Practices Shared for Lowering Costs, Improving Health

By Stephen Miller Apr 23, 2009

Several leading companies shared the lessons they've learned for controlling costs while improving employee health, at the 6th Annual World Health Care Congress held April 14-16 in Washington, D.C.

Safeway's Better Way

Between 2005 and 2009, supermarket giant Safeway Inc. has kept its health care cost trend "essentially flat," according to firm President and CEO Steven A. Burd. He noted that "70 percent of health care costs are driven by behavior." Moreover, just a handful of chronic conditions are responsible for 74 percent of all health care costs, "and obesity is a driving factor in all of them," Burd said, alluding to conditions such as cardiovascular disease, cancer and diabetes. Yet "insurance policies generally lack incentives to change behavior."

At Safeway, which self insures, health coverage has been designed to encourage prevention and wellness by linking health behaviors to financial incentives. Safeway employees and their spouses earn reimbursement for part of their health care premiums by passing a nonsmoking screening (using a cotton swab inside the mouth, which Burd and other executives also undergo), meeting body-mass index goals, and keeping their cholesterol under control—with medication if necessary. If they do so, "at the end of the year we will write you a check" reimbursing premium expenses tied to the estimated savings for avoidable health conditions, to the extent allowed under federal regulations.

Nonsmokers, for example, receive a check for $300. Those who fail their screenings or choose not to participate go without the rebate -- and can end up, in effect, with health care premiums that are 50 percent higher.

Nonsmokers receive a $300 premium rebate check.

Burd compared this with "two neighbors with the same cars but very different driving records. Bill has no tickets or accidents; John has a reckless driving citation and an accident. John's car insurance premium is twice as high as Bill's -- and we all accept this as fair."

Safeway also offers fitness center discounts, care management counseling, a 24-hour nurseline, and health food discounts at company cafeterias. Their prescription plan provides incentives for generic medications.

"Don't wait for government," Burd advised. "You can do what we did to lower costs and improve health outcomes."

(To learn more, see How Safeway Is Cutting Helath Care Costs, by Steven A. Burd, Wall Street Journal, June 12, 2009.)

Dow Chemical's Formula for Health

Cathy Baase, M.D., The Dow Chemical Co’s global director of health services and a board-certified family practice physician, explained that Dow provides comprehensive health education programs to its employees (as well as retirees and dependents). Policies and initiatives include consultations and screenings, health and disease risk-focused campaigns, on-site wellness centers, and an electronic personal health record. Site and community prevention programs worldwide focus on nutrition, fitness, lifestyle improvements, smoking cessation and stress reduction.

"Since the inception of its health strategy in 1999, Dow has saved a cumulative $93 million on health care costs for U.S. employees, as compared to the average performing Fortune 1000 employer," Baase explained. That's a significant cost savings, given that Dow spends nearly $300 million per year on direct health care costs in the U.S. alone.

Specifically, Baase noted that:

In 2008, the company’s health advocacy case management saved the company more than 7,000 absenteeism days.

Since 1999, Dow has also been able to reduce personal safety and health incidents by 84 percent, which equates to nearly 13,000 Dow employees and contractors avoiding injury.

About 75 percent of global Dow employees and 90 percent of U.S. employees participate in one or more Dow health services programs each year.

Black & Decker Drills Down Costs

"Far too many benefit managers make decisions and try to evaluate outcomes of their initiatives without all of the data necessary to prove whether their programs succeeded or not," said Raymond J. Brusca, vice president of benefits at The Black & Decker Corp.

A decade ago, the company examined two full years of data to determine what was driving its health care costs and identified that "Adult Type-2 diabetes, diagnosed and potentially undiagnosed, was behind the majority of our chronic costs," Brusca said.

The company's health plan provided coverage for insulin syringes and test strips, "but data showed most diabetics were not utilizing these benefits," he recounted. "We concluded that it was hard for diabetics to get these items filled, and that the multiple co-pays for each item created a significant financial barrier."

In response, Black & Decker conceived a program that would customize a "60-day kit" for each diabetic based on their own insulin and testing regimen. The kit would be sent to them cost free. A vendor would monitor refills and "if not reordered 45 days into the current 60-day kit, they would outreach to the diabetic to ensure compliance and reorder."

The company found a vendor whose sole business was providing mail insulin and supplies via mail to diabetics. "Under our health plan, the only source for these supplies would be the new vendor—we excluded coverage from all other components of the medical plan" to better ensure compliance and control costs.

Using a data warehouse, the company completed an initial two-year study and a subsequent study using four years of data. The results: "In both studies the [health care cost] trend rate for the diabetic population was lowered to match the trend rate for the nondiabetic population." The company has seen flat to low single digit cost increases over the past nine years, with only minor plan design cost shifts.

Brusca stressed that, along with plan design, communication is a key component of effecting change. "Our message is clear," he noted, conveying to each employee that "they have the power to impact their own health profile, their own finances, and the finances of Black & Decker."

Stephen Milleris an online editor/manager for SHRM.​

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