Health care insurance premiums continue an alarming trend upward. What’s a conscientious employer to do?
“Health care costs continue to spiral out of control for many employers,” says Michael J. Stief, a partner at Jackson Lewis LLP. “Many employees who work for smaller companies don’t have company-paid health care at all. Other employers are slashing health care benefits.”
A report titled “Guide to Health Care Cost Control, 2008” by the Institute of Management and Administration says that employers today pay 59 percent more and employees contribute 79 percent more than five years ago for employer-sponsored health plans. In 2002, employers paid an average of $4,342 in medical costs for employees; in 2007, those costs jumped to $6,924.
Smart Business talked to Stief about corporate alternatives to increasing health care premiums, including the adoption of some employee wellness programs.
What are wellness programs designed to do?
Workplace wellness programs are designed to create a culture of health in the workplace. They often offer incentives for employees who adopt healthier lifestyles, such as discounts on group health premiums, and penalize those employees who do not.
This is somewhat of a new phenomenon, and it’s really because employers are faced with a health care system that’s broken. But there’s also a hidden benefit: a healthier work force lives longer and is happier. Employee wellness programs are a good idea. They work. But programs should be created only after employers really think through just how much they want to dictate the lifestyle choices that their employees make.
How much can a wellness program affect a company’s health insurance premiums?
It depends on a lot of things, like the census of its work force and how aggressive the wellness program is. The proof is in the pudding. If you reduce health care costs over the course of a year, that will play a big role in your premiums being lowered.
How can wellness programs become controversial and even illegal?
Employers can get very aggressive. For instance, some have created policies where people cannot use tobacco products at any time and still be employed at the company. This is different than not smoking while at work; this is not smoking at all and that is a very controversial policy.
A good number of states have lifestyle-rights laws that protect employees’ right to smoke when they’re not at work. Pennsylvania is not one of those states. If an employer in Pennsylvania so chooses, it can adopt that type of policy. However, that’s a very important step that must be well thought out. Obviously, there are employee relations implications. Will such a policy affect morale? Will it lead to a union-organizing drive among workers? Could it affect the company’s ability to recruit or keep top talent?
The depth of these questions shows you the radical steps that employers may be willing to take in order to cope with this health care crisis. Dictating off-duty lifestyle activities is the exception rather than the rule right now. But if costs continue to spiral, you may see more employers adopting this kind of policy.
Are those corporate lifestyle policies legal?
If you are in a state that has no lifestyle discrimination laws, then an employer that adopts a smoke-free work force would most likely have the legal right to terminate any employee that uses tobacco products at any time. The decision to adopt such a strict policy is something you need to go over with labor and employment counsel because there may be legal issues under the national Americans With Disabilities Act or under your state’s disability-discrimination law or under a state lifestyle-discrimination law.
Are there other ways for employers to avoid rising health care costs other than adopting strict wellness programs?
Many employers today try to shop around every time their insurance goes up which is just about every year to get the best rate they can. However, to call that a negotiation with insurance companies is a misnomer because the insurance companies have most of the power, especially when smaller employers are involved.
Where is the whole trend toward dictating wellness programs and even off-duty lifestyle activities going?
Employers are faced with a real Hobson’s choice when it comes to spiraling health care costs. It seems like our system is broken and no remedy is on the horizon, and employers are doing what they think is in the best interests of the entire work force. It goes without saying that people who live unhealthy lifestyles, including those who smoke, use their health insurance more. Some would say it’s unfair that healthy employees have to share in the same costs as unhealthy employees.
With the 2008 U.S. presidential elections on the horizon, some politicians are talking about the need to correct the health care problem. However, it doesn’t appear that they have any substantive solutions, and the debate whether this country should go to socialized medicine is very controversial.
MICHAEL J. STIEF is a partner at Jackson Lewis LLP. Reach him at (412) 232-0138 or firstname.lastname@example.org.