With medical costs eroding an ever-increasing chunk of profits, employers are looking for ways to drive down costs while still providing a level of health care that will keep their employees happy, healthy and productive. These employers may want to apply the old saying “an ounce of prevention is worth a pound of cure” to their health care spending plans.
“Research clearly shows that focusing your health care efforts toward trying to help people once they have already developed chronic conditions or become ill is far more costly than investing in wellness and prevention programs to keep people healthy,” says Sally Stephens, president of Spectrum Health Systems.
Smart Business spoke with Stephens about why employers should focus on keeping their healthy people healthy, and what steps they can take to achieve that goal.
Why is it important for employers to focus on prevention for everyone, not just employees with pre-existing health issues?
Senate Finance Committee Chairman Max Baucus (D-Mont.) says, ‘Today, we spend nearly $800 billion on health problems that are directly linked to lifestyle and poor health habits each year — about one third of our total health care spending. Reforming our system to focus on prevention will drive down costs and produce better health outcomes.’
At the same time, following health care reform, the Trust for America’s Health and the Robert Wood Johnson Foundation released a public opinion survey showing that Americans rank prevention as the most important health care reform priority and overwhelmingly support increasing funding for prevention programs to reduce disease and keep people healthy.
Also, in a recent government study, the results showed that more than half of all Americans do not receive preventive services they need, such as immunizations, screening tests for early detection of disease, and education about healthy habits and injury prevention.
How does keeping employees healthy impact a company and its health care costs?
For many companies, medical costs consume as much as half of corporate profits. To combat these costs, some employers look to methods such as cost sharing, cost shifting, managed care plans, risk rating, and cash-based rebates or incentives. Unfortunately, these methods merely shift costs to employees and do nothing to affect the root cause of high medical costs. Disease prevention and wellness stand out as the most meaningful long-term answers for keeping employees well in the first place.
The research is clear, and results have shown that trying to help people once they have developed chronic conditions or become ill is far more costly than investing in wellness and prevention programs to keep people healthy.
Kevin Volpp, physician and the director of the Center for Health Incentives at the University of Pennsylvania School of Medicine and the Wharton School in Philadelphia, says, ‘The reality is that we have a health care financing system that pays to treat people once they are sick. There’s a growing recognition that health behaviors are a major driver of premature mortality and health care costs. We need to rigorously test approaches that can better align incentives for patients with other interests of the health system, such as employers and insurers, so that resources go to keep people healthy. Wellness incentives are a piece of that and can be used in ways that provide positive feedback to patients.’
How else can focusing on prevention benefit employers?
Research shows that as health risks increase, costs increase, and as health risks decrease, costs decrease. When employers and workers join forces to manage rising health care costs, everyone wins. Employers who support their employees in managing their health also achieve higher productivity, lower absenteeism and reduced claims costs.
In addition, employers who provide comprehensive prevention programs are building a better relationship with their employees. They are not just supporting their people when they become ill; they are instead providing them with resources to stay well and improve the quality of their lives.
What steps can employers take to keep their healthy people healthy?
An investment in maintaining a population’s good health status has a much better payoff than trying to move unhealthy people to a state of health. So what can employers do? Here are several options:
- Implement strategies that appeal to low-risk or healthy employees.
- Offer incentives to employees to move to lower risk.
- Conduct health assessments to track risks over time.
- Tie wellness initiatives to the health plan.
- Build a culture that supports health and well being.
- Educate employees on age- and gender-appropriate preventive screenings and make it easy for them to participate.
What are some programs or resources employers can use to aid prevention efforts?
Provide most routine health checkups and preventive services at no cost in-network to plan members. That is a commitment shared by only 5 percent of major U.S. employers. Those services include commonly accepted preventive medical tests and screenings such as those recommended by the U.S. Preventive Services Task Force, as well as routine physical examinations and wellness checkups. In addition, implement or expand to a comprehensive wellness strategy that offers assessments and onsite screenings, as well as health education.
Because employers are, in most cases, bearing the largest portion of health care costs for their employees, it only makes sense that they partner with their people to manage costs through improved health.
Sally Stephens is president of Spectrum Health Systems. Reach her at (317) 573-7600 or firstname.lastname@example.org.
