India Inc. grappling with rising health care costs - Watson Wyatt Health Care Benefits Survey

Corporates to continue using health care cover as a major retention tool

Majority of India Inc do not take care of employee health in their twilight years

Mumbai, December 28^th : Most Indian companies providing health care cover to their employees are grappling with an average 10 percent rise in premiums over the last three years says Watson Wyatt’s Health Care Benefits Survey. In 45 percent of the cases, one of the major reasons for rise in premium was the advent of sophisticated medical technologies. However, employees seeking excessive care and malpractices like over-recommendation of services were also cited as major reasons. Employers feel that these factors would also pose significant challenges in providing affordable health care to employees in the future.

The survey done in the second half of 2009 covers 125 of India’s largest employers. The respondents represent a cross section of industries, mainly from the private sector, reporting an average revenue of more than Rs.400 crore.

The average rise in health care premia over the last three years has been in the range of 10 to 15 percent. Inspite of rising premium costs, economic turbulence and the difficulty in maintaining an affordable health care cover, 58 percent of the companies surveyed did not deduct any premium costs out of employee salaries. Importantly, over 46 percent of those surveyed did not plan to share the costs with the employees even in the coming year.

Interestingly, the survey reveals that only 17 percent of the companies cover post retirement medical expenditure. Post retirement medical benefit is mainly provided by companies in the Public Sector, while a very small proportion of private sector companies provide such long term benefits.

The survey highlights that rising premium costs have not reduced the importance of health care cover as an employment value differentiator and that Indian companies continue to use it as a part of their hiring and retention strategy. Almost 41 percent of the companies use heath care cover as a talent attraction and retention tool, while 11 percent use it to minimise losses arising out of employee health issues, says the survey.

Speaking about the rising health care costs, Mr .Kulin Patel, Head of Benefits Practice, Watson Wyatt India, said, “Rising health care costs are making corporates strive to strike the balance between increasing premium costs and their talent management strategies. To achieve this objective it is crucial that companies are constantly reviewing and customising their health care plans. It is vital that employers design appropriate plans, employ efficient ways to manage them and ensure that employees understand their value.”

Corporates are constantly devising different strategies to control health care costs. The survey finds that 74 percent of the companies are stressing on employee education around health care. Approximately 28 percent of the companies took wellness a step forward by offering healthy meals at their cafeterias, while 36 percent of them have developed a calendar of wellness related activities.

“Moving forward we could expect a joint sharing of health care expenditure between employers and employees, an initiative which is known to have brought substantial improvement in the coverage and quality in many countries, notably China. There is a similar opportunity for Indian companies to consider innovative approaches in controlling health care costs and at the same time provide valuable health care benefits to its employees. Employers in India are also likely to find interest in health saving plans which are offered with varying degrees of success in several countries such as Hong Kong, Singapore and South Africa,” added Mr.Patel.

About Watson Wyatt Worldwide

Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the world’s leading organisations on people and financial issues. The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,500 associates in 33 countries and is located on the Web at www.watsonwyatt.com.