Listen Up CEOs: Cutting Health Care Costs is Your New Job

April 18, 2012
Five steps that can be implemented immediately

Health care costs are now the third largest cost of doing business for U.S. companies. And CEOs need to do something about this, says Darrell Moon, CEO of Orriant, a wellness-program provider.

"CEOs can no longer continue to pay the skyrocketing costs which doubled in the last ten years to $15,000 a year for family coverage. As it is now they are paying 73% of that cost. They have to find ways to change the culture so that everyone takes responsibility for lowering these costs," says Moon.

In manufacturing, often lowering these costs depends on both management and union getting on board to realize that everyone benefits as costs decrease and the work population becomes healthier. "A common misconception is that employer-based programs feel like 'big brother' employer telling people what to do. Across the board studies have shown that most people like the idea their employers are investing in their health. And when a wellness program is set up that is based on participation, it is more successful."

Moon explains that when everyone is eligible to achieve financial rewards based on their participation in a wellness program, accountability is spread across the company and the issue of discrimination is absent.

Where are the costs coming from? A new Gallup poll shows that 86% of full-time employees are either overweight or suffer from a chronic health condition which costs employers more than $153 billion per year in absenteeism alone. Moon points out that this is four times the lost-productivity cost in the U.K.

What steps can a CEO take? Moon suggests the following:

  1. Give Incentives to Insurance Brokers
    Paying brokers on a fee-for-service basis instead of the current system where brokers earn more if the plans are more expensive."Better still to offer brokers a bonus tied to the amount by which they can reduce a plan's costs, not benefits," says Moon.
  2. Give Incentives to Managers
    Give bonuses to human-resource and benefit managers who reduce claim costs. "Every CEO learned in business school that if you want to achieve a key business objective, you need to provide incentives to managers to help you succeed," states Moon.
  3. Give Incentives to Healthier Employees
    Accountability-based wellness program where participants are held responsible for their health are producing results. Moon points to his companys experience of four mid-sized employers who found that paid claims per person of those participating in programs dropped to $2,269 compared to $6,187 for non-participants.
  4. Employ Disease-Management Programs to Target the Highest cost Risks
    A huge cost, that is not always as well-known, is the affect of depression on employee's health. The claim costs of employees suffering from depression is 70% higher than for those who are not depressed, according to the Health Enhancement Research Organization.
  5. Better Manage Pharmacy-benefit Managers
    Moon suggests using transparent pharmacy-benefit managers that provide both members and administrators with drug price sheets and claims data to help manage costs.

In addition to these steps another important step an employer can use is to provide an EAP to the workforce. For those companies that already have EAPs, efforts should be made to make sure employees are using it. "A good EAP should have 14% of all employers actively using its services, "says Moon.

While a majority of employers currently provide health care benefits, that might not be the case in the future. A study released in March 2012 by Towers Watson found less than one in four (23%) companies are very confident that they will continue to offer health care benefits 10 years from now, down from a peak of 73% in 2007.

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