KEEP EMPLOYEES HEALTHY Controlling Health Status and Healthcare Cost of Employees Force 6: Employee Health. With the dramatically increasing cost of healthcare and the fact that in the United States, more than 40 percent of healthcare costs are paid by employers, a serious problem is developing. Companies can no longer sustain the projected increase in healthcare costs. At the same time, employees globally are increasingly unhealthy, creating problems with productivity, absenteeism, and accidents. Reducing or eliminating employee healthcare is not a viable option. New and creative solutions are developing that can help enable employers to control employee healthcare costs by shifting to employer-funded individual healthcare and taking dramatic and comprehensive steps to make employees more healthy. This is a critical part of human capital strategy, considering that healthcare is soon projected to cost $4 trillion in the United States, representing 17 percent of gross domestic product. 

This chapter focuses on how employers can reduce the costs of healthcare and make employees healthier. Reducing costs is absolutely essential for the financial sustainability of many organizations. At the same time, the human resources function is in the best position to influence the behavior of employees who have developed unhealthy habits. For a necessary and dramatic shift in healthcare spending to be realized, employees must change their habits in terms of diet, exercise, and preventative healthcare. This chapter explores the current status and cost of healthcare, how it has affected employers, the deteriorating health status of employees, and some solutions that can make a big difference.

Opening Stories The connection between health and job performance is widely known, and many companies are now realizing that success can only be achieved with a healthy workforce. The implementation of healthy-living initiatives benefit both employers and employees. A healthy workforce results in reduced downtime due to illness, improved morale, increased productivity, and higher employee retention, and employees get the benefits of increased job satisfaction and an improved ability to handle stress. Plus, getting a workout while getting some work done sounds good, too. Here's a look at three companies that are taking steps to improve employee health.1

Progressive Insurance Headquartered in Cleveland, this national insurance company helps their twenty-five thousand employees stay healthy with an onsite fitness center, Weight Watchers reimbursement program, yoga and boot-camp classes, personal training, and smoking cessation program. Customer representative Carla Minichello lost 150 pounds after eighteen months using Progressive's fitness center.

"These amenities show Progressive's commitment to employees and their daily desire to be productive both in work and life," says Pamela Sraeel, senior manager of benefit services. Sraeel says making a healthy lifestyle more convenient and affordable for employees has resulted in a more motivated and less stressed staff. "When employees are healthy, they feel good. They innovate, solve problems, and take initiative, which is imperative in a tough global marketplace."

Twitter This social media giant encourages the thousand employees at its San Francisco headquarters to stay healthy by offering onsite yoga, Pilates, Wing Chun Kung Fu, and CrossFit classes. Onsite massages and acupuncture sessions are also available for a fee.

"The attitude and energy we all bring to work is so important to our culture," says Amy Obana, HR and wellness program manager. "But such energy can make us susceptible to fatigue and burnout. Twitter aims to avoid this by offering diverse fitness and wellness programs to encourage renewal so that as employees we can manage our energy better and get more done in a sustainable way."

TELUS This Canadian phone company has approximately twenty-six thousand employees in thirteen locations across the country and offers internal fitness facilities with cardio equipment, weight rooms, and group fitness classes, as well as on-site massage and reflexology practitioners, active living challenges, and mental health support.

Janet Crowe, director of wellness and work-life solutions, says encouraging employees to adopt healthy lifestyle habits is part of the culture of TELUS. "It's the overall strategy of TELUS to have a healthy work environment," she says.

Don't worry if these kinds of programs seem out of reach for your business. You don't have to build a gymnasium to encourage a healthy workforce. Crowe says wellness initiatives are possible no matter how big or small a company is, and having a healthy workforce begins with making health a priority in the workplace.

She encourages small businesses to begin by asking employees what initiatives would help them. "Don't assume what your team wants, ask them what they need to reach their goals," she says. Sraeel says reaching out to local gyms to negotiate a discount rate or hosting group lunch-hour walks is something every company can do no matter the size. Celebrate business goals with a healthy-cooking class or another activity staff identify as something they'd like to try. "Group activities can be empowering and team-building," says Sraeel.