HR professionals haven’t seen a need to revise their company’s health care strategy. After all, they’ve been busy with staff reductions and taking steps to offset rising health care costs, while waiting for a government committee to clarify the murky details of health care reform.
But it’s time to stop procrastinating and get back to the drawing board, because employer health care costs are projected to rise by 7 percent in 2012 and insurance carriers are reporting an increase in employee claims for illnesses related to post-recession stress.
“It’s easy to avoid change in times of uncertainty, but at some point it only puts you further behind,” says Bruce Davis, principal and national practice leader for Health & Group Benefits at Findley Davies. “Employers should continue introducing purposeful changes to their health care plan within the context of a clearly conceived strategy.”
Smart Business spoke with Davis about the latest health care trends and how employers are using the information to make plan changes and update their current strategy.
Is cost shifting the new reality?
Surveys show that companies will continue shifting costs onto employees, who are already stressed because they’re working longer hours and haven’t received a substantial raise since the start of the recession. So this is the perfect time to revisit your basic contribution philosophy. For example, it might make sense to shift costs for dependents and part-time workers instead of reducing the health care subsidy for full-time employees. If you communicate a new pricing structure and reinforce the eligibility requirements before open enrollment begins, employees may voluntarily lower costs by removing ineligible dependents or transitioning to a less expensive plan. If your plan costs are still too high, consider conducting a dependent audit or changing the spousal requirements, because you may be able to avoid additional cost shifting.
Is wellness really the solution to rising costs?
Employees receiving short-term disability benefits may be responsible for more than 50 percent of an employer’s health claims. Furthermore, new studies indicate obese workers have greater incidence of workers compensation claims and a longer/more expensive duration of treatment.
Also, working long hours while caring for an aging relative creates so much stress that employees often use the Federal Medical Leave Act to take time off and are less productive when they finally return to work. Savvy employers are starting to understand the connection between work-related absences, family issues, depression and disability claims, so they’re taking a holistic approach to wellness by bundling health incentives with workplace safety programs. They’re also offering stress-reducing benefits like EAP and elder care resources in an attempt to control the entire spectrum of health-related costs.
Will employers continue migrating toward high deductible health plans and HSAs?
High deductible plans and HSAs are not a magic bullet for rising health care costs. In fact, data show that education and market-driven plan changes may yield similar results. One company with a zero deductible plan substantially lowered its costs by educating employees and helping them become smarter health care consumers. Generic drugs already accounted for 40 percent to 50 percent of this company’s filled prescriptions, but teaching employees to request less costly alternatives from physicians and pharmacists increased generics to 70 percent. Employees have a vested interest in maintaining their coverage, so don’t underestimate their desire or ability to help the company save money.
How are employers handling health care reform?
While some employers have been reluctant to change their current plans and forgo grandfathered status, because they would have to comply with additional requirements, other HR professionals have been concerned about the excise tax on ‘Cadillac plans,’ so they have been tweaking their plans to stay below that tax threshold. They’re initiating changes to control costs, like adjusting co-pays on prescription drugs, changing contribution levels and encouraging employees to proactively manage their health by offering incentives to complete a risk assessment.
How should employers approach this year’s open enrollment period?
Many are using this year’s open enrollment period to educate employees, scrub ineligible members from the program and introduce outcome-based incentives. Several of our clients are using inducements to increase participation in programs that help employees manage chronic conditions, as the majority of health care claims emanate from illnesses like diabetes and hypertension. The use of onsite medical clinics is also increasing, especially for employee assessments and health care screenings. These clinics have been successful because fewer families have a regular physician and employees are more inclined to proactively manage their health when they have convenient access to a doctor.
What else can employers do to manage health care costs in this era of uncertainty?
Employers are leveraging their purchasing power to lower costs by joining prescription drug collaboratives and purchasing groups. They’re also excluding certain pharmacies to improve overall ingredient cost discounts and eliminating coverage for expensive brands that have generic or over-the-counter alternatives. In addition, employers are re-considering the use of more narrow networks of hospitals and physicians to optimize discounts while preserving quality and access. Also, the competitive market for life and disability coverage has let companies request bids and apply the savings to health care. Overall, it’s not a time for rash decisions, but there’s never been a better time to institute small changes and revisit your health care strategy.
