Health insurance rate increases aren't the problem. They're a symptom. Similarly, absenteeism, presenteeism and lost productivity are symptoms of the same underlying cause.
The cause driving all of these expenses is, of course, illness – or, more broadly, deteriorating health within your workforce and the families enrolled in your healthplan.
As basic as it sounds, health insurance is expensive because healthcare is expensive. And Americans are demanding more healthcare every year to combat the diseases we've acquired – most of which are a direct result of our unhealthy lifestyles, insufficient diagnosis rates and failure to manage (or cure) the diseases we have. In financial terms, we have a demand problem.
That's why changing carriers, reducing benefits and increasing employee contributions do little, if anything, to contain costs: Those actions treat the symptoms and not the cause – they do nothing to curtail the demand for healthcare services. The only solution to healthcare cost containment (and even reduction) is improving people's health status.
But is there a business case for healthier people?
First, we need to consider those diseases that can be impacted by improvements in personal health. The following chart1 illustrates the percent of selected chronic diseases that are lifestyle-related and avoidable:
These four disease states typically account for a high percentage of claims expense for the average employer – and they are largely avoidable through health risk reduction.
So which health risks drive these diseases? The chart1 below outlines the national prevalence of lifestyle-related health risks:
|High Blood Pressure||30%|
Taking these basic facts into consideration, the health insurance cost containment equation is deceptively simple:
Reduce Health Risks → Reduce Chronic Diseases → Reduce Demand for Healthcare → Reduce Cost
Why should I as the employer get involved in wellness and reducing health risks? Isn't this the responsibility of healthcare providers and our healthplan?
Almost daily, it seems, evidence mounts showing that wellness programs are effective strategies to control employers' healthcare spending, contain escalating healthcare costs and reduce the "behind the scenes" costs of absenteeism, presenteeism and lost productivity.
Let's consider the potential advantages of having healthier people:
- Fewer dollars spent on health insurance,
- Greater on-the-job productivity,
- Fewer disability claims and reduced premiums, and
- Improved worker satisfaction and retention.
Health-related costs increase with the number of health risks experienced by an employee. The natural trend is for health costs to increase over time, as employees get older. The following table2, from an intensive scientific review, demonstrates that increases in the number of health risks result in excess percentage of lost work days, productivity loss and an increase in health claims. The more employees you have with high numbers of risk factors, the greater the cost of healthcare claims, absenteeism and loss of productivity will be.
|Number of Health Risks||Excess Absenteeism days (%)||Excess Productivity Loss (%)||Increased Health Claims Cost (%)|
|2Productivity, Absenteeism and Health Claims relationship with number of risk factors (Burton et al., 2005, WellSource, 2006 and University of Michigan, 2006)|
Give me an example of how to interpret this chart.
It's clear that employers pay more for unhealthy employees. This fact, coupled with the natural tendency of individuals to flow from low risk to high risk over time, further emphasizes the gap between costs associated with low and high risk employees. Therefore, intervening while individuals are still at low risk mitigates the increase in costs that occur as those individuals move to high risk categories.
In a healthy company the largest proportion of employees have either zero (0) or one (1) risk factor, indicating lower overall costs for the employer. What is your company's risk stratification? If you don't know or can't easily get this information, click here for help.
The obesity crisis in America is all over the news these days, can you give me a little more information on the effects of obesity on productivity and whether exercise makes any difference at all?
Need more convincing of the financial value of wellness programs? Here are just a few examples of Return on Investment (ROI) results from the published literature.
- Citibank: For every $1 the company spent on its comprehensive health program, there was a savings of $4.56.
- Pillsbury Company: For every $1 spent on wellness, the company saved $3.63 in health-related costs.
- BC Hydro: For every $1 spent on the organization's wellness program, the company saved an estimated $3 (after running 10 years).
- Canada Life Insurance: The company saved $3.43 for every $1 spent on its fitness program.
- University of Michigan: For every $1 spent on workplace health programs, savings were estimated at $1.50 to $2.50.
- Dupont: For every $1 spent on a company health promotion program, the company saved $2.05 on disability after 2 years.
- 8 Halifax Organizations: For every $1 spent on wellness, these organizations saved $1.64 on average, per person, plus:
- $2.04 for participants with 3-5 risk factors
- $3.35 for smokers
- Coors Brewing Company: For every $1 spent on a fitness program, the company saved $6.15.
- Telus-BC: The company saved $3 for every $1 spent on corporate health initiatives.
- Johnson & Johnson: Employees benefit from meaningful reductions in rates of obesity, high blood pressure, high cholesterol, tobacco use, physical inactivity, and poor nutrition. Average annual per employee savings were $565 in 2009 dollars, producing an ROI in the range of $1.88 - $3.92 saved for every dollar spent on the program.
Is there any science behind employer-sponsored wellness and health promotion?
So, what does this all mean?
The implication of these case studies and research is quite simple: Employers must actively engage in health risk management in order to control healthcare costs, reduce absenteeism and improve productivity.
While you may need to consider changing carriers, modifying benefits or even increasing employee contributions at some point in the future, focusing on these actions for long-term cost control is a failed strategy. Similarly, relying on your carrier or healthplan vendors to do the job for you without active oversight and management by independent healthcare clinicians and medical management experts, will only lead to more of the same: Annual "trend" increases.
What does medical trend really mean?
At NextLogical, we employ both employee benefits experts and healthcare clinicians to design, implement and manage fully integrated, high performance healthplans that bring together all the latest technology and research to ensure healthcare cost control now and into the future.
If you're ready for healthier people and healthier profits, or if you'd like to learn more about how we've achieved remarkable results for our clients, please call us, email us or click here.