Chronic conditions: how they affect self-insured employers.

Self-insured employers have a huge stake in employee health, including the high cost of chronic conditions. As such, they should be looking for cost-effective ways to contain rising costs such as developing a comprehensive strategy for managing chronic conditions and diseases.

More than half of Americans get their health insurance from their employers. Of these employers, about 60% are self-insured. Self-insured employers take on the risk for medical coverage for their employees, assuming the burden of rising healthcare costs by paying claims rather than paying a fixed monthly rate. Overall, approximately 1%–2% of members drive 30%–35% of annual claims with an average claims cost of $122,000.

Why Self-Insured Employers Need to Understand Chronic Conditions

According to the CDC, six out of 10 Americans are living with at least one chronic condition or disease. Employees managing chronic conditions are costly to employers. These costs are divided between direct healthcare costs like doctor visits, prescriptions, trips to the ER, and indirect costs like lost productivity, absenteeism, and early retirement.

Implementing a good strategy to manage chronic conditions will help your employees lower their out-of-pocket healthcare expenses, will facilitate healthier lifestyles, will improve employee satisfaction with your benefits offerings, and will help you directly control the rising costs of employee healthcare.

The 2012 RAND Wellness Program Study showed that lifestyle management and chronic disease management programs reduced average employee healthcare costs by about $30 per member, per month. Of that total, 87% of the costs savings were properly managed illnesses. In fact, employee participation in condition management programs generated savings of $136 per member, per month. This was largely driven by a nearly 30% reduction in hospital admissions. All this goes to show that while overall lifestyle management programs are valuable, you must manage chronic conditions in order to achieve maximum success in your overall health and wellness programs for employees.

Helping High-Cost Claimants

According to Mercer’s National Survey of Employer-Sponsored Health Plans, on average, the sickest 6% of an employer’s population represents 47% of the total allowed medical and pharmacy spending. As such, employers must contain healthcare costs for those “high-cost” claimants. By focusing on employees managing chronic diseases like diabetes, heart disease, declined mental health, or cancer, employers can identify high healthcare utilizers as well as those who could potentially become a high utilizer. They can then promote enrollment in chronic disease management programs.

These programs encourage employees managing chronic diseases – and those trending toward these chronic diseases – to participate in guided education and interaction with highly trained experts. Employees who are actively engaged in management programs experience a leveling of healthcare expenses, they are less likely to miss work, and they are overall much happier and healthier.

You may also be interested in our podcast Chronic Disease Management in the Workplace.