Risk Scores Impact Employee Benefit Costs

Over the past several years, we’ve seen unprecedented medical inflation, causing many employers to ask how to control benefit costs and increase productivity. After exhausting the supply side of healthcare through decreased benefits, spousal carve-outs, etc., employers seem to be running out of options.

One current strategy is to look at the demand side of healthcare – lowering employer and employee risks using wellness programs and improved population management. A company that can decrease claims through better benefits plan utilization can realize more favorable pricing through increased marketability and a larger number of interested carriers.

Improving Risk Scores

Since every business has different risks, wellness programs need to be customized to best fit that company’s culture. In this instance, the definition of wellness needs to consider all risk factors and potential exposures that can increase claims and, therefore, decrease the overall “health” of the organization. The approach is similar to workers’ compensation return-to-work or robust P&C safety programs that help reduce the frequency of claims and better control costs.

A holistic approach that manages employee risk versus personal health generates higher returns as wellness and risk management initiatives integrate into the work culture. “A well-run wellness program can provide a return of three to one, and, in some instances, a six to one return on investment,” says Geoff Christian, Executive Vice President, AssuredPartners Benefit Captive Leader.

Incentivize and / or Penalize

Employers could incentivize or penalize an employee for unhealthy lifestyle choices through a wellness program. Life insurance has done this for years. If an employee is a smoker or overweight, they pay more. The same goes for wellness programs; those employees with an unhealthy lifestyle – smoking, high cholesterol, diabetes – who are not addressing their issues – pay more.

As a business owner or member of a leadership team, you already have first-hand knowledge of the effect medical inflation has on the well-being of your employees and its impact on your company’s bottom line. Knowing that wellness and population management can provide a solution, the question is, “What comes next – how do we implement a vigorous wellness/population management plan?”

Implementation: 1, 2, 3

First, hire a third-party administrator (TPA) of wellness programs to help introduce and customize a plan that works for your company’s risks and exposures. “As leaders in the employee benefits arena, we have well-established relationships with top TPAs and can guide you to the best choice for your organization’s specific needs,” says Christian.

Second, Christian recommends that businesses work with a reputable agent. He notes, “It is imperative to work with someone who can successfully tie the wellness program to your employee benefits program. After all, this process aims to improve employee risk scores.”  

Third, “Think of your employee benefits program as an asset,” advises Christian. A good, strong wellness program can incentivize employees to make healthy lifestyle changes, improve absenteeism/presenteeism, and, most importantly, enhance your employee benefit risk score.

Christian has the following advice for any organization looking to improve their benefit offerings while keeping an eye on costs: Company culture is important when choosing employee benefit programs. It’s imperative that your choices improve your workplace environment. Careful consideration must be given to ensure you are taking care of your employees’ well-being while you are getting the most from your medical program spend.

With so much to consider, take time to get your solution right for your organization’s needs. AssuredPartners can help.

For more information regarding Employee Benefits financial management strategies, call Geoff Christian, Executive Vice President, AssuredPartners Benefits Captive Leader, at 304.720.5978.

The Captives Vertical team is committed to assisting you in making the best choices for your business. For more information regarding Employee Benefits or Property & Casualty captive offerings, contact us at captives@assuredpartners.com. There’s Power Through Partnership.