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LONDON-The number of U.K. companies that offer private medical insurance benefits is declining, a new survey shows.

Rising costs for such coverage is among the possible reasons for the decline, according to executives of Watson Wyatt Worldwide, which is due to release the survey later this month.

At the same time, another recent survey suggests that few U.K. employees have an accurate picture of the cost of the benefits they receive.

Other key findings of Watson Wyatt's 1997 Medical Benefits Survey are that more U.K. employers are self-insuring their private medical coverage, and more are using either a broker or benefits consultant to obtain private medical coverage.

The 1997 survey found that of 356 U.K. companies responding, 55.9% provide private medical insurance for employees and their families, down from 75.9% of employers in the 1995 survey and 81.3% in 1992.

At the same time, the percentage of employers restricting private medical insurance to employees only has steadily risen to 28.8% in 1997 from 15.5% in 1992. Watson Wyatt also saw an increase, however, in the percentage of companies providing coverage to employees' domestic partners, increasing to 15.3% this year from only 3.2% in 1992.

Since the first 1988 survey, the number of U.K. companies that allow employees to continue to receive private medical insurance benefits into retirement also has declined. The latest survey found that 39% of companies provide retiree health care benefits, compared with 43% in 1995 and 46% in 1992.

Among those companies, the percentage of companies prepared to pay for retirees' health care premiums has fallen to 21% in 1997 from 29% in 1995, while the percentage of companies willing to share the cost of premiums with the retiree has fallen to 8% from 12% over the same period.

"The apparent general reduction in cover is probably linked not only to rising costs but to employers taking a more sophisticated and pragmatic look at this employee benefit," John Gillman, a principal in Watson Wyatt's health care practice in Reigate.

Slightly more than 86% of companies surveyed purchase insurance to cover private medical benefits, down from 94% in 1992. This mainly reflects the growing use of captive and self-insurance programs, used today by slightly more than 6% of the companies surveyed, compared with 2.6% in 1995 and none in 1992.

The survey also found that with the introduction in Britain of the insurance premium tax in 1994, many companies say they are considering financing employee health care expenses through tax-exempt employee health trusts, though few are actually making the switch. Employers can set up these tax-exempt trusts solely for the benefit of employees, with the funds used by the employee to pay for the cost of treatment.

In 1995, 32% of companies stated they were considering EHTs, and of these, 44% planned to make the change. In 1997, 24% of companies considered EHTs, though only 13% were planning to make the change.

Also, the percentage of U.K. companies using a broker or benefits consultant to negotiate their private coverage has increased steadily. The latest survey shows 70% of companies use an intermediary, compared with about 66% in 1995 and 42% in 1990.

Meanwhile, a separate study released last week by Towers Perrin on benefit effectiveness indicates that few U.K. employees realize the true cost of their company benefits, and still fewer rate employee benefits very highly as a reason for staying in their jobs.

Only 26% of employees say that benefits are one of the main reasons they stay with a company. They also have a very low perception of the true cost of their benefits, with about 62% of workers thinking their benefits are worth less than 20% of their pay, whereas the average cost to the employer can be more than 30%, says Towers Perrin.

"The message from the research is that employees don't fully understand or appreciate the value of their benefits, largely because benefits are not communicated to them," said Tammy Mattson, Towers Perrin's benefit strategy practice leader in London.

Towers Perrin intends to turn the report into an annual Benefit Effectiveness Index, which would tell employers how well they are doing in achieving their aims and whether their benefits programs are helping them meet business objectives.

The 1997 Medical Benefits Survey costs 150 pounds ($256) plus 17.5% VAT for a summary of key results, or 350 pounds ($597) plus 17.5% VAT for the full report. It is available from Jan Booth, Watson Wyatt Healthcare Practice, Watson House, London Road, Reigate, Surrey RH2 9PQ, England; phone: 441-1737-274-503; fax: 441-1737-241-496.

The Towers Perrin study is not available to the public. It will be distributed to employer participants only.