Many people in the benefits world slough off wellness programs. Why do wellness plans offered alongside health insurance need to be thought of together?
I recently listened to a podcast with the founder of the Vitality program, and CEO of Discovery out of South Africa. Adrian Gore is an actuary, entrepreneur, and acclaimed South African businessman. Adrian summed up the importance of integrating wellness perfectly.
I am taking my Spending Account hat off here. So, I am talking about these as well as insured plans. Both are a form of health insurance. One is a type of self-funding (HSA), and the other Traditional health plans (insurer funded).
The idea is that you need/should offer both a Wellness type plan and a Health insurance plan alongside to get the full value of a benefit plan. This fundamentally makes sense from a definition of what insurance is. Insurance, and especially health insurance, operate under one fundamental concept. Healthy people need to stay in the pool to pay for those who have unhealthy outcomes. Everyone pays the same premiums, and some will pay into the pool but not use it (or not as much), and others who have expenses get reimbursed. In the end, the costs are shared across many, so those with higher costs are covered.
A problem that faces all group health benefit plans is that everyone needs to participate but depending on each member and how you interact and use a health plan – you will value the benefit plans differently. Healthy people do not want to participate in traditional insurance (because they do not use it often) and see little value. At that moment, they are not sick or using the plan but seeing premiums put into the plan. In many cases, the employees can waive or opt-out of the health plans as well.
This is not a debate on insurable events like Life and disability but more on the EHC offerings. On the flip side, those employees who do have health expenses will value the traditional health benefits higher because they are receiving more than they are paying into it.
This is good – this is why you have insurance to help those with above-average expenses. We do not want to change this model, but it does create an issue if the healthy are not in the pool contributing premiums.
The 80/20 rule most likely applies the same way in group insurance as it does in all areas of life. So, the majority of 80% of claim costs will come from 20% of the employees. The challenge then becomes, how do you keep the 80% engaged and paying premiums into a pool that they are not using?
Here is where wellness plans come in. First, I would say you need to have an acceptance fundamental assumption. That is, Total Rewards and Compensation INCLUDES all of the following: salary, insurance, retirement, and other benefits. Employees expect all of these and consider the sum of the parts as part of their entitled compensation. In their eyes, this is owed to them. I think you would be living under a rock to disagree that most employees in 2021 look at all the offerings as part of their total compensation and evaluate these when deciding who they work for.
If you agree with the above statement, then you should offer something significant enough to those who are not using the insurance portion – due to their good health – to keep engagement and willing to increase participation in the total plan. Therefore, leave them contributing premiums for those who need the coverage.
Having these people stay in the pool allows the plan to be financially feasible in the future. Here is where wellness plans and related services come in. These are the five powerful tools in my opinion:
Wellness plans offer something to those who are healthy and active – a benefit THEY value. If you have no reason to interact and use any part of the rewards plan, chances are you will not find value from it.
Since many of these activities will decrease mortality and morbidity rates, you could decrease the average cost spent on insurance claims in the short term, as well as keep a percentage of the workforce healthier for a longer period. Potentially, delaying or removing future costs from the equation as well.
It may act as an incentive for those currently in the high usage on the health claims to do certain activities or adopt lifestyle changes and have a benefit in doing so. For example, if someone is a smoker, they may see the benefits in the wellness area as appealing to take action to use more from that side of the ledger and quit smoking.
It impacts the company culture. You increase healthy lifestyle awareness in a company and promote and reinforce healthy behaviour – having a long-lasting impact on everyone. If the majority of the people in your office eat healthily, see doctors regularly, do not smoke, and exercise, then it becomes part of the culture of the organization.
Finally, you can use it for marketing! Let’s not kid ourselves that part of attracting and retaining employees comes down to the marketing of what you offer as part of compensation. Is it easier to tell people you will offer XX amount of dollars if they lose a thumb or would you rather talk about their employer paying for their gym membership? It is way easier to share the fun stuff you offer versus the very important but not that appealing.
By offering both Wellness and Health plans, you create a more engaged workforce that finds value in their benefits plans no matter what their current health situation is. There is a higher degree of long-term feasibility because you have all or most of the workforce contributing to the pool of premiums. This allows the concept of insurance to flourish and the healthy make-up for the sick. You promote staying healthy and active – helping in claims, recruiting culture, and employee engagement.
Steve McEwan
COO & Co-Founder
myHSA