About Us  |  About Cheetah®  |  Contact Us

Experts discuss how to tailor health care benefits to your employees

In today’s challenging fiscal environment, firms that sponsor health care benefits are looking for benefit solutions to help them do more with less. Such solutions might involve closer scrutiny of health plan data or the creation of new partnerships with coalitions, brokers, plan managers, and employees. Large and small employers alike use strategies like these. The National Business Coalition on Health has developed a report suggesting ways in which your company can tackle the challenge of rising health care costs and improve employee health in the process.

The need to take action is hard to ignore. Spending on health care in the United States continues to rise. Even though the growth rate has moderated in recent years, at present rates, total spending is likely to reach more than 20 percent of the country’s gross domestic product (GDP) by 2018. Still outpacing the inflation rate, expenditures will hit $2.5 trillion in 2009. Employers and their covered employees share a very large portion of that bill; together, they pay 56 percent of the nation’s spending on health care.

Employers pay the larger share of premium dollars, but employee cost sharing has increased so sharply in the past few years that there are signs they may not be able to absorb further out-of-pocket costs. Recent studies warn that higher cost sharing may cause patients to skip doctor appointments or screenings and skip refills of prescribed drugs, undermining the benefit that comes with good treatment.

Hewitt Associates predicts that employees will pay just under a quarter of premium costs in 2010, which represents a 10 percent increase from 2009. Also in 2010, employees’ share of out-of pocket costs is expected to rise, with employees paying an additional 10 percent increase in copays, coinsurance, and deductibles. While facing this 20 percent rise in costs of health care, the average worker probably saw only a 1.8 percent salary increase in 2009 — the lowest in 33 years.

Large and small employers face common challenges. Findings based on a 2004 report by the Integrated Benefits Institute (IBI) show that employers that continue to provide health benefits to employees not only struggle with rising health care costs and premium costs, but also with added costs of lost productivity when covered employees are injured or ill.

A 2009 study bolstered IBI findings with an analysis that combined Health and Work Performance Questionnaire survey information with medical and pharmacy claims data. The study found employers that focused only on medical and pharmacy costs in creating employee health benefit strategies might misidentify the health conditions that were having the most impact on productivity and that other factors impacting their total costs might be missed entirely. For example, cancer and coronary heart disease were consistently among the top 5 conditions driving overall benefit costs, but the chronic health conditions that were most important in driving costs related to lost productivity were depression, obesity, arthritis, back/ neck pain, and anxiety. Researchers verified earlier studies indicating that health-related productivity costs significantly exceed medical and pharmacy costs — on average, by 2.3 to 1. The takeaway is that both sets of cost drivers (the high-cost chronic conditions, as well as the conditions causing the most absenteeism) need to be addressed to achieve the greatest reductions in total costs to the employer.

“Preventable health risk factors”—those that can be identified early, before they lead to full-blown disease—were identified by a Kaiser/HRET study as being major contributors to the continuing rise in overall costs of health care and, especially, to the rising cost trend for employers. However, because much of the time such risk factors remain unidentified (lack of screening) or go untreated (lack of follow-up), they fuel rising levels of health care use by patients, as those patients progress to more serious health conditions.

On the other hand, addressing health risks through workplace interventions can reduce, or at least slow, rising costs due to preventable health risks. Comprehensive worksite health promotion programs can yield a $3 to $6 return on investment for every dollar spent over a 2- to 5-year period. A review of 42 different programs found that workplace health promotion programs were able to reduce absenteeism, health care use, and disability workers’ compensation costs by more than 25 percent each.

Practical approaches to making positive changes

Information from studies like those described above reinforces what has emerged as an important understanding for beleaguered employers: that total cost of care should be their strategic focus in managing employee health benefits. This understanding has propelled the pursuit of “value-based benefit design” as well as the adoption of a growing array of employee health interventions in the workplace. Both strategic approaches seem to be establishing good track records, helping employers and employees to make every dollar count.

Not surprisingly, large employers have been pioneers in implementing a broader focus on total health benefit costs. But the core elements of such programs work just as well for small and mid-sized employers who want to make positive changes among their own employees and on their bottom line. As Dianne Kiehl, the executive director of Business Health Care Group of Southeast Wisconsin, said, “Sometimes, the smaller the company is, the more success it has in engaging employees in health care initiatives. They already understand that when they help their employer control overall budget costs, it helps the business grow and become more successful.”

