There is a lot of discussion every year around the rising costs of healthcare, and in the U.S. it’s employers who bear a significant amount of these costs. On average, employers spend more than $7,400 per employee, and the Centers for Medicare and Medicaid Services (CMS) predicted that total employer spending on healthcare in 2024 will exceed $1.3 trillion.
While these numbers are staggering, they only account for direct healthcare costs – things like employee premiums or procedures and medications paid for by self-funded employers. There is also a hidden cost to employers that is more difficult to quantify, but no less critical. The U.S. Health and Human Services Department labeled it the “U.S. Health Disadvantage,” explaining in a 2021 report:
“With more Americans in poor health, fewer Americans working, and the whole country burdened by high and growing healthcare costs, the United States is less able to compete in the global economy and sustain opportunities for Americans to achieve their best health, wealth, and well-being. Quality of life suffers for all Americans as potential remains unrealized for too many.”
These costs manifest in multiple ways, including:
Missed workdays as a result of poor health, particularly for employees with chronic health conditions. The Centers for Disease Control and Prevention (CDC) estimatesthat productivity losses from absenteeism account for $225.8 billion a year.
Lost productivity as a result of unmanaged or poorly managed health conditions (presenteeism). Many employees don’t take days off, but their productivity suffers when they come to work sick or have unmanaged chronic health conditions. A study from the Integrated Benefits Institute calculated that employers lose the equivalent of 540 million workdays from employees underperforming due to chronic health conditions. Another report from the Partnership to Fight Chronic Disease estimates that chronic disease could cost employers $794 billion per year in lost productivity by the year 2030.
Premature death or exiting the workforce as a result of chronic conditions. Heart disease and stroke account for more than 859,000 deaths a year, cancer accounts for more than 600,000. Diabetes was the cause of more than 100,000 deaths in the U.S. in 2021. Many of these deaths are people still in the workforce. Worldwide, 48% of diabetes deaths were people under the age of 70. Premature death from chronic disease can have a significant negative impact on employers and coworkers. Additionally, millions more people may decide to leave the workforce early due to poor health as a result of chronic disease.
Mental health and its impact on workplace productivity. A Gallup surveyfound that 19% of employees rate their mental health as “fair” or “poor.” Those individuals had nearly five times the number of missed workdays compared to peers who rated their mental health as “good,” “very good,” or “excellent.” While there are not a lot of studies on the direct or indirect costs of mental health on workplace productivity, one study estimated that absenteeismrelated to depression costs employers $44 billion a year, and another study found the average per-employee cost of presenteeismfor those with depression are about 5 to 10 times higher than absenteeism costs. Mental health conditions can also exacerbate the impacts of other chronic diseases.
Value-Based Care Could Mitigate Impact for Employers
Value-based care (VBC) is gaining momentum in the U.S. as an alternative to a broken fee-for-service system. It emphasizes and incentivizes keeping people healthy, improving health outcomes, and reducing costs. While many payers and providers are familiar with (and participating in) VBC programs and models, most employers don’t think about how they could play a more active role in value-based care, and the benefits it could provide.
In the U.S. about 83% of large employers operate self-funded insurance plans, and almost two in threeAmerican workers are covered by one of these plans. These employers are, in essence, healthcare payers. They would benefit from approaching employee benefits the same way payers look at it. Even among small- and medium-size companies who work with brokers or third-party administrators for benefits, there are compelling reasons to embrace value-based care.
Lower total cost of care: VBC has proven successful at lowering the total cost of care by focusing on things like preventive care, employee wellness, chronic disease management, and mitigating high-cost events, such as preventable ER visits or hospital readmissions.
Better health outcomes for employees: Focusing on preventive care and targeting patients with the right interventions based on their unique needs means better health outcomes (and higher productivity) for employees.
Higher satisfaction with healthcare benefits: When employees get the right care at the right time in the right place, they are more likely to be satisfied with their healthcare benefits, which can benefit employer retention efforts.
Keys to VBC Success for Employers
Most employers have little to no experience or expertise in healthcare. To succeed in lowering total costs and improving employee health and well-being (benefitting employees as well as the bottom line), employers should look at what’s working for healthcare payers and providers:
A data-driven approach to healthcare benefits. Self-funded employers – as well as small- and mid-size employers working with the right broker or TPA – have access to troves of data that can inform everything from optimizing benefits design to measuring the ROI of point solutions that can improve employee health and targeting interventions and resources to the highest-cost employees within your portfolio.
Collaboration with providers and care teams. Data insights are more valuable when employers can coordinate care with providers and health systems, translating data into actionable steps to improve care and health. End-to-end software solutions like Cedar Gate’s, which can seamlessly share data between analytics, care, and payment software, enable the highest level of collaboration.
Measuring ROI of employee wellness programs. Investing in point solutions is a great idea to help employees manage chronic conditions and improve health. But with so many options out there, it’s also critical to have tools that help employers measure the impact of each point solution to find the one(s) that result in the highest ROI.
Since the 1950s, many U.S. employers use health benefits to recruit and retain talented employees. It’s a system so ingrained in our workforce that it’s unlikely to change anytime soon. But as the cost burden of healthcare grows, and the health of the workforce declines, that cost is increasingly burdensome to employers’ bottom lines. By approaching the problem with a value-based care mindset, employers can start to bend the cost curve back down and improve care while also reaping the benefits of a healthier, happier workforce.
