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BY DAVID OLSON, President, Minnesota Chamber of Commerce
N
LQHW\¿YHSHUFHQWRIHPSOR\HUVVD\WKHFRVWRIKHDOWKFDUHLVDbusiness priority. For small and medium-sized business owners, the health and wellness of their employees directly affects the livelihood of the overall business. The indirect costs of poor health can be two to three times the direct medical costs.1 However, American companies
are spending an unsustainable amount of money on employee health. 7KLVWURXEOHVRPHWUHQGSRVHVDVLJQL¿FDQWFKDOOHQJHWRWKHDELOLW\RI American businesses to compete in the global market. Businesses must EHDEOHWRPDQDJHKHDOWKEHKDYLRUVFRQFXUUHQWO\ZLWKWKHKHDOWKEHQH¿WV they offer if they are to optimize their expenditures.
The questions, confusion and frustration of all these facts for business owners are overwhelming and time consuming. The remainder of this chapter will include an overview and explanation of the health care frustrations for small businesses, the impact and importance of having healthy employees, and the role of wellness in the workforce.
Health care frustrations for small businesses
Employers want their employees to be healthy and happy. How to make an employee healthy might seem straightforward – give them DQLFHEHQH¿WSDFNDJH±EXWWKHUHDOLW\LVPXFKPRUHFRPSOLFDWHG
SECTION
4
CHAPTER 5
Small Business Health Care
and Wellness
77
(PSOR\HUVDUHIRUFHGWRPDNHGLI¿FXOWGHFLVLRQVDERXWZKDWW\SHV of packages to offer and how these packages translate into employee EHQH¿WV'RQ¶WIRUJHWWKHTXHVWLRQRIEDODQFH $WZKDWSRLQWDUH employers asking employees to take on too much of the cost? At what point are employers allowing employees to be irresponsible for their RZQKHDOWK"7KHVHTXHVWLRQVRQO\EHJLQWRH[SODLQWKHFRQÀLFWVIDFLQJ employers. As business owners, at the end of the day you can only afford a certain amount of insurance, if any, for your employees. For some employees, the question becomes: Why could my employer afford insurance last year but not this year? The answer: Cost.
The cost of health care is increasing at an unsustainable rate. Research by Hewitt Associates shows that total healthcare costs have more than doubled in the last decade, from $4,793 in 2001 to $11,058 in 2010. It is estimated that these costs will increase 18 percent over the next 50 years due to the aging U.S. population. No doubt, every company has a breaking point. This could come from one employee’s illness that results in skyrocketing premiums for the company or from the continuous increase of healthcare coverage costs.
The cost increases anticipated during the next 50 years will cover primarily the rising need to manage chronic diseases, including coronary heart disease and congestive heart failure.2 Annual healthcare spending
in the United States increased from $75 billion in 1970 to $2 trillion in 2005; by 2015, annual spending is estimated to reach $4 trillion.3 As the
chart below shows, from 1999 to 2005, the average employer cost for health insurance rose from $1.60 to $2.59 per employee per hour. With the continual increase in the cost of health insurance, employers will have to choose between having a smaller workforce and reducing their health insurance coverage.
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The skyrocketing cost of health insurance is no surprise for small businesses. They have been feeling the impact of rising insurance premiums for more than a decade. Private health insurance premiums grew 5 percent from 1997 to 2000. That growth rate nearly doubled – to 9.2 percent – from 2000 to 2005.4 At the same time that the cost
is increasing, by many measures health outcomes in the United States are worse than in other developed countries. As displayed in the graph below, the United States spent $6,401 per capita on health care in 2005, more than double the median per-capita expenditure of the 30 countries that form the Organization for Economic Cooperation and Development. The United States also has the largest proportion of people in the private insurance market.
Employers that recognize health outcomes are worse than in other developed countries are forced to make business decisions. The bottom line is that the money directed to health care in this country needs to KDYHUHVXOWVWKDWEHQH¿WDEXVLQHVVRZQHULHKHDOWK\HPSOR\HHV
In Minnesota, the cost of private health insurance has been growing faster than the economy, wages and incomes. These rapid cost increases have likely contributed to the recent decline in the percentage of
Minnesotans who have health insurance through an employer.5 In
similar fashion, it has also likely contributed to the recent increase in the percentage of uninsured Minnesotans. More employers are unable to provide coverage due to the economic downturn, and employees cannot
79
afford coverage because wages and incomes have not kept pace with rising healthcare costs. In recent years, providing health coverage for employees has become too expensive and too complex for employers to continue at the same level. The answer is clear: Something must be done to control the cost of health coverage.
Many employers have been forced to increase the cost share of their employees. The graph below illustrates the trend in total healthcare spending per enrollee – health plan plus enrollee out-of-pocket cost. The share that enrollees were responsible for rose by 9.3 percent in 2008. In contrast, the health plans’ share of spending increased by 4.4 percent.
