What’s the Real Cost of EE Healthcare? (Hint: More than You Think)

How Big Is the Number?

Most HR managers underestimate the full costs of employee health (or lack thereof), says Ahlrichs. He refers to a study involving auto manufacturers and 171,250 employees.

The study recorded basic medical costs for the measured period—the metric most wellness plans look at—at $509 million.

• But add pharmacy and the number jumped to $623 million.
• And adding lost time pay brought it to $824 million.
• Then adding the impact of absences drove it to $923 million.
• Finally, adding performance impact, presenteeism, etc., brought it to a total of $1.24 billion.

Use the bigger number, says Ahlrichs, when you are fighting for your wellness budget.

Top 10 Claims

And then there’s another way to use big numbers. One of Ahlrichs’ clients found the following changes in its top 10 claims a year after implementing a wellness program:

That’s a change that gets CFOs interested.

Ahlrichs also uses charts to help HR managers understand costs of health problems. In the first chart, notice two things, he says. First, you see the surprising amount of costs related to presenteeism. Second, you see the multiplier effect of adding more chronic conditions.

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Then, in the second chart, you see various types of costs broken out for specific diseases, expressed as cost per 1,000 employees:

Barriers to Effective Wellness

Ahlrichs offers a list of common barriers to effective wellness programs:

• Lack of employee interest
• Insufficient staff resources
• Inadequate funds
• Failure to engage high-risk employees
• Inability to elicit the support of upper management
• Wellness usually reaches the healthy employee, not the sedentary spouse

In addition, CFOs are skeptical to begin with, and we often track metrics they don’t care about or they think are not valid. It can help to remind CFOs that wellness has ties to customer service and workers’ compensation.

What Else Is Working?

Ahlrichs suggests the following:

• Avoid the “One-Size-Fits-All” approach—Individualize goals/incentives as much as is administratively possible.
• Issue pedometers that collect downloadable data. Get people moving! People can’t cheat. Much.
• Never do open‐ended programs.
• Try not to leave your program on “autopilot.” Your cost drivers can easily shift as employees come and go.
• Consider Value-Based Insurance Design (VBID). Motivate those with chronic disease to obtain the right care, at the right time, from the best providers, by lowering costs associated with those treatments.
• Survey your employees to be sure you are getting the motivators right!

Wellness—just one of the daily challenges all compensation and benefits managers face. “Maintain internal equity and external competitiveness, control turnover, provide competitive benefits, but still meet management’s demands for lowered costs.” Heard that before?

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