How to Save Corporations & Organizations TONS of Money.

How To Design a Health Benefits Plan That Saves Your Business Money

How to Save Corporations & Organizations TONS of Money.

Employers and institutions are routinely searching for ways to save costs – especially when it comes to health care costs. Yet, one of the most common (and costly) health conditions continues to persist in most organizations. It’s a touchy subject to address, but one which presents significant financial strain for many employers.

The obesity epidemic in America continues to grow and plague many individuals, companies, and organizations alike. Obesity’s direct link to some of the most threatening and costly conditions such as Type 2 diabetes, cardiovascular disease, several cancers and others is inarguable. In fact, most providers and insurers fully realize that a solution to this prevalent condition could save countless lives – along with significant amounts of money from related medical costs, lost productivity, absenteeism and more.

There are numerous studies and reports pertaining to the added financial burden that obese employees place on a business. In this blog, we want to piece some of those together in a way that will enable an employer to see the potential amount of savings that can be attained by having a proven and effective weight loss program.

In a 2015 “How Obesity Causes Big Problems for The Economy”, Katey Troutman referenced a recent study which had been conducted by the McKinsey Global Institute to determine how much obesity costs the world. They found that the global price tag was estimated to be more than $2 trillion annually and compares it to the economic impact of smoking or an armed conflict. (1)

Here are some other quick stats as shared in an article by Christina Merhar on peoplekeep.com in which she cited findings from a report done by the Northeast Business Group titled “Weight Control and the Workplace”. (2)

  • More than one-third of American adults are obese, a number that grows every year (and is not including the even larger “overweight” numbers)
  • According to the CDC, chronic diseases such as arthritis, diabetes, and heart disease, which are linked to obesity, account for 75% of national health care expenditures.
  • More specifically, 95% of diabetics are type II diabetics, and of those, 55% are obese. Diabetes care costs the nation $147 billion annually. 
  • Each year cancer costs the US $200 billion and 4.4–7.5% of new cancer cases can be attributed to obesity. 

Those are some big numbers! The truth is they are even higher than that today as the article was from 2013 and the trends related to obesity have, unfortunately, continued to worsen.

Perhaps an employer may read these and think they are all referencing the “outside world” and wonder how obesity affects them financially as an employer. In other words, how does all of this translate into dollars and cents? Well, let’s go there …

A study was published on the Journal of Occupational and Environmental Medicine (JOEM) website in February of 2020. This study analyzed variations in the relationship between obesity and healthcare and other employee costs. The study included data on more than 39,000 U.S. employees between 2010 and 2017, drawn from a large administrative claims database. Excess costs associated with obesity at different severity levels (class I, II, and III) were compared for eight broad industrial sectors. Here are the findings:

“In all sectors, direct health care costs increase with increasing body mass index, according to the study. Average direct costs per person per year (PPPY) increased from about $4,500 for non-obese workers, to $7,150 for those with class I, $9,700 for class II, and $19,000 for class III obesity. Medical-related absenteeism and disability costs showed similar trends”. (3)

Below we will pull all of this together for your financial considerations and, for simplicity, we will use only the findings for Class l. In regard to that class, this study showed a raise of the PPPY cost from $4500 to $7,150. This represents a $2,650 PPPY hike.

Also, please note that study only assessed “direct” costs. To accurately evaluate the full cost, a company needs to consider both direct and “indirect” expenses. Quoting from that JOEM study, “Obesity is also associated with substantial indirect costs, such as those related to disability, workers’ compensation, absenteeism (absence from work, such as sick leave), and presenteeism (reduction in productivity while at work)”. 

Relating to this aspect of costs, here a more findings from the Northeast Business Group’s study referred to previously:

  • Overweight employees cost their employers $73.1 billion a year and file twice the number of workers’ compensation claims. 
  • Obese men take six more sick days a year than non-obese men. Obese women take 9.4 more days a year than non-obese women. The resulting obesity-related absenteeism costs employers $6.4 billion/year.
  • Health care spending due to obesity is as high as $210 billion (in 2008 dollars), which (was) approximately 21% of total health care spending. If indirect costs are included, spending costs due to obesity are as high as $450 billion.