The New Era in Healthcare Healthcare reform is front and center in American society, the economy, and the political arena. Costs have grown annually, outpacing general inflation for decades, compounding the healthcare concern. The weight of this cost trend on Medicare has led Congress to pass landmark legislation that is the legacy of the Obama administration. The legislation addressed coverage for the uninsured, affordable health insurance for small businesses, and coverage for minors and those with pre-existing conditions. This legislation was sweeping in nature and has far-reaching implications. In other countries, where a larger share of healthcare costs are usually absorbed by the government, the healthcare systems face the same challenge: provide better patient outcomes, reduce costs, improve patient satisfaction, and serve more people.

Substantial Cost Impact To pay for expanded coverage for the millions of uninsured Americans, a series of cuts in Medicare reimbursements to hospitals, physicians, and other providers from current levels were used as "prepayment." The expanded coverage and payments for the uninsured were designed to forestall the current practice of cost shifting by hospitals to commercial carriers to cover the uninsured. Hospitals have shifted the cost of providing uninsured care to commercially insured payers via increased pricing.

Healthcare reform also allows employers and individuals to purchase coverage through state-run insurance exchanges that bid competitively at lower prices to offer coverage. These declining Medicare reimbursement rates, which generally do not cover costs in most hospitals, are having a devastating impact on the viability of healthcare operations. Consequently, hospitals of all sizes will need to reduce costs by as much as 17 percent to break even on Medicare reimbursement.

Changing the Rules of the Game Payment for services has traditionally been based on a fee-for-service model in healthcare. Healthcare reform includes modification to the model by shifting to a pay-for-value-added model via value-based purchasing, penalties for readmissions, and prices that do not cover excessive utilization but instead reward providers for managing population health. The overall concept of the "triple aim" focuses on the following:

1. Decreased costs

2. Higher value through improved outcomes and services

3. Expanded coverage to care for a population or community's health2

The "triple aim" approach is a radical modification of the current model for the healthcare enterprise. The healthcare system will shift accordingly with emphasis on accountable care.

Rethinking Organization of Care Currently, analysts claim $365 billion of waste occurs in the healthcare system.3 This waste is difficult to avoid in the current fragmented system, which is characterized by payers that cover the cost of care for users (patients) provided by an independent, fragmented market of providers (physicians and hospitals) that are not integrated with care models, information, or costs. The system is full of redundancies and inefficiencies of over- and undertreatment due to excessive, overlapping, and nonintegrated processes, tests, and treatments. In the current environment, decisions for improvement are made incrementally by fragmented groups (physicians, hospitals, insurers, ambulatory centers, etc.), each maximizing returns at the expense of the others and at the expense of the patients in the system. Each exploits the other at the expense of the whole to maximize individual gains. This action drives costs of care up in a never-ending spiral. Each group also seeks larger scale to leverage negotiations, again at the expense of the others and the patients.

Generally, the system comprises tax-exempt organizations complemented by public institutions and independent physicians. Physicians are, however, rapidly moving away from independent practice and joining larger groups. These larger groups focus on the patient with a "do no harm" perspective with little or no business acumen in decision making. This process, therefore, makes limited use of financial or mathematical models to determine value added, even when investments are made with financial objectives.

In essence, the industry will not survive in its current form and must reinvent itself with new business models, systems of care, and processes. The system will evolve from care per incident, or pay for procedure, to care for a population and pay for value.4 This evolution will require a model with lower-cost structures, medical management of care, intelligent information systems, and integrated networks of care and physicians, all accountable for population health. Employers are in the position to have an important role in this development.

The Challenges Marshall Goldsmith's book What Got You Here Won't Get You There: How Successful People Become Even More Successful is especially appropriate for the healthcare industry.5 This industry must transform fundamentally during a time when demand will increase significantly due to aging baby boomers, who are turning sixty-five in unprecedented numbers each year. This aging population puts enormous pressures on federal Medicare programs and radically shifts the mix of payers in the healthcare industry. As the baby boomers age, they enter the phase of life when the average individual consumes the majority of the medical resources a person uses in a lifetime. They also demand high quality of care.

