Health issues affecting America – hypertension, high cholesterol, chronic back pain and diabetes – certainly impact U.S. corporations and their work forces, including AEP’s. Rising medical costs associated with potential health care reform, lost productivity, increased safety risk and the human toll of poor health are causing us to seek new and better ways to support employee health and wellness.

Nationally, companies have seen workers’ compensation costs decline an average of 4 percent since 2001, but AEP has experienced a 6.4 percent reduction during that same period. Although AEP experienced a 2.6 percent increase in 2011, that was near the low end of the national average increase in workers’ compensation costs that year. We believe our focus on safety and health contributes to this.

AEP is self-insured and covers approximately 80 percent of medical plan costs. Our net cost of providing this benefit for active employees in 2011 was approximately $168 million. E mployees paid an average of $2,800 for health care premiums in 2011 .

The company’s medical expenses grew between 7 percent and 13 percent annually from 2005 through 2009, but have remained essentially flat since. This is good news and it suggests people’s health has improved overall. Another factor is the possibility that people are deferring elective medical procedures. We expect costs to increase when the economy recovers further. Another unknown is how implementation of national health care reform initiatives will affect our medical costs; although we project that it would cause additional increases.

Companies that focus on helping employees manage their health and well-being are more likely to have a healthy and productive work force. The “AEP Wellness … Energy for Life” program completed its fourth year, with participation in 2011 declining dramatically. Less than 13 percent of eligible employees completed all three steps of the program, down from 36 percent the prior year. The program consists of a health screening, health assessment questionnaire and health improvement program such as health coaching, cardiovascular activities, maternity management or wellness condition management. Employees who completed all steps were eligible for a reduction in their medical premiums and those of their covered spouses or partners if they also finished the program.

To promote worker wellness, we are implementing changes to make it easier and more attractive for employees and their families to make healthy life choices. We recently selected a new vendor, Healthways, to administer our wellness program and expect to have greater in-house oversight of our overall wellness efforts.

The new wellness program will provide more generous incentives that are based on health screening results rather than simply on participation. Health coaching will continue to be offered. Personal information will continue to be kept confidential by the vendor, but screening results in the aggregate will be provided in order to track employees’ overall health to identify trends we need to address .

In addition to the wellness program, AEP offers more than 30 work/life programs, including flexible work schedules for certain jobs, parental leave, adoption assistance and benefits for same-sex partners and their dependents. External groups and publications in 2011 once again honored AEP for its adoption policy, for supporting military veterans transitioning to civilian life, for providing a positive environment for working mothers and for promoting women into management roles.

AEP annually provides flu shots for employees and their families as part of its employee Health & Wellness program.