Using an online inflation calculator (www.usinflationcalculator.com), today’s prices are 1.21 times higher than average prices since 2008, according to the Bureau of Labor Statistics consumer price index. (4). Using that fact, $450 billion in 2008 is equivalent to $544.5 billion today.

The key point is that the “indirect” costs of obesity are significant and must be considered as they result in total cost that is more than double the direct costs for employers.

Now, let’s use some of the numbers above to make this all make sense for employers and organizations who are providing health care coverage for a large group. While there are fancy (and costly) “cost calculator” programs out there, let’s consider some very simple and conservative numbers.

  • According to the Centers for Disease Control and Prevention (CDC), in 2017–2018, the prevalence of obesity in adults was 42.4% with no significant differences between men and women among all adults or by age group. (5).
  • Consider a company or organization with 1,000 employees. Assuming this group is made up of an average cross section of individuals (in regard to BM, 420 of those would be considered clinically obese. Again, some would be Class ll or Class lll obesity (and even more costly), but for simplicity we are only considering Class l here.
  • In line with the study cited above, those 420 individuals would be costing an organization an average of $2,650 PPPY more per year which would mean an additional $1,113,000 of costs per year.
  • While we realize all obese employees will not participate, if just half those individuals (210) participated in a proven, science-based clinically supervised program and reduced their medical costs back to average, that would result in an annual savings of $556,500 of “direct” costs.
  • Adding in the fact that “indirect” costs more than double this direct amount, it becomes clear that a group of that size can SAVE AN ADDITIONAL MILLION DOLLARS PER YEAR through an effective solution for the obesity epidemic!
  • Not to mention preventing many of their workforce from succumbing to serious and potentially deadly conditions like heart disease, type 2 diabetes, cancer and more … and the emotional toll that would take on them, their families and their work peers. You simply cannot put a price tag on that!

Interested in learning more about our science-based weight loss program that would equip and empower you to approach employers in your area with a cost-saving solution to the Obesity Epidemic?

To learn more about the Activate Metabolics Program just CLICK OR CALL!

Phone: 440-253-9422

Sources:

  1. Cheatsheet.com; May 27, 2015; “How Obesity Causes Big Problems for the Economy” by Katey Troutman. https://www.cheatsheet.com/life/how-obesity-creates-enormous-problems-for-the-global-economy.html/
  2. Peoplekeep.com; Nov 6, 2013; “Workplaces Taking on The Cost of Obesity with Weight Control Programs” by Christina Merhar. https://www.peoplekeep.com/blog/bid/323708/workplaces-taking-on-the-cost-of-obesity-with-weight-control-programs#:~:text=The%20Impact%20of%20Obesity%20on%20Employers&text=Overweight%20employees%20cost%20their%20employers,%247%2C503%20for%20non%2Dobese%20employees.
  3. Journal of Occupational and Environmental Medicine; February 2020; “Direct, Absenteeism, and Disability Cost Burden of Obesity Among Privately Insured Employees.” https://journals.lww.com/joem/Fulltext/2020/02000/Direct,_Absenteeism,_and_Disability_Cost_Burden_of.2.aspx?PRID=JOEM_PR_020620
  4. https://www.usinflationcalculator.com/
  5. CDC.gov; “Prevalence of Obesity and Severe Obesity Among Adults: United States, 2017–2018”; NCHS Data Brief No. 360, February 2020; Craig M. Hales, M.D., Margaret D. Carroll, M.S.P.H., Cheryl D. Fryar, M.S.P.H., and Cynthia L. Ogden, Ph.D. https://www.cdc.gov/nchs/products/databriefs/db360.htm
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