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Good health = good business

Good health = good business

Study: High-performing companies investing in employee health

Whether a business succeeds or fails could depend as much on a company’s wellness culture and -employee health as its products and services. The companies that realize that fact have more productive employees and lower healthcare costs, according to Towers Perrin’s 2009 Health Care Cost Survey. The survey showed that high-performing companies are in better control of healthcare costs. In fact, high performers will pay 12% less on their healthcare premiums than low-performing companies this year.

There are other benefits to being a high performer besides saving money. A healthier work force also means improved employee productivity and engagement, wrote Towers Perrin in its 20th anniversary survey.

Al Gubitosi, principal at Towers Perrin in Parsippany, NJ, says high-performing organizations drive employee behaviors and invest in health programs.

Good health means good business, Gubitosi says. “As I look at [the results], I think that is one of the most powerful takeaways from this study,” he says.

One mistake that organizations make is viewing money spent on health programs as merely a line-item expense rather than an investment. “They are investing in the health of their employees to drive business outcomes,” says Gubitosi.

It’s important for companies, especially during difficult economic times, to avoid cutting health programs as a way to save money. “If they are looking at it as an expense line item, they are missing a great opportunity,” says Gubitosi.

High-performing companies are creating better employee behaviors through more targeted outreach, hands-on coaching, and mentoring that reinforces healthy behaviors.

Towers Perrin wrote that the right investments for businesses are ones that promote health and effective health management.

Leading companies are now building health and well-being into their culture as part of their business strategy. “They recognize the strong correlation between employee health and positive financial and operational results— a health dividend that includes lower costs, but also improved performance and overall business success,” Towers Perrin wrote.

High-performing companies are balancing affordability objectives with efforts to prevent illness and promote health. Nearly 80% of high performers believe they are meeting employees’ financial protection needs and that they motivate employees to manage their healthcare purchases responsibly. Meanwhile, only about half of low performers believe they are accomplishing those roles. (See Figure 13 below.)

High-performing companies view employee health as a critical component of business success. (See Figure 14 on p. 12.)

Towers Perrin stated that high performers achieve superior results by:

  • Building the link between work force health and business results
  • Ensuring that key success factors, such as leadership involvement, are firmly in place
  • Engaging employees and promoting a culture of health
  • Investing in a broad range of existing and emerging health management programs and approaches
  • Designing and pricing programs to create transparency and appropriate incentives
  • Rigorously measuring programs and vendor performance against goals
  • Building action plans to address opportunities and gaps

The role of employers is changing

The survey also highlighted the evolving role of employers. Businesses surveyed said they will need to manage costs, promote better healthcare consumerism, and require that employees take a larger role in the near future. (See Figure 15 below.)

“They expect to support those efforts by taking steps to better identify and communicate the health and financial risks employees face, as well as by providing programs and support tools to help manage them,” wrote Towers Perrin.

One issue for low performers is that they often don’t measure how wellness and better health affect the company or do not measure their healthcare programs properly.

Another problem occurs when senior leadership does not value or promote the programs. In fact, only 34% of low performers in the survey said their company supports a culture of health, whereas 77% of high performers said they promote that culture.

As a way to contain costs, Gubitosi says employers and health plans have moved their focus away from managing doctors and plan to improve employee/member health. “Employers now say, ‘I have a better chance of managing the health of my own population by devoting resources to that end,’ ” he says.

Health benefit costs on the rise

In the survey, Towers Perrin predicted that employer health benefits would increase by 6% this year, but high performers will see only a 4% increase. The survey found that high-performing companies will save $1,200 for every employee plan this year when compared to low performers.

The difference will also affect employees. Those employed at a low performer will see their costs increase by 10%, whereas those working for high performers will see an 8% increase. This difference means employees in low performers will pay an extra $324 this year for healthcare. (See Figure 16 above.)

Employer healthcare costs have risen by more than $1,700 per employee in five years. (See Figure 17 at left.) Although costs continue to rise, the annual spike is not nearly as steep as at the beginning of the decade. (See Figure 18 on p. 14.)

Pre-65 retirees face higher costs

Pre-65 retirees now pay more than half of their healthcare costs, and Towers Perrin thinks that will continue as businesses look for ways to cut costs.

Pre-65 retirees now pay three times higher premiums than other people covered by employers. Within five years, those who retire before 65 could pay as much as 80% of their healthcare coverage.

Less than half of survey respondents are confident that they will provide the same benefit programs to pre-65 retirees as they do today. However, businesses are also exploring other ways to provide coverage to retirees, including Medicare Advantage and health savings accounts, to ensure that employees will be better prepared to pay for their healthcare when they arrive at retirement age.

Employers are now asking workers to think about their health in a 20- or 30-year window rather than as a way to pay for healthcare today. This thinking leads employees to prepare for expensive health-related retirement costs, Gubitosi says.

Account-based plans numbers will increase

Account-based health plans (ABHP) will play a larger role in the coming years, according to Towers Perrin. (See Figure 19 at right.)

High-performing respondents encourage employees to spend healthcare dollars wisely, promote healthy behaviors and appropriate healthcare decisions, and build a sense of shared responsibility with employees. (See Figure 20 on p. 15.)

High performers also say that ABHPs are meeting their objectives to control employees’ and employers’ costs and sparking wiser healthcare consumers. (See Figure 21 on p. 15.)

Gubitosi says he is surprised that account-based plans—also known as consumer-directed health plans—are not rising as fast as he anticipated, but employers and health plans are devoting money to providing better decision support tools and support mechanisms.

“Account-based plans are more and more emerging to encourage savings and prepare employees for retirement,” says Gubitosi.

What’s considered a high performer?

To find the companies that are considered high performers, Towers Perrin created a formula based on self-reported observations regarding how the organization is meeting or not meeting objectives. The survey is usually filled out by the company’s benefits or HR officer.

The performance designations are based on relative costs and cost increases, coupled with metrics that test whether an organization is meeting these key areas:

  • Managing employer and employee costs
  • Enhancing efficient purchasing of healthcare services
  • Improving employee understanding and engagement
  • Increasing employee satisfaction, attraction, and retention

Towers Perrin then divides respondents in its annual survey into three categories: low-performing, average-performing, and high-performing companies.