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In January 2004, Apogee Enterprises Inc. replaced its traditional health plan with a consumer-directed health plan--a health reimbursement account administered through Aetna Inc.

It was no easy task.

The learning curve was steep. "Employees were used to paying a $20 copay for health-care services, and were frustrated that they had to pay more out of pocket if they used more health-care services," she says.

It was also a big eye-opener for employees regarding the cost of prescription drugs. "Employees began to see what these drugs actually cost, and began asking for generic substitutes," says Thompson.

Management began by treading gingerly. The CEO prepared a video explaining the reason for the change. Executives also held webinars to explain the changes to workers.

Approximately 3,200 of Apogee's 4,500 employees enrolled in the plan, with 50 percent carrying over fund balances the first year. "Employees were relatively conservative in their use of health-care services," says Thompson. "We also saw a significant drop in the utilization of prescription drugs. Employees are now beginning to understand the plan better and make better use of their health-care dollars."

Most employees seem satisfied with the plan and have re-enrolled, Thompson also says. While Apogee's premiums have gone up only slightly this year, Thompson also says the company was not just looking for a cost-saving plan design.

"We wanted to find a way to engage our employees in their health-care decisions and make them more educated consumers," she says. "Our focus was on changing behavior so we could continue to offer employees health-care benefits."

Looking back, Thompson says the company could have done an even better job educating employees about the plan. By the time the plan started in January, many people forgot how it worked because open enrollment took place the previous October. "We could have done another set of meetings that may have made the initiation period a little smoother," she says.

At Apogee, the consumer-directed plan is funded by both the employer and employees, and allows employees to roll over any unused funds from year to year. Individual employees pay $750 into the HRA, which is matched by the employer, with a $2,250 out-of-pocket maximum. Once the out-of-pocket limit is reached, the employee is covered by a traditional PPO plan. In addition, the company allows employees to set aside money toward the deductible or additional medical expenses through a flexible spending account.

April 15, 2006

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