The CEO of Safeway has an interesting op-ed on his company's approach to reducing health care costs. It seems to begin with the premise that incentives matter:
Of course, if we really want to incentivize people we should start by reducing the role played by insurance in the health care business. People are simply less likely to care when someone else is picking up the tab.
At Safeway we believe that well-designed health-care reform, utilizing market-based solutions, can ultimately reduce our nation's health-care bill by 40%. The key to achieving these savings is health-care plans that reward healthy behavior. As a self-insured employer, Safeway designed just such a plan in 2005 and has made continuous improvements each year. The results have been remarkable. During this four-year period, we have kept our per capita health-care costs flat (that includes both the employee and the employer portion), while most American companies' costs have increased 38% over the same four years.He goes on to detail how the company assesses each employee in areas such as obesity and smoking and bills them accordingly for health premiums. This has produced results:
Safeway's plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.
Our obesity and smoking rates are roughly 70% of the national average and our health-care costs for four years have been held constant. When surveyed, 78% of our employees rated our plan good, very good or excellent. In addition, 76% asked for more financial incentives to reward healthy behaviors.This is a key reason why a taxpayer-funded "public option" for health insurance would be such a disaster. You can rest assured that under such a model that there would be no incentivization, if for no other reason than constituents would call their elected representatives to kick and scream about paying higher rates than someone else. Government is far more synonymous with handing out goodies than making hard choices.
Of course, if we really want to incentivize people we should start by reducing the role played by insurance in the health care business. People are simply less likely to care when someone else is picking up the tab.
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Ford Motor Company instituted a similar system in 2007. They require their employees to get an annual physical every year to keep the cheaper insurance, and during that physical the employee is evaluated against 6 key risk factors. If the employee fails any of the 6 tests, the doctor consults with the employee on how they can improve their scores on the tests they failed and schedules a four month checkup. The company never sees the patient's results. They just see whether or not you are going to the mandatory appointments, and adjusts you out-of-pocket premiums accordingly. I don't know the overall effects to their work force, but it would be an interesting study.
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