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Employer health insurance costs overtook profits in 2008, and the gap continues to grow.
Health care costs are the fastest growing expense for employers. The Congressional Budget Office has estimated that job-based health insurance could increase 100 percent over the next decade, reaching nearly $25,000 for a family of four by 2018, four times the rate of inflation.
What explains such escalating costs? When demand for health care grows faster than the supply, prices for those services (and related insurance) inevitably increase. The question is, why is demand growing so fast?
Demographics provide part of the answer. The population is growing and the population is aging, increasing the demand for late-life health care (40 percent of lifetime health care costs are incurred in the last year of life). But most employers are not paying for the health care costs of people 75-95 years of age. Why is demand for health care escalating among employee families aged 25-65, especially when family sizes have been shrinking? Put simply, the workforce has become less fit as employees make unhealthy lifestyle choices. And an unhealthy workforce increases demand and cost of health care.
The costs associated with diagnosis and treatment of personally preventable illnesses makes up approximately 70 percent of the total bill. Most of these illnesses are linked to personal lifestyle choices.
Sony Corp. of America analyzed claims data and found that 50 percent of its indemnity plan costs were incurred by employees with medical conditions that were lifestyle-related, and could be changed.
Smoking. Roughly 20 percent of adults in the United States (43.4 million people) are smokers. 8 million people have at least one serious illness from smoking and over 400,000 will die prematurely every year as a result of smoking and exposure to tobacco smoke. Each smoker costs an employer an additional $3,856 a year in health care costs and lost productivity.
Drinking. Twenty-five to 40 percent of all patients in U.S. general hospital beds are being treated for complications of alcohol-related problems. Annual health care expenditures for alcohol-related problems amount to $22.5 billion. The total cost of alcohol problems is $176 billion a year. Untreated alcohol problems waste an estimated $185 billion per year in health care, business and criminal justice costs, and cause more than 100,000 deaths. Health care costs related to alcohol abuse are not limited to the user. Children of alcoholics who are admitted to the hospital average 62 percent more hospital days and 29 percent longer stays.
Weight control. According to the North Carolina Medical Journal, 65 percent of American adults are considered overweight or obese. This figure is closely related to the rise in insurance premiums for both employees and employers. According to a report by the Conference Board, nationwide costs related to overweight employees are $45 billion annually, accounting for 27 percent of the rise in medical costs. Related problems such as diabetes, heart disease, hypertension, lower back disorders, and hip, leg, and foot disorders, cost employers more than $220 billion annually in medical care and lost productivity.
While some employers look to cost sharing, managed care plans, risk rating, and cash-based rebates or incentives to address their rising health care costs, these methods merely shift costs. They do not reduce the costs and they do not result in a healthier, happier, more productive workforce. Reducing the need (demand) for health care utilization by changing lifestyle habits is ultimately the only way to bring costs down, extend insurance coverage to more people and maintain quality. There is ample evidence that this works.
According to the American Journal of Health Promotion, employees who make healthy lifestyle choices utilize less
Sick leave (-28 percent)
Health care benefits (-26 percent)
Workers comp and disability claims (-30 percent)
Most people view their lifestyle choices as a very personal matter. If they choose to smoke, drink, overeat and eschew exercise, that is their business and no one else’s.
While it may seem obvious that an individual’s lifestyle choices are, indeed, a personal responsibility that cannot be addressed by anyone other than the individual, many employees will not accept that their health, health care and health care costs should be seen as a direct result of their choices.
They have come to think of health as a “right,” an entitlement guaranteed to all citizens of a modern democratic society.
They want and expect health without having to make healthy lifestyle choices.
Furthermore, they consider it entirely appropriate that someone else should pay most of the costs. What do you think?
Editor’s Note: This guest editorial is offered by John Cragin, a member of The News-Star Guest Editorial Advisory Board. He also is CEO of Vertical Learning Curve and adjunct professor at OBU. The views expressed by our guest editorialists and guest columnists are theirs, and do not necessarily reflect the views of the News-Star’s management.
