Wearables companies like Fitbit (NYSE:FIT) and Apple (NASDAQ:AAPL) with its Apple Watch have long talked about the ability for their devices to play a key role in the healthcare system. Fitness wearable users should be happy to hear that more and more companies and insurers are including wearables as part of an overall health and wellness initiative to keep employees healthy -- often giving perks such as reduced health insurance costs to those that participate.
Wearables could mean lower insurance costs
Health insurance can be expensive for companies. Total health benefit costs were nearly $12,000 per employee so far in 2016, according to Mercer. Anything that shows signs of significantly reducing that cost is likely to be welcomed, such as a relatively inexpensive fitness tracker that may reduce health benefit claims.
That's the goal behind programs like Fitbit's group health initiative that partners with companies to try to get their workforce more active. The company released a report in October in which researchers studied employees for two years and found that those who took part in Fitbit's corporate wellness program had on average $1,300, nearly 25%, less in annual healthcare costs.
Insurers seem to like the sound of that, too, and many are willing to pass some of those savings on to the insured. UnitedHealthcare Group (NYSE:UNH) announced "UnitedHealthcare Motion" in March, a program that provides employees with wearable devices at no charge and makes it possible -- if they meet certain activity and fitness goals such as average daily steps -- to earn up to $1,460 in health reimbursement account (HRA) credits.
Aetna (NYSE:AET) is another health insurance provider that is not only working with the companies it services to try to get their employees a subsidized or free tracker, but has also offered to give an Apple Watch at no cost to all of its thousands of employees. Aetna's wellness reimbursement plan will offer employees credits based on activity levels, and it has also announced various new iOS apps to help streamline users' tracking and healthcare management.
Investors should be happy, too
For wearables users, the benefits are obvious in that you might save on your health insurance or get reimbursement credits for completing activity goals. Better health and cost savings are a win-win. Investors interested in this space should be happy about this trend, too. As more companies see these benefits in action, they're likely to join, which should contribute to rising wearable sales in the months and years to come. Fitbit, Apple, and others have even accessorized their devices to be more appropriate for professional work environments to make this transition easier.
There are some roadblocks to this being a slam-dunk for wearables companies. A big one is privacy: Not everyone will feel comfortable having their employer seeing so much personal information, and there's also the potential for some employees to feel left out -- particularly those with disabilities or elderly employees, both of which are protected classes under the law. The AARP recently sued the U.S. Equal Employment Opportunity Commission over similar discount programs in October for what they claimed was a bias against elderly employees.
To combat that concern, Fitbit claims that results are based on individuals increasing their own fitness level from wherever they start, not compared to an average or base model. Also, a recent case study highlights one employee with spina bifida who was able to use an upper body fitness machine to get similar activity and tracking results.
There is another large caveat to all of this. Over the last few years, healthcare has been transformed by the Affordable Care Act and other regulations, some of which encouraged more action in getting employees more involved in their own healthcare management. President-elect Trump has signaled throughout his campaign that there will be massive changes to the current healthcare system.
Still, healthcare will almost certainly continue to be a large expense for companies under the next administration, so wearables' attractiveness in this market shouldn't change. But, just like with every segment of the market in the coming government transition, investors will be wise to follow what's happening and update their investment plans accordingly.
Seth McNew owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Fitbit. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.