Containing the Cost of Employee Health

A sluggish economy and continued escalation of health care costs have forced employers to get creative about improving the long-term health and productivity of their workforce while taking steps to keep costs in check.  An article posted on the Society for Human Resource Management website explores employee healthcare strategies and trends based on a recent survey conducted by Hewitt Associates.

A Growing Concern

Even with all the talk about health care reform, most U.S. employers remain on course for a significant increase in employee health costs over the next few years. This trend continues despite employer costs, employee payroll contributions, and out-of-pocket expenses that have more than doubled in a decade according to research by Hewitt.

Developing a Strategy

While companies are beginning to implement programs and tactics that will help contain escalating health care costs, fewer than half the companies surveyed actually have a formal policy or strategic plan in place. According to Ken Sperling of Hewitt Associates, “Health care is one of the biggest expenditures for a company, yet most organizations don’t have a formal plan that outlines their program’s goals and ties them to business objectives.” While formalizing a plan is important in order to lay the groundwork for long-term success, employers can still implement less sophisticated cost-cutting tactics for short-term results. Following are some of the tactics to consider:

• Focus on Improving Physical AND Mental Health - more companies are incorporating behavioral/mental health strategies into their programs to improve productivity and absence management.

• Financial Incentives to Encourage Participation - the number of companies offering cash incentives for completing a health risk questionnaire and for participating in health improvement and wellness programs has increased significantly since 2009.  Often, the incentives are tied to steps that require behavioral change such as exercising, eating properly, and getting preventive care.

• Penalties for Unhealthy Behavior - employers are increasingly challenging employees to be accountable for the decisions they make by imposing penalties, such as higher premiums or deductibles, for smoking or failing to participate in disease management programs.

According to Sperling, “Measuring clinical changes in health risk can help employers gauge whether these programs are actually changing employee behavior and ultimately leading to longer-term cost reduction and improved employee health.”