As the graph shows, the total healthcare cost per enrollee in 2008 was 2.4 times higher than it was in 1998. Considering the other economic pressures facing consumers, it’s clear these rising out-of-pocket costs need to be addressed. In 2007, 60 percent of employers offered health EHQH¿WVFRPSDUHGZLWK SHUFHQWLQ:LWKWKHHYHUULVLQJFRVWRI KHDOWKFDUHFRPSDQLHVWKDWDUHDEOHWRFRQWLQXHWRRIIHUKHDOWKEHQH¿WV are likely to increase the amount workers contribute to premiums (45 SHUFHQW LQFUHDVHGHGXFWLEOHDPRXQWV SHUFHQW LQFUHDVHRI¿FH visit co-pays (42 percent), or increase prescription drug premiums (41 percent).6 It’s unfortunate, but the option of increasing the enrollees’
responsibility does not solve the overall skyrocketing expense of healthcare coverage.
0RUHDQGPRUHFRPSDQLHVKDYHWRWHUPLQDWHKHDOWKEHQH¿WVGXHWR rising costs. One study shows that companies that concentrate
cost-80
reduction efforts on raising employee expenditures could ultimately spend three to 10 times more in lost productivity and absenteeism.7
The cost-shifting strategies discussed above have other implications as well. These strategies have been shown to possibly create barriers to high participation in preventive health screening or lower medication adherence in the management of common chronic health conditions such as diabetes, asthma and hypertension.8 Employers are subsequently
left with few options and skyrocketing costs.
(PSOR\HUVQRGRXEWDUHEHLQJIRUFHGWRPDNHGLI¿FXOWGHFLVLRQV regarding health coverage for their employees and how that affects their bottom lines. Unfortunately, there is no right answer.
The impact and importance of having healthy
employees
(PSOR\HUVDEVRUEVLJQL¿FDQWLQGLUHFWSURGXFWLYLW\FRVWVZKHQWKHLU employees are not healthy. Productivity losses related to personal and family health problems cost U.S. employers, on average, $225.8 billion annually, which is $1,685 per year.9 Poor employee health reduces
overall productivity by 5 to 10 percent. Increased medical expenditures are accompanied by a decreased output of goods and services.10 This
productivity loss affects a business in multiple ways: production, workforce availability and potentially the cost of premiums. This loss to businesses cannot be recouped and is a constant speculation game for employers.
The aging workforce is accompanied by chronic health conditions that drive healthcare costs. In 2006, 70 percent of people aged 50 to 64 were actively engaged in the workforce, up nearly 4 percentage points from a decade earlier. In the 65-to-74 age bracket, 22.8 percent were employed in 2006, representing a nearly 6-percent increase over the preceding 10 years. These trends indicate a shift to older Americans remaining engaged in the workforce for a longer period.11 Therefore, employers
must also accommodate the aging workforce and the accompanying health needs.
Small business and wellness
A study by Hewitt Associates showed for the second year in a row that keeping employees healthy is the top workforce issue. The ability of businesses to manage health behaviors concurrently with the health EHQH¿WVWKH\RIIHUZLOORSWLPL]HWKHPRQH\VSHQWRQKHDOWKFDUH$ FRPSUHKHQVLYHKHDOWKPDQDJHPHQWVWUDWHJ\LVGLI¿FXOWWRIRUPXODWH due to the three leading actual causes of death in the United States: tobacco, poor diet/physical activity, and alcohol consumption all being PRGL¿DEOHOLIHVW\OHUHODWHGEHKDYLRUV12 About 37 percent of deaths
81
in 2000 were attributable to tobacco, physical inactivity/poor diet and alcohol. These behaviors often underlie the development of the nation’s leading chronic diseases: heart disease, cancer, chronic obstructive pulmonary disease, stroke, and diabetes.13 Changing employee behaviors
has not traditionally been the role of an employer. However, employers DSSHDUWREHQH¿WLIWKH\DVVLVWZLWKFRVWPDQDJHPHQWDQGLPSOHPHQWD strategy for employee productivity. As a result, employers are attempting to encourage employee behaviors by unconventional means.
More than three decades of research by the University of Michigan Health Management Research Center has shown that excess health risks (i.e. tobacco, poor diet/physical activity, and alcohol consumption) are independent of the cost burden of chronic disease. These excess health risks increase the total cost burden of chronic health conditions on small businesses.14 A collaborative study involving Chrysler Corporation and
the United Auto Workers Union showed that workers with unhealthy weights (BMI >30) had 143 percent higher hospital inpa tient utilization than those with healthy weights (BMI <25).15 Therefore, regardless
of employee health status, it is in the employers’ best interest to be aggressive in managing the health risks of their employees.
