A PRIMER ON CRAFTING A VALUE-BASED BENEFITS PROGRAM
By Kathy Durbin
Nationally, family premiums for employer-sponsored health insurance increased 119 percent between 1999 and 2008. According to a new Commonwealth Fund report and numbers from the Centers for Medicare and Medicaid (CMS), costs could increase another 94 percent to an average of $23,842 per family by 2020 if cost growth continues on its current course. The report further showed in Texas in 2008, the average family premium was $12,000 compared to the national average of $12,298. At current cost trends, Texas employers are right on target to hit the projected 2020 per family rate. Most employers I talk with do not have a business plan to grow sales and revenue to keep up with that kind of trend. What is driving those costs nationally and here in Texas and what can a company do?
Who Really Pays For Health Care?
Businesses and individual taxpayers actually pay for the majority of health care costs in the United States with the average out-of-pocket cost the patient pays at just 12 percent, while employers pick up 32.2 percent. The remaining funding comes from private and public sources or from Medicare/ Medicaid. Those other private/public sources are endowments, gifts, and taxes – and who pays for this? It’s the business owners or top officers. (Figure 1)
Everything Is Bigger In Texas–Except For Health Care Quality
Dartmouth University (http://www.dartmouthatlas.org/) has been tracking health care costs for many years and measures “Total Rates of Reimbursement for Noncapitated Medicare per Enrollee by Hospital Referral Region.” Simply stated, this report compares how much is paid in Texas, per citizen, for those enrolled in Medicare. In areas like The Valley/Border region, East Texas (from Houston to Tyler), and extreme Northwest Texas, the cost of health care matches cities and regions in the top five percent cost areas like New York City, Miami, San Francisco, Los Angeles, Chicago, Detroit, and Las Vegas. What are Texans getting in better health care and outcomes for our higher costs? Not much it seems. Across Texas we rate in the lowest 25 percent of health outcomes and health care quality for two of our biggest disease states – diabetes and cardiovascular disease.
I am not proposing that it is any one group’s fault. Rather, it is a system that has been built on what we as payers pay for: We pay for disease production rather than prevention. What patient gets the most benefits in terms of dollars paid – those who are the sickest or those who are the healthiest? Which providers get paid the most – those who treat the sickest or those who treat the healthiest? We are incenting the wrong behavior in both patients and providers in our current health care delivery system by rewarding them for getting or being sicker.
As a business owner or officer, there may seem to be little that can be done by an individual company. Not so. The largest employers have to band together to affect the type of change needed nationally, as well as in Texas. Tackling the problems in the health care system will take collaboration among all stakeholders – payers, providers, insurance companies, and Medicare/Medicaid. In Texas, programs like Bridges to Excellence, which joins together health plans, providers, patients, and payers and rewards those providers who measure and demonstrate best-practices medicine are gaining traction. State by state, this program has shown to improve health and outcomes as well as reduce costs for all stakeholders by rewarding for disease reduction and prevention.
Employees spend more time at work, or thinking about work, than most do in their personal lives. It stands to reason the workplace has the potential for a lot of influence over employees’ behavior. The ability to influence employees is significant (if done right), based on a company’s culture and internal communication style.
What You Can Control
Worksite wellness programs can be done without spending a lot of money. Take the results from a comprehensive wellness program I oversaw and implemented over more than eight years based on a “one step at a time” program. The first step was to create awareness which caused people to change their diet and activity levels for the positive. The next step was to educate and share knowledge about the clinical risks and effects of lifestyle choices, along with the need to “know your numbers.” Next, challenges were created to teach employees how to eat better and move more. Finally, the program consistently demonstrated that employees who engaged and participated in the program used over 50 percent less in health care dollars than those who did not, even though there were the same number of people who had diabetes, heart disease, or a weight problem in both groups. What made the difference? People who get involved in their health by making minor changes do not need as much health care over time and don’t have to go to the doctor or hospital as often. When employees take control of their health and their lives, there’s a much higher level of energy and productivity at work, as a result. (Not to mention increased commitment and engagement.) Even though our company had over 74 percent of employees at risk due to weight, they took control by losing between five to ten percent of their body weight which had a significant effect on their total clinical risk factors. In this case, a little went a long way and for a long time.
Launching a wellness program at work starts in the corner offices by showing employees the C-suite can walk the talk – and that means in both personal life, and at work in front of employees. A culture of wellness is not an overnight transformation and needs to be approached in small steps. Wellness works best if the people in the C-suite are willing to champion the effort and are not afraid to admit personal trials and their failures of the past. Employees will identify with the struggles, and it makes for better leaders both at work and at home.
One no cost change which can be implemented immediately is mandating healthy foods be offered at company meetings and functions – consider what the high fat or sugar offerings are really costing in the long run. Another no cost action is teaching employees how to read labels. I’ve experienced the eye opening discovery of working with employees who did not know how to read a label on a soda can or a bag of chips, let alone the many items in their grocery bag. Sadly, these co-workers had no idea how many calories or how much fat they were consuming because labels show the amount per serving; they did not understand how to determine how many servings were in a bag or a can. The information was there but they did not know how to interpret it. In less than five minutes a discussion with a concerned leader changed their understanding forever.
