Study Suggests Health Care Management Cuts Costs

July 24, 2007 ( - Employers who want to mitigate health care costs must focus on employee health management as well as using traditional cost-based management methods, a recent study suggests.

The 2007 SHPS Health Practices study of 115 companies found cost differences of as much as 50% between employers who only focus on traditional financially-based cost management and those who have adopted best practices in employee health management.

Companies that focus on managing the health of their employees through clinically based care management programs see an average of 18.2% lower health care costs, according to one finding. Care management might include programs that monitor the quality of care and provide nurse counseling for catastrophically ill or injured patients.

The study also found that cash incentives that encourage employees to be healthier can lead to reduced health costs. Employers using cash incentives average a 15.1%, or $1,165, reduction in total cost per benefit-eligible employee.

Excellent benefits administration and communication can lower health care costs by as must as 12.7% per eligible employee when they are integrated with the delivery of health programs.

The SHPS study also identified some common health benefits practices that are associated with higher healthcare costs:

  • Employers who reported managing employee health solely through the use of Web-based health portals and lifestyle management coaching spend nearly 17% more on health care that those who do not.
  • The study suggests that employers who offer several choices in consumer health care in the form of multiple plan designs appear to increase cost and complexity without adding value.
  • Employers using deductibles and co-pays as a primary way to drive changes in employee health behavior have health care costs averaging 29% higher than those who do not offer them.
  • Using health benefits as a way to draw in employees, or the keep them, has a negative effect on the health care costs of most employers, because most employees don’t make decisions based on benefits.

For a full copy of the study go here .