Revenue is down, the budget has been hacked away and now you’re edging toward reducing employee health care coverage — or even eliminating it outright. Before taking action, take into account the short-term benefits and long-term effects of your options.
A knee-jerk reaction may be to shift the benefit burden to employees. But those who have been down that road, say there are ways to take a strategic approach to generate value from a shrunken budget and employee pool. The most successful organizations over the long-term will be the ones that cut costs now, while improving the health of their employee populations.
Utilize existing resources to find out how you can save money, starting with your health insurance provider.
“If your insurance provider builds plans on wellness and prevention, you could save money by initiating a wellness program to complement your current employee health insurance plans,” says William B. Caswell, senior vice president of operations for Kaiser Permanente, Southern California Region. “You don’t want to be asking all of the time how you got sick but, ‘How do I get better and stay better?’”
Awareness of the claims filed by your employees will allow you to determine the best health plan move that will work for their needs and devise a health promotion program that will be most appealing to them. While moving to a lower-cost plan may be a necessity, it is a temporary fix and should be complemented with an emphasis on health that will have a more lasting impact.
A 2009 Watson Wyatt report shows that 67 percent of employer respondents to an Annual National Business Group on Health survey say the top challenge to maintaining affordable benefits coverage is employees’ poor health habits. Only by managing these habits can you truly get your costs under control.
Work with your provider
Work with your health insurance provider to decide what the best options to your budget will be. Negotiating rates with insurers isn’t usually effective, as insurers aren’t offering massive discounts because of the economic downturn. The option you usually have is a different plan with reduced coverage.
One option is cost shifting to save the company money while increasing the cost to employees. But altering plans and shifting costs to employees isn’t solving the problem of high premiums. A Hewitt Associates LLC executives’ survey shows that participants found cost shifting didn’t bring out desired behavior changes in employees and that an emphasis on health at the workplace is needed.
Another money-saving health care option is risk sharing.
“You can switch to a plan that only pays when there is a medical event,” Caswell says. “But this is risky because an employee could get a costly ailment or go on maternity leave. You need to couple a doable plan with a wellness program. But when you implement these programs, don’t expect a dramatic, immediate change.”
A third option is a health savings account, which takes money out of an employee’s check pretax and the employer has the option of adding money to the account, as well. If the employee switches jobs, he or she will take this health savings plan to the new position and the employer will retract its contribution from the fund.
“The economy will improve, and the way you treated your employees during this downtime will make a difference in your future business,” says Christopher DeRosa, president and general manager, CIGNA HealthCare, Southern California. “You don’t want to drop their coverage or cut them way back at the worst time.”
While health promotion — or wellness — programs aren’t usually at the top of the list when contemplating short-term health insurance savings, a program will have positive results in the short term with the best outcomes in one to three years. Companies that effectively promote health see immediate savings in premiums of 10 to 13 percent with the potential of reducing future medical costs. The investment has a $3 to $6 payback on the dollar.
Your best bet to cut costs will be a two-prong approach. Change your health plan for instant budget relief and initiate a health promotion plan.
“You will see an 8 to 10 percent trend reduction in premium and 2 to 4 percent reduction in program costs when a wellness program is initiated,” DeRosa says.
Design your health awareness plan with consideration of the number of employees that will be participating. A smaller company of 50 employees or less shouldn’t invest more than $25 per employee initially, but should focus on raising awareness by providing educational material that emphasizes preventive care, proper nutrition and health-related Web sites.
A midsized company of 300 or more employees should invest about $90 per person. Providing educational tools, focusing on the population’s main areas of concern and taking a competitive, fun approach is effective. A large company with a willingness to invest about $240 per employee can have a comprehensive program using education, financial incentives, include spouses and offer perks like gym memberships.
Your insurance provider may have free online health risk assessment surveys. By surveying your employees you can determine ways to meet the company’s and employees’ financial needs. Ask questions about physical activity, stress management, tobacco use and general disease risk factors.
“People move and take action only when they feel they need to,” says Jim Elliott, vice president, mid/large sector sales, Southern California, Blue Shield of California. “Discuss the economic reason to alter health insurance plans and tell them what benefits a wellness plan can have on not only their health but their finances.”
Discussing what your insurance company provides to you at no cost or at reduced rates is a great first step. Many employers are unaware of fringe benefits included in their plans. If the insurance provider doesn’t offer what you need for free, it should be able to direct you to an organization or local hospital program that does.
After you’ve determined a health awareness focus for your employee population, you can create a plan of action.
“If you offer more incentives to lead a healthy life, your employees will do it,” Caswell says. “Why does a football coach care if his team is fat and smokes? They won’t be winning any games, that’s for sure, and it’s the same with your staff.”
You also need to make an assessment of your workplace wellness environment. Identify strengths and areas that need improvement. Enforce no smoking on the campus; provide healthy choices in vending machines and the cafeteria.
“Foster an atmosphere of health, make your office a no-smoking campus,” Caswell says. “If employees have to migrate too far, they might start thinking about giving up smoking instead of taking the long walk.”
Provide health tips, programs, discounts to gyms and other information through multiple delivery sources. Some employees are more receptive to e-mails or newsletters — or they just need to hear the same message multiple times to get motivated into action.
“If you have 60 to 80 percent participation in a wellness program, you will see serious changes not only in employees’ day-to-day health but in health care costs,” Elliott says. “It will be worth all of your effort, and you’ll wonder why you didn’t start a wellness program sooner.”