Employee Health Care Costs: The Risk of Doing Nothing

By Peter Rathmann

Companies are realizing today more than ever that they must take direct action to control their health care costs.  Congress passed health care reform in March 2010 but we have found it does more to shift cost premiums to employees and carve out benefits currently offered, than actually rein in costs.  These tactics can lessen the value of a benefit plan that is intended to retain and attract good employees.

So what can a business do to curb the current trend of medical inflation that now approaches 14% in southeastern Wisconsin?  Following the current inflationary trend, the cost of doing nothing means the average health care cost per employee of $10,000 per year will be $19,500 by 2015.  The solution many are turning to are employee wellness programs.  However, a business needs to be strategic in implementing its plan.  The plan must be designed to impact the business’ specific claims expenses and identified risks in order to obtain a good return on investment and be valuable to employees in the long term.

For a wellness program to be successful in controlling costs, it must have a strategic, managed, and sustained process that becomes part of the culture of the company.  It needs to have acceptance from the top management down to the most entry level positions.  A successful program should include the following:

  • A three- year strategic plan reviewed and updated quarterly
  • Benchmarked biometric and claims data to measure progress annually
  • A benefits committee comprised of different department members and positions
  • 95% plus participation of all qualified members associated with the benefit plan
  • Minimum reward of $1,000 in earned benefit value for participation
  • Participation rewards embedded in the benefit plan requiring no additional incentive expenses
  • A qualified vendor to bring the resources and talents, and delivers the services as a partner

Without these key items, companies will struggle to have a successful wellness program and will struggle to control their costs.   They will find that every day that passes is an opportunity missed to protect their current benefits package.

Oak Hill Business Partners is a professional services firm serving small and mid-sized businesses.  Oak Hill provides Growth Management Services, Mergers & Acquisitions Support, and Turnaround Solutions.

Peter Rathmann is a Strategic Partner of Oak Hill Business Partners, specializing as a benefits consultant who can control costs through non-traditional broker tactics.

Posted by Erik Owen