Mid-market employers that successfully drive down workers
compensation premiums through safety programs can be just as
successful in lowering health care costs through wellness programs,
although the payback likely will take more time, experts say.
Though the terminology may differ, the procedural road map for
becoming a “well workplace” is very similar to that of becoming a
“safe workplace.”
In fact, the worksite wellness movement in many ways mirrors the
development of safety in workers compensation, experts say.
“If you think about the evolution of the work comp market,
insurers started providing the coverage and then, to be more
competitive, they introduced financing alternatives like
retrospectively rated and large deductible programs,” said Robert
Cohen, CEO of IMA Financial Group Inc. in Denver.
“Then someone suggested controlling claim costs through the use
of preferred providers, return-to-work programs and on-site
occupational care clinics. Then safety was introduced to prevent
claims from happening. Then there was the introduction of the
experience modification factor to track return on investment,” Mr.
Cohen said.
The formula for calculating experience modification factors,
often called “ex-mod,” compares actual reported loss information
for a particular employer, usually over a three-year period, with
average loss data for all employers in a given state that are in
the same classification. Employers with an ex-mod higher than 1 pay
higher premiums than the average, while those with an ex-mod less
than 1 pay lower premiums.
Employer-sponsored health benefits evolved much the same way,
starting with the introduction of major medical insurance that
gradually was expanded to cover medical care beyond
hospitalization, Mr. Cohen said. “Then there were new financing
tools like copays and coinsurance,” which enabled employers to
share some of the cost with plan members.
Eventually, some employers, especially large ones, opted to
self-insure health care benefits just as they did with
retrospectively rated and large-deductible programs in workers
compensation, Mr. Cohen said.
“Then the (health maintenance organization/preferred provider
organization) world exploded to control claims costs,” Mr. Cohen
said. “Lately we've been in this wellness thing, which is like
safety and loss control.”
Recognizing these parallels, Mr. Cohen in 2007 led IMA to launch
a health risk management practice that applies the basic tenets of
safety and loss control from the workers comp arena to health care
benefits. IMA even created a tool to track return on investment,
which Mr. Cohen originally intended to call the “H-mod” similar to
the “ex-mod” used in workers compensation.
Instead, IMA dubbed the program “ibenefit” and used it on its
own employee population before rolling it out to clients (see
related story).
Cheryl Mealey, national practice leader for wellness consulting
in the Willis Group Holdings P.L.C.'s human capital practice in
Wauwatosa, Wis., said she often invokes the analogy between safety
and workers comp and wellness and health benefits when talking to
employers, “and it does resonate.”
“I ask them, "What is your ex-mod? Do you have a fully
functioning safety committee? Then why not a wellness committee?'”
Ms. Mealey said. “Sometimes, you can expand the safety committee to
incorporate wellness. Both have education and training, middle- and
upper-management support. Then the light bulb starts to go
off.”
However, the longer it takes employers to realize a return on
investment from wellness initiatives vs. safety programs, the more
it can pose a challenge for some organizations, Ms. Mealey
said.
“You can put a guard on a machine, you can wear protective
equipment, you can engineer a lot of things out of the workplace,
but you can't do that in people's homes and in people's personal
lives,” she said.
There's also a direct financial reward in workers comp:
Employers with lower experience modification factors receive
credits against their premiums in a guaranteed-cost workers comp
program, Ms. Mealey said.
Unfortunately, “we don't have similar pricing in health care.
Actuaries will tell you it takes awhile for wellness to impact
health care costs. If somebody has 50 pounds to lose, it could take
several years for them to lose it, and then the impact on their
health might take several more years to show up,” she said.
“Companies just need more patience.”
Because it takes awhile for the impact of wellness to become
evident through reductions in health care benefit costs, Ms. Mealey
and other health care benefit consultants advise employers to
collect data on other effects of wellness program effectiveness,
such as absenteeism and presenteeism—defined as workers who show up
but don't perform at full capacity—or disability incidence and
duration, productivity and morale.
“Those things will show a more immediate impact,” she said.
In some cases, improved health status can actually have a
positive impact on work comp programs because healthier and more
physically fit workers have fewer occupational injuries, according
to a 2009 study published in the journal Occupational Medicine that
assessed the relationship of obesity, smoking, alcohol use, sleep
disorders, musculoskeletal disorders and other diseases on the rate
of occupational injuries for various age groups.
Researchers concluded that “efforts to prevent disease and
promote health by addressing issues such as obesity, smoking,
alcohol use and optimum use of health care may also yield benefits
in terms of reductions in the rates of workplace injuries.
Appropriately, targeted workplace interventions may provide
opportunities to reduce not only the risk of disease associated
with working conditions but also the risk of workplace injury.”
“The healthier people are, the less likely they are to have a
work comp claim,” said Kevin Herman, director of worksite wellness
at the Horton Group, a benefits broker based in Orland Park, Ill.
Moreover, chronic conditions often exacerbate work-related
injuries, oftentimes extending recovery times, he added.
“If someone has hypertension, maybe they don't know it but are
experiencing dizziness that could result in a work comp claim or a
disability claim,” said Cindy LaQuatra, a senior consultant at
Benefits Resource Group in Independence, Ohio. “If we can engage
people in different types of programs to identify conditions, teach
them what it means to have that condition, and help them stay on
track with treatment, we reduce not only health care costs, but
also work comp and disability claims.”
“When I talk to employers, they continually ask, "Why should I
care about wellness?' I tell them there are a lot of reasons. It
isn't just the effect on health care costs,” Ms. LaQuatra said.