By Aon Hewitt
The cost of health care in Asia is certain to rise and, therefore, employee health will rise as a priority. Employer’s health care costs in Asia will rise for two basic reasons: the workforce in Asia, especially North Asia, is becoming older and employees are becoming more demanding as their incomes rise.
These factors combined with the inability of governments in Asia to pay for it on their own, ensures that higher health care costs for employers combined with the inability of governments in Asia to pay for it on their own, ensures that health care costs for employers in Asia will rise sharply in the years to come.
China is a case in point. According to a recent report, between 1995 and 2005, China added 107 million working-age adults to its population. Between 2025 and 2035 though, it is projected to subtract 79 million. In fact, China’s population is aging faster than any other country in the world. In addition, many multinational employers in China have seen the average age of their workforce increase as a natural result of their long-term presence in the country.
When first starting in China, most foreign companies had few employees who were more than 30 years old. Twenty years on, the average age has risen as more and more people have longer experience working for MNCs. The increased age of employees will lead directly to increased health benefits cost, especially for employees with a high health risk.
Employees’ higher incomes have also increased the demand for broader health care coverage. As incomes rise and the workforce ages, employers are faced with increased demands to expand their health care coverage to include supplemental medical benefits. The Chinese government is adding to the pressure on employers as it tries to fund the country’s inexorably rising health care needs.
In any case, employee health already may be costing employers in Asia more than they think. According to a multiemployer study in the US personal health costs (medical care, pharmacy) account for less than one-third of total employee health costs. More than two-thirds of the cost can be attributed to productivity cost in the form of absenteeism (short-term disability and long-term disabilities) and “presenteeism” (turnover, temporary staffing, administrative costs, replacement training, off-site travel for care, customer dissatisfaction, variable product quality).
Under these circumstances, it is critical that employers in Asia proactively address health care costs before they become a burden. Initiatives that improve long-term employee health can help slow the rise in health care expenditures. This is possible because a large proportion of health costs are avoidable. Access to care, genetics, environment and behavior determine a person’s health care status; however, behavior accounts for half of the total. This means that most people's health is in their own hands, whether it be smoking, drinking, eating, managing work-life balance or exercise.
When health risk and age are combined, the impact of health risk on health costs becomes quite significant. According to a recent study, annual average health care costs for a person less than 35 years old in the U.S. can increase from $1,247 to $3,432 entirely based on the number of health risks due to a person’s lifestyle and behavior.
A comparable increase in cost based on age alone for those with low health risk occurs only over a period of 20 years. Reducing health risks by changing a person’s behavior and lifestyle can lower health costs at any age as well as keep costs from rising rapidly as a person ages. Wellness programs have been shown to change people’s behavior and improve their health. Consequently, Wellness initiatives undoubtedly reduce employer health care costs.
The key to wellness and its efficacy is in cost avoidance _ it is not in cost prevention. The objective is to decelerate the trend in rising health care costs. By reducing employees’ health risks, Wellness initiatives can help lower per capital health care cost below what it otherwise would have been.
How do you get started with a Wellness Program designed to improve employee health and, consequently, help slow down the increase in health care costs? The first obstacle, which is a huge hurdle, is the “readiness to change.” An organization has to be ready before a Wellness initiative can succeed. It needs to have strong management support. Obtaining that buy in and creating organizational readiness to change is the essential first step towards a successful Wellness program.
Companies start by building employee awareness around “What is wellness?” A global benefits manager of a high-tech company is in the initial stages of a Wellness initiative in Asia. According to his experience, “In China and India we face significant cultural obstacles because neither country has the infrastructure for or culture awareness of wellness.
We need to understand cultural differences and provide resources to address these differences. We are creating a roadmap to build awareness and testing infrastructure to provide these services. It will be a good three years before our Wellness program is in place.”
A plan or “roadmap” is essential to a Wellness initiative. Wellness needs to be done in a committed way _ not in a randomly implemented fashion. Wellness is not about one or two programs, nor is it about an initiation of a certain product or service. Companies can get quickly off track by relying too heavily on management opinion or employee feedback to formulate their plans. Wellness is about establishing a culture and developing a holistic approach. It requires that an organization understand its health risk profile, rather than depend on random feedback of likes and dislikes.
Begin with the diagnosis. A systematic and well-researched health risk profile provides a solid foundation for a wellness program. Without a risk or cost profile at the start, proving a return on investment (ROI) at a later point becomes next to impossible.
The Health Risk Appraisal (HRA) is one of the best tools available to risk profile individuals and groups of employees. HRA measures four quadrants: family history (cancer, heart disease, diabetes); lifestyle (alcohol, tobacco, exercise, nutrition, seatbelts, stress) behavior (readiness to change, self-perception of health status, confidence level); and clinical (blood
Create a vision. Senior management needs to be firmly behind the program because when funds run out, the enthusiasm often will as well. Wellness is not a one-year program, so a long-term vision and commitment is necessary for success.
Design plans. The components of a plan should depend on the results of the health risk assessment. Common wellness programs include healthy pregnancy, health coaches, healthy heart, smoking cessation, occupational health and safety, behavioral health, employee assistance programs. Diabetes and heart disease prevention is popular in India while stress reduction appears to be trendy in Japan.
Once you decide on the focus of your wellness programs, you then need to consider the methods of delivery. Delivery can span a wide spectrum from simply disseminating health information to providing onsite health services to employees.
Many companies have provided health content information to employees for a long time. Blitzing health information to everyone at large has little value since only those that are directly impacted will read it. Health content must be targeted. So, if a person’s risk screening profile shows a high risk for heart disease, then that person is sent information related to a healthy heart. Other programs that companies employ include personalized health records, coaching, and onsite services ranging from screenings and immunization to primary care.
Select vendors. Make sure you select good vendors who can provide the necessary support across the territory being serviced. Few vendors have the geographic span to provide Wellness services across Asia. Thus, a careful vetting of their true capabilities is essential before embarking on a formal contract.
Your vendor will play a very important role in maintaining employee privacy. People are concerned about having their health data being used against them. The vendor provides HR with aggregate or generic information, which is always without associated names. It is entirely dependent on your vendor to look at risk stratification and targeting programs at a discrete and one-on-one manner to the population. The information that trickles back to you is only at a high level or trend-level basis.
Communicate. Communications is the key to success. The initial up-take of a Wellness initiative, even when there is solid backing, can be as low as 12 to 15 percent. Be prepared and be realistic in terms of what you have to do to reinforce the message. Targeting a certain population and showcasing the results as a success story can be an effective strategy. Incentives also can play an important role, especially in the first year. One company reports that it pays employees to complete a health risk assessment questionnaire on their intranet. The $750 they receive can be used to select from a menu of employee benefits.
Evaluate the program. Evaluation and adjustment is an essential final step. Metrics can generally be categorized into six groupings: financial, HRA results, administrative/operational, clinical measures, participant engagement and communication effectiveness.
Finding metrics in Asia that work has its own difficulties. An issue in Asia is that the insurance industry does not yet provide the information needed for many Wellness metrics (e.g. benefits utilization by employee category). Even such basic information as data on sick leave and absenteeism is unobtainable, as most companies do not capture it.
A comprehensive benefits program needs to address the fact that short term measures of cost containment have limited effectiveness and it is essential to make investments employee health improvement to produce sustainable savings in the longer term. Employers in Asia need to recognize that the paradigm for offering benefits is changing and investments made in employee wellness will pay off in the long run.
This article was provided by Aon Hewitt Korea.