Shaken by Bloating Healthcare Costs, Corporate America Must Focus on Prevention - But How?

It’s no secret that a growing challenge for corporate America is how to slow rising healthcare costs. Healthcare costs currently rank as one of the top challenges to corporate profitability and are now threatening jobs and entire families’ livelihoods. While Washington has expanded coverage to millions of previously uninsured Americans with the Patient Protection and Affordable Care Act (PPACA), the bottom line is this: Insurance alone doesn’t make employees healthier.

Solely providing more access to existing health services fails to address the root cause of what’s causing demand for medical care to spike. Unmanaged, preventable healthcare costs are rising at more than 10 percent annually and represent one of the largest drains on corporate income statements.   Forward-looking companies, shaken by a seemingly uncontrollable spend, understand they cannot wait for their employees to get sick and then manage the problem. While certain new PPACA provisions such as eliminating lifetime dollar limits and expanding coverage to employees' adult children up to age 26, may be affecting premium hikes, most companies know from more than a decade of claims filed that the majority of costs originate from elsewhere:  chronic diseases, which are largely preventable.

More than 75 percent of the nearly $2 trillion healthcare costs impacting businesses and their employees today stem from chronic, lifestyle-related conditions like heart disease, diabetes and some forms of cancer. The good news is these conditions can be controlled or avoided altogether with healthy lifestyle choices, such as getting enough physical activity, a healthy diet, and avoiding tobacco.

Preventing the onset of lifestyle-related disease is imperative to tackling costs.  And getting people to take more responsibility for their health is an essential element of this strategy.

Planning an Employee Health Strategy in the Midst of Healthcare Reform Enactments

The PPACA features a number of wellness initiatives geared toward helping consumers with healthcare costs, and several that also help companies sharpen their focus on prevention. This is a major policy milestone that formally recognizes the value of creating healthy lifestyles, and formulates and funds strategies and tactics to achieve healthy lifestyles as a national goal.

The Essential Benefits provision (PPACA, sec. 1302), for example, requires that all individual, group and health insurance exchange health plans cover “Essential Health Benefits Requirements,” which includes “Preventive And Wellness Services And Chronic Disease Management.” Employee Wellness Discounts (PPACA, Sec. 2705) expands on HIPAA’s current Healthy Lifestyle Discounts, which allow employers to offer incentives of up to 20 percent of annual health insurance premiums to employees who participate in a bonafide wellness program.  The PPACA raises this amount to 30 percent, with the potential for it to be increased to 50 percent at the discretion of Secretary of Human Health Services.

But with so much focus on new consumer healthcare provisions, some companies may feel overwhelmed at the impact on current healthcare plans, and neglect taking advantage of existing HIPAA wellness provisions as they wait for expanded PPACA wellness benefits to be enacted in 2014. With current premiums forecasted to surge, companies that do not start early are at risk of even further increasing  their healthcare spend over the next year by not leveraging preventative measures.

To take advantage of today’s HIPAA Healthy Lifestyle Discounts as well as the expanded wellness provisions to be enacted in 2014, careful planning on how to manage and save on healthcare costs, and applying mechanisms to measure and manage wellness programs for compliance are needed.

Contrary to popular belief, there are multiple strategies to fund these programs to allow companies to create more affordable or even cost-neutral employee health programs. Companies can do this and still manage to pay the participating portion of their employee base hundreds, if not thousands, of dollars in health incentives by balancing increases in employee contributions, deductibles, co-pays, or reduced HSA funding for those employees who choose not to engage in healthy behaviors with corresponding decreases for those employees who do choose to get healthy. This approach often provides additional net cost savings.

The Value of Incentives and Measurement in Controlling Healthcare Costs 

Incentives Spurs Engagement

According to a recent PricewaterhouseCoopers study, 80 percent of executives surveyed believe providing financial incentives for employees to live healthier lifestyles is the most promising option for reducing corporate healthcare costs. Ironically, healthcare insurance is the only form of insurance that doesn’t reward people for exhibiting intelligent behaviors.  Safe drivers are routinely awarded discounts on their auto insurance, for instance.  Shouldn’t employees who exercise, watch their weight, stop smoking and adopt other healthy, preventative behaviors benefit as part of a workplace culture that rewards the right behaviors?  Incentives give companies the opportunity to apply a rational, data-driven causal model to preventative healthcare, one that creates rewards for good decisions and behaviors. This is why incentives are becoming more widely adopted among companies seeking to lower healthcare costs and create a company culture of good health. 

One example of a company that has effectively applied incentives is Louisiana-based Ochsner Health System. By applying a mix of incentives and leading technology to its employee health program, Ochsner has achieved remarkable results. Ochsner’s healthcare cost increases trended only three percent while the national healthcare trend for 2009 healthcare cost increases was approximately 10 percent. Employee-only medical claims were down over 2008 levels by $3 million, including new employee participant growth in the plan.  Over time, Ochsner expects to see even more reductions in healthcare costs, particularly around pharmacy costs as employees become healthier and can reduce their reliance on certain medications, with their doctor’s approval.  How did Ocshner get to this point (sans healthcare reform enactments)?

Ocshner found that as the organization grew, so did its healthcare costs. Recognizing that employee participation in the company wellness program was critical to lowering healthcare costs, Ochsner implemented a “Pay-for-Prevention™” approach pioneered by Virgin HealthMiles.  Employees could earn points for physical activity and program participation, which could total up to $300 annually in cash rewards. Ochsner also offered employees the opportunity to earn up to a $2,000 discount on family health insurance premiums once they reached a key milestone in the employee health program. 

