The Secret to Reducing Healthcare Costs
by Jeff Spencer
Historically, employers have responded to the impact of higher healthcare costs in dollar-driven ways. They have cut benefits, outsourced jobs, or passed the increased cost of benefits on to their employees. Such approaches have produced a temporary blip on the bottom line, but have done nothing to change the long-term trend.
A paradigm shift is needed — moving healthcare focus away from reaction toward prevention. As it stands today, the sicker a person is, the better the American healthcare system is. From smalltown doctors to world-class medical centers, America’s focus is on treating the patient after the problem exists, rather than preventing the disease.
In 2005, the Centers for Disease Control and Prevention reported that 75 percent of the nation’s $2 trillion cost of healthcare stems from chronic diseases, and 70 percent of deaths in America are caused by chronic diseases. And, here is the point of opportunity for change: Most chronic diseases are the result of lifestyle choices, daily behavior and bad habits.
In fact, 50 to 60 percent of all healthcare claims in the U.S. are lifestyle-related. Only 30 percent of the American population (18 and older) knows its basic health indicators: blood pressure, cholesterol and HDL/LDT. Fewer than 10 percent know their blood glucose level —an indicator for diabetes.
These percentages point to the root of the problem: a population with worsening health and without the basic biometric information to recognize when it is at risk.
Over the years we’ve observed that many employers viewed rising healthcare costs and declining employee health as a situation beyond their control. So, step one in the paradigm shift is getting employers to understand that healthcare is an expense which can be managed through proactive programs. A healthier workforce is a more productive workforce and will ultimately reduce healthcare costs.
So while experts are warning about the approach of healthcare’s “perfect storm,” Holmes Murphy structured a proprietary pilot program in 2004 to educate and provide incentive for our employees to improve their health by changing lifestyles and knowing their vital health indicators.
At-risk employees were identified using a HIPPA-compliant third-party screening and assessment process. A best-of-class wellness company was retained to ensure third-party objectivity and participant privacy. Ultimately, this employee program had 97 percent participation. With all data de-identified, we were able to identify trends and set a benchmark for measuring the impact of the program and participation benefits.
As a result of the “well-care” program, claims cost per member have been reduced by 5 percent the last three years. During this same period the national trend increased 25 to 30 percent. An additional benefit was greater productivity and reduced absenteeism. We believe this approach is a way to prevent 50 percent of healthcare claims before they happen.
For 10 years prior to this initiative, Holmes Murphy offered voluntary wellness options —including health club memberships, self-administered online assessments, and national brand-name weight-control programs —but saw no return on investment. The reason was that only health-conscious employees participated, individuals at-risk did not. It is the classic conundrum: 15 percent of the population drives up the cost of healthcare for the rest of the population because of lifestyle-related health problems.
The results of this three-year pilot program have
been hailed as the secret to reducing healthcare costs.
And the best part is, not only are the results proven,
but they are also replicable for other employers. 
Jeff SpencerVice President,
Holmes Murphy &
Associates.
P | 866.574.6282
E | jeffspencer@holmesmurphy.com