Should a Fully Insured company do wellness?

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Fully insured employers (and their brokers) are often reluctant to implement wellness because their health insurance premiums are determined more or less by the claims of all the employers in the carrier’s risk pool.  That’s usually condensed into the sentence, “I’ll never see an ROI”.  Conventional wisdom is that any savings from a healthier workforce fall to the insurer’s bottom line, not the employer’s.  Therefore, it might be logical to think that it should not be employers, but insurers, that should invest in wellness to improve their profits.  However, most carriers use wellness only as a loyalty program – not for reducing healthcare costs, as covered in a recent blog post.

Most fully insured employers we have encountered do not get serious wellness programming from carriers… so what is the business case for running a program on your own dime?  Wellness WILL still help control health insurance costs, but the biggest pay-off for wellness is NOT the direct cost of health insurance… that’s just the tip of the iceberg.  Here’s the reasoning:

Direct Costs to the Health Plan

1.     Even though the smallest fully-insured employers’ premiums are based entirely on the experience of the whole risk pool, carriers watch each employer’s experience, which can be so much worse than the pool that it becomes virtually impossible to shop plans.

2.     As the number of covered employees increases, there is a point at which carriers start to increasingly adjust premiums according to each employer’s claims experience.

3.     There is a point at which the number of covered employees is sufficient for carriers to adjust premiums entirely based on the employer’s own claims experience.

4.     Some carriers are reportedly beginning to give 2-4% discounts off the nominal increase in premiums for wellness programs they feel are effective.

Indirect Costs and Other Reasons

1.     The indirect costs of poor health, such as absenteeism, workers comp, STD, LTD and presenteeism, are 3 times the direct costs of health insurance. (See figure below and study from Harvard Business Review).

2.     Wellness programs improve morale.  Happy workers are more productive.

3.     Employers need wellness for the same reason that they need benefits – to attract and retain the best employees.

4.     The smaller the firm, the health and productivity of each person become even more important.  Taken to the limit, if the sole employee in a one-person firm goes down, it’s out of business.

5.     Michael O’Donnell found that culture is the single most important determinant of the success of a wellness program, and culture is much quicker and easier to improve in smaller organizations.

What does the fully insured CEO at Haulers Insurance Company think?   Read the first paragraph.


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