Financial Press Release

Employers explore wellness to keep costs down

NEW YORK--(BUSINESS WIRE)--Jul. 2, 2012-- The cost of providing employee medical benefits continues to escalate at double-digit levels around the globe, although some regions are seeing cost increases beginning to stabilize, according to a new survey from Towers Watson (NYSE, NASDAQ: TW), a global professional services company. And while traditional cost management approaches continue to dominate, wellness programs and health promotion strategies are gaining traction as employers look to promote healthy lifestyles among their employees and improve outcomes.

The 2012 Towers Watson Global Medical Trends Survey, a survey of 237 leading medical insurers in 48 countries, found that the global cost of employee medical benefits is expected to increase 9.6% this year. While this is slightly lower than the 9.8% increase experienced in 2011 and 10.2% increase in 2009, costs are expected to continue to increase at double-digit levels in four of the five global regions this year, with only Europe expecting to see single-digit increases.

As cost increases have remained somewhat constant, so have the top cost drivers. The three factors cited most often, which repeat from 2011, are new medical technology causing overuse of care (cited by 52% of survey respondents), practitioners recommending too many services (50%) and providers’ profit motives (31%).

“The news is not all gloom and doom. Across all regions, we are seeing projections increase at a slower rate than in the recent past — perhaps evidence of the global economic slowdown,” said Francis Coleman, director, international consulting at Towers Watson. “Nevertheless, with trend rates expected to continue rising, even if less quickly, employers will be compelled to look for innovative solutions to manage their medical costs. In particular, many will investigate how a strategy of holistic health promotion can help curb long-term costs effectively.”

Although the most popular methods of medical cost management remain contracted provider networks and preapproval for inpatient services (both cited by 57% of respondents), some less traditional methods are receiving attention, too. More than two in five (42%) respondents reported using chronic condition or disease management tools, and more than one in four (29%) are using wellness programs.

The most common prevention feature remains the second medical opinion, which is offered by nearly 80% of respondents (both in-house and through a partner). Insurers are also increasing wellness services, such as health risk assessments and chronic condition/disease management programs, offering these either in-house or through the use of partners.

“Employers are moving slowly but steadily toward an increased focus on wellness,” said Nicole Serfontein, senior international consultant at Towers Watson. “This slow progression for multinational companies is not surprising given challenges such as finding vendors that can provide wellness services on a global or regional basis, poor infrastructure and other inefficiencies. But these obstacles can be overcome with a commitment to organizational health promotion — a strategy that will not only enable employers to manage their costs, but also drive employee health, engagement and productivity over the long run.”

About the Survey

The Towers Watson Global Medical Trends Survey was conducted in January 2012 and reflects responses from 237 leading medical insurers operating in 48 countries (where insurers have representative market share). The number of insurers and countries participating in this survey continues to increase — this year’s survey represents a nearly 40% increase in participating insurers and a 30% increase in the number of countries since 2010 — illustrating how rapidly the private health care industry is expanding worldwide and how popular health care coverage has become as an employee benefit.

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 employee 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.

Source: Towers Watson

Towers Watson
Ed Emerman, +1 609-275-5162
eemerman@eaglepr.com
or
Binoli Savani, +1 703-258-7648
binoli.savani@towerswatson.com