Health Care and Insurance and Government

ECONOMIC ANALYSIS: Employers hope to save by promoting healthy living

May 14, 2007

"Mandates are a form of love," a state legislator once said, explaining a vote that added requirements to privately funded health insurance programs statewide. And our governments evidently love all of us-businesses, individuals, and even other governments-very much. Our legislatures tell us the lowest wage we can pay our workers, the questions we can and cannot ask during job interviews, and how many gallons of water we use to flush our toilets.

To the admittedly narrow-minded thinking of an economist, mandating something we wouldn't ordinarily do is a recipe for making us worse off, not better. But that's a mind-set few people share. In our classrooms, we may preach that individuals are the best judges of what's good for themselves, but our students enter a world of building codes, fuel-efficiency standards, and a thousand other requirements that steer us in the direction others want us to go.

Most of these mandates fall on businesses. However, thanks to the skyrocketing costs of health care, there is a new player in the mandate game, and that is businesses themselves. Forced to pry open the hood to see what's driving their health care spending, businesses are starting to understand how the lifestyle choices of their workers are affecting their own bottom lines. And that's making them think about a few mandates of their own.

Health care spending is where the distant worlds of public health and public corporations come together. Businesses whose sole focus has been on their markets and their customers are starting to realize they've got more to worry about than their competition. They've got to worry about whether their employees smoke, drink too much, or are overweight.

You'd think the workers should be worried about that already, and of course you are right. But the evidence on how many of us are apparently not, and pursue a risky lifestyle that is statistically linked to deteriorating health, decreased quality of life and even early death, is depressing.

We Americans have heard the message on health and wellness, and we've ignored it. We're heavier, more sedentary, with fewer ways of relieving stress besides alcohol, than ever before. It's all about us-we're the ones who make our lifestyle decisions and we're the ones who bear the consequences. And we cast our votes every day.

But that's not quite true-the consequences of our health decisions aren't confined to our own bodies. They can affect the companies we work for quite profoundly. It's more than just health care costs, although those are clearly high on every company's radar screen. It can also be absenteeism, Worker's Compensation claims, and being less productive while on the job. That's turned business into a potential partner with public health professionals to rekindle the flame of desire in their employees to keep fit and healthy.

Whether that will make a difference in how we as workers take care of ourselves remains to be seen. The dynamics of personal health are unfamiliar to most businesses. It is well-known, for example, that an 80/20 rule applies to health care costs, with a small fraction of employees accounting for a large fraction of spending. But as tempting as it might be, concentrating resources to control spending in that subpopulation won't make much headway in changing the trajectory of costs. That's because by the time these employees identify themselves as high-cost, it is too late to do anything about it.

As University of Michigan researcher Dee Edington has pointed out, strategies that affect how workers become "high risk"--in advance of the onset of debilitating disease-that is a key to reining in costs. That means waking up workers to the impact of their lifestyles and motivating them to change, using both the carrot and the stick. And even mandates.

Can our employers make us shape up? That remains to be seen. But a growing number are becoming convinced they need to try.



Barkey is a research economist at Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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