Workforce Health and Cost Trends: What to Expect in 2009
According to the American College of Occupational and Environmental Medicine and the Integrated Benefits Institute, when employer health care costs are combined with the cost of productivity losses through absenteeism and presenteeism, the annual cost averages $13,000 per employee. Although employers increasingly are recognizing that productivity is inextricably linked to the health of their workforce, most employers struggle to find the proper strategies to curtail the burgeoning costs while improving wellness.
Preliminary survey findings by HR consultancy Mercer indicate that health benefit costs will rise by 5.7% in 2009 – the lowest rate of increase in more than 10 years. Other consultants, such as Aon Consulting and Buck Consultants are predicting increases in the 10 to 11% range.
In all cases, the findings recognize that employers are taking steps to curb costs. Most employers intend to increase deductibles, co-payments, co-insurance or employees’ out-of-pocket spending limits. From 2003 to 2007, the median family deductible for in-network services in a PPO rose from $1000 to $1500. Other cost saving measures include adding consumer-directed health plans, a high deductible plan with an employee controlled HSA or health reimbursement arrangement (HRA).
Faced with higher costs, many employees are taking appropriate steps to lower their medical costs, such as lower cost drug options. However, some are taking actions that could lead to higher costs in the future including skipping recommended doctor’s visits.
According to Cathy Tripp, national leader of consumerism at Watson Wyatt, “In the current financial climate, employers stand to gain from reinforcing messages on preventive care, wellness resources and the importance of following prescribed drug regimens. There are a number of behaviors that, if embraced today, will lead to substantial health cost savings in the long term.”
Wellness programs are among the most prevalent ways companies are promoting healthful behavior. A June 2008 report, Employee Health & Productivity Management Programs: The Use of Incentives, by ERISA Industry Committee, the National Association of Manufacturers (NAM) and IncentOne, Inc. found that incentives are an effective tool to engage employees and keep them involved in wellness programs. The report concludes that incentives for weight management programs ranged from $5 to $500 and for smoking cessation programs from $5 to $600. Incentives per person per year ranged from $100 to $300, with an overall average of $192.
Employers continue to experiment with incentive offerings. While in 2007, the primary incentive was health premium discounts; in 2008, gift cards were the most popular incentive, closely followed by health premium discounts and cash incentives. Rewards are focused on participation and completion rather than the achievement of specific goals such as weight loss or smoking cessation.
While motivating employees to participate, employers must comply with an array of legal and regulatory issues, including HIPPA, ADA and state laws. Legal issues in this area are constantly evolving as more challenges to programs occur.