Funding Strategies for Employee Health and Wellness Programs
March 16, 2011 / Uncategorized
Out of control healthcare costs have become a board-level issue for virtually every U.S. organization and employers are increasingly recognizing that helping their employees become healthier can make a substantial impact on costly, preventable lifestyle-related diseases. However, we do still get a lot of questions on how organizations can fund a health and wellness program in this challenging economic climate. Within our own client base, some have done it on an entirely cost-neutral basis to their income statements. They do this and still manage to pay the participating portion of their employee base hundreds, if not thousands, of dollars in health incentives by balancing pay outs or reductions in next year’s premiums with offsetting increases in employee contributions, deductibles, co-pays, or reduced HSA funding for those who choose not to comply or engage in healthy behaviors. Other clients offer the program as a pure benefit. Let us take you through a couple examples of ways clients we’ve seen clients fund their programs today.
One strategy employers can use to fund their employee health programs is to increase employee contributions to healthcare premiums, and offer opportunities to earn premium discounts for participation in prevention-based employee health programs. With this funding strategy, employers see an upfront savings in healthcare costs by increasing the portion that employees contribute to premiums. With the savings, employers can implement a program which gives employees the opportunity to earn discounts on their premiums. This allows for a direct cause and effect relationship when it comes to price, which has, to date, not been seen in healthcare. Similar to a good driver discount, those employees who exercise regularly and make other healthy decisions will pay less, while those who don’t will bear more of the financial burden.
One of our clients, a large healthcare system with more than 10,000 employees, has employed this method through a tiered approach, and has had great success. The organization offers employees a healthcare premium discount after achieving a “Level 3” status in the Virgin HealthMiles program. Why is this milestone important? “Level 3” is the point at which an individual is getting enough physical activity, according to the CDC’s guidelines, to reap long-term health benefits which ultimately lower costs. And it doesn’t stop with discounts; the organization provides employees with an opportunity to pocket even more money. Instead of increasing employee contributions by three percent, the company opted to raise them by five percent and held the extra two percent as a funded pool to incentivize the employees who get active and take care of themselves. Employees can earn up to $300 each, offsetting the increase in premiums they’re paying. Together with the Level 3 premium discount, these incentives can equal as much as $2,300 each year for a family.
Another strategy employers can use is to offer a less expensive, consumer-driven health plan in conjunction with an HSA or HRA. Data shows that more than 54 percent of companies today offer a consumer-driven health plan. While employers may choose to use the savings from these less expensive plans to contribute to their employees’ HSAs, a portion of the money can also be used to fund health and wellness programs. Using this funding strategy, employers can offer their employees a program which allows them to earn cash for their good health behavior and have it deposited into their HSA accounts. Money earned can be used for deductibles and other medical and health-related expenses.
Recently, a client chose to fund their program using this strategy. The company switched from multiple plans to one high-deductible plan accompanied by a health savings account. The company makes a contribution to the account, and also allows employees the opportunity to earn an additional $1,000 toward the account by participating in the Virgin HealthMiles program. This strategy offers the employees who are increasing and maintaining healthy levels of physical activity and seeing improvements in key health measurements an opportunity to earn a substantial amount of cash to use toward their annual deductible and other health-related expenses. It also sends a compelling message to the organization: your healthcare costs will be considerably lower by participating in preventive health behaviors. By making these changes to their health plan and implementing the Virgin HealthMiles program, the company hopes to share the responsibility of healthcare costs while creating more engaged employees who carefully consider costs and outcomes.
One of the best strategies organizations can employ is to focus on prevention and take a proactive approach to help employees stay healthy. It’s all about preventing the onset of chronic conditions that drive the majority of healthcare costs impacting businesses and employees. Taking advantage of these provisions, in combination with a prevention-focused, technology-based employee health program allows employers to offer their employees even greater incentives and motivation and see quantifiable improvements in employee health while getting more from their budgets.
Let us know if you have other questions on funding strategies or examples of how your organization has tackled this issues.