Taming the Beast

Keys to Reducing Healthcare Costs and Improving Employee Retention May Lie in Wellness Programs and Employee Education

Have you seen the news lately? Have you seen the numbers?

Healthcare expenditures are growing faster than the gross domestic product itself. Forty-five million Americans do not have health coverage. The cost of employee healthcare has increased by 10 percent in the last year, and the percentage of large and medium-size companies that are paying all of their employees’ individual healthcare premiums is plummeting.

Have you heard? The healthcare beast is running wildly out of control. The mammoth antagonist is tearing down a steep slope and damaging everything in its path – including, quite possibly, your healthcare plan.

As politicians and industry leaders and economists battle valiantly, their spears and swords have had results of mere toothpicks, as healthcare costs continue to skyrocket.

Employers and their employees are affected at every level – from retention to promotion to termination. And now that we’ve realized that the beast is out, we are all searching for ways to tame it.

Employee involvement in healthcare decisions is the most recent and powerful trend in attempts to tame this healthcare “beast.” Consumer-focused ideals are on the national agenda and gaining momentum. By taking advantage of certain initiatives, you can reduce healthcare costs that will soon begin to fall on your shoulders.

The Trend

According to the Henry J. Kaiser Family Foundation's 2004 Employer Health Benefits Annual Survey, health insurance premiums increased 11.2 percent over 2003. 2004 marked the seventh straight year of health insurance premium increases, and the fourth consecutive year of double-digit increases. And only 21% of all firms (small to large-sized companies) pay 100% of their employees’ individual premiums, according to the survey.

Rates, deductibles, and costs everywhere are rising, and healthcare continues to take up a greater chunk of employers’ profit dollars – and shrink more bottom lines. After years of such disparities, employers are finding it harder and harder to preserve and provide competitive benefit packages.

As a result, they have been forced to reduce and even cut benefits. While retention of successful employees is always a priority for HR professionals, it has been challenging of late due to these struggles. Even leaders of large labor unions, organizations offering such heralded benefits packages, are feeling the squeeze, and are beginning to ask members to accept unprecedented health benefit cuts to save billions on healthcare.

A Shift in Responsibility

Due to these astounding figures and threatening trends, employers have felt pressured to shift responsibility to their employees – on economic and personal levels.

Economically, business leaders have started exploring options of passing costs on to employees. The theory stands that if employees pay more “out-of-pocket expenses,” they will be better, more cost-conscious spenders.

Parallel with this assumption, however, is the stress on consumer choice. Employers are being forced to shoulder greater responsibility in making more informed health decisions. They must understand their medical package, know the difference between HMOs and PPOs, and further, decide which one is best for them.

But this consumer-focused ideal that industry leaders have put on the forefront was initiated and is being advanced beyond the scope of economics. Employees and consumers in general are becoming aware of the healthcare problems in America. The outrageous expense of healthcare is highly publicized, and it is no secret that benefits are being threatened. People are beginning to understand the importance of their involvement in healthcare choices.

Wellness Programs

In keeping with the shift in responsibility to employees, many companies are focusing on lifestyle risks as a liability – and as a means of curbing healthcare costs. This recent focus on preventive medicine is receiving widespread support in healthcare industry and at the national level.

Last year, Union Pacific Co. boldly announced that it stopped hiring smokers in seven states. The company estimates that each smoker costs the company $922 annually in health-related expenses. Weyco, Inc., a third-party administrator (TPA) in Michigan, has fired four employees who refused to quit smoking after giving them more than a year to do so. Companies have implemented modified plans nationwide, some providing healthcare incentives such as lower premiums to those who are healthy, and others simply refusing healthcare coverage to those who are not.

But employees are not left in the cold. A growing number of companies are providing wellness programs designed to improve workers’ health. Controllable behaviors such as smoking, obesity, and high cholesterol are being targeted, as well as depression, fatigue, and stress.

Promoting individual responsibility through programs of this fashion has in the past been used to motivate and boost company morale and productivity, but their structure also combats rises in healthcare expense. The thought is that healthier employees will result in a reduction of visits to the doctor – and in turn fewer medical claims and lower healthcare costs.

Companies across the country have facilitated such programs with the following functions:

  • Seminars hosted by local wellness speakers or authors
  • Employer-sponsored health fairs providing employees with free basic cholesterol screenings or blood tests
  • Paid smoking cessation programs
  • Workshops offering tips on stress reduction, drug awareness, and healthy diets
  • Company functions, such as a walk-a-thon
  • Tips for healthy lifestyles in company newsletters
  • Reimbursed health club memberships

Basic and accessible wellness programs can save organizations the upwards of 10% per year on medical plan costs. Coupled with continuous employee education healthcare packages, companies experience significant savings.

Employee Education

Educating employees in healthcare is also beneficial. Meetings and seminars with HR professionals to discuss and explain benefit packages not only instills trust in workers, but it goes further to put cost on their conscious level. Visiting an emergency room for the flu, for example, can cost thousands more than waiting a day to see a family doctor. Now that more costs and responsibilities are being shifted to employees, the incentive exists for them to learn and become more informed about such aspects of the industry.

Those who understand their benefits and compensation packages typically value and know how to better utilize those benefits. Offering simple tips can reduce expenses:

  • Understanding the importance of visiting in-network physicians
  • Asking for generic drug prescriptions, as opposed to name brands
  • Knowing when to visit the emergency room
  • Understanding medical insurance package: what it covers, who it covers, and what it costs

In addition, education of employees compliments the consumer-focused trend. Consumers, as mentioned, are beginning to understand their new role in the healthcare marketplace. For example, online medical tools are growing in number and popularity.

A recent RAND Corporation report supports this idea, finding that more than 60 percent of American consumers have turned to sources such as the Internet over the past 12 months for information to help them make treatment decisions.

Informed Health Choices, one such online hospital-comparison program, enables individuals to select the best hospital for their specific needs. The tool ranks hospitals based on cost, mortality rates, patient volume, and other factors a consumer may find important.

“I can think of few more important issues on the current healthcare landscape than the ability of consumers to have access to medical information at their fingertips,” says David Vaughn, Chief Executive Officer of Informed. “With recent trends, people will need to make better health choices, and better decisions reduces costs – for individuals and their employers.”

Moving Forward

As the healthcare beast continues to roam, benefits have in many cases become more important than salaries. Providing the best benefit packages possible is vital for companies looking to stay competitive and retain workers.

The shift towards consumer-focused ideals and costs, coupled with the already soaring healthcare costs, provides an incentive for both employers and their employees to change.

The wellness programs improve health and well being, and employee education provides a look into the true costs of healthcare.

We are all becoming responsible for helping to tame the healthcare beast that is running wild in America, and exploring joint efforts such as these – which have potential benefits that include and exceed cost-savings and retention – could mean a step in that direction.