WellAI’s Health Cost Savings Calculator – Is Health Inflation Important?

This is part 3 of the series on the WellAI’s health cost savings calculator for CEOs, CFOs and heads of HR.  Today we will talk about health inflation and how it plays into WellAI’s ‘34% to 45% health cost savings estimate for a typical US company’.  Health inflation is a strong term for an artificial price increase that is initiated by big-5 insurers, and then propagated via chain reaction to hospitals, doctor offices and TPAs.

For example, according to the KKF 2019 Employer Health Benefits Survey, the average annual health insurance premium for a single coverage has increased by 4.1% per year from 2010 to 2019, and that for a family coverage has increased by 4.4% per year for the same time period.  How could one possibly justify these numbers at a time when the national inflation measured by CPI was only 1.6% per year for the same period?  A more important question is: Why are employers taking it to the chin, when there are clearly other alternatives, whether it’s negotiating with a benefit broker or working with a leading technology company like WellAI.  Some heads of HR I’ve been talking to don’t even hide the fact that health cost increases by insurance companies are to be ‘expected’.  No questions asked.  When I heard this for the first time, my knee-jerk reaction was: Isn’t this what HR supposed to do – making sure company employees and the company itself get the best benefits there are?  The problem is of course the conflict of interests: 1) HR’s own compensation is not aligned with an extra effort to change the ‘status quo’, and 2) HR is treating such partners as the big-5 insurance companies better than its own employees because the HR staff never gets punished for maintaining the status quo, often detrimental to the company’s well-being.  In fact, the CEO would often pat HR on the back for minimizing the paperwork for the legal team.  I wonder what the board (and shareholders) would think about these gross violation of the management’s fiduciary duty.

The key question for this blog is: Does the health inflation get incorporated into our calculation of health cost savings for employers?

The answer is No.  The reason is simple. Most of the studies that analyze economic implications of digital health tools and wellness programs are cross-sectional, not time series.  What it means is that a treatment group (e.g. high health risk employees) and a control group (e.g. low health risk employees) are analyzed over the same time period.  Hence, given a reasonable assumption that most employees experience the same rate of growth of health costs from previous year, we don’t explicitly consider inflation.  However, if you are an employer, you are working on a budget for the next year, you are considering of acquiring the WellAI digital assistant for your employees for the whole next year, our assumption of next year’s health costs’ increase is, say, 4%, and the WellAI health cost savings calculator suggests savings of, say, 40%, then it is reasonable to assume that the post-inflation health cost savings would be around 38% (= 1 – (1+0.04)*(1-0.40) ).

The WellAI app called Doc In A Pock is now available on your smartphone.  Please use the following links to schedule a 1-on-1 demo:

• If you are an employer and would like a cool benefit that makes your employees healthier and happier, and saves 34% to 45% on your healthcare costs, please schedule a virtual meeting here.
• If you are a potential investor who would like to be part of a unique once-in-a-lifetime investment opportunity that will forever revolutionize healthcare, please schedule a virtual meeting here.
• If you are a potential customer, a patient or you are just curious about any of the WellAI high tech products – voice-guided digital health assistant, data-driven Telehealth 2.0, or the scientific chronic disease management program – please schedule a virtual meeting here.