Wellness Incentives Reduce Rising Health Benefit Costs

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In an effort to control operating costs, many companies look to employee health insurance benefits as a source of potential savings. Employee health-related expenditures can cost a private business 40% of total profits before tax according to a study performed in 2002.

In a survey released this week by the Kaiser Family Foundation and the Health for Research & Educational Trust, 40% of employers surveyed said they are likely to reduce their overall healthcare costs by increasing employee contribution toward health benefits provided. In addition, many employers are looking for other cost-saving alternatives, such as preventative care and limiting certain elective procedures.

Employers currently pay about 70-75% on average for the total cost of a standard family health policy. With the increasing costs, employers can expect to pay up to $13,000 per employee per year in health benefits.

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Sixty percent of employers offer health benefits as part of employee compensation, and this has remained stable over the course of the past 10 years. According to the survey, one in five that do offer health benefits have reduced the scope of benefits or have increased the worker cost-sharing portion with higher premiums and co-pays. Some smaller businesses are evaluating whether they can continue to offer health benefits at all to employees in coming years.

Healthcare costs are expected to continue to increase about 166 percent over the next decade. Factors accounting for rising healthcare costs include increased pharmaceutical expenses, the aging of the population, and the increase in consumer demand because of chronic disease states such as diabetes and obesity. Illness and injury associated with an unhealthy lifestyle is estimated to account for 25% of employee health care expenditures.

Wellness incentive programs are one way to combat the rising costs of healthcare. According to a Jackson Hewitt survey of over 450 companies, about 48% of employers that offer employee benefits also offer wellness programs such as weight loss classes, gym membership discounts, smoking cessation programs, and employee newsletters. Using these programs, employers can save 26% in healthcare costs, and can expect to generate a return on investment of $3 for every dollar spent on wellness.

Businesses that institute a comprehensive wellness program have reaped the benefits of savings in health care costs. At the IBM headquarters in New York, for example, company leaders found that by offering wellness incentives, or payments to get healthy, they have reduced the number of claims for chronic disease management and have improved employee productivity and absenteeism. Many health insurance carriers also lower the overall premium costs for employers who offer preventative care programs.

Materials from Washington Post, Reuters and National Coalition of Health Care are used in this report.

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