Reducing Health Insurance Costs The Year Ahead


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An article describing a strategic approach to reducing health insurance costs.

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Reducing Health Insurance Costs The Year Ahead

  1. 1. Preparing Now for Lower Healthcare Costs in 2009 by Cheryl Lagunilla, Fiscal Advantage, LLC In 2009, the nation will still be struggling with a slow economy, tough business challenges and dispirited consumers, making it hard for the public to feel that we are on the path to a more vibrant economy. Executives will have to do more with less, yet still have to compete to recruit and retain talent with an ever more complex workforce. Employers will have to find ways to offer quality benefits that are affordable for employers and employees, even with average healthcare costs well over $10,000 per active employee. THE BAD NEWS: If you're one of the growing ranks of US employers that experienced a double digit rise in healthcare costs this year, you know firsthand how healthcare costs have been rising faster than inflation for the past four years. THE GOOD NEWS: With a little extra work and a solid plan, businesses can work now toward lowering their cost of healthcare coverage in 2009. Factors Driving Increased Health Insurance Costs Finding the solution to rising healthcare costs begins with an understanding of the root of the problem and which factors can be controlled by employers and their employees. Several explanations have been offered for rising health care costs: • General Inflation, broader access plans, cost of uninsured to private payers, higher priced technologies, prescription drug increases and administrative costs. • Increased utilization – These include: aging population, lifestyle challenges, and rise in chronic disease and illness. Of all these factors, companies have the ability to affect the increases in utilization. Companies are being told by their insurance providers that increases are in large part due to these increases in utilization. The National Coalition on Health states that the costs associated with treating disease and illnesses are astronomically higher than to prevent them. A variety of evidence, including feedback from insurers, suggests that there are opportunities to constrain and/or reduce health care costs while creating a healthier, more productive workforce through programs that effectively reduce healthcare plan utilization. There is overwhelming evidence that support the implementation employee health and wellness program as part of a strategic plan for companies to get rate relief. Page 1 Fiscal Advantage, Cheryl Lagunilla, 610-454-7755,
  2. 2. A Look at the Numbers The Center for Disease Control (CDC) states the 75% of health care costs are attributable to chronic diseases that could often be avoided. The Centers for Disease Control and Prevention (CDC) estimates… 80% of heart disease and stroke • 80% of type 2 diabetes • 40% of cancer • …could be prevented if only Americans were to do three things:  Stop smoking  Start eating healthy  Get in shape A Plan To Contain Costs Employee health and wellness programs have become a vital component in addressing and decreasing high utilization and reducing medical costs, which is why over 2/3 of US companies have them in place. From a pure business point of view, the ROI on health and wellness programs have been documented to range from $2.50 to $5.81 for every $1.00 spent. In addition, insurance providers are recognizing this as a viable attempt to decrease utilization and offering discounts and reductions to companies who have an effective program in place. Additional benefits to your company include:  Increased productivity  Reduced absenteeism  Lower worker’s compensation costs  Improved employee morale  Lower Liability Insurance Costs Increasingly, employers are adopting plan designs that help workers 'earn' discounts or save money for behavior that keeps them healthy, productive and engaged. By encouraging personal responsibility for health and offering significant incentives for healthy living, you can provide valuable tools to improve employee health and lower health insurance costs one employee at a time while staying in tune with employee needs. Page 2 Fiscal Advantage, Cheryl Lagunilla, 610-454-7755,
  3. 3. Components of an Effective Wellness Program Not all employee wellness programs and initiatives are created equal. Not everyone who implemented a wellness program found rate relief. Why is that? An Employee Health and Wellness Program is only effective if people participate. One more thing… Their participation must create the desired healthy behavior changes. An effective approach to corporate wellness needs to include the following to create desired outcomes and encourage participation: 1) Engage employees by addressing their desire to take control of their health and benefits 2) Accountability from employer, employee and wellness provider 3) Compliance and adherence to privacy issues protecting both the employer and employee. Without this important component in place, you will have difficulty in gaining support and participation from your employees. This can be accomplished by including a third party or outside provider as part of the program. 4) Identify and address employee health risks and areas of interest 5) Motivate and educate the employee to proactively manage his/her health. Motivate them to participate and make desired behavior changes through incentives and inclusion in the outcomes. 6) Create a high level of participation. 7) Measure the impact of changes in employee behavior, risk and consumption. Having measurable data will put you on better footing at rate renewal time. 8) ROI: Studies have shown an ROI ranging from $2.50 to $5.81 for every dollar spent on an employee wellness program. If you currently have a wellness program in place, make sure that you are receiving a return on your investment. Strategical Approach Employers looking to do more than just react to the industry’s standard cost increases have an opportunity to put a long-term plan in place to strategically manage their benefit programs as not only a key to financial well-being, but also in attracting and retaining talent. This starts with a well thought out plan that includes continual planning and involvement from all parties involved with negotiating your insurance terms and costs. In today’s environment demanding more for your dollar is not unreasonable. Consider the following: If your health benefits programs: Can improve the health status of your employees through “real” behavioral change. • Help employees and their families lead long, healthy lives • Reduce medical claims and lower the cost of your workforce, providing your company a • strategic advantage Page 3 Fiscal Advantage, Cheryl Lagunilla, 610-454-7755,
  4. 4. Then why don’t you: Manage employee health the same way you manage resource allocation or corporate • spending? Measure and report the activities and results that will drive improvement in outcomes? • Stop talking to employees about medical insurance and start showing them what’s in it for • them? The objective is to take employee benefits from the procurement of insurance products to strategic benefit planning that can deliver long-term cost management, improve employee health and productivity, and provide valuable communication resources that improve the perceived value of your benefit program. Page 4 Fiscal Advantage, Cheryl Lagunilla, 610-454-7755,