What does it take to make positive changes in your company? For positive changes to occur, it takes knowledge, commitment, and practical interventions that have the power to improve both employee health and employers’ total health benefit costs.

1. Step 1: Gather the information you need to make smart decisions. Determine your company’s total spending on health care: what you pay in premiums, in medical and pharmacy claims, in disability due to illness or injury, in workers’ compensation, and in lost productivity due to illness or injury.
2. Step 2: Gather the information that tells you what your own covered members’ health issues and health risks are. Use claims data analysis, public health information profiling your region or state, or an employee Health Risk Assessment (HRA) questionnaire. An HRA has proven to be a valuable tool in making positive changes and affecting total health benefit costs. More than half of all firms with 200 or more employees reported using HRAs in 2008, and its use by smaller firms has also grown over the past 2 years.
3. Step 3: Build commitment to the process among management and nonmanagement employees. Companies that decide to become proactive about controlling health-related costs have to understand that success takes time. It also takes buy-in from the top of the organization to generate acceptance and participation from all covered employees. Think broad and think long-term.
4. Step 4: Select interventions that fit your needs and your resources. Smaller employers can recognize the same kind of benefits that larger firms have seen after committing to specific employee health improvement interventions. The process is sequential: investigation, planning, intervention rollout, and evaluation. With smaller workforces, both the monetary resources applied and the consequent return on investment should fit the size of the company. As you weigh the value of interventions that are most likely to show positive results, consider: strategies that fit your own goals; resources that fit your budget; interventions that can be implemented within your workplace; rollout that motivates employees; and ways to evaluate your success.

Determining the right tools for the job

Many simple, readily available data resources are available at low or no cost to employers that want them. Gathering specific data about your own company’s health costs and health drivers provides the knowledge base to support company decisions about strategic initiatives. Even more importantly, it provides baseline data you can use to evaluate the success of those initiatives.

Data, data, everywhere. Claims data provide total costs, for specified timeframes, for all medical and pharmacy services used by your employees and other covered members. Medical claims are coded by diagnosis, provider, and treatment, telling you what services were used most often, what illnesses or injuries were treated most often, and what providers were used most often. The data tell you what costs were attached to those particular conditions, treatments, and providers. Pharmacy claims give you similar information, but are sorted by the prescriptions filled by patients, rather than by coded condition.

Go straight to the source. The health plan and the pharmacy benefit manager (PBM) that provide and manage your company’s medical and pharmacy benefits are the most obvious sources of company-specific health care and benefit cost information. Christopher Goff, JD, MA, is CEO and general counsel for the Employers Health Coalition of Ohio. He shared the following insights on how small employers should go about obtaining such data and using them.

A self-insured, employer-plan sponsor has a right to employee-specific data held by the insurance carrier. The parameters of how the data are sorted and delivered are generally specified in a data clause in the contract. The clause can and should be negotiated with the insurer. For example, you can negotiate to direct the carrier to integrate, often without additional cost, the data streams about your employees that come from the PBM and other vendors. The timing and sorting of data are also directed in that clause. It is often difficult to convince the carrier to supply data in some different format midway through the contract’s term. But it’s worth working on getting what you need—through your coalition, attorney, consultant, or broker—before you launch health benefit interventions that will depend on patient information reports to succeed.

Fully insured employers are not likely to receive quarterly claim reports, but they may receive an annual report of health care costs and services reimbursed by their health benefit carrier (plans and other vendors) and purchased through the employer’s premium payment. The fully insured employer’s contract is the health benefit policy. Thus, fully insured employers are not in a negotiation position regarding the kind of data runs supplied by the insurer. Nevertheless, it is possible to gather such information in more detail than the annual report may provide, if it relates to specific interventions. Try some of the suggestions that follow.

Use existing programs offered by your health plan. The fully insured employer has most flexibility when shopping for annual benefits. In lieu of being able to receive data runs that support a workplace intervention, ask prospective plans what programs they can incorporate in benefits for your employees. Plans will differ on what they can provide.