If It Were Easy, Everyone Would Be Doing It…So It Must Be Hard
This is a myth about wellness programs – take tobacco cessation as an example. Smoking is something that can be controlled at work by offering tobacco cessation programs and working towards a tobacco free worksite. Tobacco free includes offices, grounds, vehicles, factories, etc. Some health insurance companies do offer lower premiums to fully insured companies who have tobacco-free workplace policies, and for the self-insured, there will likely be a reduction in medical claims costs.
The overall prevalence of tobacco use in Texas is about 19.4 percent of the total population, with the rate being higher among men than women. In addition, people with lower educational levels have higher rates of smoking and are less likely to quit. Evidence-based programs, which are known to reduce smoking, should be intensified among these groups, including a comprehensive awareness and education campaign along with counseling and medications to assist the tobacco user in their attempt to quit. How to pay for this? Use the tobacco premium cost change to pay for the program. The cost change should allow more than enough in savings to cover the cost of the counseling programs, educational materials, communication, and any prescription or over-the-counter drugs.
Personal stories from leaders and peers can also be a great inspiration for people to make the decision to take the first step. Patience is the key, as the average smoker makes seven to ten attempts to quit before they are finally successful, according to the American Cancer Society. From a cost/benefit perspective, it does not take seven plus years to realize the savings. Costs will go down immediately with reduced absences and there will be improvements in lost productivity (no longer stepping out for a smoke), and reduced health care costs will follow in as few as six months. The Centers for Disease Control estimate companies spend $3,856 per smoker per year in direct medical costs and lost productivity. A 2006 study by the National Business Group on Health found nearly half of the employees surveyed reported taking between three and six smoking breaks per day. More than two-thirds of those who take smoke breaks reported breaks lasting between five and fifteen minutes – these breaks could add up to nine weeks of lost productivity per year.
Who Should Pay?
If tobacco users cost more, should they pay more for health care? Many employers think the answer is yes. According to a Hewitt Associates survey of nearly 600 large U.S. employers, 47 percent of employers said they use or plan to use financial penalties over the next five years for employees engaging in this type of unhealthy behavior: increased premiums (81 percent), increased deductible (17 percent) or increased out-of-pocket costs (17 percent).
Three behaviors drive the majority of death and health care costs according to the Oxford Health Alliance. (Figure 2)
Communicating the “why change” and how much it costs is important in the successful implementation of a tobacco cessation program. Do not underestimate an employee’s ability to understand why tobacco use costs everyone more, or why those who do use tobacco should pay their fair share. Using peer pressure both at home and at work is highly successful, as well.
What is in it for smokers? In addition to the health of employees and their families, another key selling factor for smokers to quit is the cost. The average cost in 2010 in the U.S. for a pack of cigarettes was between $4.00 and $6.00 depending on taxes. At an average cost of $5.00 per pack or $50 a carton and smoking one pack per day, a smoker would spend $150 a month or $1,800 a year. If this amount were put into a savings account without any earned interest or return, it would add up to around $36,000 over a 20 year period. If invested, the amount could be worth over $1 million – that’s a retirement plan. The odds that every employee would have their health to enjoy in retirement with their family goes up exponentially and they’re doing the things they have always wanted to do but never had the time while working.
One more thought about dealing with diabetes. With an investment of $250,000 in additional medication and supplies for their diabetic population, one company saved $3.5 million in health care claims in 18 months through reductions in emergency room visits and decreases in the frequency and length of hospital stays. That is a 14:1 dollar ROI and good business math.
Connecting The Dots
The world can be changed one person at a time by investing in health rather than disease production. Start by knowing the workforce. Research has demonstrated people with less education and income tend to have a higher prevalence of disease states like diabetes and cardiovascular/heart disease, and, as shared above, this group tends to use tobacco more. With a workforce like this, spend a lot of time focused on awareness and education that disease can be prevented by making a few changes in lifestyle and behavior. This type of communication does not have to be overbearing or obtrusive. I’ve worked in organizations where most of these types of changes were made not for the employee, but rather for their loved ones. Focusing on why employees should change for their families and their future works better than focusing on them.
Including health care and benefits vendors as well as providers in the design and delivery of a benefit plan is smart business because most already have programs in place, or can offer additional resources to create customized programs based on diversity and geography. These are important partners and should be aligned with the company’s objectives. At the same time, do not be afraid to push vendors towards innovation – besides, they can always go sell the ideas and programs to other customers.
For companies willing to take on the challenge, rewards can be reaped for years through heightened engagement and decreased health care costs.
Kathy Durbin retired as the Director of Benefits for H-E-B and Verizon/GTE with over 25 years of human resources experience. Today, Ms. Durbin continues consulting with employers in the areas of health, productivity, consumer education, value-based-benefits, change management/process improvement, and HR metrics and can be reached in San Antonio at email@example.com, 210-355-7433.
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