More demand, lower prices, and higher expected outcomes and experiences require new skills in leadership and tools to permit the industry to determine added value of initiatives, interventions, and new methods. The American Hospital Association, among others, has highlighted topics and key skills for success, including physician relations, community health, critical thinking, financial and quality integration, and risk assumption. At the organizational level, boards of directors and trustees must apply knowledge and skills in healthcare delivery and performance, business and finance, and human resources. After all, success is achieved through people, and the cost of employees is the largest healthcare expenditure. To misjudge the impact and importance of these critical skills will negatively affect an organization's ability to survive during this time of accelerated transition.

The Cost of the U.S. Healthcare System Compared to Other Countries The Organization for Economic Cooperation and Development (OECD) tracks and reports on more than 1,200 health system measures across thirty-four industrialized countries.6 In a recent analysis, concentrated on OECD health data for Australia, Canada, Denmark, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States, healthcare spending in the United States towers over that of the other countries. The per capita spending of about $8,000 per year is about 60 percent more than the next country, Norway. Expenditures as a percent of GDP is at 17 percent, with France second at about 12 percent. Yet, the United States has fewer hospital beds and physicians and its citizens make fewer hospital and physician visits than in most other countries. Prescription drug utilization, prices, and spending all appear to be highest in the United States, as does the supply, utilization, and price of diagnostic imagining. U.S. performance on a limited set of quality measures is variable, ranking highly on five-year cancer survival, middling on in-hospital case-specific mortality, and poorly on hospital admissions for chronic conditions and amputations due to diabetes. These findings suggest opportunities for cross-national learning to improve health system performance.

How This Affects Employers The total cost of healthcare was estimated to be $4 trillion in the United States in 2014, and 41 percent of this cost was borne by employers as they provided employee healthcare as part of their benefits structures.7 Because of this financial burden on companies, many of them are declining coverage. From 1999 to 2013, the average annual premium healthcare companies charged for employee healthcare plans increased by approximately 182 percent to roughly $16,350 per family. For single coverage, the cost has increased about 168 percent to $5,884 per single.

During this period, many employers stopped providing health benefits entirely. U.S. jobs offering health benefits fell to 57 percent of all jobs in 2013, down from 66 percent in 1999. The future is not brightthe average cost of employer-provided health insurance is expected to reach approximately $20,000 per family and $8,000 per single employee in 2016. On average, employees will be paying more and getting less in terms of higher deductibles, higher copays, and higher out-of-pocket maximums.8

The trend of declining employer-provided coverage will continue, primarily because of the problems generated by employer-provided healthcare. Table 8.1 indicates the ten reasons employer-funded healthcare isn't working.9 In essence, having employer-provided healthcare has caused many of the problems in the healthcare system overall, and it is not difficult to see why it works in an adverse way. For example, when employers pay for healthcare, insurance companies want to charge more, employees want to use the healthcare system more, and hospitals tend to do more testing, because, after all, the employer is paying for it. This has sparked excessive costs through extra cautionor as some people refer to it, abuse by physicians, hospitals, clinics, and employees. More on this shift is covered later.

Table 8.1. Ten reasons employer-funded healthcare isn't working.

1. It's temporary. You lose your health insurance if you or your loved one gets sick.

2. It's overpriced. You pay $4,000 to $12,000 more than individual health insurance for the same coverage.

3. It's risky. Your coverage may be cancelled at any time without notice.

4. It's limited. You don't get to pick your doctors and hospitals.

5. It's one-size-fits-all. You don't get to choose your deductible or copays.

6. It's unfair. You are disqualified from receiving your $2,000 to $12,000 per year share of the trillion-dollar federal subsidy.

7. It's unstable. Your cost could double due to one employee with a million-dollar claim.

8. It's bad for your career. You may stay in a job that doesn't let you realize your full potential.

9. It's bad for your business. You spend time managing health insurance that should be spent on customers and products.

10. It's bad for America. Employer-provided health insurance is the top reason U.S. healthcare costs are almost $4 trillion, approaching one-fifth the size of the U.S. economy.