Healthier workers can help control healthcare costs as, over time, costly serious illnesses are prevented and existing ones are better
managed. A review of 73 published studies of worksite health promotion programs shows an average $3.50-to-$1 savings-to-cost ratio in reduced absenteeism and healthcare cost.16 In order to capture these savings,
businesses need to address the high-cost groups (i.e. diabetes, heart disease) through programs that target the management of such diseases DVZHOODVDGGUHVV³DWULVN´JURXSVWKDWKDYHPRGL¿DEOHEHKDYLRUV LH tobacco, poor diet/physical activity and alcohol consumption). We’ve all become accustomed to wellness programs. A meta-review of 42 published studies of worksite health promotion programs shows:17
Average 28-percent reduction in sick leave absenteeism. Average 26-percent reduction in health costs.
Average 30-percent reduction in workers’ compensation and disability management claims costs.
Average $5.93-to-$1 savings-to-cost ratio.
However, we have not seen an overwhelming amount of change in employee behavior. Some companies are starting to take a different approach by penalizing workers for unhealthy behaviors.
Many employers are changing tactics and plans in an attempt to promote employee accountability. In the 2010 study conducted by Hewitt Associates, that surveyed nearly 600 large U.S. employers,
82
SHUFHQWVDLGWKH\HLWKHUDOUHDG\XVHGRUSODQQHGWRXVH¿QDQFLDO SHQDOWLHVRYHUWKHQH[WWKUHHWR¿YH\HDUVIRUHPSOR\HHVZKRGRQRW participate in certain health improvement programs. Of the companies XVLQJRUSODQQLQJWRXVH¿QDQFLDOLQFHQWLYHVSHUFHQWVDLGWKH\ZRXOG do so through higher premiums, 17 percent by increasing deductibles and 17 percent by increasing out-of-pocket expenses. When asked what types of behaviors or programs they would penalize, the business answers included both high-cost groups and “at risk” groups that have PRGL¿DEOHEHKDYLRUVLQFOXGLQJVPRNLQJ SHUFHQW QRWSDUWLFLSDWLQJ in disease management/lifestyle behavior programs (50 percent) and not participating in biometric screenings (45 percent). The shift of incentive-based programs all stemmed from the 95 percent of employers that said cost is a top business issue. Allowing employees to determine if they want to pay more for poor behavior, or pay less for responsible behavior allows for employers to reallocate that responsibility.
There is a long history of businesses adding wellness incentives to their insurance programs. Employees have embraced these incentives at varying degrees. However, as discussed above, healthcare costs have continued to increase. It turns out that unless someone (e.g. the Legislature or Congress) does something about all of the other parts of the healthcare system that are driving up utilization and cost, our workforce could be twice as healthy and we’d still be spending as much, if not more, on health care. This is not a reason to put wellness programs DVLGHRUWRDYRLGDGRSWLQJWKHPWREHJLQZLWKEXWWKH\DUHQRWVXI¿FLHQW to bring cost under control on their own. Something more must be done to control the cost of health care.
The cost of health care is a major concern for employers. The KHDOWKFDUHLQGXVWU\PXVW¿QGDZD\WRPDNHKHDOWKLQVXUDQFH sustainable and affordable for businesses. A healthy workforce is EHQH¿FLDOIRUHYHU\RQHLQYROYHG,IWKHDQVZHUVZHUHVLPSOHIRUKRZ to make a workforce healthy, every company in the country would be implementing the program immediately. Programs are not the answer, cost control is.
1 (GLQJWRQ':%XUWRQ:1+HDOWKDQGSURGXFWLYLW\,Q 0F&XQQH\
RJ: A Practical Approach to Occupational and Environmental Medicine. 3KLODGHOSKLD /LSSLQFRWW:LOOLDPV :LONLQVUGHG
*RHW]HO5=/RQJ652]PLQNRZVNL5-+DZNLQV.:DQJ6/\QFK: +HDOWKDEVHQFHGLVDELOLW\DQGSUHVHQWHHLVPFRVWHVWLPDWHVRIFHUWDLQ SK\VLFDODQGPHQWDOKHDOWKFRQGLWLRQVDIIHFWLQJ86(PSOR\HUV- 2FFXS(QYLURQ0HG
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care model of the impact of population aging on the cost of chronic conditions in the United States. Disease Management. 2007;10(2):51– 60.
3 Henry J. Kaiser Family Foundation. How Changes in Medical
Technology Affect Health Care Costs. http://www.kff.org/ insurance/ snapshot/chcm030807oth.cfm. Accessed February 13, 2009.
4+HQU\-.DLVHU)DPLO\)RXQGDWLRQ(PSOR\HU+HDOWK%HQH¿WV
Annual Survey. Henry J. Kaiser Family Foundation. 2005.
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6+HQU\-.DLVHU)DPLO\)RXQGDWLRQ(PSOR\HU+HDOWK%HQH¿WV
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increas-ing investment in workplace health promotion programs by large- and medium-sized companies. North Carolina Medical Journal. 2006;67(6):449–452.
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