Employee Benefits In-Depth Series (Part 1): Mission 'Critical'
BY PATRICIA VOWINKEL, who has worked for national media outlets for more than 20 years
Unlike Ebenezer Scrooge who gave little thought to poor Bob Cratchit's well being, today's employers realize it's counterproductive to keep employees hunched over their desks for long hours. Companies are more likely to provide their workers with healthy snacks and encourage everyone to get up and go for a walk.
While the companies that are taking an active role in their employees' health are still at the cutting edge, there is a recognition that unhealthy employees drive up health insurance costs, and are less productive and more prone to illnesses, disability claims and workplace injuries.
Employers also see that the standard approaches haven't been working. For years, they have offered traditional medical coverage through a preferred provider organization or point of service plan, and then watched as their insurance premiums spiraled out of control while the health of their employees continued to deteriorate.
The passage of national healthcare reform last year has forced many employers to give even more effort to their employee benefits strategy, forcing them to make decisions about their group health plans and implement new mandates. Companies now have the opportunity to make sweeping changes: in some cases to reduce their healthcare benefits or even eliminate them. Others, meanwhile, have been shifting costs onto employees through higher deductibles and copayments for medical procedures and physician visits.
While these strategies may help to reduce or contain employers' costs, they do nothing to improve the health of employees, said Thomas Parry, president of the Integrated Benefits Institute, a national health and productivity research organization.
What many employers are coming to realize is that a healthy workforce is a strategic asset and healthcare benefits are not just a cost, but also an investment, Parry said. Instead of cutting benefits, some employers have decided the answer is to get more involved in healthcare.
"If a person is mission critical, they need to be healthy and productive at their job," said Dr. Ian Chuang, medical director at global insurance broker Lockton.
More companies are offering employee health assessments, specialized disease management programs, exercise classes, nursing hotlines, and health coaches. Companies are also offering incentives, such as rewards programs and discounts on health insurance to encourage employee participation.
For example, Denver-based Intrepid Potash, the largest U.S. producer of potash, has decided to play a more active role in employees' well-being with the hope of pre-empting illness, injury and medical expenses. The company has gone as far as trying to identify which workers are more prone to illness or injury by monitoring their body mass index.
Meanwhile, within management ranks, benefits managers, human resources, and chief financial officers are leading the charge as they revamp their benefits plans and move to comply with the new requirements under the U.S. Patient
Protection and Affordable Care Act (PPACA).
Benefits managers are beginning to include risk managers in this effort by having them sit in on safety meetings and collaborating with them on logistics planning and other internal communications. In addition, benefits managers are working with their brokers and legal advisers for guidance on compliance and cost issues.
Behind the changes is the stark reality of two major healthcare trends: the rising cost of health insurance and the deteriorating health of employees.
Health insurance premiums have risen rapidly. Average total health benefit costs per employee rose 6.9 percent in 2010 over the previous year. The increase is three times faster than the increase in the Consumer Price Index in 2010 and the biggest increase since 2004, according to an annual survey by consulting firm Mercer. Costs rose 8.5 percent for employers with 500 or more employees. Costs connected with changes mandated by PPACA for 2011 are expected to add another 2 to 5 percentage points to that, according to various experts.
Employers expect to hold their actual cost increase to 6.4 percent by making changes to medical plan design or changing plan vendors, the Mercer survey found.
Employee healthcare benefits are the largest indirect business expense for most employers, said Tom Lerche, national healthcare reform leader at consulting firm Aon Hewitt. Although health insurance costs have been rising for some time, the trend has been particularly painful over the past few years; the distressed economy forced many employers to take a close look at their budgets and manage expenses by offering paltry or no raises, reducing benefits or laying off workers.
"Each year it takes up more and more of their balance sheet," Chuang said of employee medical coverage. "At some point it's not sustainable."
Some employers have been shifting costs onto employees by moving to high-deductible health plans. While that has helped slow the increases, in many cases, it simply discourages employees from seeking treatment or going to a doctor, Lerche said. After ignoring ailments, these employees often end up in emergency rooms with more costly and significant health problems.
Too much cost shifting also may drive away top employees, who may seek a job with better benefits at a competitor. Many employers view healthcare benefits as critical to recruitment and retention.
