As employers cope with the seemingly inevitable high inflation in employee health insurance premiums, while their sales and profits increase at far slower rates, they have come up with a number of low-priced insurance options.  One is called “micro-insurance” and barely deserves the name.  It typically costs one or two hundred dollars a month, and covers very little – either by restricting coverage to only a few kinds of conditions and care, or setting a very low limit on the total amount of coverage in any given year, often as low as $25,000.

Such plans are popular among both employers who have little or no commitment to their employees’ health, and employees who are paid little, are young and healthy, and don’t expect to stay long with their current employer.  Another alternative is “catastrophic-only” coverage, which is more like other forms of insurance in covering only extreme levels of unexpected expense.  These usually have a very large deductible, so that ordinary care expenses are paid for by consumers, rather than even creating any claims processing costs for insurers.

These plans are popular among employers whose employees are well-paid and relatively healthy, and are often offered at premiums that are competitive with the micro-insurance plans.  Employees who would rather get more disposable income or retirement fund contributions from their employers, while willing to manage their own health and routine care, find these attractive, as well.

The recently developed “consumer-directed health plans” (CDHPs), which combine a catastrophic coverage approach, including high deductibles, with personal spending accounts that can grow and gain interest over time, are increasing in popularity.  Many of the employers who offer these plans also cover “preventive” care on a first-dollar basis, in order to gain the advantages of keeping their employee health and happy at work, thereby improving both employee and employer performance.

The fourth type of plan has only recently arisen and is not yet widely available, but is also growing in popularity.  It provides good coverage at modest premiums, but only insofar as employees agree, and fulfill their commitments to becoming or remaining healthy.  Such plans are particularly popular among employers who consider their employees as valuable assets, and want them to be healthy for the full range of performance impacts their health can have.

For example, the Lawley Service Insurance Group just announced a partnership with Marathon Health Co., the wellness firm, in offering insurance whose lower premiums are conditional on employees’ doing what it takes to reduce high levels or remain at low levels of blood sugar, pressure and cholesterol.  Marathon has predicted ROI levels of 1.8 to 2.8:1 for employers who invest in its wellness programs, and that costs can be reduced by as much as $48 per employee per month.

Marathon expects roughly 40% of employees to be “well”, while 45% are in a “pre-disease” risk state, while 15% already have one or more chronic diseases that are driving healthcare expenditures and causing performance impairments.  By paying attention to the 45% at risk, rather than just the 15% already generating costs, wellness programs can greatly expand their impact on both healthcare costs and workforce performance.  Marathon is willing to put part of their fees at risk for achieving predicted results with particular employers whose employees cooperate in the wellness program. [A. Franczyk “Lawley Plan Aimed at Cutting Health-Care Costs” Business First of Buffalo May 4, 2007]

The Health Insurance Commissioner in Rhode Island helped employers in that state create a wellness-focused health plan with a $750 deductible, free annual checkups and immunizations, 90% coverage for hospital care, and only costing $309 per moth per employee. {M. Davis “Employer-Built ‘Wellness’ Plans” Providence Business News Apr 11, 2007]  The Seattle brokerage ClearPoint formed a trust that offers wellness-contingent insurance and predicts significant reductions in employers rates of premium increase, to the low single digits, rather than double-digit rates. [P. Neurath “Health-Care Trust’s Wellness Plan Wins Converts” Puget Sound Business Journal Feb 12, 2007 (seattle.bizjournals.com)]

These wellness-focused plans have the potential for being both low in premium costs - to both employers and employees – and saving added money through increasing employee productivity levels.  Both wellness and disease management efforts have been shown to increase productivity by a significant amount, as long as employees participate and cooperate in such efforts.  And by offering direct incentives to employees to participate and cooperate, employers can increase their likelihood of achieving optimal results.