Use data warehouse services. Employers who use multiple vendors to deliver health benefits and services may be good candidates for use of a data warehouse. Health data warehouses can combine all claims streams that were generated by covered members and supply those de-identified data in a way that allows the employer to analyze the data. The employer also can price the services of the warehouse to prepare the data analysis needed to assess total costs.16 Such services are widely available from commercial companies such as Ingenix, MedStat, and Health Data Management Solutions (HDMS).

Partner with coalitions. Because employers have limited resources to perform such analyses or the clout to negotiate specialized services from health care vendors, it may make sense to form or join a local coalition. For example, Christopher Goff’s Ohio coalition offers its members the option to use data warehouse services at a rate negotiated by the coalition. The coalition-wide database can aggregate and analyze health information from employer coalition members that participate in the coalition group purchasing programs. Information includes medical and pharmacy claims, biometric data, and health risk assessment information.

Similarly, the HealthCare 21 coalition in Knoxville, TN, has long offered a data cooperative to its members. Using company-specific data, members can benchmark against peers, cooperatively develop wellness intervention programs, and track outcomes. HealthCare 21 provides 2 full-time data analysts and specialized consultants when needed. Through the co-op, employer members’ “data are now in a place where they can get to it.”

Partner with brokers. Especially for small employers and for those that are fully insured, the broker is often a major resource in tailoring health benefit designs to include “value-based benefit” aspects that can address overall costs. John Kahle, senior vice president of Intercare Insurance Solutions in San Diego, CA, said insurance carriers are resistant to adopting cost-saving strategies. For example, he believes most have not made an effort even to set a value on initiatives such as disease management programs.

What’s more, Kahle said, carriers are reluctant to provide data to fully insured employers about their plan. If an employer wants to know how many diabetic employees are not compliant with their medications, for example, the insurer is unlikely to provide the data easily. “The plan will say, ‘We can’t give you this information because the group is too small, therefore it’s not credible’,” Kahle said. “Or, the plan will use some other excuse.” Kahle and his fully insured clients exclude the insurance carriers from the health risk assessment buying process, preferring to hire third-party administrators (TPAs) instead. Kahle explained, “Using the same TPA ensures consistent data year after year, even if an employer switches insurance carriers.”

Partner with regional and state health information exchanges (HIEs). Your state or metropolitan regional area may have sponsored the establishment of a central health care database with information contributed by employers, providers, and health plans. That is the case in Indiana, Maine, and California. Statewide HIEs have often evolved from regional HIEs that were established in metropolitan service areas to help hospitals and other providers share patient information.20 Recently, more HIEs have seen the advantages of including employer-based patient information in regional databases, and even statewide enterprises may be open to partnering with coalitions or medium-sized, self-insured employers.

Strategic use of proven interventions

Once an employer has set a dual goal of achieving better health for plan participants and interrupting the spiral of rising costs, the initial approach is to address those health-related costs it can affect most effectively.

Identifying specific health risk factors among employees and addressing them with effective wellness and disease management programs need not be expensive. Employers can usually manage most aspects of such programs themselves using free or low-cost, pre-packaged resources that are becoming more and more available.

Assessment tools and cost calculators. Several tools, such as cost calculators, are available online. One such tool, The Blueprint for Health, is available from the American College of Occupational and Environmental Medicine (ACOEM) ( blueprint.acoem.org) and is also offered on the Web sites of the American Diabetes Association (www.diabetes.org) and the Centers for Disease Control and Prevention (CDC) ( www.cdc.gov). The Blueprint for Health is a free, Web-based tool for making value-based decisions on health and productivity management. This tool is valuable to all employers, regardless of their expertise in data analysis and formal tracking of absence or productivity.

The tool uses data, methods, and metrics derived from a large dataset of US employers and covers several key medical conditions including diabetes, hypertension, insomnia, obesity, cholesterolemia, and several comorbidities. It estimates the full implications of cost, including medical expenses, absenteeism, and work impairment (presenteeism). Using this tool, you can generate reports to:

  • Project total cost of health care, including productivity and absenteeism.
  • Learn the impact of variables such as age, gender, geographic location, and benefit design on overall health care costs.
  • Understand the migration of employees to higher or lower cost levels over time.
  • Help initiate a health and productivity management program.

