Trim the Fat on Health Care Costs - Employee Benefits
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Trim the Fat on Health Care Costs

By Mary Sedor

Article Date: 01-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.

Implementing a wellness program has a double-edge benefit: lower costs to you, plus healthier, more productive employees. You decide which is more valuable.

With health insurance costs on an upward climb, many employers have been searching for methods to prevent further increases. Next to payroll, health care benefits are the second largest line item on an employer’s budget, so any amount of savings goes strictly toward a healthier bottom line.

But saving money is an uphill battle.

Employer-provided health care benefit costs have increased by approximately eightfold since 1981, according to the National Compensation Survey released last March by the U.S. Bureau of Labor Statistics.
In 2008, premiums for employer-sponsored health insurance increased by 5 percent, and have more than doubled since 1999, as reported in the 2008 Employer Health Benefits Survey released last September by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET).

While there are no quick-fix solutions to cut health care costs, there are a few areas employers can change to create an immediate impact on costs, such as changing the amount of employee coverage, increasing employee contribution and changing the amount of coverage, explains Bob Walsh, managing partner of Veritas Risk Services in Oak Brook, Ill.

Employers typically run into trouble by basing health care costs on a “worst case” scenario for a small percentage of employees, he said.

“Most actuarial studies find that 50 percent of a group’s claims are utilized by 5 percent of the population. For example, take a mid-sized group of 100 lives and five people are responsible for 50 percent of that group’s claims,” said Walsh. “If we can introduce a program that can impact behavioral change it can have a big impact on claims.”

Employers across the country are taking control of their health care costs by trimming the fat – from the budget and their employees’ waistlines – through wellness plans. These plans essentially work to improve the health of employees to eradicate claims before they happen, says Walsh.

In a company-wide wellness plan, the goal is becomes prevention of major illness among the employee base. Contrary to popular belief, it is not the doctor office co-pays and prescription coverage that cost employers the most; rather, it’s the claims from a major illness, explains Walsh. For instance, the average expected employer cost for a newly diagnosed cancer patient’s treatment is $83,084, as reported in December by CFO & Controller Alert, published by Progressive Business Publications.

“What you are trying to do over time is take those five people and make it four,” said Doug Truax, managing partner of Veritas Risk Services. “You’re preventing something you didn’t know was going to happen. You start to see that return on investment over time and by the reduction of premiums. There is a clear reduction in claims cost for groups that self-insure.”

Wellness Plans Explained
For companies that are self-funded, or those employers that provide health coverage to employees and assume the direct risk for payment of their claims benefits, most third party administrators are attached to a wellness program, explains Helen Northey Clary, vice president of the employee benefits division of Alper Services, a risk management consulting firm in Chicago.

A basic wellness program includes a health risk assessment, which is often completed online. Employees input their medical circumstances and daily living habits and receive information about their dietary and genetic concerns.

“The first time I did a health risk assessment it told me that I wasn’t drinking enough water,” she said. “It tells you simple things you can change.”

The next level of a wellness plan includes telephonic coaching, so if an employee wants to work on an issue such as weight management, stress management or smoking cessation, the employee has access to a trainer by phone who will design a workout program or coach the employee through the behavioral change. Clary says this is usually an affordable option for employers – costing about $2 an employee for a group of 50.

A third level of wellness combines the telephonic coaching with a health risk assessment using a blood draw. Generally a medical team arrives on an employer’s campus with nurse phlebotomists to draw blood and gather basic health information such as height, weight, blood pressure and health history. “All of the information is combined to create a score, explains Clary.

“In the first year, very often the employer will provide discounts to employees if they participate in the blood draw,” she said. “In the second year, to maintain the discount the employee may need to maintain their score if they were in the normal range, or show improvement if their score was bad to maintain the discount. It’s a way to tie people in to responsibility and a quantifiable way to attach the expenses to the health plan.”

The key to implementing a wellness plan successfully is to roll it out in stages, says Truax at Veritas.
“You have to give your employees time to adjust behavior before you can go back and say here are the new rules,” he said.

Making it Work

Since implementing its program in 2002, Wacker Neuson Corp. in Menomonee Falls, Wis. has saved at least three lives and dropped thousands of pounds as a company.

What started as an experiment has now blossomed into a full wellness program. At the first health risk assessment, Wacker Neuson asked for volunteers to get a sense of the overall health of the company. Eighty-one people participated. Wacker Neuson has a partnership with Core Health Group, which provides staff, programming and program design for the wellness program.

