Enterprise Minnesota Magazine - December 2010

HELPING MANUFACTURERS GROW PROFITABLY

Ten Ways to Lower the Cost of Health Care

BY ANDREA LAHOUZE

If you are like most manufacturers, you are immensely frustrated over your inability to affect huge annual increases in your annual costs of health care. But Minnesota brokers say the cost crisis is not completely out of employers' hands. Here, they offer 10 tips to help you take care of both your employees and your bottom line.

Know your company's claims trends.

Employees with modifiable health risks -- medical conditions that result from an unhealthy lifestyle and that can be corrected with healthier habits -- account for at least one-quarter of all medical expenditures, according to the Minnesota Department of Health. Jayme Fanucci, employee benefits consultant and insurance broker at Unison Inc., which coordinates benefits packages for small and mid-sized companies in Minnesota, says knowing which health risks are within your employee population is a good first step toward forming education and wellness programs to help employees bring those risks (and, ultimately, your health costs) down to a minimum. A 2005 analysis in the American Journal of Health Promotion reports that, on average, work-site wellness programs result in a 25 percent reduction in sick leave, health plan costs, workers' compensation and disability costs for employers.

Fanucci recommends that businesspeople become familiar with their company's claims analysis and tracking data, which brokers often provide to customers at no cost. Claims data can reveal a variety of company cost drivers, which can then be used to develop a menu of costcontrolling solutions.

You may find, for example, that employees aren't getting annual wellness exams that frequently catch serious health issues at an early stage. "An employer may want to offer some sort of incentive to get employees to go in for those exams," Fanucci says. "Or, there may be a large percentage of people using emergency rooms. ... Obviously, there's a time and a place for emergency room care, but it is very overused and very expensive for both the employer and the employee."

Fanucci adds that focusing on lifestyle-related claims trends, such as a high rate of smoking or diabetes-related claims, also can be helpful when deciding how to tailor a wellness program's focus and incentives.

Help workers become thrifty health care shoppers.

In Minnesota, consumer-driven health plans currently account for about 30 percent of the state's employer-based health insurance. A consumer-driven health plan is any plan that makes it the consumer's financial prerogative to shop around for the best value in their medications and care. One example is a high-deductible health plan paired with a Health Savings Account or HSA. It features lower monthly premiums than traditional health plans, and the HSA component allows employees to deposit a portion of their pre-tax income into an account for future health expenses. The idea is that the lower premium and pre-tax HAS appeal to the employee, while the higher deductible increases awareness of and accountability for out-ofpocket health expenses, motivating the employee to search for the best value.

Shopping smart for prescriptions and care, however, requires education. The Minnesota Council of Health Plans reports that cheaper, generic alternatives are available for about 80 percent of all brand-name prescription medications. Fanucci says that employees often don't know that going to a retail health clinic for a minor treatment such as a sore throat or an ear infection typically generates a smaller claim than seeking treatment at a regular clinic or urgent care. A late-fall search on Medica's online cost comparison calculator, Main Street Medica, reveals that while Target Clinic averages $66 to treat an ear infection, Park Nicollet Health Services averages $181.

Lower overall claims also can benefit employers at renewal time. "Renewal rates from the carriers are directly related to the cost of claims. So, when it is time for the renewal to be generated and claims paid out are compared to premium paid in, the difference in where people are receiving their care can be significant," Fanucci says.

Brokers provide a variety of services to teach employees how to save on their deductibles. David Martin, president of David Martin Agency, Inc. in Edina, holds regular user groups for clients' consumer- driven health plan participants to share stories and information about pricing at different locations.

"A user group is highly effective because the more people can anticipate what's going to happen, the more calm they feel about it. It almost becomes like a coupon-clipping club [for health care]," Martin says.

Martin adds that people often do not realize the vast differences in medical procedure prices between one medical facility and another. "You look at how carefully people choose vacation property as compared with how they might choose where they get their CAT scan done or their hospitalization, and the differences there are really sort of crazy," he says.

He encourages clients to take advantage of the medical cost comparison websites available online. For example, Blue Cross Blue Shield of New Mexico's Care Comparison Tool reveals that, in fall 2010, hip replacement surgery cost $18,346 to $23,587 at United Hospital, while the same surgery cost between $28,830 and $34,070 at Woodwinds Health Campus just a few miles away.

Know the benefits of preventive care.

In health, an ounce of prevention really is worth a pound of cure. And in many health insurance plans, that prevention is free.

For Minnesota companies with fewer than 50 employees, preventive care is covered at 100 percent. Many large groups also have this coverage, including those with HSA or Health Reimbursement Account plan components. While preventive care varies by gender and age group, typically covered services include routine eye exams, annual physical exams, prenatal/postnatal care, mammograms, immunizations and well-child care.

Prevention also takes the form of work-site wellness programs, many of which can be offered free of charge using tools and incentives provided by the health insurance carrier.

"There are so many employers that don't know what all is available for them and, as a broker, I feel like that's my job," to make them aware of carrierbased work-site wellness resources, says Kelly Brenna, director of human resources and benefit services at Kraus-Anderson Insurance. "[Many carriers] help you break it out by the quarter, decide what you should roll out, how you should roll it out, et cetera. They have posters, they have gift cards that employees get back -- and the employer doesn't pay a dime."