Source: Paul Z. Pilzer and Rick Lindquist. The End of Employer-Provided Health Insurance: Why It's Good for You, Your Family, and Your Company. Hoboken, NJ: Wiley, 2015.

The Health Status of Employees You don't have to look far in the United States, and even in some other countries, to see that the health of the population, and employees in particular, has decreased. Statistics are presented routinely about this trend. For example, these figures on obesity come from the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK):

More than two in three adults are considered to be overweight or obese.

More than one in three adults are considered to be obese.

More than one in twenty adults are considered to have extreme obesity.

About one-third of children and adolescents ages six to nineteen are considered to be overweight or obese.

More than one in six children and adolescents ages six to nineteen are considered to be obese.10

Other statistics detail the increased prevalence of illness and injury:

Diabetes. Obesity has contributed to more than eighteen million Americans having diabetes and another forty-one million over age forty having prediabetes. Most people with prediabetes develop type 2 diabetes within ten years. Diabetes virtually guarantees that you will have health issues requiring time away from work at some point in your life, and 65 percent of people with diabetes die from heart disease or stroke.

High blood pressure. About sixty-five million Americans over age twenty have high blood pressure, a chronic disease requiring medication and one that dramatically increases the chances of having heart disease during your working lifetime.

Cancer, heart attack, or stroke. One in four men and one in five women will suffer one of these debilitating events before age sixty-five.

Car accidents. More than three million people are hurt each year in auto accidents. Common injuries include fractures, broken bones, and spinal damage resulting in short- and long-term disability.

Other conditions. Most Americans will develop some type of major medical condition at least once during a forty-five-year working lifea condition that could likely lead to job termination and loss of employer-provided health insurance.11

With this deteriorating health status and rapidly increasing healthcare costs, solutions that have been developed must become more common, intensive, and comprehensive.

Health Status Solution: Health and Wellness Programs There is no doubt that health and wellness programs are positive for health and well-being. The question may be, "What is the right type of program for my organization?" This is what the organization must evaluate, and the choices are endless. Many company campuses are equipped with weight rooms, tennis courts, and jogging trails. Some companies offer free gym memberships or encourage and sponsor competitive events. As with many of the newer health and wellness programs, isolating the value of a specific program becomes difficult. With current spending on wellness programs equaling approximately 2 percent of an average corporation's total insurance claims, defining that value becomes more important.

Health Screenings One element of an overall health and wellness program is a health-screening plan. These are designed to provide baseline information about both new and existing employees' physical health. These programs supplement existing programs that ensure employees are physically capable of performing their jobs. For example, to operate an overhead crane, an employee has to meet certain correctable vision standards. Employees likely know if they have monocular vision. On the other hand, if employees are long-term smokers and have trouble getting up stairs, there is an opportunity to improve their health by encouraging a smoking-cessation program, additional medical treatment, and a very limited exercise program. Presented in a positive way, employees are encouraged to improve their heath, resulting in gains associated with healthy and productive employees.

Healthy Eating and Nutrition As with exercise, the connection between good health and nutrition is well established. Companies are developing programs to encourage healthy eating both at home and in the workplace. Campuses with in-house dining services are offering healthier products. Some companies are simply buying healthy breakfasts and lunches for their employees. Another option is swapping out the traditional snacks in vending machines for healthier alternatives.

While promoting healthy eating is not an overly expensive proposition, it is still a program that someone in the organization must design, implement, and manage.

Smoking-Cessation Programs The connection between smoking and poor long-term health is also well established. Most experts agree that smoking takes about a decade off a person's life. In addition, the habit is very expensive for employers. In some cases, smoking cessation in the work environment is fairly easy to implement: simply prohibit smoking anywhere in or around the facility. While there may be some pushback from a group that has been going to a smoking pit for the last few years, overall a nonsmoking facility is well received by staff and employees. For those with difficulties quitting, at least while at work, there are intervention options.

