5 Things I Would Recommend If Reducing Cost Is a Priority | Mercer US

Five Things I Would Recommend If Reducing Cost Is a Priority

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Five Things I Would Recommend If Reducing Cost Is a Priority
Calendar18 September 2015


Preliminary results from Mercer’s 2015 National Survey of Employer-Sponsored Health Plans show that health benefit cost growth will remain relatively low in 2016. We asked Michael P. O’Donnell, MBA, MPH, PhD (Editor in Chief, American Journal of Health Promotion, and Clinical Professor, School of Kinesiology and Director, Health Management Research Center at the University of Michigan) what his advice to employers would be to keep the streak going. Here’s his response.

If reducing medical costs is a top priority, I would recommend five things.

1. Most important, be overwhelmingly transparent. Make sure all employees understand that medical care costs the company $12,000 for each employee, and explain how this money could be spent if it were not spent on medical care. Tell them that about 25% of all medical costs can be directly tied to modifiable lifestyle risk factors, and that employees with the healthiest lifestyle are subsidizing the costs of employees who smoke, are inactive, or are overweight. These are average numbers; each company should be sharing actual numbers for their organization.

2. Clarify cost-shifting goals. The fastest way to reduce medical costs is to shift more premium costs to employees. Each organization has different cost sharing goals; most try to conform to their industry or local market. Whatever the goals, articulate them and be transparent so employees know they have skin in the game.

3. Implement serious participation and outcomes-based incentives, be transparent about how numbers are derived, and include them in the cost-sharing formula so they have no net cost to the organization. Participation incentives should be big enough to engage most of the population in health screenings, health risk assessments (HRA), and goal-setting sessions. Outcome incentives should be big enough to reduce the extent to which employees with healthy lifestyles are subsidizing everyone else. See my new book, Health Promotion in the Workplace, 4th edition, for clues on how to do this.

4. With the money saved from cost shifting, provide an insanely great health promotion program to all employees and dependents. Use a combination of high-tech and high-touch programs that are scientifically sound, fun as can be, and have the goal of helping every single person feel so great they want to scream!

5. Have a comprehensive evaluation program in place to make sure programs are implemented well, improving health, cost effective, saving money, and achieving other organization goals.

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