Nearly half of all businesses say employee health care costs are reducing corporate profits, according to a 2006 Watson Wyatt Worldwide survey. For this reason, brokers and agents should recognize that previously effective ways of managing health care costs, such as adjusting copays or employee contributions, no longer go far enough to satisfy bottom-line-oriented executives in today's slowing economy.
To find relief and solutions for these cost increases, employers are doing their homework and becoming more knowledgeable about new health plans that promise long-term cost management strategies.
Knowing that employers have changed the way they approach health care, the following are a few factors to consider before your next presentation.
Increasing health care costs
In the past, it was the HR professional's job to make the final decision about health plans, but with the effect of today's skyrocketing health care costs on bottom lines, C-level executives have become more involved with health care decisions. They have realized that healthier employees produce fewer medical expenditures and are more productive and happier, which in turn means lower health care costs in the long run.
It is not always easy to convince the final decision-makers that the plan options you're presenting are the best for their company, especially when there is an upfront investment of time and money. This is why it's important that you do your research and present several options that not only match the demographics of the organization, but also provide cost savings. You may not always be presenting a plan to top management, but keep in mind that they have the final say.
Consumerism
Consumerism is a relatively new branch of health care, gaining more popularity during the last few years. A recent survey conducted by Watson Wyatt and the National Business Group on Health revealed that the number of companies offering consumer-directed health plans (CDHPs) is rising, and the number of workers enrolling in these programs has nearly doubled within the past two years. By 2009, more than half of the employers surveyed plan to offer a CDHP. While it's considered a complex health plan that requires a lot of education, more employers are slowly beginning to implement a CDHP -- putting the financial and decision-making responsibility on the employees to make their own lifestyle choices that reduce costs.
As employers begin considering alternative health plan options to help with rising health care costs, don't shy away from presenting a CDHP. While these plans have higher deductibles, employers can contribute to a health savings account or a health reimbursement account to help pay for employee medical expenditures.
Shift to wellness
The concept of wellness has evolved tremendously in recent years. Previously, employers avoided wellness programs because of upfront costs needed to achieve long-term savings, but as health care costs began to rise because of the increased prevalence of obesity and other lifestyle-related illnesses, these programs started to gain ground. In fact, 74 percent of American health care costs are due to preventable lifestyle-related behaviors such as smoking, according to a 2006 study by Purdue University.
As a result of the rising medical expenditures due to lifestyle-related behaviors, wellness programs have grown in popularity among employers. According to a recent study by the Wellness Councils of America, more than 81 percent of businesses with 50 or more employees have some form of health promotion program -- the most popular being exercise, smoking cessation classes, and stress management. Employers use incentives, such as gym memberships and health screenings, as a way to encourage employee participation. Without these programs, obesity, smoking, and other lifestyle-related choices can directly increase health care costs by putting employees at greater risk for illness.
When employers take measures to encourage employee wellness, they are minimizing the likelihood of future health concerns, and in doing so, reducing long-term costs.
Disease management programs work well in conjunction with wellness programs to manage diseases once they are identified through a health screening, taking the next step to mitigate illness and health care costs for employees. If health conditions continue without treatment, they can be extremely costly in the long term.
While you may face some resistance and uncertainty from employers when presenting a wellness or disease management program because of potentially high upfront costs, it is important to face the skepticism head on. If an employer's goal is to reduce costs and their employees are overweight or smoke, a wellness program may be the perfect match. While these programs may not be a quick fix, they do provide results in the long run.
Health care today
When the economy was booming, most companies were able to cover the majority of the health care costs for employees. During the last few years, companies have gradually shifted more financial responsibility to employees due to the rising cost of health care. With today's economy possibly entering a recession, one can assume that in the future, employees will continue to pay more for their health care.
According to the Kaiser Family Foundation and the Health Research and Educational Trust, the average employee contribution to company-provided health insurance has increased more than 143 percent since 2000. Average out-of-pocket costs for deductibles and copays for medications and physician and hospital visits rose 115 percent during the same period. Employers are looking for ways to manage health care quality and costs, while getting the most bang for their buck.
Understanding the effects of today's economy will help you understand the needs of your clients. With resources in short supply, it is important to remain sensitive to the fact that companies have less money to spend.
Whether it's because of the state of the economy, increased consumer demand, or the declining health of the U.S. population, health care costs are expected to reach unprecedented highs in the years to come. The National Coalition of Health Care predicts that health care costs will continue to rise during the next decade or so, reaching $4 trillion by 2015. These rising costs have directly affected the way C-level executives now view health benefits. Before, they entrusted the plan design to HR professionals and merely signed the contract, but now they are more involved and educated than ever before.
Be sure to keep your audience in mind when enrollment time comes. Know what's important to a company and its employees, and be willing to present innovative plans to find the right solutions for today's employers. Most importantly, be prepared to address the notion that new plans may require an upfront investment but deliver long-term cost savings.
Dave Parker is senior vice president of sales for Meritain Health. He can be reached at 800-242-6226.
