Corporate Wellness Incentive Plans : The U.S. Health Care Crisis
Over the past decade healthcare insurance costs have risen steadily. This is taking a toll on the bottom-line of corporations, cutting into earnings, limiting growth and forcing a reevaluation of a once sacred employee benefit system. According to a projection by McKinsey & Co., at the present rate, by 2008 health benefits will eclipse earnings at the average Fortune 500 organization.
Businesses, through private health insurance organizations, are the leading provider of healthcare services in the United States. In 2004, 59.8% of American citizens were covered by a organization-based health insurance program, accounting for 88% of all private health insurance. Yet the escalating costs of Medical Care, ever-rising prescription prices and a steady rise in chronic illnesses have brought the corporate culture to a breaking point.
For many businesses the increasing burden has become too difficult to carry. Over the past five years healthcare insurance premiums have grown an average of 11.6% each year, more than four times the average rate of inflation and employee earnings over that time.3 Not surprisingly, this exponential growth in costs has caused the number of businesses offering Health Care services during that time to drop from 69% to 60%.4 In addition, in 2005, healthcare insurance premiums jumped 9.2%, more than three times the rate of inflation – and that was the lowest increase in the past five years.
In this environment companies need to find innovative ways to stem the increasing costs of Healthcare coverage. Seemingly, the easiest strategies to accomplish this goal would be to lower benefits coverage or pass on arising burden to workers and retirees. Greater than 80% of companies have chosen one or both of these cost saving measures in the past few years and almost half of all big companies are likely to increase the amount workers pay in 2007.5
Nonetheless, these methods do nothing to mitigate the primary causes of increasing costs, one of which is a population that requires increased healthcare. To make a long-term and meaningful effect on costs and central health, businesses need to look beyond a traditional reactive-based approach.