Employees routinely rate healthcare benefits as the first or second most valued benefit offered by employers, said Tracy Watts, who leads Mercer's healthcare and benefits consulting segment activity for the Mid-Atlantic, Southeast and Southwest.
"We think employers will be reluctant to lose control over such an important benefit," Watts said.
As employers seek ways to keep healthcare costs under control without reducing benefits, they have been looking at the reasons for those increases.
One of the biggest is the growing demand for healthcare services. People who are overweight are usually more prone to illnesses and injuries and wind up in the doctor's office or the hospital. As waistlines have expanded, people have needed more care and that has sent the cost of healthcare soaring.
COMPANIES STEP IN
At Intrepid Potash, the largest U.S. producer of potash, medical claims costs were more than 50 percent higher in the 2009-2010 plan year for people who had a body mass index over 35, said Kendall Lindenbaum, the benefits manager at Intrepid Potash.
One of the compelling reasons for employers to play a more active role in their employees' health is that many of today's health problems are, in fact, preventable.
"About 50 percent of all healthcare spend is avoidable," said Mike Barton, chairman of Willis North America's Human Capital Practice.
Because most large employers are self-insured, they have the freedom to design benefits programs to meet the particular needs of their employees. At the same time, they are able to save money because self-insured companies are not required to comply with state mandates.
Companies have taken action by launching programs to help their employees be healthy, with assessments and screenings, nursing hotlines, on-site clinics, specialized disease programs, weight-management and smoking- cessation programs, as well as various exercise regimens.
Predictive analytics and data gathered from claims and health assessments also help companies develop programs that are right for their employees, said George Pantos, executive director of the Health Performance Management Institute, which promotes healthcare performance management.
At Intrepid Potash, for instance, data from health screenings showed that contrary to expectations the company's employees had a much bigger problem with their weight and diabetes than they did with smoking.
As a result, the company was able to adjust its focus and offer disease-management programs targeted for those needs.
Employers are also providing rewards to encourage employees to take action.
These include programs that offer employees points that can be used for purchases at major retailers or a system of discounts on health insurance for participating employees.
At London-based global insurance broker Willis Group, which has sizable operations in the United States, employees could get $250 for each "healthy event," such as an exercise class, health coaching or screening. That money goes into their health savings account, which can be used toward deductibles on their health insurance, Barton said.
Regis Corp., a Minneapolis-based owner of beauty salons worldwide, has a similar program that allows employees to earn money that goes into a health bank account for doing things like taking a health risk questionnaire, getting a biometric screening, getting their blood pressure taken, taking an exercise class, or participating in any one of 40 different wellness programs.
These health incentive efforts are making a big difference.
"Companies that have utilized these procedures have been able to reverse the trend and bend the cost curve down rather than up," Pantos said.
Intrepid Potash has seen impressive results from its efforts, which include offering employees discounts on health insurance if they take a health assessment and participate in other activities.
At a time when healthcare costs were up 40 percent over the last three years nationally, Intrepid Potash's costs increased 20 percent, said Jamie Whyte, executive vice president in charge of human resources.
The company's hospital admissions, meanwhile, have decreased 21 percent over the past two plan years and the average length of stay also has decreased. Emergency room visits were down 19 percent over the last two plan years as well.
American Century Investments, a Kansas City, Mo.-based asset management firm, has had similar results, with healthcare costs up only 3.8 percent on an annualized basis over the last 36 months, said Brent Simmons, the account executive for American Century at Lockton.
At Regis, claims costs have declined almost 35 percent since it began offering health clinics onsite for its employees, said Allison Brown, director of health and welfare benefits.
While some employees may be happy to have an employer that encourages them to eat better and get some exercise on company time, as well as provides them with improved access to medical care, others may see this as just one more step in the evolution of the "nanny state."
Like some people have railed against what they see as an overly intrusive government seeking to control what they eat and how they live their lives, treating them as children in need of a nanny, some people also may dislike the new "nanny employer."
This approach of companies getting more involved in promoting the health of their employees is what employers say allows them to keep offering health benefits and maintain a productive workforce that shows up for work and is less prone to injury.
"What needs to be done is all of us need to make different decisions about diet, exercise and healthy habits," said Barton of Willis North America. "Everybody knows the solution, the tough part is how do you get people to change their behavior.
"We're our own worst enemies," he said.
February 17, 2011
Copyright 2011© LRP Publications