In addition to eliminating smoking from the workplace, companies are looking to provide financial incentives for employees to completely quit. While there are a few compliance hurdles, companies are establishing two-tiered health insurance programs. Smokers pay a substantially heftier premium than nonsmokers.

In addition to addressing smoking among existing employees, some employers today are refusing to hire people if they are smokers. Being a smoker is not a protected status, and companies that are serious about these issues are not hiring those who currently smoke. According to the CDC, smoking accounts for $96 billion in direct medical costs and another $97 billion in lost productivity and premature death.12 Therefore business takes smoking seriously.

Obesity Programs Foremost among the health issues plaguing this country and its workforce is the obesity problem. The health effects of obesity are well known. Obesity can lead to a number of conditions:

Type 2 diabetes

Heart-related illnesses such as high blood pressure and stroke

High cholesterol

Osteoarthritis

Gall bladder disease

Liver disease and other illnesses

Obese workers are less healthy, miss more work, and drive up insurance costs. Companies are implementing programs to combat obesity. One place to start is with an employee health-screening program. As a part of that program, encouragement to lose weight and to improve health can be initiated in a positive way with the privacy of medical staff. Other obesity program efforts include the following:

Educational programs

Fitness activities

Individual treatment

Moral support groups

All these programs are being used as obesity-reduction initiatives in the business community.

Industrial Hygiene While the role of the industrial hygienist remains devoted to the anticipation, recognition, evaluation, prevention, and control of stressors arising from the workplace, a considerable amount of industrial hygiene work has moved from the shop floor to the main office. Today's industrial hygienist spends a great deal of time working on programs to prevent poor indoor air quality (sick building syndrome, second hand smoke), exposure to diseases such as AIDS and other blood-borne pathogens, and cumulative trauma disorders.

In addition to these newer programs, industrial hygienists continue to develop and initiate programs that include the following:

Managing chemical exposures

Detecting and controlling exposures in the areas of radiation (ionizing and non-ionizing), noise, and illumination

Emergency response and hazard awareness

More than ever, the programs within the industrial hygiene field impact all employees.

Ergonomics With the rising cost of healthcare and the increase in musculoskeletal disorders (MSDs) as a portion of workplace injuries, much focus has been placed on the field of ergonomics in the workplace. In fact, MSDs are the most common form of workplace illness in industrialized nations. MSDs include carpal tunnel syndrome, repetitive strain injuries, and cumulative trauma disorders.

Comprehensive ergonomic programs are being developed. These programs include extensive training for employees and management, surveillance of data to spot trends early, case management of all MSD illnesses, job analyses, and design to address ergonomic risk factors (force, repetition, awkward postures, static postures, vibration). While these programs address the multidisciplinary sciences addressing the interface between the employee and the work performed, the value of these programs is often unclear. Productivity improvements are hard to isolate. MSDs may also be caused or aggravated by activities outside the work area, and the treatment of these illnesses is different for each individual. While it is widely believed that a sound ergonomics program brings value to the business, determining that value is a difficult task.

Stress Management According to the Institute of Stress, employers lose $300 billion annually due to excessive worker stress. This is before the impact of healthcare costs, which are nearly 50 percent higher for workers reporting high levels of stress. Given these numbers, stress management/reduction programs are getting ample attention in the business community. Companies are making various efforts to reduce stress in the workplace. Some of these programs include the following:

Bringing pets to work

Assistance with time management

Classes on financial wellness

Time off for exercise

Time for meditation

Mutual support pairings

While the value of some of these programs may remain questionable, employers have recognized that stress arising from the workplace impacts the bottom line and are taking action.

The Payoff of Investing in Employee Health The landscape is covered with all types of healthy-living initiatives and projects. Health, wellness, and fitness programs are everywhere. They touch every part of a business's operations and each employee within the business. These programs must be integrated, managed, and properly implemented to reap the greatest rewards. There are several factors that help drive the changes that are taking place in the health and safety profession.

