Prove value of wellness programs

July 13, 2009

Executives are poised to push a well-thought-out wellness program for employers.

A growing number of employers are offering wellness and disease prevention programs, according to Pricewaterhouse Coopers’ (PwC) recent medical costs trends report, Behind the Numbers. However, participation remains low-employers reported that less than 15% of eligible workers participate.

“Managed care executives are in a position to inform employers about the importance of implementing a well-thought-out incentive program to attract employee participation and generate results,” says Richard Judy, Partner, Health Industries Advisory, Payer Practice, PwC.

Additionally, managed care executives should prepare themselves for potentially contentious rate negotiations with providers, Judy says.

“There may be more stand-offs than we have seen in a while as payers, providers and employers all fight for fewer dollars that are in the system,” he says.

The major findings of the report point to a renewed focus on managing costs and improving quality, which could be good news for managed care executives:
• Medical costs are going up by another 9% in 2010. Although this is a slightly slower rate of growth than last year’s increase of 9.2%, it will still significantly outpace inflation and wage increases.
• With unprecedented investment losses, Providers have taken a huge hit in their overall profit margins. Providers will be looking to fill this gap through raised price demands as they negotiate with private payers.
• The continued increase in health spending is forcing the hand of employers to pass more of the costs of health insurance on to employees. Forty-two percent of employers intend to increase cost sharing next year, according to the survey. This increased cost sharing is not good for anyone, especially employees, who are already struggling financially. Well-managed programs are needed to control these costs.
• Employers will be required to refocus on more sustainable longer-term approaches to medical cost containment, such as wellness and prevention programs, as they react to higher medical costs as the economy recovers.

According to the survey, more than two-thirds of employers are expecting to expand wellness and disease management programs over the next two years.

“Despite the healthy numbers of employers who want to implement these programs, surprisingly few are convinced that these programs are effective at mitigating healthcare costs,” Judy says. “Employers are calling on MCOs for innovative ways to increase enrollment and for better education as to why these programs are important. MCOs should step up their efforts and recognize the growth opportunity that awaits them in wellness and prevention.”

In addition, the PwC analysis showed that the mere prospect of health reform back in the early 1990s had an effect of pushing the healthcare cost trend downward.

“Other factors, such as high capital costs, nursing shortages, increased utilization by those insured employees worried about a potential loss of coverage with a layoff and provider/payer investment losses are keeping the trend propped up,” Judy says.