Is Control an Illusion for Employers When it Comes to the Cost of Employee Benefits?

By Brian Cardin, PT, C.Ped.

The Problem

Good employees are invaluable to any employer. Knowing this value, employers strive to provide a work environment and appropriate compensation that recognizes each employee’s value to their company. Attracting and retaining the best and brightest workers has challenges and costs. Payroll costs, while being the top expense for business, are expected and are essentially controllable. The same cannot be said for Employee Benefits, the other half of employee compensation, which is the second leading expense in today’s corporate world. Small and large business owners alike are struggling to find ways to provide health and wellness benefits to meet employee’s needs, to remain compliant with government regulations and to not over-burden their bottom line. At the same time, the cost of insurance premiums, utilization of healthcare and cost of healthcare provided continue to rise. Yet, the American workforce is not getting healthier.

The Reality

The U.S. Department of Labor and Statistics reported that the average employer cost of employee compensation per hour worked in December of 2017 was $35.87. Wages and salaries accounted for $24.49 (68.3%), while benefits accounted for $11.38 (31.7%). Controlling costs is an integral part of any business’s success. In order to control any aspect of business, however, we must have a working knowledge of what goes into those costs as well as what we get for the cost (to determine its value). As a business owner or CEO of a company, understanding the costs associated with health benefits and wellness programming is difficult. Many would say that it is an impossible cost to control since insurance premiums are dictated by the insurance carrier, and in the case of self-insured corporations, the utilization of healthcare dollars is determined by employees and their healthcare providers.   

Employers often turn to employer-sponsored wellness programs in an attempt to improve employee health to reduce the utilization of high cost medical care. This is particularly popular with self-insured employers, as they assume the direct risk of paying for medical services that their insureds receive. Unfortunately, most wellness programs are successful at engaging the healthiest of workers, and lack effectiveness in engaging employees with a variety of health risks. This presents a problem, as it is well documented that the Pareto principle (80/20 rule) applies to healthcare spending and savings. Twenty percent of each employee population will account for 80% of healthcare utilization costs. If the goal of a wellness program is to help control healthcare expenditures, it stands to reason that engaging employees with the most health risk is the key to success. This is undoubtedly the most challenging of endeavors.

For years, well-intentioned employers have given inordinate amounts of money to wellness service providers to “Improve employee health” to help create a healthier workforce. Yet, the American workforce is not getting healthier, insurance premiums continue to rise, and self-insured employer costs continue to escalate with increased healthcare spending. Some might argue that wellness programs are an ineffective expense added to employee benefits with little to no return on investment (ROI). However, there is evidence to suggest that the opposite can be true. Data-driven wellness programming can bring great value when it is focused on engaging and meeting the actual needs of each employer group. Knowledge is power. In order to restore valid decision-making power to employers, the employers must understand the needs of their specific group of employees, independent of their health insurance carrier or third-party administrator.

Historically, employers have relied on health insurance companies to dictate the entirety of health and wellness benefit programs from services and systems to costs. Prospective third-party payers (TPAs/health insurance companies) gather information related to the health of employees via a Health risk Assessment (HRA). While this is advertised as a “Free” service to the employer/employee, the costs associated with administering, maintaining, and reporting the information is carefully bundled into the administrative fees that the employer pays. HRAs are offered under the pretense that they garner knowledge for the employer, however, the reality is that the insurance company owns the information, and the information is analyzed specifically for the purpose of evaluating the insurer’s potential financial exposure as the payer of health insurance claims. The insurance company then dictates the cost of the benefits plan (as the comprehensive insurance provider, or as the stop-gap TPA for self-insured companies) because they have all the information to predict risk or costs. Simply stated, employers/employees pay money to give their health data to insurance carriers on a proverbial silver platter. This information is then used by insurers to justify continually increased healthcare premiums. By an employer not knowing their workforce’s valuable health information and/or by giving this valuable information away, they lose all of their negotiating power.

The Need For Change

The time has come to empower employers with the knowledge necessary to regain control when it comes to employee health and wellness benefits. This requires an employer advocate who is not focused on selling health insurance. PORT is that advocate. PORT teaches employers how to stop being passive consumers of healthcare benefits plans by equipping them with information to understand their healthcare costs, and tools to manage and reduce healthcare costs in realistic and meaningful ways.

This begins with a Behavioral Economic study aimed at understanding the company’s current status with respect to claims, employee engagement and the effectiveness of existing programming. Unlike insurance-company sponsored HRAs, PORT’s proprietary process focuses on identifying employee’s understanding of the status of their health, their readiness to change, and their confidence level in their ability to make that change. This information is used to analyze the financial impacts of individual’s health and lifestyle choices on the group. Combining this information with the data gathered in other aspects of the behavioral economic study allows PORT to produce unique feedback and recommendations that are specific to each employer and their employee groups. All information/data is owned by the employer. This equips the employer with knowledge about their group; and knowledge is power.

Population health management requires a clear understanding of what the population needs, what the population wants, and how to get them engaged. For example, an employer may have 25% of their population identified as smokers, and only 1% of that group ready to focus on smoking cessation. This organization may be better served to support opportunities to engage their population on their current perspective on smoking (and the associated health risks) vs. rolling out a costly smoking cessation program. PORT has over ten years of experience in delivering evidence-based population health programs. In that time, it has become clear that having appropriate knowledge about the employee population holds the greatest value.

Once an employer has this knowledge, they can begin to make a difference. Data driven, measurable programs can follow. Mechanisms to strategically monitor and evaluate the efficacy of programs can be implemented to insure ongoing value for the employer and the engaged employees. It is long-past time for employers to have an advocate working for them in this arena. PORT is excited to lead the way. We want to replace frustration with a sense of control. The goal is to develop employers and employees engaged with a sense of clarity and understanding. To get there, change is in order. In the words of Henry Ford, “If you do what you’ve always done you’ll get what you’ve always gotten.” It is time to do away with illusions, in favor of restoring control for the stakeholders that are the foundation of our societies.

References available upon request.