Most employers don’t like unpleasant surprises when it comes to financing employee health. The cost of employee health insurance is one of the largest expenses in many employers’ budgets – so a few large medical claims can shape opinions about the benefits of alternative insurance options. Many employers have opted to be fully insured with fixed monthly premiums, even when annual costs exceed partially self-insured options. As a result, fully insured employers (and their brokers) are often reluctant to implement employee wellness programs. This is where employee wellness programs can help.

Fully insured employers feel their health insurance premiums are largely determined by the claims of all the employers in the carrier’s risk pool. This translates into the belief that they’ll never see the savings from investing in employee wellness programs. And while it is true that some of these savings from worksite wellness programs benefit the insurer, employers should consider the ways these programs can strengthen their organizations as well. 

At Engagement Health Group, our employee wellness programs can improve employee health to reduce health insurance costs, optimize operations, and enhance employee productivity. 

Why Insurers Do Not Invest in Employee Health 

It is logical to think that insurers should invest in wellness to improve their profits. However, employee wellness programs would add 5% to the carrier’s health plan cost. This makes the health plan uncompetitive against other insurers that do not have the costs associated with serious worksite wellness programming. Therefore, insurers believe their customers would jump ship long before an investment in employee health would pay off. 

As a result, most carriers use wellness as a loyalty program – not to reduce healthcare costs. They offer “free” virtual tools like a worksite wellness portal, an online Health Risk Assessment, or a call-in wellness coach. These tools are relatively inexpensive window dressings that insurers offer to make their health plans more appealing without making their pricing uncompetitive. Unfortunately, one characteristic of these tools is that they don’t accomplish anything unless employees use them – and the typical utilization of insurers’ virtual worksite wellness tools is practically nil. 

The Dangers of Ignoring Employee Health Initiatives 

Since most fully insured employers do not get serious employee wellness programs from carriers, what is the case for running a program on your own dime? Let’s look at several factors that can impact the direct cost of health insurance:

1.     REPEAT OFFENDERS – While the premiums for fully insured employers are predominantly based on the experience of the whole risk pool, carriers also monitor each employer. When an employer’s experience is worse than the pool, carriers have to provide much higher renewals, sometimes 30-50% or more! Employers must accept these huge increases because it becomes virtually impossible to shop for plans.

2.     CLAIMS EXPERIENCE – As the number of covered employees increases, carriers adjust premiums according to each employer’s claims experience. Therefore, employers with an unhealthy population and higher claims will receive higher premium increases than the rest of the pool.

3.     EXPERIENCE RATED – As the number of employees increases, there is a point when carriers adjust premiums based on the employer’s own claims experience. If an employer’s claims come in higher than the insurer budgeted in the premiums quoted, they will make up for it in the following year’s premium increases.  

4. DISCOUNTS FOR WELLNESS – While carriers do not invest in serious worksite wellness for their customer base, some reportedly give 2-5% discounts off the nominal increase in premiums to customers who have effective employee wellness programs.

Employee Wellness Programs Reduce Costs and Improve Operations

As a result of the aforementioned factors, the cost of poor employee health does impact the cost of health insurance, even for fully insured employers. And smart leaders mitigate cost increases by managing risks. They proactively measure and manage employee health risks using effective employee wellness programs because they DO help control the direct cost of health insurance.

However, the biggest pay-off of employee wellness programs is not just on the cost of health insurance. That’s the tip of the iceberg! Investing in employee health can also provide other benefits including:

1.INDIRECT COSTS – The indirect cost of poor employee health – such as absenteeism, workers compensation, short and long-term disability, and presenteeism – are 2-4 times higher than the direct costs of health insurance. (See the landmark study reported in the Harvard Business Review).

2. KEY PEOPLE – With a smaller organization, the health and productivity of each employee becomes even more important. Taken to the extreme, if the sole employee in a single-person firm goes down, the company is out of business.

3. MORALE – Employee wellness programs improve morale. Happy, healthy workers are more productive and provide better service

4. SAFETY – Healthy workers are also safer, while unhealthy workers are more likely to have an accident – resulting in harmful consequences and increased costs.

5. CULTURE – Michael O’Donnell found that organizational culture (hyperlink to updated blog post You Won’t Find ROI) is the single most important determinant of a successful employee wellness program.  Culture is much quicker and easier to improve in smaller organizations that tend to be fully insured.

6. ENGAGE/RECRUIT/RETAIN – Employers need worksite wellness for the same reason they need benefits – to attract and retain the best employees. Prioritizing employee health is a terrific way to say that you care while improving retention and decreasing the cost of turnover. One of the primary reasons Vanderbilt University implemented an employee wellness program for the university and medical center was to reduce the high cost of turnover – with outstanding results. In fact, they won the prestigious C. Everett Koop National Health Award in 2008. 

Conversations About Employee Wellness Programs

Following is the typical conversation that occurs when I speak with fully insured employers:

Employer: “I can’t afford an employee wellness program. I can just barely afford health insurance.”

Me: “I understand. Then why don’t you drop your health insurance benefits? You cannot sustain these cost increases.”  

Employer: “Are you crazy? How could I attract and retain good employees without health insurance?”

Me “You’re right. If you offer health insurance, you are in the health management business, whether you like it or not. Now, the question is – are you going to manage health reactively or proactively? Employers who manage health reactively are the ones who can barely afford insurance anymore. In fact, they may soon be bankrupt. Many employers have already been driven out of the business, or out of the country, by unsustainable health plan increases.”


Even if you are fully insured, investing in Engagement Health Group employee wellness programs will reduce your healthcare costs, boost your bottom line and provide you with a healthy workforce that will drive your corporation to succeed.

Contact us today to learn more information about our employee health initiatives.

About the author

Jack Curtis

Jack Curtis is Founder and CEO of Corporate Health Partners (2002) and Co-Founder and CEO of Engagement Health Group (2022). With an ongoing commitment to making a difference in corporate health and well-being, Jack enjoys his long-term membership and Leadership Committee chair position at an industry Think Tank of thought leaders within employee health management, called Health Enhancement Research Organization (HERO).

Engagement Health Group