Employee Wellness Plans : The United States Health Care Crisis

Over the past decade healthcare insurance costs have risen steadily. This is taking a toll on the bottom-line of organizations, 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 employer.

Companies, through private healthcare insurance companies, are the leading provider of healthcare services in the United States. In 2004, 59.8 percent of American citizens were covered by a employer-based healthcare insurance program, accounting for 88 percent of all private healthcare insurance. Yet the increasing costs of Health Care, ever-increasing drug prices and a steady rise in chronic diseases have brought the corporate culture to a breaking point.

For many organizations the growing burden has become too difficult to bear. During the past five years medical 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 growth in costs has caused the number of organizations offering Medical Care services during that time to drop from 69% to 60%.4 In addition, in 2005,  medical 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 businesses need to discover innovative ways to stem the increasing costs of Medical Care coverage. Seemingly, the easiest strategies to accomplish this goal would be to reduce benefits coverage or pass on an increasing burden to staff members and retirees. More than 80 percent of businesses have chosen one or both of these options in the past few years and almost half of all large businesses are likely to increase the amount staff members pay in 2007.5

Nevertheless, these options do nothing to mitigate the fundamental causes of increasing premiums, one of which is a population that requires increased medical care. To make a lasting and meaningful influence on premiums and overriding health, organizations need to look beyond a traditional reactive-based approach.