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| Posted on: Tuesday, June 21, 2005 |
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While promoting healthier habits among employees and their families has the potential to save an organization money over the longer term, it is unlikely to lower health plan costs immediately. This creates a dilemma for many employers who, although they would like to make a commitment to the well-being of employees and recognize the potential for cost savings, feel the pay off will occur too far in the future to justify the expense today.
Let’s approach this dilemma logically. The attitudes and age of the workforce, intensity of the effort made, and the ability to accurately measure results will all have an impact on the success of an organization’s promotion of healthy habits. By addressing specific elements of this challenge, we hope you will be better able to gauge if promoting healthy habits meets the financial and cultural goals of your organization.
First, let’s address common myths about promoting healthy habits
Myth: If a workforce has lower health claims, insurance rates will not decrease.
Reality: For self-funded plans, cost reductions from lower claims can be seen right away, and even with fully-insured Medical plans, lower claims will reduce your future premium increases. A 2% reduction in annual increases is “big money” a few years out. If a medical plan’s rate increase 9% every per year, costs will double every 8 years. At 7%, they double every 10.3 years.
Myth: High staff turnover will result in the benefits of employees” healthier habits going to other, future employers.
Reality: Even with turnover of 100% per year in certain positions, it is likely that over half of an organization’s workforce does not turnover rapidly. That “half” is typically somewhat older with larger families, and often incurs the majority of health claims.
Myth: You can get good results without committing internal staff by outsourcing health education efforts to insurance companies, TPAs or other specialty vendors.
Reality: Of course selecting the right vendor partners to help evaluate and improve employee health is critical. However, without sincere, long term executive/owner buy-in and on-site HR support and promotion, results will be a bit like those you could expect if you outsourced raising your children.
Myth: Changing employee health habits, if even possible, is too difficult to measure.
Reality: Progress is difficult to measure; however, for decades employers have invested in job skills training, subsidized employee education, sponsored EAP’s, and sent staff to motivational seminars, the value of which are all equally difficult to measure. Employers invest in these types of programs because they believe they intrinsically add value to the organization.
Myth: We don’t need a wellness program because our employees and their family members are self-motivated and already successfully deal with the health concerns listed below.
Reality: Studies have shown that, even for those with healthy habits, as people age commitment to a healthy lifestyle diminishes. Wellness programs should be designed to help healthy people stay healthy and encourage those with medium health risks to get healthy.
Myth: You won’t see any return from healthy lifestyle incentives for decades.
Reality: In today’s world, if you can’t build a strategy to produce measurable results in three years, it will never sell to senior management. Properly implemented and incentivized, a Wellness strategy can achieve this with measurable results.
Which risk factors, when improved, have the greatest value?
1. Smoking habits
2. Alcohol intake
3. Exercise habits
4. Seat Belt use
5. Body Mass Index (BMI)
6. High Blood Pressure
7. Cholesterol levels
8. Self Perceived Health status
9. Life Satisfaction - mental balance and stress level
10. Diabetes
Source: Dee Edington, Ph.D., University of Michigan, Multiple studies
Next, where would you look for results?
1. Lower medical plan claims - one study suggests savings of $1,283/yr for changing a medium health risk employee to low risk, age 45-54.
2. Lower absenteeism (sick leave, disability, work comp, temp costs) - Savings of $292/yr for each employee that changes from medium risk to low risk.
3. Productivity gains by reducing “presenteeism” (productivity losses that result from health related conditions).
4. Improved productivity and morale from the “likes attract” hiring phenomenon. Healthy people, with positive attitudes are attracted to and by those with similar values.
Source: Dee Edington, Ph.D., University of Michigan, Multiple studies
Whose job is it to manage health risk factors?
At its core it is the individual’s job to take care of him/herself. However, because employers have such a large financial stake in individuals doing this well, and many are not, it follows that an employer should consider getting actively involved. An employer’s primary options in managing health risk factors are:
Hands-Off: Leave it to the individual and get out of their way
Educational: Help employees know the consequences of their lifestyle decisions by making available effective educational and practical tools. In addition, the “costs” of not taking advantage of these educational tools must be increased via thoughtfully redesigned higher medical plan copays and deductibles for non-participation in health initiatives, or
Intensive: Jump in with both feet, requiring all employees complete annual Health Risk Assessments, strongly incentivize desirable health habits, post educational material, conduct motivational meetings and, in general, build an organizational “culture” that promotes health habits every day!
What’s Next?
As with most things in business and life, there is no simple answer. However, it is clear that the cost of inaction is not “healthy” for an organization’s bottom line. It is not a matter of if, but when an organization will step up to this challenge.
Should you have any additional employee benefit questions or would like to discuss this material in detail, please don’t hesitate to call the Denman Team.
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