Saving on Health Care by Spending More? Makes Sense to George.

My favorite Seinfeld episode was the one in which George Costanza – the unabashed Biff Loman of the group – had an epiphany that all of his bad luck was the result of his abysmal judgment and impulses. He decided to try an experiment to reverse a lifetime of consistent underachievement by resisting each and every one of his instincts and doing the exact opposite, no matter the situation. In doing so he effectively broke his losing streak and proved to himself that his innate judgment had led him to every failure he had previously experienced, culminating in his becoming unemployed, broke, and single, and living with his parents.

While most employers continue to shift more of the cost of healthcare coverage to employees through higher premiums, IBM’s leadership decided last week to follow a plan that some may say George would have embraced during his “do the opposite of my better judgment” experiment.

The plan: Save money by shifting the cost of employee health benefits. Old hat, old news, been done, you say? Au contraire. IBM is shifting the costs away from its employees, taking on 100% of the cost of covering its workers starting in 2010. The plan will cover in-network primary care with employee internists, family practitioners, pediatricians, general practitioners or primary osteopaths with no coinsurance payments or deductible for employees. This move, of course, flies in the face of the conventional wisdom that you cannot spend your way out of the red into the black. But IBM reps are confident that this is a tactic that will pay off in the long run.

IBM reps say that this is a strategic move to get employees more involved in their health and well-being, with a focus on regular preventative care. The company expects to save millions through preventative care and has invested $79 million in employee wellness programs, which, between 2004 and 2007, saved IBM $191 million in health-related costs and improved productivity.

Whether healthcare reform is passed or not, IBM’s “Costanza Plan” will take the company off the well-trodden path followed by pretty much every other employer on the planet. Will the plan pay off, and will other organizations follow? Time will tell, and you can bet everyone will be tuned in.

What do you think about IBM’s strategy of increasing spending and emphasis on preventative care and wellness to control health-related costs?

Lorrie Lykins
Lorrie is i4cp's Vice President of Research. A thought leader, speaker, and researcher on the topic of gender equity, Lorrie has decades of experience in human capital research. Lorrie’s work has been featured in the New York Times, the Wall Street Journal, and other renowned publications.