‘Tis the season – for thinking about health insurance. Nov. 1 marked the beginning of open enrollment on the state and federal insurance exchanges; employers everywhere will soon kick off the enrollment process for employees and their dependents.
Even if you’ve been living under a rock or in a cave, you know that premiums, deductibles, co-pays, and prescription drug costs will all increase in 2016. The healthcare industry, with a less-than-gentle nudge from Washington, is finally trying to tame two decades of unchecked growth in healthcare spending, in large part by making consumers more responsible for their care.
(The hypothesis: Consumers will make wiser, more cost-effective healthcare decisions if they have more at stake financially. While nice in theory, it is nearly impossible for consumers to actually do such as there is a dearth of transparency metrics on cost and quality. But we digress…)
This makes long-term economic sense, but in the short term, as the industry tears down the system that enabled that unchecked growth in the first place, consumers bear the brunt of the burden. Plans on the insurance exchanges are more expensive and less comprehensive than in previous rounds of open enrollment, while employers continue to pass healthcare costs onto employees. That’s even as employer healthcare cost growth has slowed in recent years, partly under the guise of preparing for the Cadillac Tax in 2018 and partly as an excuse to shift healthcare costs burden to employees.
It doesn’t have to be that way. I’m a member of Virgin Pulse, the health and wellbeing arm of the Virgin empire. I wear an activity monitor, log healthy behaviors, and participate in various wellness challenges. (I even wore my device to a water park this summer to accurately capture my step count as I dragged my inner tube from one water slide to another. Suffice to say, I learned the hard way that the device, just as the manufacturer clearly states, is not waterproof.) For my trouble, I accumulate points that earn me cash as well as a premium discount – enough that I will pay less for insurance in 2016 than I did in 2015.
Wellness programs garner criticism for two main reasons: Doing too much, and prying into employees’ lives in order to save money (think mandatory biometric screenings or health risk assessments), or doing too little, and failing to save money or foment positive behavior change (think unisex, one-size-fits-all “I Did the 10,000 Steps Challenge” cotton T-shirts).
To address these criticisms, and boost wellness program effectiveness, employers should focus on the value of investment (VOI) instead of return on investment (ROI). The former emphasizes an inclusive culture of health and wellness, while the latter targets high-risk and high-costs employees. It shouldn’t surprise you that a recent Willis survey found wellness programs focusing on VOI to be more successful, and more popular with employees, that those fixated on ROI.
Virgin Pulse takes the VOI approach, as do wellness vendors RedBrick Health and Wellright. Even vendors that focus on high-risk patients, such as Canary Health and Omada Health, put wellbeing first and cost reduction second. (Chilmark Research subscribers got to read additional thoughts on the way wellness plans can help companies cope with rising healthcare costs in last month’s Consumer Engagement Domain Monitor. If you’re interested in receiving that kind of insight from our analysts on a regular basis, visit out Chilmark Advisory Services page.)
Admittedly, wellness programs aren’t perfect; selection bias, unintended discrimination, and the inability to numerate the value of a weekly yoga class all threaten their long-term viability. If wellness programs can’t encourage people to change their behavior, they’ll be about as effective as, say, employer discount codes that are only half as good as Black Friday or Cyber Monday sales. (Ten percent off a laptop? You don’t say!)
However, a wellness program that provides beneficiaries a chance to significantly lower their premiums and earn some cash without subjecting themselves to a screening or HRA is a hard one to pass up. Plus, offering a meaningful reward for trying to make healthier decisions and improve wellbeing does a lot more for employee morale than sending a “times are tough” email that attempts to sugarcoat the higher premiums people must pay. Good wellness programs won’t bend the cost curve overnight, but they will start pushing it in the right direction – down.