While some companies trek to Washington in search of bailout cash, most are being forced to look inward for survival. What’s clear, however, is that all business leaders must take a harder stance on extraordinarily high line items like health care costs.
Consider General Motors, in the limelight of late due to its inability to compete, which spent about $5.6 billion in 2006 on health care for its employees or, by some estimates, $2,000 per car produced. These are crippling costs.
“While we spend the most on health care, the health of Americans is worse than other Organization for Economic Cooperation and Development (OECD) countries,” says Govind Hariharan, chair and professor, Department of Economics, Finance & Quantitative Analysis, Coles College of Business, Kennesaw State University. “This implies that, in terms of return on investment in health, we as a nation, and our companies, are less efficient than many of our competitors.”
Smart Business recently spoke with Hariharan about why more companies would be wise to partner with employees and insurers through wellness initiatives to build a healthier, wealthier and more competitive country.
In what ways does the high cost of U.S. health care impact our global competitiveness?
A healthy citizenry is perhaps the primary engine for economic growth and prosperity. Healthy individuals are more productive at work, have lower absenteeism rates and generally are happier. The cost savings to the economy from healthy citizens is huge.
The overwhelming majority of individuals in the U.S. receive coverage through their employer, and health care coverage, which makes up 12 percent of benefits, is the most expensive employer-provided benefit. According to the Council on Foreign Relations, the United States spends in excess of $1.9 trillion on health care annually, which is 134 percent more than the median for OECD countries. Competing in a ‘flat world’ mandates that companies are cost competitive and efficient.
How are companies working to offset these extreme health care costs?
One way is to reduce the reliance on workers. Robots don’t require expensive benefits. The problem is that this results in unemployment, and robots and automation cannot handle every job. A second way is to increase insurance costs borne by employees, which at best is a short-term solution. The third and perhaps best approach is to encourage better health among employees. Companies such as Lockheed and providers such as Wellstar are increasingly adopting wellness programs that emphasize exercise, better nutrition and smoking cessation. General Motors’ Life-Steps health promotion program, for instance, is estimated to have obtained a return on investment of $2 to $3 per dollar spent on the program, while others such as Citibank have seen an ROI of well over $4 per dollar spent on wellness programs.
What actions can insurance providers take to help reduce health care costs?
Insurance companies have long been blamed for everything and especially for not encouraging prevention. Insurers have come to the realization that in addition to adopting technology to reduce errors and waste they must lead the charge for better health awareness and preventive care for the uninsured. In Georgia, for example, Humana’s wellness solutions provide services that help build a culture of wellness through health assessments and health coaching. These wellness initiatives drastically improve the ability to identify diseases before they become more advanced and costly. Through appropriate incentives in the form of lowered premiums and through wellness information and resources, preventive health is becoming central to the health care system in the U.S.
What can individuals do to help lower their employer’s health care costs so the company remains viable?
During tough economic times, preventive care and wellness often take the backseat. This is a big mistake. The only way for us to become competitive again is to have a healthy work force. While employers can provide the incentives and structure, employees must take it upon themselves to take better care of their health. Doing so not only helps them, it also helps their employers and their country. It is the patriotic thing to do.
How would government-mandated universal health coverage affect the current health care environment?
While much has been discussed in terms of the current system versus universal coverage, the debate is moot as far as health costs and resultant global competitiveness of U.S. companies are concerned. Whether it is paid for through taxes or by the employer, the costs ultimately come out of the same pocket, the citizen’s. Some efficiency gains can be wrought out of hospitals and other providers, but is unlikely to make a major dent in costs. Increased emphasis on wellness and preventive care and appropriate incentives to bring it about is the only way, in whichever system we adopt, to generate the needed healthy work force and a competitive economy.
GOVIND HARIHARAN, Ph.D., is chair and professor, Department of Economics, Finance & Quantitative Analysis, Coles College of Business, Kennesaw State University. Reach him at (770) 423-6580, or firstname.lastname@example.org.