The most important point is that these programs work, but only if they are implemented properly. For example, Johnson & Johnson has reported dramatic results with their wellness program. Since 1995, the percentage of Johnson & Johnson employees who smoke has dropped by more than two-thirds. The number who have high blood pressure or who are physically inactive has also declinedby more than half. That's great, obviously, but should it matter to managers? Well, it turns out that a comprehensive, strategically designed investment in employees' social, mental, and physical health pays off. J&J's leaders estimate that wellness programs have cumulatively saved the company $250 million on healthcare costs over the past decade; from 2002 to 2008, the return was $2.71 for every dollar spent. Similar savings are reported in other companies such as Chevron, HEB, Lowe's, Nelnet, and SAS Institute.13

Investing in healthy living is not new. It has been practiced for many years, and it has developed in phases, as shown in Table 8.2. The initial investment was based on image, recognizing that it is good to be taking care of employees. The focus was the job satisfaction of the employees involved. Then it became a benefit, implemented to attract and retain employees. The measurement focus was job satisfaction, participation, and recruiting image. With healthcare costs increasing, these programs became focused on cost control. Healthy living is a way to control healthcare costs, improve productivity, reduce absenteeism, and prevent accidents. Health insurance plans provide coverage for preventive programs in the healthcare plan, and health and wellness programs are offered in the organization. The measurement focus was participation, healthcare costs, productivity, absenteeism, and accidents. In today's climate, healthy living has moved to more of a business focus, recognizing that improving employee health is a great investment when the economic benefits of these programs are compared to their cost. However, these improvements will not occur unless the programs are implemented with proper planning, leadership, and execution.

Table 8.2. The phases of investing in employee health programs benefits.

Phase

Rationale

Measurement focus

Image

"It's good to be taking care of our employees."

Job satisfaction

Employee benefit

"This will attract and retain employees."

Job satisfaction, participation, image

Cost control

"This will help to improve healthcare costs, absenteeism, and productivity."

Participation, healthcare costs, productivity, absenteeism

High ROI

"This is a great investment when the economic benefits are compared to costs."

Six outcome measures, including ROI, and intangibles

Table 8.3 shows the key ingredients for the success of health and wellness programs. Leadership is necessary at all levels, from those at the top throughout the management ranks. The program must be aligned to the business, with clear business goals. The programs must be designed and executed focusing on what is necessary, convenient, and important for employees. The programs must be successful in terms of participation rates and ultimate outcomes. But most of all, the programs should be accessible to allat least in some capacity. Some programs are more accessible than others, obviously, but ideally they should be available to all employees when possible. Low-cost or no-cost programs are preferred, and having them integrated on site is a plus. Partnerships should be established with a variety of groups that are available to help, either internally to promote the group process, or externally with all kinds of organizations in the healthcare improvement field.

Table 8.3. Making wellness work.

1. Leadership is needed at all levels.

2. Alignment with business goals is essential.

3. Programs must be relevant to the target audience.

4. Top-quality services must be provided.

5. Programs should be accessible to all, at some level.

6. Make low- or no-cost programs a priority.

7. Integration of programs is essential, because convenience matters.

8. Partnerships, internal and external, must be established.

9. Communication with all stakeholders must be routine.

10. Outcomes at the business level should be measured:

Lower health costs

Improved health status

Less absenteeism

Reduced accidents

Improved retention

Increased job satisfaction

Increased job engagement

Decreased stress

Source: Adapted from Leonard L. Berry, Ann M. Mirabito, and William B. Baun. "What's the Hard Return on Employee Wellness Programs?" Harvard Business Review, December 2010.

Communication with all stakeholders is critical, letting them know why the programs are being implemented, the importance of these programs to employees, and why the company is pursuing them in such an aggressive way. At the same time, the successes along the way have to be detailed. The outcomes must be developed at the business level, and the lower part of Table 8.3 shows an impressive list of possible outcomes. These are reported in a variety of documents. It is easy to find these kinds of programs available, and when implemented, they can have a tremendous impact on not only the health status of employees but ultimately the bottom line of the organization.

