Wellness programs continue to receive the spotlight as a way to counteract the rising costs of health insurance. But do they? Many experts see wellness programs not as a cure-all but an integral part of a new beginning.
“Promoting healthy lifestyles and positive behavior choices is always a good thing,” says Mark Mixer, vice president for Alliant Health Plans. “It is difficult for employers to realistically gauge the impact it will have on health insurance premiums. The smaller the employer, the more difficult it becomes.”
Smart Business spoke with Mixer about how to tell if a ‘feel-good’ solution makes fiscal sense for your company.
Why are wellness programs becoming prevalent?
The unceasing trend of double-digit increases has employers frustrated, and solutions are elusive at best. Professional insurance advisers are compelled to provide solutions, and many have become advocates of wellness programs. Even the new government mandated benefits will require a wellness component. Employers logically want ROI calculations that show substantially lower costs.
Unfortunately, the excitement is short-lived once employers are told these programs come at an additional cost, above the insurance premium already being paid. Unless the end result of a wellness program will put an immediate and substantial dent in costs, it may be put off. The downside is unrealistic expectations on what wellness programs can truly provide and how they can benefit or enhance an employer’s benefit program.
Do wellness programs benefit employers?
To answer that question, we have to understand the core precept of insurance, which is ‘risk.’ Virtually all midsized to small employers are ‘fully insured,’ which means the premium payment they make effectively ‘transfers’ the risk of health care claims to the insurance company. Larger companies are typically ‘self-funded,’ with the employer paying the claims and assuming the risk (even though the employer may have an insurance company handling the transactions or taking the risk for the catastrophic claims on its behalf).
So here is the critical question: If a wellness program is beneficial, who benefits? In respect to premium costs the answer is the entity taking the risk. Why would an employer (fully insured) add additional costs of a wellness program when the risk — and thus the upside or benefit — is gained by the insurance company? Shouldn’t the company holding the risk pay for such programs, since they will reap much of the upside? Only the insurance company, or a large employer, has enough people to positively bend the cost-curve by employing wellness programs. It is virtually impossible to calculate the savings in a fully insured group (small to midsized company) with any accuracy.
Employers want the best for their employees, and for them to exercise, stop smoking and eat right. But there is a catch. Unless the insurance company is also invested in the results and can measure them, a realistic ROI is impossible to determine. If the carrier is not paying for these results, ask why. This is the logic we used to become the first health insurance company in Georgia to offer an incentive-based wellness program that is paid entirely by us — the insurance carrier — yet all parties have an opportunity to benefit.
