Unbiased Analysis of Today's Healthcare Issues

Employers Pushing Healthier Living

Written By: Jason Shafrin - Aug• 08•11

“This isn’t about big brother telling people what to do,” says John Rice, GE’s vice-chairman, “but helping them make better choices.”

The Economist reviews large employers efforts to improve employee health and thus decrease their own health care costs.  Some of these efforts include:

  • Prohibiting smoking on company premises
  • Handing our healthy recipes
  • Building on-site gym
  • Bonuses for healthier living

Take these examples from Fortune 500 companies:
At IBM, employees receive a $150 bonus for exercising, eating nutritious meals and so on. One such bonus is designed not just for an employee but for his entire family. According to IBM’s own data, caring for a diabetic child is six times costlier than caring for a healthy one.

Kevin Volpp, the director of the Centre for Health Incentives at the University of Pennsylvania, found that GE’s anti-smoking incentives prompted 9.4% of smokers to remain smoke-free after 18 months. Without incentives, only 3.6% of those who tried to quit succeeded. A review published in Health Affairs last year found that firms saved $3.27 for every dollar they spent on health programmes.

Is this a good thing? Health insurance should account for random health risks. Health risks due to individual employee behavioral choices, however, should be internalized by the individual. Since the premium prices are basically the same (free) for most employees in large firms, they have a smaller incentive to maintain a healthy behavior than would be the case if employers used individual underwriting in pricing policies. Thus, efforts to give bonuses for healthier behavior by employees and their families is, in essence, an effort to increase net premiums for those who do not engage in healthy behaviors. With health care costs consuming a larger and larger portion of employer’s budgets, these efforts to control costs will be increasingly important over time.

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4 Comments

  1. Dial Doctors says:

    A company that encourages healthy living is a savvy and humane one. After all, sick employees drain out their workforce and eventually raises overall health care costs. Besides, we currently have a society that’s poisoning itself through overeating, smoking and making poor choices. Hopefully these bonuses will be enough to encourage changes within families

  2. I agree with all of this. I have seen this positive change occur in almost all of my dealings with clients. Getting the employer involved is crucial… and by the way involvement doesn’t require each employer to build gyms or hand out gym memberships.

    Awareness and accountability seem to work well for all.

    Thanks

  3. PKamp3 says:

    Let me throw another example into the mix (even though the plural of anecdote is not data). My company recently rebuilt the gym at my site, does the whole gift-card-for-health-consultation thing, encourages (through Q&A sessions and literature) enrollment in the high deductible plans, and even provides fruits for free.

    The other curve ball is a fair number of large companies self-insure… so even if it doesn’t completely pay off for them in reduced health care payments, they may just look at it as another recruiting perk.

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    There have been research studies conducted that observed Pacific islanders who have almost no occurrences
    of heart related illnesses despite the fact that they’re main source of energy is the oil they get from coconuts. I stuck with it and my skin is getting better every single day. Her expertise focuses on Nutritional Genomics and Functional Medicine.

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