Virgin gives employees a stake in wellness

Virgin Healthmiles is a program that lets employees save as much as $2,500 on their insurance costs, and can flatten costs for employers.

It's called Virgin Healthmiles.

In tech terms the idea is simple.

Give people a financial incentive to control their wellness. That means monthly monitoring of things like blood sugar and cholesterol, and a tamper-proof measure to prove you are exercising.

"It's a salesforce.com tool for managing preventative wellness, with a good driver discount for healthcare," explains CEO Sean Forbes (right -- but no relation to the publisher).

By that Forbes means much of the program comes through an inexpensive Software as a Service (SaaS) program, just $27 per year per active participant.

There are also client devices, like pedometers, on which Virgin has worked to make them tamper-proof (someone showed a former CFO trying to use foot-tapping to boost his pedometer score on YouTube). These cost $25 each to replace.

It's really cheap-as-chips, but what makes it compelling is the business model employers build around it.

"They give people doing the right things 10-20% cuts in their next year premium, and layer on a corresponding increase in the portion of the population not doing the right thing. That allows them to do this on a cost neutral basis. It also allows them to create a causal link to the pricing of coverage."

Because the Virgin Healthmiles system measures compliance closely, the discounts can be adjusted based on actual participation. Companies that have offered the program have gotten as many as 40% of employees to participate.

Employees need to exercise and make the measurements move to get the biggest cut. How big a cut? As much as $2,500. Given that it now costs $12,500 to insure the average employee's family that's big money.

The health reform allows an even bigger cost shift, as much as 30%, Forbes noted.

"Health insurance is the only industry that doesn't have a causal linkage to rates. In auto you pay more when you have accidents. This is the first time we're doing this in health."

It works for employers as well. "Some companies that had been experiencing 19% annual cost increases show flat costs with Virgin," he said.

The best corporate prospects for the service are companies who have the biggest incentive to make change happen. That means companies that self-insure their health risks, that have seen substantial increases in premiums, and that are willing to make results the metric, not the process.

"The option of taking benefits away and raising the price is becoming less and less available. There's a growing population of employers who need to manage this like you manage a supply chain or a sales pipeline."

To my mind, this is real health reform. Government is not involved, except insofar as the new law increases the incentives private businesses can offer. Making measurable success the metric is also key.

"It's a three link chain – inactivity, smoking and overeating lead to high lipids and high sugars, then disease. Now the only thing you can see is the claim."

That needs to change. Forbes has a way to see the change, then reap the benefits.