More On Wellness Programs To Improve Health and Reduce Costs

Since about 60% of the insured population has their insurance from their employer, there is a super opportunity for a win-win – to improve the employee’s (and spouse’s) health while lowering the costs of health insurance to the employer.

Some companies have used wellness programs to very good effect. General Mills has indicated their satisfaction with their programs. Safeway began a wellness program in 2005. As of the end of 2010, it total costs were about the same as 5 years before – a time period when most corporations were experiencing 30-40% increases.
Steven Burd, CEO of Safeway, in a Wall Street Journal Op-Ed explained that Safeway has made wellness programs available to all of its 30,000 nonunionized personnel. Its program is based on two insights: 70 percent of all medical costs result from adverse behaviors, such as smoking, overeating, and lack of exercise; and 74 percent of all costs are related to four chronic illnesses—cardiovascular, cancer, diabetes, and obesity—and that are, for the most part, preventable with behavior modifications.
An article in the Washington Post challenged Burd on his contention that incentives were a key to success. Safeway responded that it began a wide ranging program including aggressive use of generics drugs, etc plus a wellness program that included dollar incentives to its employees. Not all of the cost management resulted from financial incentives; indeed, those only began in 2008. As of the end of 2010 Safeway had held total all-inclusive per-employee health-care costs at 2005 levels, whereas most other large American companies have seen a cumulative increase of about 50 percent over the same time period. Safeway points out that had the company not actually expanded benefits, its costs would have fallen by 5 percent from 2005 to 2009. (Note that I discuss this in some detail in “The Future of Health Care Delivery.” See http://www.medicalmegatrends.com/ )
Orriant, a company that manages wellness programs for corporations, has amassed substantial data on how large an incentive is needed to drive action. They can closely predict the percentage of employees who will participate based on the level of the incentive.
They find that over time an increasing per cent of staff will become “healthy” based on objective measures. For example, at one large company that has used wellness programs for 7 years, the medical care costs have been flat, i.e., the same as 7 years ago. 31% of staff are now measured as “healthy” compared to only 11% eight years ago.
Orriant looked at the data for 4 years (2007-2010) of 4 client companies. Each company had about 800 staff. On average 64% of employees chose to participate while 36% did not. Although one might expect that only the healthiest would sign up, in fact some 68% of participants had at least one significant health issue or health risk. But they were likely healthier than the nonparticipants because in the first year the claims paid for the participants was about $1200 whereas it was about $3000 for the non participants. But the value was in the long term impact. By the fourth year, the claims paid for participants had risen to about $2000 compared to $6000 for the non participants. This relative difference held true for hospital claims paid, physician claims and pharmacy costs. The total claims paid by the 4 companies’ declined during the last of the four years by 1.3%; a time when the USA average rose by 6.9%

Wellness programs seem to work best when the incentive is connected to accountability, i.e., the participant needs to set goals with a health coach and then work toward them
The end results with wellness programs are healthier workers who are generally more productive and have less sick days and also report increased job satisfaction. At the same time the employee has a meaningful increase in take home pay while the company enjoys a significant savings as represented by lowered increase (or even flat or declining) in health care costs from year to year.

Wellness Programs To Improve Health and Reduce Corporate Expenses

Some 80% of healthcare costs go to just a few very serious complex chronic diseases including the likes of diabetes and heart failure. But these are all largely preventable with lifestyle adjustments. Unfortunately, we Americans are an over fed (on non-nutritious diets), under exercised, chronically stressed population with 20% of us still smoking. One third of us are frankly obese and another one third are overweight.