Bruce Davis is a principal and national practice leader for Health & Group Benefits at Findley Davies. Reach him at (419) 327-4133 or email@example.com.
Many employers continue to pay their health care premiums month after month, without really understanding what they’re getting and how the plan is being used.
If you’re not using claims reporting to understand how your employees are using health care and pinpointing how you can help them use it more wisely, you are leaving dollars on the table, says Mark Haegele, director of sales at HealthLink.
“Many employers that take an approach of active engagement have not had any cost increases for years,” says Haegele. “It’s not unrealistic to have flat costs for several years in a row as a result of the active management of information and reporting.”
Smart Business spoke with Haegele about how health care reporting can save employers money and help employees get more directed care at a more reasonable cost.
What is health reporting?
A true managed care approach helps employers understand their costs, and that is done through reporting.
Your broker should be identifying what your costs are for your health plan and looking at the drivers that are causing year-over-year increases. Using that information, you can apply solutions to help mitigate those costs.
Too many employers simply pay their premiums with no idea what they are getting. They don’t go to that next step and get a full understanding of their costs.
How can employers begin to take that next step?
Take, for example, wellness and biometric screening. Those are important and the employer will pay for employees to get their blood drawn, identify cholesterol numbers, but then that’s it. They don’t close the loop and make sure the member’s primary care doctor gets the information, or that those whose numbers were above normal get a checkup six months later to measure improvement.
Employers are not taking advantage of the information available to them and then asking the right questions. You have to ask: What is driving these costs? And the best way to get the answer is through reporting.
How does the reporting process work?
Cost in a health plan is driven by three components: price, utilization and intensity. Intensity is the one that everyone forgets about. Everyone knows price: You went to the hospital, it cost X dollars per unit. Utilization is the type of services and how often they were used; for example, someone went to the emergency room four times, you had so many hospital admissions per 1,000 members, etc. Intensity is the third, but not often acknowledged, component of health care. For example, did a member get an MRI when he or she could have gotten a less expensive CAT scan, or had carpal tunnel surgery when he or she could have had therapy?
To get started, talk to your broker about this funnel approach. Give him or her 12 months’ worth of claims information. Then the broker can break it down by categories — inpatient dollars, outpatient dollars, physician dollars and ancillary dollars that make that initial number of claims dollars.
Then, because everything is driven by trends, you want to look at three years’ worth of claims information. Start with year one and see how each of those categories has gone up and down. Now you can see how your overall costs increased year after year on a per-member, per-month basis, versus the total.
Next, look at what is increasing. If everything is increasing, you know you have to dig into each category. But if only outpatient costs are increasing and the other three have been level, you now have a direction to focus your energy.
Then, as you dig into that category and claims information, you can pinpoint the thing that is driving those costs and identify where there are either opportunities to get people into a lower-cost setting or avoid waste, fraud and abuse.
Then you can establish, over the next 12 months, and over three years, what you are trying to accomplish with your health plan.
If you are ever going to implement a strategy that is going to end cost trends and improve the health of your members, it all starts with reporting. As with anything, in order to create improvement, you have to understand the metrics, and you have to have a benchmark and a baseline to identify where to improve from.
Otherwise, you’re just going on without any kind of acknowledgement or realization of what you can accomplish.
What would you say to a business leader who seems overwhelmed by this approach?
Go after the low-hanging fruit. There will be certain things that you’ve identified when you look at these numbers that are clearly the worst, so start by going after whatever is the easiest and presents the biggest opportunity for you.
If you’re not doing this, if you’re not dedicating your energy and resources to understanding your benefit plan through reporting, and creating metrics and objectives to control costs; that’s part of the reason your costs are going up. If you dedicate time to this, you will find savings and opportunities that are very significant and that will afford you the ability to control trends.
Don’t worry that you can’t change the overall culture overnight. That’s where your strategy comes in, where you work with your broker or consultant to try to create some improvement.
Employers should expect from their health plans, and from their consultants, that this is being done. As a business leader, you shouldn’t have to dedicate much of your time to making this happen. You’ve hired a health plan, you’ve hired brokers, and you should expect them to bring new solutions to you. And if they’re not, you should be asking for it.
Mark Haegele is director of sales at HealthLink®. Reach him at (314) 925-6310 or firstname.lastname@example.org.