact on consumer behaviors, an area many leading employers have
begun to target as one of their key cost-containment opportunities.

Nevertheless, among health care proposals currently on the table, 53% of
employers believe that research on effectiveness of alternative treatments will
have a positive impact on their business by, over time, influencing the quality
of care, and 44% believe that reforming the health insurance market to ensure
guaranteed access to coverage regardless of health status will have a positive
impact. However, nearly half (47%) of survey respondents believe that an
employer "pay or play" mandate would have a negative impact on businesses.

"The way employers would respond to reform proposals that raise or lower their
costs is one of our most telling findings - one that could conceivably impact
economic recovery," said Guilmette. "With companies struggling to manage rapidly
escalating health care costs and reclaim profits, only 11% of companies would
agree to absorb increased health care costs by reducing their profits. The
overwhelming majority of companies would respond to higher costs by reducing the
benefits their employees receive."

(See exhibits for details on how employers said they would respond to higher
costs or savings resulting from health care reform.)

Despite the sharp focus on costs, the survey respondents express strong positive
views on the importance of workforce health to business success, the role of
health benefits in the rewards portfolio and the opportunities benefit programs
provide in influencing workforce health. Notably, a majority (61%) say they
would stand by their commitments to employee wellness and health promotion
programs even if they no longer offered medical benefits (under the "pay" option
of a pay-or-play mandate, for example).

"For many companies and in certain industries, health benefits are viewed as
critical to the total rewards package," says Ron Fontanetta, Towers Perrin
Principal. "These programs provide important levers in managing talent and
supporting other key business objectives."

Towers Perrin`s Health Care Reform Pulse Survey also examined the experience of
employers based in Massachusetts, a state that has imposed a pay-or-play mandate
on employers and a coverage mandate on individuals similar to those currently
proposed in Congress. Among those employers, most are not sure what, if any,
impact the three-year-old Massachusetts mandates have had. Most respondents have
seen little or no change in employee or employer health care costs or access to
or quality of care. Notably, however, more than two-thirds of these employers
report that their administrative burdens have increased.

Among the full survey group, employers expect they would respond to a
pay-or-play mandate in the following ways:

* 37% of employers would provide company-sponsored health coverage that
substantially exceeds the standard.
* 29% of employers would discontinue company-sponsored health coverage and pay
the assessment if the per-employee costs of payments to the federal government
were substantially lower than their current costs.
* 26% of employers would provide company-sponsored health coverage at the level
of the minimum standard required.

"In some industries, particularly those with low margins and
lower-income/high-turnover employee populations, some companies would, under a
mandate, choose to write a check to the government and allow employees to
purchase coverage in a reformed market for individual health insurance," noted
Fontanetta. "For example, fully 42% of retail companies in the survey said they
would close their plans and pay a federal assessment, versus 28% of those in
financial services and 24% of those in technology/telecommunications."

"As the process continues to unfold and specific elements are known, employers
will want to model the financial and employee relations impact on their specific
organizations," added Guilmette. "Senior executives also are more likely to
engage directly, given the cost and visibility of this important benefit."

Methodology

The Tower Perrin Health Care Reform Pulse Survey drew responses from 433 HR and
benefit executives from a cross section of midsize and large organizations in
the U.S. At the time of the survey, 94% of employees at respondents` companies
were eligible to receive health benefits, and 81% were enrolled in
company-sponsored benefit programs. The survey was conducted online in July
2009. (See selected exhibits.)

About Towers Perrin

Towers Perrin is a global professional services firm that helps organizations
improve performance through effective people, risk and financial management. The
firm provides innovative solutions in the areas of human capital strategy,
program design and management, and in the areas of risk and capital management,
insurance and reinsurance intermediary services, and actuarial consulting.
Towers Perrin has offices and alliance partners in the United States, Canada,
Europe, Asia, Latin America, South Africa, Australia, New Zealand and the Middle
East. More information about Towers Perrin is available at www.towersperrin.com.

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For Towers Perrin
Joe Conway, 914-745-4175
joseph.p.conway@towersperrin.com
or
Russell Weigandt, 646-747-7163
rweigandt@kwitco.com

Copyright Business Wire 2009