Employer health insurance costs overtook profits in 2008, and the gap continues to grow.
Health care costs are the fastest growing expense for employers. The Congressional Budget Office has estimated that job-based health insurance could increase 100 percent over the next decade, reaching nearly $25,000 for a family of four by 2018, four times the rate of inflation.
What explains such escalating costs? When demand for health care grows faster than the supply, prices for those services (and related insurance) inevitably increase. The question is, why is demand growing so fast?
Demographics provide part of the answer. The population is growing and the population is aging, increasing the demand for late-life health care (40 percent of lifetime health care costs are incurred in the last year of life). But most employers are not paying for the health care costs of people 75-95 years of age. Why is demand for health care escalating among employee families aged 25-65, especially when family sizes have been shrinking? Put simply, the workforce has become less fit as employees make unhealthy lifestyle choices. And an unhealthy workforce increases demand and cost of health care.
The costs associated with diagnosis and treatment of personally preventable illnesses makes up approximately 70 percent of the total bill. Most of these illnesses are linked to personal lifestyle choices.
Sony Corp. of America analyzed claims data and found that 50 percent of its indemnity plan costs were incurred by employees with medical conditions that were lifestyle-related, and could be changed.
Smoking. Roughly 20 percent of adults in the United States (43.4 million people) are smokers. 8 million people have at least one serious illness from smoking and over 400,000 will die prematurely every year as a result of smoking and exposure to tobacco smoke. Each smoker costs an employer an additional $3,856 a year in health care costs and lost productivity.
Drinking. Twenty-five to 40 percent of all patients in U.S. general hospital beds are being treated for complications of alcohol-related problems. Annual health care expenditures for alcohol-related problems amount to $22.5 billion. The total cost of alcohol problems is $176 billion a year. Untreated alcohol problems waste an estimated $185 billion per year in health care, business and criminal justice costs, and cause more than 100,000 deaths. Health care costs related to alcohol abuse are not limited to the user. Children of alcoholics who are admitted to the hospital average 62 percent more hospital days and 29 percent longer stays.
Weight control. According to the North Carolina Medical Journal, 65 percent of American adults are considered overweight or obese. This figure is closely related to the rise in insurance premiums for both employees and employers. According to a report by the Conference Board, nationwide costs related to overweight employees are $45 billion annually, accounting for 27 percent of the rise in medical costs. Related problems such as diabetes, heart disease, hypertension, lower back disorders, and hip, leg, and foot disorders, cost employers more than $220 billion annually in medical care and lost productivity.
While some employers look to cost sharing, managed care plans, risk rating, and cash-based rebates or incentives to address their rising health care costs, these methods merely shift costs. They do not reduce the costs and they do not result in a healthier, happier, more productive workforce. Reducing the need (demand) for health care utilization by changing lifestyle habits is ultimately the only way to bring costs down, extend insurance coverage to more people and maintain quality. There is ample evidence that this works.
According to the American Journal of Health Promotion, employees who make healthy lifestyle choices utilize less
Sick leave (-28 percent)
Health care benefits (-26 percent)
Workers comp and disability claims (-30 percent)
Most people view their lifestyle choices as a very personal matter. If they choose to smoke, drink, overeat and eschew exercise, that is their business and no one else’s.
While it may seem obvious that an individual’s lifestyle choices are, indeed, a personal responsibility that cannot be addressed by anyone other than the individual, many employees will not accept that their health, health care and health care costs should be seen as a direct result of their choices.
They have come to think of health as a “right,” an entitlement guaranteed to all citizens of a modern democratic society.
They want and expect health without having to make healthy lifestyle choices.
Furthermore, they consider it entirely appropriate that someone else should pay most of the costs. What do you think?
Editor’s Note: This guest editorial is offered by John Cragin, a member of The News-Star Guest Editorial Advisory Board. He also is CEO of Vertical Learning Curve and adjunct professor at OBU. The views expressed by our guest editorialists and guest columnists are theirs, and do not necessarily reflect the views of the News-Star’s management.
