February 8, 2005
Health care costs have skyrocketed. While the medical community, insurance companies, and politicians address the issue, each group jockeying for the position that best serves their interests, employers are having to make serious decisions about whether they can continue to provide employee health care plans—the most valued employee benefit—without breaking the bank. Exploring all possible ways to keep plan costs down for both the employer and the employee is an arduous, critical task.
Employer-sponsored health insurance premiums increased an average of 11.2 percent in 2004, less than 2003's 13.9 percent increase, but still the fourth consecutive year of double-digit growth, according to the 2004 Annual Employer Health Benefits survey released by the Kaiser Family Foundation and Health Research and Educational Trust (HRET). Premiums for employer-sponsored health insurance rose at about five times the rate of inflation (2.3 percent) and workers' earnings (2.2 percent).
The survey also found that the percentage of all workers receiving health coverage from their employer in 2004 was 61 percent, about the same as in 2003 (62 percent), but down significantly from the recent peak of 65 percent in 2001. As a consequence, there were at least 5 million fewer jobs providing health insurance in 2004 than in 2001. A likely contributing factor was a decline in the percentage of small employers (three to 199 workers) offering health insurance over this period. In 2004, 63 percent of all small firms offered health benefits to their workers, down from 68 percent in 2001.
Facing continued premium increases, many employers said they attempted to make cost-saving changes in 2004. Among firms offering coverage, 56 percent reported that they shopped for a new plan in the past year. Of those firms, 31 percent (17 percent overall) reported changing insurance carriers, and 34 percent (19 percent overall) reported changing the type of health plan offered.
Tackling the costs of employer-provided health care, a recent article on thefabricator.com offered recommendations from the National Association of Manufacturers (NAM) to help employers take control of health care costs. Among these recommendations is to "encourage disease prevention and healthy habits."
Regular checkups and healthy habits go a long way toward improving employee health and reducing medical expenses. When health care plans come up for renewal, insurance companies review past claims and determine whether to increase premiums, change the plan, or even whether to continue providing coverage at all. Insurance companies can refuse to renew coverage for companies with employees who have excessive claims.
Comprehensive wellness programs can improve employee health, both physical and mental, and reduce medical costs. Program components can include providing nutrition information for healthy eating and weight control (obesity is a leading cause of health problems); initiatives to encourage employees to break unhealthy habits, such as smoking and alcohol and drug abuse; hygiene education to prevent spreading diseases; encouragement of and opportunities for regular exercise; and training in stress reduction methods.
Anything that improves employee health potentially lowers medical costs. Michael O'Shea's "Better Fitness" column in the January 16, 2005,PARADE® Magazineanswered the question: To what extent can exercise lower my medical costs?
O'Shea responded that research by the Dallas-based Cooper Clinic indicates that being a faithful exerciser may cut hospital stays and doctor's visits—for serious or minor illnesses—by almost half. A 19-year study of nearly 7,000 men aged 20 to 80 suggested that fit men reduced their medical visits and bills by 46 percent. The study also showed that men andwomen who were out of shape and eventually became fit were able to lower their chances of being hospitalized by 42 percent. To get out of the low-fit group takes 30 minutes of physical activity three to five days a week.
Ideally, a wellness program would incorporate all possible components to maximize employee health. In most cases, the ideal isn't financially feasible, nor is it always practical. In his article "Controlling Health Care Costs With Wellness Programs," an article from The CPA Journalreprinted on www.nysscpa.org, Ralph Falconer recommends a wellness program analysis that requires reviewing past health care costs to identify items that have proven to be costly. Reducing risk factors related to these items should provide predictable and measurable reductions in health care costs.
According to Falconer, the analysis also should consider existing risk factors that may not yet have caused symptoms that require treatment. For example, tobacco, obesity, and high cholesterol levels act over a period of time to promote cardiovascular problems even though the affected individual may appear to be healthy right up to the day of a first heart attack.
Demographic characteristics also must be considered. For example, in companies without high employee turnover, the average age of the work force increases, which can shift health care costs from accidents and maternity care to middle-age diseases.
Which accidents and conditions are most noticeable in your company's health history? Based on age, physical condition, and habits, what are the most obvious health risks among your employees? What should your wellness program address to reduce injuries, illness, and potential health problems?
How many of your employees are having regular checkups? Does your health plan cover annual checkups? If so, do you encourage your employees to have them? If not, would it be more cost-effective in the long run for you to provide routine screening?
As you are performing your analysis, keep in mind that your employees' health matters are highly confidential and are not to be made public knowledge.
Your wellness program can require an investment in materials, equipment, and experts. Offering routine screenings and immunizations also requires funding.
Improved employee health and reduced absenteeism are obvious benefits. Improved health should lead to a reduction in medical visits, prescriptions, procedures, and claims and help control health care premiums in subsequent years. However, for those who need more ammunition to persuade the powers that be to approve wellness program expenses, Falconer recommends a cost-benefit analysis. His article gives an example of an analysis. It also discusses the program effectiveness analysis and postaudit, steps you can and should take to monitor and improve your program and cost savings.
An ounce of prevention can save many health care dollars.