What Does Your Employee Health Balance Sheet Look Like?

By DrScott – Posted on January 21, 2014 on www.compassphs.com

What is the most expensive item on your statement of revenue and expenses every month? Employee payroll tops the list for almost every company, with health benefits landing in the second or third position depending on whether you are in manufacturing (raw materials often in second place), or a service industry.

Now, how carefully do you manage employee costs? Cost of raw materials? What about health costs? When I ask this question of most CEOs and CFOs the answer is consistent – on employees and raw materials they are meticulous, but they don’t feel like there is much they can do when it comes to health benefits.

Really? As we have examined in these blogs, there is A LOT that they can do. In fact, given the high cost of health benefits it would not surprise me if soon companies will not have to add “Employee Health & Wellbeing” to their Balance Sheet. How? Well, disease doesn’t appear in a person overnight – it takes years, and if detected early it can be cured or slowed dramatically. Why don’t we slow or prevent disease progression?

The “I Feel Fine” Syndrome lulls us into a false sense of security (as we discussed in the last 4 blogs). But this is not inevitable – identified and handled properly, costs stay down, employees stay at work, and families keep their mothers and fathers.

Smart venture capital firms like Blackstone have already figured this out and established companies like Equity Health to get control of this issue. Imagine buying a company, putting in place proactive solutions, and dropping the cost of your number 2 or 3 spend by 10 – 30% in the first 36 months consistently. Regardless of how much the rest of the company performs, you already have created significant shareholder value.

So what will the Balance Sheet say? No one knows exactly, but an educated guess includes:

Assets:

Employee Health (Assets = lower costs relative to average employee of $X)

  • % of Employees

Healthy Employees : $3,000/employee

  • 15%

Employees with Chronic Conditions well managed : $1,400/employee

  • 8%

Liabilities:

Employee health (Liabilities = higher costs relative to average employee)

  • % of Employees

Employees with poor physical fitness <$500/employee>

  • Unknown

Employee with unknown health status <$1,400/employee>

  • 57%

Employees with uncontrolled Chronic Conditions <$3,200/employee>

  • 14%

Employees with Serious Illness <$19,000/employee>

  • 6%

So let’s take a company with 1000 employees paying on average $5000 per year for health benefits. This calculation would be a net negative of <$798,000> on the balance sheet. Getting biometrics, age and gender screenings along with active primary care involvement would shift this from a net negative on the balance sheet to a break even on the balance sheet. It would also reduce health care costs by over $60,000 per month. This approach is logical and attractive both from a financial and employee well-being standpoint. However, it takes experience and competent systems to achieve.

Tremendous opportunity to make very significant differences for your employee’s health and well-being exists. Designing systems that help your employees keep their Seven Numbers at goal will add years to their life and life to their years. Thank you for following this series. Please let us know if you have thoughts or stories of how you are accomplishing this in your companies.

Wow. It's Quiet Here...

Be the first to start the conversation!

Leave a Reply:

Gravatar Image

XHTML: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>