Wellness programs must withstand criticism. For example, in the carrot-and-stick approach, programs have "carrots" to entice people to join and also have "sticks" that force them to do so.14 This is supported by the Affordable Care Act in the United States. For example, the state of Maryland said its wellness program, required as part of insurance coverage, could bring penalties of as much as $450 per person by 2017 for those who fail to undergo certain screening and fail to follow treatment plans for chronic conditions. The state said the program could save $4 billion over the next ten years, according to news reports.15

The "sticks" sometimes create problems, because some groups suggest that they may violate other laws that protect people with disabilities. In places where obesity is defined as a disability, it may be difficult to force people with obesity into this process. Nevertheless, these issues must be addressed in a very aggressive way by employers to reduce healthcare costs and improve the health status of employees.

Healthcare Cost Solution: Shift to Employer-Funded Individual Healthcare A huge change is evolving in healthcare in the United States, as employees are shifting to defined-contribution health benefits. Instead of providing a healthcare plan that continues to increase in cost and be abused, an employer with a defined-contribution health benefit essentially provides money to employees, either taxable or tax free, for them to purchase individual healthcare coverage. This is consistent with the Affordable Care Act and seems to have great potential. Table 8.4 shows ten reasons to have individual health coverage.

Table 8.4. Ten advantages of individual health coverage.

1. It's portable. You keep your health insurance if you or your loved one gets sick.

2. It's 20 to 60 percent less expensive. You and your employer pay $4,000 to $12,000 less for the same coverage.

3. It's permanent. Your coverage cannot be canceled as long as your pay your premium.

4. It's not limited. You get to pick your doctors and hospitals.

5. It's customizable. You choose your deductible and copays.

6. It's subsidized. You may be eligible for a $2,000 to $12,000 per year share of the trillion-dollar federal subsidy.

7. It's stable. You're in a large group, and your after-subsidy cost can only increase with your income.

8. It's good for careers. You are free to change jobs based on what's best for your career rather than what's best for your healthcare.

9. It's good for business. You spend more time focusing on customers and products.

10. It's good for America. It empowers Americans to manage their own healthcare, and it makes American businesses more competitive.

Source: Paul Z. Pilzer and Rick Lindquist. The End of Employer-Provided Health Insurance: Why It's Good for You, Your Family, and Your Company. Hoboken, NJ: Wiley, 2015.

With these many benefits for the employee and cost advantages for the employer, this inevitably will be a huge trend. For example, Table 8.5 shows that the percentage of employers offering healthcare benefits has been changing.16 This will continue, and it is estimated that 60 percent of small businesses will switch to defined-contribution plans by the year 2018.17

Table 8.5. Percentage of employers offering health benefits, 1999-2013.

Employer size

1999

2013

3-9 employees

55%

45%

10-24 employees

74%

68%

25-49 employees

88%

85%

50-199 employees

97%

91%

All small and medium employers (3-199 employees)

65%

57%

All large employers (200+ employees)

99%

99%

All firms

66%

57%

Source: Kaiser Family Foundation. 2013 Employer Health Benefits Survey. http://kff.org/private-insurance/report/2013-employer-health-benefits.

This trend will evolve by necessity, but it is also a creative way of handling the problems of rising healthcare costs and declining employee health status. This is similar to the huge adjustment that was made in retirement plans in the 1970s and 1980s as employers switched from defined-benefits plans to defined-contribution plans. This follows the same concept and shifts the burden of healthcare evenly between employees, the government, and employers.

Implications for Human Capital Strategy Several recommendations for human capital strategy emerge from the discussion in this chapter. As a preliminary step, you should have a full accounting of the current cost of healthcare and how it has changed in recent years. With that backdrop, it will be clear that individual strategies should do the following:

Include more preventive coverage within the current healthcare plan until major adjustments can be made.

Shift the coverage from employer-provided health insurance to employer-funded individual health coverage. Serious communications are needed for this shift, and sometimes negotiations with unions may even be necessary.

Develop and implement comprehensive and sustainable health and wellness programs for all employees, and ensure that the programs are fully functioning in the organization.

Promote healthy living routinely with reportable results.

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