“That 81-person sample opened our eyes relative to some of the problems, namely cardiovascular problems, diabetes, pre-diabetes and stress,” said Christopher Barnard, president and CEO of Wacker Neuson. “What it really told us was that it was really in our best interest to start engaging the entire organization.”

At first, Core Health Group provided a full-time registered nurse at Wacker Neuson’s campus to ensure the program was meeting all of the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The nurse became a trusted confidant of employees and helped to alleviate some of the suspicion and anxiety employees felt about the wellness program. In addition, Core Health Group continues to provide employees with coaching and a variety of challenges such as weight, nutrition and other competitive programs to keep employees motivated.

Incentives have been used throughout the program to encourage participation, including t-shirts, trinkets and lower deductibles. Slowly the company has begun to eliminate the incentives and include more activities.

“You have to walk people to it. It’s a journey not a destination,” said Barnard. “In the beginning we had a lot of skeptics – a lot of employees concerned that their health information would become the knowledge of management. But we felt it was important to implement this program to help our employees and their households take hold of their health.”

Although the results have been slow, the company has definitely seen an impact. Wacker Neuson has seen about a sevenfold increase in participation – in 2008, 525 people participated. Back in 2002, the average health risk score for employees was in the 50s out of 100, with 100 being the lowest risk, said Connie Roethel, Core Health Group. Today, the average score is in the 70s, she said. In addition, overall health expenses have decreased in the past two years.

“Just by taking steps to do a wellness program, the message to the employee has always been that their health is really very much their responsibility,” said Roethel. “We provide the resources and are very supportive, but their health is their responsibility.”

Over the past six years, Wacker Neuson has grown the program by adding a new challenge each year. Starting this month, Wacker Neuson’s campus is now non-smoking.

Tying it to Responsibility
Their goal is that by 2011, employees at Wacker Neuson will be required to participate in the wellness program or they will not be able to opt into the insurance program. The company will also start holding employees accountable and penalizing them based on certain metrics, such as weight and blood chemistry. Provisions in HIPAA allow employers to incentivize employees – in some cases with negative re-enforcement.

“We invest a lot in our employees. We want to keep our employees healthy and motivated. To have good business you have a have a healthy employee workforce, which ultimately translates into productivity and profitability,” said Barnard.

As a result of the program, Barnard says he is 47 pounds lighter since its inception and has kept his shed pounds off for the last six years.

“Chris, as the CEO of the company, has been a figurehead of how important it is for the support to come from the top,” said Roethel at Core Health Group.

The key to making it work, says Barnard, is to get advice.
“You do need expert people who can point you in the right direction,” he said. “You need direction, vision and assistance. It’s a journey that starts with where you are, and every year adds something new. It has to be looked at long term.”

Getting advice is precisely where Chris MacAllister, president and CEO of MacAllister Machinery in Indianapolis, Ind., started his company’s program.

“We came to the conclusion that the increases we were seeing in health care costs were unbearable, and we felt like we had to do something about them. So, we fired our insurance broker,” he said. “We hired a different guy we felt was more proactive and he designed a totally different program that we thought would help us not only contain but reduce health care costs.”

That was about five years ago, and so far, so good, says MacAllister.

The company’s wellness program includes a health screen of all plan participants based on five risk factors: blood pressure, body mass index (BMI), cholesterol, tobacco usage and flexibility. Employees and spouses with zero risk factors can earn $150 in cash on the spot twice a year.

“The number of risk factors a person has influences the cost for insurance,” said MacAllister. “The (financial) difference between a very healthy person maximizing their benefits and an unhealthy person who doesn’t is about 33 percent – it’s a big incentive.”

In 2003, when MacAllister initiated the program, the average number of risk factors per employee was 3.4. Today, it’s down to 1 risk factor per employee.

MacAllister Machinery also provides telephonic coaching, as well as a full-time health care specialist on staff to assist employees in need of coaching.

“The reason we picked this approach is because many lifestyle choices are easy to make, but change is not always easy,” he said. “Most people know they have a problem but don’t know how to change their lifestyle to fix it.”

Although initially their costs continued to increase, MacAllister says they reached a point where the claims cost per employee suddenly dropped. He says that it typically takes four to six years to begin to see improvement.

“The fact that we’ve seen some reduction in claims cost and because we’ve reduced the average risk factors per person, we feel we’re on the right track,” he said.

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