Health care costs could plummet if we could only become a health conscious society where these chronic illnesses became much less common. But we can adjust our lifestyles – if given the proper incentives. Of course, we all hope to live a long time, we cannot change our genes and all too many of us live in socio-economically deprived communities. And as an aging society, “old parts will wear out.”
Incentives work best if there is a noticeable reward in a short time frame – these help to keep us on track. I love the story I heard on NPR’s “All Things Considered.” A lady (an economist) wanted to lose some weight and do it over the Thanksgiving, Christmas and New Year’s period – surely a difficult time to do so. She created a personal incentive by asking a good friend to agree to accept $500 of she did not lose the prescribed weight on time. The message was that her friend had to accept the money if the weight was not off and she was to purchase something special (jewelry, iPad, etc) and flaunt it. The result was that the person paid attention to every thing she ate. Each ice cream temptation was now worth $500. And $500 was an amount which was meaningful to her although not enough to cause real financial deprivation. It worked and she lost the weight.
Another, and very effective approach is a workplace wellness program. I discuss them extensively in The Future of Health Care Delivery. In their basic formulation, the employer offers various programs such as smoking cessation, fitness, dietary stress management, etc. The employee is free to volunteer or not and in return sees a decrease in his share of the healthcare premium of the company.
Assume that a company spends $15,000 annually (the approximate national average) for a married employee’s health premium and normally expects the employee to pay one third or $4500 per year or $375 per month deducted from his pay check. But if he participates the company will reduce his share by a much as $3000 (i.e., the law allows up to 20% of the total to be reduced from the employee’s share for participation) which brings his monthly deduction down to $125 or a $250 per month incentive reflected in increased take home pay per month. This creates a strong incentive to participate in the wellness program.

But accountability is key. This means that the employee must not just attend sessions but actually follow through on, say, a smoking cessation or a fitness program with a health coach.

Here is a link to an article that outlines some of these concepts in more detail.

What happens? Employees sign up, they participate, they accept accountability in return for the incentive and they become healthier. The company’s health care costs stabilize or possibly even decline. They certainly do not rise like their competitors’ costs do. The staff is healthier, they are more productive and have less sick days and satisfaction scores rise. Clearly a win-win.

Maximizing Rights with Responsibilities to Enhance Access and Reduce Total Costs

Healthcare reform was supposed to be about both access to care and reducing the cost of care. So far it is only about the former and the new costs look to be huge with only a portion of the uninsured actually benefiting. As to cost reductions, the only suggestions have been mostly just about reducing payments to providers with the assumption that they can figure out how to provide good care with less funding. That is not a strategy but just a tactic – and it will backfire.
There does need to be a way to reduce costs and the way to do so is a combination of rights and responsibilities related to the development and the care chronic illnesses. It is possible to reduce health care expenditures without rationing and without draconian across the board cuts to providers. Much of the rapid rise in costs is due to the increase in chronic illnesses that last a lifetime and are expensive to treat – heart failure, diabetes with complications, cancer, etc. Over 70% of healthcare costs go to treat these individuals who are only about 15% of the population. And these illnesses are increasing in prevalence as the population ages and as we persist with adverse behaviors such as smoking, over eating, lack of exercise and stress.
Chronic illness should be addressed from two perspectives – coordinating the care of those who are already ill and preventing new illness from occurring. Both will reduce costs and improve the quality of life.
What has become very clear is that chronic illness needs intensive care coordination to prevent unnecessary specialist visits, procedures, tests and even hospitalizations – the source of excess expenditures. Primary care physicians [PCPs] are in the best position to coordinate care but do not do so because they are not reimbursed for the effort. They receive about 5% of the healthcare expenditures but can have a major impact on the other 95%. Changing the reimbursements to PCPs with the proviso that they coordinate care would have an immediate impact.
Workplace wellness programs that offer reductions in health insurance payments in return for healthy behaviors reduce over-all costs and improve the health of the workforce. Safeway, General Mills and others have convincing data on the value of wellness programs. It’s an incentive toward healthier living.
Similarly, insurance policies should have variable rates for behaviors and preventive medicine – not smoking, weight control and obtaining simple screening tests like blood pressure and cholesterol would mean lower premiums.
Combining rights [access to insurance at lesser cost] with responsibilities [live a healthy life style] for patients and rights [increased pay] with responsibilities [coordinate care] for PCPs will have a major impact on the total costs of care and do so quickly.