{"id":136,"date":"2020-10-16T18:03:17","date_gmt":"2020-10-16T18:03:17","guid":{"rendered":"https:\/\/wellai.health\/blog\/?p=136"},"modified":"2022-01-03T00:47:38","modified_gmt":"2022-01-03T00:47:38","slug":"is-health-inflation-important","status":"publish","type":"post","link":"https:\/\/wellai.health\/blog\/is-health-inflation-important\/","title":{"rendered":"WellAI\u2019s Health Cost Savings Calculator \u2013 Is Health Inflation Important?"},"content":{"rendered":"

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This is part 3 of the series on the WellAI\u2019s health cost savings calculator for CEOs, CFOs and heads of HR.\u00a0 Today we will talk about health inflation and how it plays into WellAI\u2019s \u201834% to 45% health cost savings estimate for a typical US company\u2019<\/strong>.\u00a0 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.<\/p>\n

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.\u00a0 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?\u00a0 A more important question is: Why are employers taking it to the chin, when there are clearly other alternatives, whether it\u2019s negotiating with a benefit broker or working with a leading technology company like WellAI.\u00a0 Some heads of HR I\u2019ve been talking to don\u2019t even hide the fact that health cost increases by insurance companies are to be \u2018expected\u2019.\u00a0 No questions asked.\u00a0 When I heard this for the first time, my knee-jerk reaction was: Isn\u2019t this what HR supposed to do \u2013 making sure company employees and the company itself get the best benefits there are?\u00a0 The problem is of course the conflict of interests: 1) HR\u2019s own compensation is not aligned with an extra effort to change the \u2018status quo\u2019, 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\u2019s well-being.\u00a0 In fact, the CEO would often pat HR on the back for minimizing the paperwork for the legal team.\u00a0 I wonder what the board (and shareholders) would think about these gross violation of the management\u2019s fiduciary duty.<\/p>\n

The key question for this blog is: Does the health inflation get incorporated into our calculation of health cost savings for employers?<\/p>\n

The answer is No.\u00a0 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.\u00a0 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<\/em> time period.\u00a0 Hence, given a reasonable assumption that most employees experience the same rate of growth of health costs from previous year, we don\u2019t explicitly consider inflation.\u00a0 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\u2019s health costs\u2019 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 \u2013 (1+0.04)*(1-0.40) ).<\/p>\n

The WellAI app called Doc In A Pock is now available on your smartphone.\u00a0 Please use the following links to schedule a 1-on-1 demo<\/strong>:<\/p>\n