Even after plan design changes, employers can expect their health care costs to increase by 7% in 2011, a sure sign that an aggressive approach to plan design is here to stay, finds research by the National Business Group on Health and Towers Watson.

Overall, the total projected annual costs per active employee are estimated to hit $11,176, up 7.6% from $10,387 in 2010, while the average employee's share of costs in 2011 is anticipated to rise 11.8%, to $2,660.

The research shows that there is still a significant gap in employers’ ability to reduce health care cost trends. The data reveal that the median two-year trend for 2009 and 2010 is 6%.

High-performing companies, however, have a median 1% cost trend. In contrast, low-performing organizations have a 10% cost trend. The median trend for the last four years was 6.3%, but companies that have kept cost trends at or below the norm during the four years have only seen a 1.8% trend.

The cost difference between consistent performers (those with a track record of keeping trends at or below the norm) and low performers was more than $2,000 per employee, while the difference between high performers and low performers was $1,745 per employee. "For a consistent performer with 10,000 employees, this adds up to a $20 million cost advantage over a low-performing competitor," researchers note.

Consistent performers made a difference with their cost trends by "renegotiating financial arrangements with their current pharmacy benefit manager, changing plan options, rewarding enrollment in healthy lifestyle activities or penalizing nonenrollment and imposing tougher restrictions on receiving financial incentives," according to the survey report's authors.

They also were more likely to participate in community-based pilot programs, such as patient-centered medical homes.

The findings appear in the 16^th annual National Business Group on Health and Towers Watson Employer Survey on Purchasing Value in Health Care. The research reflects the responses of 588 companies that employ 9.2 million full-time workers.

The survey respondents employed 7.8 million workers who were enrolled in health care programs, which represented a collective $81 billion in total health care expenditures, according to NBGH and Towers Watson experts.

Other key findings on notable planned benefit design changes include:

• Dependent coverage subsidies: 68% are moving to increase contributions for dependents, with 19% targeting per-dependent contributions, and 35% using or planning to implement spousal waivers or surcharges.
• Retiree medical coverage: 26% of employers plan to cease employer sponsorship; 25% plan to convert a current subsidy to a retiree health account, and 23% plan to eliminate employer-managed drug coverage for post-65 retirees and rely on Medicare Part D plans.
• Incentives for high-value providers: 28% of employers plan to differentiate cost sharing for high-performance networks or centers of excellence in 2012, and 21% plan to adopt value-based designs over the next year.
• In addition, 18% plan to offer incentives or penalties to providers for coordination of care, use of emerging technologies or use of evidence-based treatments.
• Accountability for engagement: A third of employers plan to reward or penalize their employees based on biometric outcomes (for weight and cholesterol), compared with just 7% in 2011 and 6% in 2010.
• Social media is one of the emerging creative strategies employers (9%) are using to improve employee health and well-being.

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