Another group of free cost calculators are on the IBI Web site ibiweb.org. These include a basic lost productivity calculator, a version that focuses costs by type of employee, and another that calculates costs related to a specific group of claimants with measured lost time ( e.g., workers’ compensation or short-term disability).

More about using HRAs: company-specific information from your employees. A GINA-compliant HRA questionnaire is a cornerstone in the design and evaluation of most employer interventions that are intended to address total health benefit costs by improving employee health over time. It is one of the most powerful tools you have in analyzing your company’s specific needs.

Even employers that do not undertake workplace health interventions directly can benefit from an HRA by using the information about their employees’ health issues to make benefit design decisions with their broker’s or coalition’s help.

The HRA form asks a series of questions that the employee answers either on a paper form or online. HRAs can be administered by health insurers (the health plan) or by a TPA. Basic health risk assessment instruments are available online for free, and employers can initiate their use directly as long as the collection of the information is through a third party so that employees’ privacy is maintained. The employer only receives the de-identified, aggregated information.

Ideally, HRAs are used to set goals and determine strategies for improving identified health outcomes and are administered each year to assess how well the strategies are working by bringing the covered population closer to meeting the goals.

What is the effect of chronic diseases among your workforce? A study using information from 119,343 employees across 21 employers found that 55 percent of employees reported two or more chronic conditions, while nearly two in 10 reported five or more. Analysts found that when the number of conditions increases from four to five, employees experience a huge jump in absence and presenteeism. When lost time for those with chronic conditions is spread over the entire workforce, it results in 19 lost workdays per year, per worker.

Using national health statistics for benchmark information. It is also possible to use the vast national health data repositories to find state and regional information about risk prevalence and incidence of disease in your own region. The National Center for Health Statistics (NCHS) houses readily useable data tables and analyzes those specific conditions that are of most importance to employers in terms of treating preventable risk and in identifying key causes of lost productivity in specific regions. The NCHS Web site ( www.cdc.gov/nchs) is a portal to other core national health information sites such as Medicare data, injury data, Social Security data, and disease risk data, primarily from the CDC. Other national agencies are also open to the public, offering their databases on treatment use, health care costs, and risk factor tracking ( e.g., Veterans Affairs, Centers for Medicare and Medicaid Services [CMS], national disease registries, etc).

Promoting program initiatives to employees

Using monetary incentives to motivate employees to take steps to improve their health or lower identified health risk factors is a common component of benefit designs that seek to change employee behaviors. Many employers use monetary incentives to encourage employees to fill out HRAs, for example.

Self-insured employers can reward employees directly with monetary incentives for using the most cost-effective or least-costly provider. An incentive might be offered for attending a health fair where cholesterol and blood pressure are measured. A coupon can be issued for using a particular drug formulary product. Among large employers or coalitions having a single health plan, network providers may be offered financial incentives for meeting cost-effective or “best price” goals.

Self-insured employers can use this technique because it is the fiduciary of its health plan. Fully insured employers cannot administratively provide monetary incentives directly to providers or to employees; however, they may work through the plans with which they contract to take advantage of programs the plan already has in place, by alerting employees, or by making such covered services more convenient for them.

Even if you cannot or don’t want to use monetary incentives for employees, encouragement to participate takes many forms, and using a range of outreach efforts has been shown to be more successful than using just one. Support and education materials can be available in multiple formats: online for download, interactive programs, in person (one-on-one coaching or interview sessions), or in groups (lunch and learns, open enrollment, health fairs). If the health plan is administering the program for you, it’s typical to offer information call-in lines as well as care management phone calls made to employees with identified conditions. Don’t overlook the pay envelope stuffer, workplace bulletin boards, and newsletter articles. Offer worksite, local hospital, or pharmacy screening opportunities. Distribute information about the importance of screening tests that are covered benefits and about managing conditions such as back pain and depression, and about the importance of healthy eating. Publicize any plan benefits that cover or offer discounts/coupons for fitness center memberships, smoking cessation programs or supplies, flu shots, and other preventive services.

Employers are taking proactive approaches because they have been shown to work, reducing total health benefit costs for the company and improving the health of your employees. It’s worth the effort.

Source: Tailoring Health Care Benefits to Your Employees: Managing employee health and health benefit costs through vendor partnerships and simple, data-driven strategies, a white paper released by the National Business Coalition on Health; www.nbch.org.