Fully insured employers (and their brokers) are often reluctant to implement wellness because their health insurance premiums are determined more or less by the claims of all the employers in the carrier’s risk pool.  That’s usually condensed into the sentence, “I’ll never see an ROI”.  Conventional wisdom is that any savings from a healthier workforce fall to the insurer’s bottom line, not the employer’s.  Therefore, it might be logical to think that it should not be employers, but insurers, that should invest in wellness to improve their profits.  However, most carriers use wellness only as a loyalty program – not for reducing healthcare costs, as covered in a recent blog post.

Most fully insured employers we have encountered do not get serious wellness programming from carriers… so what is the business case for running a program on your own dime?  Wellness WILL still help control health insurance costs, but the biggest pay-off for wellness is NOT the direct cost of health insurance… that’s just the tip of the iceberg.  Here’s the reasoning:

Direct Costs to the Health Plan

1.     Even though the smallest fully-insured employers’ premiums are based entirely on the experience of the whole risk pool, carriers watch each employer’s experience, which can be so much worse than the pool that it becomes virtually impossible to shop plans.

2.     As the number of covered employees increases, there is a point at which carriers start to increasingly adjust premiums according to each employer’s claims experience.

3.     There is a point at which the number of covered employees is sufficient for carriers to adjust premiums entirely based on the employer’s own claims experience.

4.     Some carriers are reportedly beginning to give 2-4% discounts off the nominal increase in premiums for wellness programs they feel are effective.

Indirect Costs and Other Reasons

1.     The indirect costs of poor health, such as absenteeism, workers comp, STD, LTD and presenteeism, are 3 times the direct costs of health insurance. (See figure below and study from Harvard Business Review).

2.     Wellness programs improve morale.  Happy workers are more productive.

3.     Employers need wellness for the same reason that they need benefits – to attract and retain the best employees.

4.     The smaller the firm, the health and productivity of each person become even more important.  Taken to the limit, if the sole employee in a one-person firm goes down, it’s out of business.

5.     Michael O’Donnell found that culture is the single most important determinant of the success of a wellness program, and culture is much quicker and easier to improve in smaller organizations.

What does the fully insured CEO at Haulers Insurance Company think?   Read the first paragraph.

1. It’s “free”  (I would bet the farm the costs are baked in somewhere)
2. It looks sexy
3. It’s integrated with the health plan
4. It’s reportedly “turnkey”

In reality, expecting these free wellness tools to get results is like dropping your child off at the school library (complete with computers, phones, books, etc) each fall and expecting an honor student when you pick them up the next year.  Much of the information and supplies are there, but there is no curriculum, no motivation, no regular accountability, celebration, no social support, etc.  Students need teachers.  Athletes need coaches.  I don’t recall John Wooden winning 10 championships over the phone.

Then why do they offer it?  I recently read a great blog entitled, “Ten Reasons Why Fully Insured Commercial Health Insurers Don’t Offer Worksite Wellness Programs For Their Customers”.  I probably would have called it, “Why Wellness from Most Insurers Is Only Window Dressing”.  As health insurance carriers consider how to grow their profits, there are quite a few factors that impact profits ahead of wellness.  In a webinar where Andrew Sykes, a well-known actuary, spoke about the carriers’ motivation for wellness, he assured the audience that carriers were truly serious about wellness.  They want sexy wellness tools to attract and retain their clients who are interested in wellness.  However, they really don’t care if the tools get results. After all, what’s their motivation for reducing claims?  When claims go up, their revenues and profits go up proportionately.  Their motivation for doing wellness is more likely customer loyalty – like frequent flyer programs.

Where does wellness stack up on the priority list as carriers try to boost profits?  Number FIVE.

1. More accurate underwriting

2. Better provider network with deeper discounts

3. Favorable plan designs that shift cost to employees

4. Efficient claims management

5. Wellness tools or budget

Unfortunately, many employers take the easy bait, and they loose several years of progress before they learn that wellness from carriers is only one-size-fits-all tools. It doesn’t do much to gain the trust of employees either, who are wary of carriers gaining more information about them.  Once again, there are no free lunches…

There is certainly a lot of chaos in the world of employee benefits, now that the Patient Protection and Affordable Care Act is being implemented. What’s worse, the Act is still evolving!  Besides the many provisions that have been left to various agencies to spell out, Henry Aaron recently reported in the New England Journal of Medicine that PPACA contains “64 specific authorizations to spend up to $105.6 billion and 51 general authorizations to spend ‘such sums as are necessary’ over the period between 2010 and 2019.” However, Congress must specifically appropriate these funds before they can be spent.

I have talked to a lot of benefit brokers and read a number of articles and blogs about what the PPACA chaos means to the broker community.  Responses have ranged from “There’s no future for brokers so I’m starting a new business” to the boast by one broker in a recent issue of Employee Benefit News that “My business could grow by100%”! The article suggests that this kind of growth comes at the expense of other brokers who are slow to respond and are weeded out.

An article in the October issue of American Agent and Broker shows point by point that there’s considerable upside for brokers who evolve to seize the opportunities.  One thing seems certain – the Affordable Care Act is making health insurance even more demanding and less affordable for employers.  The brokers who will come out ahead are those who can plan more strategically to control costs and take more of the load off of their clients’ HR Departments while executing those strategic plans.

I concur with Beverly Beattie’s advice in Employee Benefit News, “As pressure mounts to find optimum value and affordability in an organization’s program, coupled with uncertain residual effects of reform, we believe a well thought out benefit strategic plan will include the intelligent integration of technology, education, communication, utilization management and promotion of health and wellness.”

At first glance goal #2 appears to be corporate-focused because it relates to businesses’ bottom lines.  However, when companies save money on healthcare costs, the dollars spared can be circulated within the organization for the good of employee populations.

Excessive healthcare costs deplete organizations’ time and money, as responsible staffers spend inordinate time assessing and addressing issues related to high costs.  Negotiating with payers for the best plans and regarding issues surrounding claims is highly intensive and time consuming.  Certainly, when employees are less healthy, there are more claims, costs and issues to deal with on many levels.

However, when wellness is prioritized and employees stay healthy, companies are able to invest money in benefits programs, work environment upgrades, salary enhancements, employee relations campaigns, improved infrastructure and technologies—and so on.

Wellness should be a corporate culture.  It should pervade every aspect of a company to become fully integrated as a way of life for those out making livings.  And when it does, everyone from the C-Suite to the front desk stand to gain.