How does employee health affect insurance costs?

The costs of health insurance for employers has risen substantially and is showing no signs of slowing-since 2001, in fact, health insurance premiums have risen by an average of 68%. Mainly, those who are feeling the burden of these rising healthcare costs and premiums are employers who provide health insurance to their employees.

If you offer health insurance to your employees, you've probably noticed the rising cost of insurance coverage each year. While many things influence the cost of insurance, there is another thing that has an effect on insurance costs - the health of your employees.

How does employee health affect insurance costs?
The health of employees affects insurance costs in a simple way-the more unhealthy a person is, or the riskier their lifestyle, the more visits they make to the hospital and doctors offices, the more treatment they require, and the more prescriptions they need filled. These frequent visits and healthcare requirements translate into higher costs for insurance companies, who in turn pass the costs on to employers through higher premiums.

Two of the factors that contribute the most to increased healthcare costs are lifestyle related health problems, smoking and obesity. The Center for Disease Control estimated that almost $90 billion is spent yearly on public and private healthcare for smokers, including medical and dental. The tab for their healthcare is picked up by Americans and employers.

Obesity is another factor that affects health insurance costs. In fact, obesity related health issues, such as diabetes, high blood pressure, and so forth make up about 10% of all healthcare related costs, around the same as smoking.

Healthy employees, on the other hand, are those who make routine doctor visits for things like viruses or other sicknesses that don't relate to lifestyle costs. If employees maintained healthy weights and didn't smoke, they would require much less healthcare. As a result, the costs of health insurance would decrease significantly.

What you can do
As an employer, you do have options to help with the rising healthcare costs. Some employers have begun charging smokers higher healthcare premiums than non-smokers; one company, for example, charges those who smoke an extra $20 a month for their healthcare costs, then waive the fee for nonsmokers.

While this is an idea, it must be handled carefully, as some employers have found themselves subject to lifestyle discrimination charges. And you certainly can't legally charge more for health insurance for someone who is obese.

A better idea, then, would be to encourage healthy lifestyle choices and changes in your employees. You can do this in a number of ways, including:

• Wellness programs. Wellness programs are a great way to educate employees and help them to implement healthy changes into their lifestyle. Wellness programs can include things like inviting a nutritionist in to teach about healthy eating, offering smoking cessation programs, or having a "wellness fair" that will test employees' body fat percentage, cholesterol, and stress levels.


• Exercise and diet. Reimbursing employees for gym memberships or installing a workout room in the building are other ways to encourage activity in your employees. If you have vending machines, consider stocking them with healthier alternatives. Replace candy bowls throughout the office with fruit bowls.

As long as employees continue to make unhealthy lifestyle choices and their health deteriorates, healthcare costs will continue to rise. You can help cut your healthcare costs by encouraging healthy and active lifestyles in your employees.