“The health care problem is the No. 1 problem of America and of American business.
It’s the tapeworm, essentially, of the American economy, and we have not dealt with that yet.”
When The Dallas Morning News reported last year that, in 2013, employee premiums and deductibles together totaled 12.3 percent of median income in Texas — one of the highest ratios in the nation, nobody was pleased, but not many were surprised, either. Health care inflation — or “hyperinflation,” as it has rightfully been called — is leading Texas companies to think outside the box as they deal with increases in their employee health expenditures. In the United States in 2015, the cost of health care was close to $10,000 per employee, and research has shown that most CFOs in America believe these rising costs will have a negative effect on earnings in 2016.
There are countless reasons for these increases, and most of them are outside any employers’ control, including general overuse of medical services, the common practice of defensive medicine (physicians and hospitals engaging in unnecessary or redundant procedures to limit their liability exposure in the medical malpractice arena), the aging population, advances in health care technology and increasingly expensive government policies and regulations.
However, there is one cause employers can do something about.
In 2014, the Journal of the American Medical Association reported that nearly 80 million U.S. adults are obese, increasing their risk of heart disease, stroke, diabetes and certain types of cancer. These “lifestyle diseases” are expensive, driving over $140 billion in annual medical costs in the U.S. But they’re also preventable.
Texas Companies Are Turning To Wellness Programs To Decrease Health Care Costs
Health care strategy can impact human capital in myriad ways. With the increasing difficulty of recruiting and attracting skilled employees— not to mention the cost of keeping them — it is more important than ever for organizations to get the most out of their people assets. If employees and their family members are in poor health, they will tend to be absent more often, less productive and less engaged in their work.
So, due to the growing impact of health care costs on the bottom line, increasing numbers of Texas companies are turning to wellness programs to help decrease health care costs by targeting the risk factors for preventable diseases among employees.
This strategy appears to result in slowing down employee health care inflation — or, at the very least, decreasing the risks of future increases— for self-funded companies, as well as those using managed care organizations. Texas Mutual Insurance Company, a workers compensation organization in Austin, reports that 97 percent of employees currently participate in their wellness program, saving an average of $3,700 in health care costs. The wellness programs of other Texas-based companies including Exxon-Mobil, Valero, AT&T and other Fortune 100 organizations are seeing similarly positive results.
According to a 2016 white paper from Limeade, the corporate wellness industry was worth more than $40 billion in 2014, with 79 percent of U.S. companies offering wellness programs. And the demand is still growing. In Towers Watson’s Staying@Work survey, 75 percent of U.S. employers indicated “their commitment to employee wellness and well-being will “increase” or “significantly increase” in the next three years.”
However, there seems to be some disconnect between the employers rolling out wellness programs and the employees reaping the benefits. The Global Wellness Institute suggests that only 52 percent of the U.S. population has access to wellness programs, and further research from Towers Watson found that just one-third of employees feel their employer-sponsored wellness programs encourage them to live healthier lifestyles; 32 percent say these programs don’t meet their needs.
Nonetheless, there is plenty of research suggesting these programs are well liked and desired by employees of all ages, though small business workers are more likely than their larger business counterparts to consider wellness programs crucial for employee recruitment and retention. So, please note employers, there is an increasing emphasis in American culture on the holistic concepts of health, wellbeing, longevity and living better – not just health care.
Wellness Programs Target Preventable Issues, Keeping Costs Low By Keeping Employees Healthy
Research suggests that only 20 percent of health outcomes are driven by clinical care, and even conservative estimates say that at least 60 percent of hospitalizations could be avoided if patients engaged in healthier lifestyles. So the goal of wellness programs is to reduce clinic and hospital visits altogether by encouraging employees to trade their unhealthy habits for smarter ones.
The CDC recommends U.S. adults prevent chronic diseases by adopting these 5 habits:
Unfortunately, a 2016 survey found only six percent of adults engaging in all five behaviors. These are the kinds of factors wellness programs typically focus on, along with blood pressure and cholesterol management, personal healthy and safety practices, hygiene and stress management.
In a survey from the Society for Human Resource Management, more than 66 percent of organizations offering wellness programs indicated that these investments were “somewhat effective” or “very effective” in reducing the health care costs. SHRM also noted that the typical return on investment usually includes productivity increases due to a decrease in employee sick days, on top of the overall health care savings achieved.
However, it’s important to keep in mind that lifestyle changes don’t take place overnight, and the effects of these programs may vary based on the overall starting health of the employee population. Some companies may need to wait longer than others to see the results of their efforts. In a 2014 study of wellness programs, the RAND Corporation — which did not include “additional productivity benefits” of lifestyle management — showed that wellness programs had very few immediate effects on the amount employers spent on health care and overall had a total ROI of only $1.50 for every dollar invested. This contrasts with a study reported in the Harvard Business Review in 2010, which measured things like body fat, blood pressure and anxiety level, and found a 57 percent reduction in “high risk” classifications among employees within six months, for an estimated savings of $1,421 per person per year — an ROI of $6 for every dollar invested.
Texas CEOs looking to implement wellness programs in their companies should also consider other, less easily correlated factors than ROI, such as overall quality of life, when evaluating whether these strategies are helpful.
How Should A Company Approach Its First Wellness Program?
Wellness programs come in all shapes and sizes, and each company must decide how complex a program it can support.
Houston Methodist Hospital saves on costs by offering an extensive wellness program to its more than 14,000 employees. It has on-site gyms, free fitness and nutrition classes and even partnerships with Weight Watchers and Fitbit, which provides employees and their spouses a discount on activity trackers and allows them to earn points for monthly and annual prizes. They also conduct various wellness tests including biometric screenings and health assessments, which help employees develop personalized action plans to save hundreds on health care costs. They report that 75 percent of their employees participate in this program and it helped save $4.5 million in 2015.
However, for a company that’s not ready to go all out quite yet, there are plenty of simple, cost-effective changes Texas employers can make to encourage health in the office. For example, by making standing desks available, companies can increase productivity by up to 46 percent while helping employees burn more calories and fight obesity.
For those ready to invest in full-blown employee wellness programs for their organizations, it is important to treat this new initiative like any other business strategy. Proper implementation procedures and rational control mechanisms are the keys to mining value from these programs. It’s also important to keep in mind the regulatory environment and legal requirements for wellness programs across the country.
The good news is, plenty of companies have already trod the path and experienced some success. CEOs testing the waters for the first time can learn from the best practices and lessons these companies have to share.
The HR experts at SHRM suggest that there are five steps to designing a wellness program:
When it comes to incentives, there are a couple different schools of thought. Some research has suggested that penalties work better than rewards to motivate lifestyle changes. Humans tend to be loss averse, caring more about protecting existing assets than gaining new ones. This implies that sticks —taking away insurance coverage or taxing those who opt out — may work better than carrots. Furthermore, as judges continue ruling against efforts to challenge wellness programs as illegal and discriminatory, more companies may be compelled to enforce participation through penalties as opposed to rewards.
How does a CEO know the wellness program is working? Success will, of course, look different for different companies, depending each program’s unique goals. But Fortune Magazine recently defined the hallmarks of a great wellness program as one that’s practical and accessible, fosters a health-conscious environment, connects to the company’s structure and existing support programs and offers health screenings and education.
Only time will tell, but the future for corporate wellness programs appear to be healthy in Texas.
David G. Vequist IV, Ph.D. is the Founder/Director of the Center for Medical Tourism Research – an academic center at the University of the Incarnate Word in San Antonio researching the Medical Tourism industry. firstname.lastname@example.org
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