August 20, 2012: The health reform law may have been upheld by the Supreme Court, but it won’t alter the alarming fact that employee health costs have exploded to become the third largest expense in business today, eroding the financial health of thousands of companies.
That’s because the cause of this health cost crisis has nothing to do with the health law, but is instead due to the declining health of the American worker. A recent study found that an astonishing 86 percent of all full-time employees in the U.S. – that’s six of every seven workers – are now either overweight or have a chronic (but usually preventable) health condition that significantly raises their health costs. And as the health of employees keep declining, their employer-paid premiums keep rising – 113 percent since just 2001.
Until now, most businesses have tried to deal with their surging health costs by either reducing employee benefits or increasing the employee’s share of premium costs. But neither denial of benefits nor cost-shifting has slowed the upward spiral of employee health costs.
The simple truth is that the only way to get health costs under control is for employers to stop handing out unlimited health benefits with no strings attached. Instead, they must embrace a different kind of health mandate – one that holds everyone accountable for their health-related behaviors, from the CEO on down. Once businesses do that, the evidence clearly shows that they will get healthier employees and a healthier bottom line.
A 2010 study by Harvard health economist Katherine Baicker, which is considered the gold standard in measuring wellness return on investment, found that for every dollar spent on wellness, “medical costs fall by about $3.27…and absenteeism costs fall by about $2.73.”
Some accountability-based wellness programs can deliver even greater savings to businesses. In these, employees who take responsibility for their health-related lifestyles pay a reduced contribution toward their premium – often half that paid by non-participants. Those with biometric readings indicating significant health risks must then work with a health coach to at least try to reduce those risks in order to keep receiving the lower premium.
These programs are voluntary, and no one is penalized for being unhealthy. They are simply rewarded for trying to reduce their health risks, unless their doctors advise against it.
It turns out that even small improvements in an employee’s biometric readings make for huge reductions in health claims costs. A recent study we conducted of four mid-size employers with accountability-based wellness programs found that the total annual paid claims of wellness participants dropped to $2,269 compared with $6,187 for non- participants.
This is despite the fact that 68 percent of workers in these programs started out with significant health risks. Yet emergency room claims, pharmacy claims, hospital claims – all showed a sharp drop among wellness participants versus a steady rise among non-participants.
Maybe that’s a health mandate that business can embrace!
Politicians on both sides of the health law debate will continue to pontificate about it. But the real battle over the future of health care is being fought out in the marketplace, by tens of thousands of businesses that have to deal with its costs every day.
Source: John & Rusty Report via Choice Admin