Spokane Journal of Business

Family share of health care edges higher

Employers are moving beyond cost shifting to cost control, new survey finds

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Median households in the U.S. earn approximately $48,000 annually, and the amount of money that such families spend on employer-sponsored health care per year continues to edge closer to one months salary, a recent survey says.

The median annual contribution for family health-care coverage now is $3,120, up 15 percent from last year and 22 percent higher than in 2006, says the survey, Aon Consultings 2008 Benefits and Talent Survey. By comparison, organizations have experienced about 10 percent annual health-care cost increases since 2006.

Employers, to deal with their part of the ever-higher burden of health-care costs, are beginning to move beyond cost shifting to cost control by focusing on improving the health and productivity of their employees, the survey of more than 1,100 U.S.-based organizations found. It found that 64 percent of employers now have a benefits strategy that promotes the importance of health and productivity to their employees.

By providing their work force the tools and resources to improve their health, employers are making a commitment to invest in their employees, leading to a more productive work force, says John Zern, Aon Consultings U.S. Health & Benefits practice director. This is a change from the traditional perspective of cutting medical program costs without regard to long-term impact or worker productivity.

The most common way organizations are promoting health and productivity today is through wellness programs, which are designed mostly to prevent the development of chronic conditions such as diabetes and heart disease.

According to the survey, the number of employers implementing specific wellness programs has increased threefold from 2007 to 2008. For example, about 46 percent of employers are implementing smoking-cessation programs this year, up from 14 percent of employers in 2007. The top five wellness programs employers are implementing this year, with last years percentages in parentheses, are promotion of exercise and physical activity, 68 percent (19 percent); disease-management programs, 60 percent (18 percent); health risk appraisals, 48 percent (14 percent); biometric screening, 47 percent (12 percent), and telephone health-care coaching 46 percent (14 percent).

These figures show that employers now recognize the link between employee lifestyle behaviors and medical spending, says Tom Lerche, Aon Consultings Health Care practice leader. Chronic conditions, for example, are influenced by smoking, obesity, poor nutrition, and leading a sedentary lifestyle, and account for more than 60 percent of health-care costs.

He says, Through stress management, weight management, and smoking-cessation programs, employers can focus on the root causes of these chronic conditions to reduce health risk factors among employees and dependents, which lead to a lower rate of increase in health-care costs.

The expected worker shortage also has impacted the increase in wellness programs among employers.

In an era when retiring baby boomers are expected to contribute to the skilled worker shortages in the next 10 years, employers are embracing wellness and health promotion programs today to reduce absenteeism, Lerche says. Some employers value wellness programs as an effective recruitment tool, and others believe the programs can reduce disability costs.

Additionally, the availability of wellness programs has increased. More employers are buying these services directly, and more carriers are offering wellness initiatives to organizations, Lerche says.

The survey also shows that employers have added incentives to motivate employees to participate in wellness programs, with 23 percent offering incentives to take health risk appraisals Twenty percent of employers are providing incentives to employees who complete health risk programs such as tobacco-cessation or weight-management programs. The type of incentives varies, but about 22 percent of employers offer nonmonetary awards such as gift cards and merchandise. Only 10 percent of organizations offer employees a premium contribution reduction.

While employers understand the importance of offering wellness programs and motivating employees to improve their health, the majority of employers dont have a process in place to measure program impact or to track return on investment.

Ninety-two percent of employers surveyed said they dont have such a process for tracking overweight employees, and 87 percent said they dont have such a process for tobacco users. Similarly, 79 percent said dont have a data-tracking process for biometric data gathered as a result of employee screenings, and 69 percent said they dont have a process for tracking participation in their corporate disease-management programs.

Tracking and benchmarking employee metrics must go hand in hand with implementing wellness programs and must be measured to determine the return on investment and changes in productivity, Lerche says.

Aon Consulting says such tracking and benchmarking will enable an employer to identify the main reasons for medical costs and implement effective strategies to contain them.

Effectively communicating data with the work force also helps establish a benefits partnership between the employer and employee, as they work together to influence outcomes and reduce health-care costs, Lerche says. Employees will be much more appreciative and engaged if they are presented with data tracked over time that explains why benefit changes are being made.

Aon Consulting, of Chicago, is an employee-benefit consulting firm that employs more than 5,300 people in 117 offices worldwide and had revenues of nearly $1.4 billion last year.

It was named the best such firm in 2006 and 2007 by readers of Business Insurance magazine.

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