Mike and Carol agreed that Carol should investigate the potential of using a wellness program to cut Money's insurance costs. In larger companies the investigation could be performed by CPA employees on staff. Health care cost control must focus on factors that are both material and controllable. The firm's health care costs depend on how frequently each type of care is needed and the provider charges for that care. This is true whether the firm pays directly or whether its insurance rates are adjusted based on the company's experience.
Small firms can generally exert little influence on provider charges.
Three factors should be considered when determining if a health care item is material. Factors such as age, sex, and inherited traits are not controllable. However, there are many risk factors that are controllable. These include tobacco use, dietary habits, exercise, and learned behavior such as using seat belts or following safe practices in activities at home and work. The analysis to determine the focus of wellness programs for a specific company therefore requires a review of past health care costs to identify items that have proven to be costly.