Age Drives Healthcare Costs... Learn Industries with Old Employees, Age-Specific Benefits Strategies

This video, presented by Dr. Eric Brooker of AHealthcareZ, delves into the primary driver of employee healthcare costs: age. It argues that age is the single most significant predictor of healthcare expenses for both individuals and organizations, often overshadowing other factors like social determinants of health or specific disease states. Dr. Brooker presents compelling data illustrating how average annual healthcare costs dramatically increase with age, nearly doubling between the 19-44 and 45-64 age brackets, and more than doubling again for those over 65. He emphasizes that despite the complexity often associated with healthcare finance, the simplest explanation, as per Occam's Razor, is usually the correct one: older employees incur higher costs.

The presentation then explores the implications of this age-cost correlation across various industries. Dr. Brooker highlights that industries with older workforces, such as government/municipalities, manufacturing, education, and transportation, inherently face higher employee healthcare costs. Conversely, tech companies like Meta and Microsoft, with significantly younger average employee ages (28 and 33 respectively), experience fewer healthcare cost problems. He cites examples of innovative health plans originating from states or manufacturing companies with older workforces, underscoring their acute awareness and proactive approach to managing these costs. The speaker challenges the common practice of over-analyzing complex claims data, suggesting that a simple understanding of employee age can be a powerful proxy for healthcare utilization and a guide for strategic benefits decisions.

Dr. Brooker further elaborates on how organizations can leverage this understanding of age, even without discriminating, to tailor their employee benefits strategies. He provides actionable advice for benefits professionals, HR, and leadership on optimizing open enrollment education, refining vendor utilization metrics, and selecting appropriate vendor types based on the age demographic of their workforce. For instance, companies with older employees should focus on educating spouses and measuring vendor program effectiveness against an older demographic, while companies with younger employees might prioritize healthy mom/baby programs and mental health support. The video concludes by attributing the age-cost relationship to fundamental human biology, specifically the diminishing capacity for cellular repair and the eventual depletion of the body's natural redundancies in organs over time, making older individuals more susceptible to health issues and higher healthcare needs. He advocates for "management by walking around" (MBWA) as a simple yet effective way for leaders to observe their workforce's general health and age profile, thereby informing benefits strategies more effectively than relying solely on complex reports.

Key Takeaways:

• Age as the Primary Cost Driver: Employee age is the number one predictor of healthcare costs for both individuals and organizations, with costs significantly increasing as employees age, particularly after 45 and dramatically after 65.
• Data-Driven Simplification (Occam's Razor): Instead of over-complicating benefits analysis with extensive claims data reports, Dr. Brooker suggests using employee age as a simple, effective proxy for healthcare utilization, aligning with Occam's Razor principle.
• Industry-Specific Cost Profiles: Industries with older average employee ages (e.g., government, manufacturing, education, transportation) naturally face higher healthcare costs, while those with younger workforces (e.g., many tech companies) tend to have lower costs.
• Tailored Open Enrollment Education: Education efforts during open enrollment should be strategically focused on older employees (45+) and their spouses, as they are the primary users of healthcare services and benefits.
• Refined Vendor Utilization Metrics: When measuring the effectiveness of benefits vendors (e.g., diabetes or musculoskeletal programs), the denominator should be employees over 45, as younger employees are less likely to need or utilize such services.
• Age-Appropriate Vendor Selection: The types of benefits vendors a company engages should align with its employee age demographic; young workforces benefit more from healthy mom/baby and mental health programs, while older workforces require solutions addressing chronic conditions.
• Biological Basis of Costs: The increase in healthcare costs with age is rooted in human biology, specifically the natural decline in the body's cellular repair mechanisms (e.g., DNA repair, apoptosis) and the eventual reduction of organ redundancy over time.
• "Management by Walking Around" (MBWA): Leaders, HR, and benefits professionals are encouraged to practice MBWA—observing employees directly—to gain insights into their workforce's age and general health, which can be more informative than solely relying on complex data reports.
• Virtual MBWA: In a remote work environment, MBWA can be adapted by encouraging or requiring cameras to be on during virtual meetings, allowing leaders to observe the age profile of their teams and adjust strategies accordingly.
• Legal Compliance: While age is a key cost driver, employers must always adhere to the Age Discrimination in Employment Act (ADEA) of 1967, ensuring that benefits strategies are tailored based on age-related needs without engaging in discriminatory hiring, firing, or treatment.

Key Concepts:

• Occam's Razor: The principle that among competing hypotheses, the one with the fewest assumptions should be selected. In this context, the simplest explanation for high healthcare costs is employee age.
• Age Discrimination in Employment Act (ADEA) of 1967: A U.S. labor law that forbids employment discrimination against anyone at least 40 years of age.
• Management by Walking Around (MBWA): A management style popularized by Hewlett-Packard's David Packard and Tom Peters, where managers spend time out of their offices, walking around the workplace, talking to employees, and observing operations firsthand.
• Apoptosis: The process of programmed cell death, a fundamental biological process that plays a crucial role in development and maintaining tissue homeostasis. The body's ability to trigger apoptosis in damaged cells diminishes with age.
• Biological Redundancy: The concept that many biological systems and organs (e.g., kidneys, liver) are built with excess capacity, allowing them to function even if a significant portion is damaged. This redundancy diminishes over time, making older individuals more vulnerable to health issues.

Examples/Case Studies:

• Tech Companies vs. Traditional Industries: Contrasts the low healthcare costs of companies like Meta (average employee age 28) and Microsoft (average employee age 33) with the higher costs in industries like government, manufacturing, education, and transportation, which have older workforces.
• Innovative Health Plans: Cites the State of Indiana, the State of New Jersey, John Tornes (a manufacturing company), and Purdue University as examples of organizations with older workforces that implemented progressive employee health plans due to their significant healthcare cost challenges.
• Transportation CEOs: Highlights transportation CEOs, particularly in places like Arkansas, as being exceptionally astute and innovative in managing employee health and healthcare costs due to their older workforces.
• Restaurant Chain Benefits Head: Describes a benefits head for a national restaurant chain who traveled to service centers and restaurants to observe managers (who were typically in their 40s and 50s) and understand their benefits needs firsthand, rather than relying solely on reports.
• Trucking Company CEO: Mentions a trucking company CEO who, despite receiving statistics from HR, simply observed her employees' unhealthy appearance to confirm the significant health problems within her older, obese workforce, illustrating the power of direct observation.