Despite Years of Education, Employees Continue To Buy Health Coverage with Their Hearts Not Their Heads, Towers Perrin Finds

Fear and Anxiety Drive Purchasing Decisions, Running Counter To Employer Efforts to Encourage Good Consumer Behavior

STAMFORD, CT, JUNE 14, 2005 — When employees make decisions about their health care options, they are strongly influenced by fear and insecurity, according to new research from Towers Perrin, a global professional services firm. The new study clearly demonstrates that health care decisions are fueled by emotion to a far greater extent than by rational evaluation and decision making. The study also shows that employees are far more negative than positive about both their current coverage and their current experience in obtaining health care.

The study involved more than 1,400 employees of large and midsize organizations across the U.S., and used a technique that measures people�s emotions on a topic — in this case, views on health care coverage, care and health in general.

According to the study, more than half of the survey respondents (52%) are negative about their current health coverage and most of those are intensely negative. Specifically, they worry that their current health plan doesn�t provide adequate financial protection, cover the services they need (or may need) or deliver enough value for the cost.

Interestingly, feelings about getting care (i.e., the health care experience itself) are even more striking — fully 60% of survey participants express negative feelings. Fear is again the most prevalent reason for this, with concerns about quality and ability to make good decisions looming large.

“This study offers a glimpse into the psyche of the U.S. health care consumer, revealing high levels of insecurity and skepticism,� said Dave Guilmette, Managing Director, Towers Perrin and leader of the firm�s HR Services business health and welfare consulting practice. �People are afraid, first of all, that their insurance won�t protect them against financial hardship in the event of unforeseen medical needs. They also have serious concerns about navigating the provider system — not finding the right doctor, not knowing which tests to take, what treatments are best or which hospitals would provide the best care.

“Fear causes people to want to spend more than they need to,� continued Guilmette. �People tend to think that by paying more for coverage, they will receive better value. They assume that more care is better care and that higher-priced providers are better. They are conscious of the risk of lack of care but not the risk of unnecessary care. And they tend to over-insure to minimize the risk of unbudgetable out-of-pocket cost.

“In reality, however, health care quality does not correlate directly with cost, and most company-sponsored health plans provide ample financial protection when viewed over the span of a year. Even more important, the mentality that compels people to �throw money at the problem� runs counter to employer efforts to control costs by encouraging employees to become more effective health care consumers. Our data indicate that, if they want �consumerism� strategies to have an impact on costs, employers must find new ways to help employees understand their coverage alternatives and gain confidence in navigating the system,� said Guilmette.

In keeping with employees’ desire for predictable expenses, the survey participants rank covered services highest in importance when selecting a health plan. Premium contributions and coinsurance also rank high on the list of decision factors. In other words, employees seem willing to contribute more up front if that investment limits their exposure to out-of-pocket costs. Along these same lines, more employees (55%) are willing to take on a portion of the increases in the predictable components of cost (premium) than are willing to face the risks of reduced benefits (23%).

“Companies want employees to choose coverage carefully and use it appropriately. They want employees to understand care options, choose correct treatment and, most important, to live healthy lifestyles,� notes Martha Terry, Principal, Towers Perrin. �Employees, on the other hand, want security, value and quality — and they want to feel confident in their choices. Our study shows this confidence comes in part from believing their employer has a genuine concern for their health and demonstrates that concern through supportive programs and actions. Today, however, partly due to the legacy of managed care, most employers focus only on the company perspective — costs, limitations, what to do and not to do. As a result, the fear factor — created in part by employers themselves — creates skepticism among employees about company motives and intolerance for company actions.”

To counter the fear factor, the survey suggests that companies must consider their employees� emotional response when formulating and implementing their health care strategies. That will allow them to effectively align their interests with those of employees and create more positive employee health care decision making and behavior. �Companies need to start engaging employees in a dialogue that focuses on employees as health care consumers, and demonstrates the value and quality of their health care choices and the value of managing risks over time,� said Terry. �That focus should also address employees� fears and highlight how the employer and coverage options can meet their needs effectively.”

When companies demonstrate commitment, and support their employees� health care decision-making process, more positive behaviors emerge. In this survey, for example, among employees who said their company makes efforts to support affordable, quality care and good health for employees, over half (54%) qualified as relatively good health care consumers based on a set of 11 behavioral factors, such as carefully evaluating coverage options, having regular check ups and following doctors’ recommendations. Of those who regarded their company as not being committed to employee health, only 36% reported behaviors that would qualify them as good consumers.

Similarly, employees who have access to and use employer-provided health care resources and decision support tools — such as online access to health care information, tools to support coverage decisions and care management programs — are significantly more likely to report good consumer behaviors than those who do not have or use such resources (56% versus 30% of respondents).

About the Towers Perrin study

The new Towers Perrin survey is part of a multiyear, multidimensional study on the drivers of employee behavior in health care decisionmaking and how employers can influence behavior as a way to reduce costs, enhance the work experience, and increase workforce productivity and engagement.

This year’s survey combined a traditional questionnaire with a technique most commonly used for marketing and product research. The technique, called ResonanceTM, was pioneered by Gang and Gang, Inc., and is designed to identify the level and nature of emotions that drive consumer decision making. The survey asked participants about four aspects of health-related experience: their health care coverage, their care, their overall health and, specifically, their employer�s support for good health. The survey also gathered data on actual consumer behaviors and health status as reported by the respondents themselves. The more than 1,400 respondents all work for midsize and large U.S. companies and participate in a company health plan.

About Towers Perrin and HR Services

Towers Perrin is a global professional services firm that helps organizations around the world improve their performance through effective people, risk and financial management. Through its HR Services business, Towers Perrin provides global human resource consulting and administration services that help organizations effectively manage their investment in people. Areas of focus include employee benefits, compensation, communication, change management, employee research and the delivery of HR services. The firm’s other businesses are Reinsurance, which provides reinsurance intermediary services, and Tillinghast, which provides management and actuarial consulting to the financial services industry. Together, these businesses have over 8,000 employees and 78 offices in 76 cities in 24 countries. More information about HR Services is available at