The program’s automated reporting tools also provided Ochsner’s wellness director with more control over managing and understanding the impact of the wellness program.  The tools also enabled the organization to create department efficiencies by greatly reducing the number of staff needed to manage its overall wellness strategy. 

By offering a mix of health insurance premiums and cash rewards, 81 percent of Ochsner’s employees have enrolled in its employee health program – significantly above the single-digit industry norm. More than 50 percent of enrolled employees qualified for premium discounts in 2010. Health improvements were realized, as 89 percent of Ochsner enrolled employees have improved or maintained their Body Mass Index numbers, and 82 percent have lowered or maintained their blood pressure. 

Effectively structured and implemented wellness programs are proven to drive down employer healthcare costs by preventing chronic conditions before they develop.  They’re shown to create a more engaged workforce – something that’s more essential than ever in today’s recessionary economy. 

Measurement Provides Benchmarking and Compliance

Nearly every chief financial officer warms to the idea of inspecting what we expect, and getting better insight into a wellness program’s effectiveness through reporting and data.  However, looking just at the numbers, many wellness programs have failed to deliver significant value. There are several reasons why programs may fail. First and foremost, low participation hampers program success.  In traditional programs, the average participation is well under 10 percent and there really hasn’t been much in the way of spurring long-term engagement once the program’s launched.  Other factors include trust:  Many programs have been offered by insurers, but employees are often have concerns about sharing personal data for fear of future ramifications.  Often times, the previous generation of wellness programs were solely educational in nature, or reliant on time consuming and unvalidated self-entry based reporting systems.  And finally, most come without a compelling call to action such as hundreds or thousands of dollars a year in incentives such as cash or premium reductions.

From an employee’s point of view, these types of programs provide helpful information about making health changes, yet offer little in the way of motivation or tools to help them get started and stay on the path to good health.  From an employer’s point of view, such programs are often unable to integrate with other employee health initiatives, or lack the ability to track and report measurable health outcomes.  And finally, most fall short on actionable reporting mechanisms.

This is why measurement is so critical to the success of wellness programs.  The good news is that today, there are a number of tools and technology to help employers and employees alike manage their progress and processes.

The Birmingham, Alabama-based insurance company, Protective Life, overcame a measurement dilemma. The company had found one of the most significant limitations of its previous programs promoting physical activity was there was no way to easily correlate improvements in biometric data with physical activity. Other concerns were that current programs could not be effectively implemented in locations outside of the Birmingham corporate office and there was room for improvement in assessing engagement, not just program enrollment. Previous programs implemented by the company also relied on the employees to self-report information, which was often tedious and could be inaccurate.   For example, employees had no way to track their level of engagement in traditional programs like their annual fitness event, and once the “event” was over, the tracking ended too. Employees were unable to follow their progress in real-time and have a validated, continuous record of the activity they were really doing.

With Virgin HealthMiles, Protective Life’s employees received pedometers to track their daily activity and monitor their progress through an easily accessible online program portal. Employees would upload the validated data captured by their pedometers to the online portal where they would track their daily activity levels (e.g. number of steps walked each day), create challenges with fellow participating employees, see the rewards they were earning, and monitor their progress toward their goals.  Such intuitive yet comprehensive measurement capabilities and technology made it easy for Protective Life’s employees to view their progress towards improved health at a glance.

Protective Life also gained aggregated reporting capabilities, enabling the company to see how well they were faring with their overall wellness investment. The company’s wellness director was able to eliminate the self-reported nature of previous programs when it came to analyzing data, and received updates based on validated data and measurement in real-time.

Protective Life’s participating employees have collectively walked more than three billion steps. More than 83 percent of its members also routinely monitor their progress through their online program portal eight or more times per month, indicating that members are engaged and proactive with reviewing their progress. Furthermore, 10 percent of Protective Life’s participating members who have taken their key biometric measurements at the Virgin’s HealthZone® measurement stations have dropped out of the obese category since the program’s inception.

It is no surprise that challenging economic times and the need to do more with less are spurring companies to more carefully consider employee health programs to ensure they’ll deliver upon their promises and create substantial value for the organization.  If an organization can’t point to quantifiable improvements in health, worker productivity or other cost reductions gained through their employee health investments, then the money, time and resources invested in these programs becomes a low priority. By using technology to help both employers and employees measure their progress and analyze outcome, companies are better positioned for success.

Where do we Go from Here?

While the immediate and long-term impact of the healthcare reform enactments remain to be seen, companies should not forget what has driven the majority of healthcare costs over the past decade. Multiple recent studies predict healthcare spend increasing, not decreasing. Corporations that have pulled themselves up with their bootstraps and applied innovative and creative strategies well before healthcare reform talks already exist, and have reaped the benefits over the past five years. By motivating and equipping employees with the tools to take personal responsibility for their health, employees can apply smart, preventative healthcare practices to their lives and make long-term healthy behavior changes that will lead to lower overall healthcare costs.  Washington recognizes the importance of prevention and has created provisions allowing employers to offer significant incentives to their employees for participating in wellness programs. Now, companies must take advantage of these provisions and build upon what they’ve learned from companies who got it right – even before these provisions were formed – by implementing prevention-focused, technology-based programs. It is then when companies will be able to maximize the impact employee health programs will have on their workforce and their bottom-line, now and for the future.

About The Aothur

Sean Forbes is president of Virgin HealthMiles, a leading provider of technology-based employee health programs that help organizations build healthier workplaces and reduce healthcare costs. The company is part of Sir Richard Branson’s Virgin Group. Forbes is a frequent commentator and blogger about corporate health programs, and has appeared on Fox Business News, Fortune, New York Times, and Bloomberg, addressing the critical role prevention plays in healthcare reform.