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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.
Because much of IMA Financial Group Inc.'s expertise came from providing loss-control services in the workers comp arena, the middle-market broker introduced its health care cost containment program in 2007 as a “health risk management” rather than a “wellness” program.