Whatever shape health care reform takes over the coming years, "we want our health care plan costs to slow down, and we want to have healthier, more productive employees," said Nancy L. Newell, SPHR, speaking at the Society for Human Resource Management's 2010 Employment Law & Legislative Conference in Washington, D.C., on March 17.
Newell, a principal with Nth Degree Consulting in Albuquerque, N.M., cited Kaiser Family Foundation data showing that health insurance premiums have increased 131 percent since 1999. While some argue that health care reform could lower premium growth and others predict the opposite, "we can agree that the present cost trend is not sustainable," Newell said. Leaving aside plan design issues such as traditional vs. consumer-directed health plans, Newell pointed to three top health care cost drivers that employers can address regardless of plan type: changing behaviors to reduce chronic diseases, controlling prescription medication costs and reining in administrative expenses.
Avoiding Chronic Diseases
Over 75 percent of U.S. health expenditures are for chronic diseases or serious illnesses—such as diabetes, heart conditions and lung cancer—that can often be linked to unhealthy behaviors, Newell said. Effective wellness programs that provide appropriate incentives for employees to alter their behavior (no smoking, better diet, more exercise and stress reduction, in particular) can significantly limit these costs, "but many programs aren't effective, aren't integrated into the corporate culture and don't engage employees," she remarked.
Newell recommended rewarding the "right" behaviors by linking discounted co-pays, premiums and deductibles to measurable good health habits and achievement of wellness goals, as measured by health risk assessments. "Effective wellness programs are results-oriented," she said. Among other suggestions, employers should provide:
• Effective communications and reminders, individually and companywide.
• Personalized support such as health care case managers and/or a nurse helpline.
• Access to online technology employees can use to chart their movement toward wellness goals.
Newell noted that the results can be dramatic, citing a study by Nuvita, a wellness program provider, showing that an integrated wellness program resulted in a 26 percent reduction in health care costs, a 28 percent reduction in sick leave and a 30 percent reduction in workers' comp claims.
"Leadership has to model good health behaviors," Newell told attendees. "If we don't help our leaders to get onboard, we're looking at unsustainable cost increases."
Controlling Rx Drug Costs
"Does a $30 flat co-pay make sense for a drug costing $40 (which, if a generic, might be available at Wal-Mart for just $4) as well as for a specialty, genetically designed drug costing $3,000?," Newell asked. She noted that more plans are shifting from co-pays to percentage-based co-insurance for many prescription drugs.
But there is a contravening trend related to health promotion as discussed above: lowering or eliminating cost-sharing for drugs targeting symptoms that can lead to chronic disease, such as high cholesterol and high blood pressure. "This will raise health plan costs in the first year," Newell warned, but she said research shows that improved adherence with prescribed medication for these conditions lowers health care costs for heart disease, diabetes and other high-expense conditions in subsequent years. "The goal here is to help employees stay out of the hospital," she stressed.
Reducing Administrative Costs
"Self-funding saves on administrative costs but may be unduly risky for small plans," Newell observed. Smaller employers will have to take account of their employee demographics and claims history to make that determination.
Another suggestion: "Find a good insurance broker who can effectively negotiate rates on your behalf, and who can shop the plan to different insurers or TPAs [third-party administrators] to find better rates and discounts," Newell advised. Look for a broker who has knowledge of your local market, networks and TPAs.
"Your insurer, if fully funded, and TPA, if self-funded, should be willing to negotiate your fees and put some at risk if they don't deliver on cost savings," Newell said.
Educating Employees on Using the Plan
Newell urged employers to do a better job of educating employees on how to use their health benefits. "Teach employees what to do if their EOB [explanation of benefits statement] is wrong and offer to help them with claims processing issues. Encourage them to negotiate price with doctors and hospitals, and help them to understand that they can," she advised.
In addition, Newell said that employers need to do a better job teaching employees:
• Where to seek care (not to visit an emergency room unless it is an emergency, and to find a general practitioner to be their personal/family doctor).
• Prescription plan access (generics vs. mail order).
• Using decision-making tools and technology, if provided (and they should be).
"Get your marketing department on board and let them help you," Newell urged. "Use their in-house expertise to get the message out."
Stephen Miller is an online editor/manager for SHRM.
Employers Weigh Health Care Strategies, SHRM Online Benefits Discipline, March 2010
More U.S. Employers to Penalize Workers for Unhealthy Behaviors, SHRM Online Benefits Discipline, March 2010
Employers Change Health Benefits to Cut Costs, Alter Behavior, SHRM Online Benefits Discipline, March 2010
Renegotiate Benefit Contracts and Cut Costs, SHRM Online Benefits Discipline, July 2009
Study: Competitive Bidding Cut Employers' Health Plan Costs, SHRM Online Benefits Discipline, December 2008
SHRM Online Benefits Discipline