Medica and HealthPartners, for example, both offer telephone-based smoking cessation coaching, and a $20 credit toward monthly membership dues at any fitness club for employees who meet the minimum requirement of eight or more workouts per month. Medica also provides gift cards to employees asincentives for taking a health assessment or participating in custom-tailored online fitness programs. HealthPartners' Healthy Discounts program encourages good habits by offering discounts at local retailers for such products and services as exercise or fitness classes, snowboard and ski equipment, Weight Watchers and spa services.

Blue Cross and Blue Shield of Minnesota helps employers begin a "do campaign" at work. The do campaign's mission is to encourage 30 minutes of physical activity each day to lower health risks like high blood pressure and obesity. Blue Cross and Blue Shield's online tutorial includes step-by-step directions, examples of sample work-site campaigns and printable posters that employers can post around their work sites.

Kraus-Anderson Insurance also provides a stepby- step manual to help businesses start a wellness program, and will even guide employers through the first year, helping them form a wellness committee and use the tools provided by their insurance carriers. The Minnesota Department of Health estimates that companies with work-site wellness programs can expect to gain a return on investment of between $3 and $6 for every dollar spent -- even if those dollars don't come from their companies.

Offer two plans.

If your company employs more than five people, you typically have the option to offer more than one insurance plan. Offering one traditional plan and one high-deductible plan can result in significant cost savings
for the company.

"The employees who see the benefit in the richer plan can pay the difference in premium for thatplan at their own cost, and the employer's premium stays constant. Those employees who don't need or want the richer plan can benefit from the lower premium," Fanucci says. The savings from offering multiple plans can be as high as 30 percent, because the employer's premium will remain constant with the high-deductible plan and the higher premium plan's expenses will be passed on to those employees who choose it.

A choice of plans can also result in higher benefit satisfaction among employees, which can help to retain a talented workforce. According to a 2010 survey conducted by the Society for Human Resource Management, benefits were the second-most important factor in job satisfaction, topped only by job security.

If you're thinking about introducing an HRA or an HSA, consider first giving employees a choice. Martin says this enables employees who embrace change quickly to "jump into the water first" and become advocates of the consumer-driven elements during the next enrollment period.

Factor in your broker's commission.

Brenna says commission rates are standardized by the insurance carriers for companies with 50 employees or fewer and cost about $19.50 per member per month. But large group commission rates vary greatly because they can be decided upon between the carrier, broker and employer group, ranging from a flat monthly fee to a certain percent of the premium.

Gordie Billmark, president of Billmark's Lakes Area Insurance in Alexandria, says transparency in commission not only can help to avoid high commission costs, but also can help to set the honest brokers apart. For companies with 51 or more employees, Billmark recommends only considering brokers who provide their commission schedules to you before you commit.

"Unfortunately, commissions vary greatly by broker. There are many brokers that talk the talk to sell the account, and only after it is too late do you discover the exorbitant commission, and sometimes even override commissions, both of which are direct costs to your company," Billmark says. "If your broker is not disclosing his entire broker expense when bidding on your business, it might behoove your organization to re-evaluate and find a broker you can trust."

Shopping for insurance? Time it wisely.

Your policy's renewal date is not always the best time to consider switching insurance plans. Your insurance broker should help market your business to other carriers at a time that fits with planned claims within your employee base.

"If your renewal date is January 1st and someone has a surgery, birth or other major medical expense coming up in February, potential carriers will look at those assumed claims costs. It might be a better idea to look at the other carriers for a quote when the situation is over and done with -- maybe May or June," Fanucci says. "This sort of thing is something that more employers should do than actually do.

Invest in health advocacy service.

Health advocacy services give every employee overthe- phone access to a health insurance expert. This expert can provide answers to any insurance question and also will make calls to the appropriate parties on behalf of employees to resolve any insurance issue that arises, preventing stress, saving time and potentially saving money.

"Not only does it help to have somebody who is really knowledgeable about the system to remedy the situation for them, but also it is a productivity tool for the employers that we work with, so that the employee is not spending time on the phone during work hours trying to solve a claim or billing issue," says Donn Scroggins, senior benefits consultant for insurance brokerage and risk management firm RJF Agencies. "If someone is diagnosed with something, they can guide them to the providers that they should go to based on cost and quality."

Some brokers negotiate with advocacy services companies to offer clients discounted access to advocacy services. RJF Agencies' clients, for example, can purchase advocacy services for one-third of the full price, which Scroggins says can often be made cost-neutral to the employer and non-disruptive to the employees by adding a dollar or two to the monthly employee contribution. If your broker also offers a discount on a health advocacy service, consider adding it to your employee benefits plan.

Sidestep stress with Employee Assistance Programs.

Many employers don't realize that they have an Employee Assistance Program available to them. Provided by the carrier and commonly free, EAPs offer employees guidance on any number of matters they may be facing inside or outside the office, from a conflict with a coworker or a question about insurance coverage, to locating child-care services, seeking help for depression, or investing for college or retirement.

EAP services typically include access to consultants by telephone, online tools and resources, and even face-to-face visits with health benefits counselors to help employees sort out short-term problems. Often, the consultant serves as a sounding board, listening and giving unbiased advice to help employees resolve tricky challenges. This extra assistance will not only help employees to find the most cost-effective services for them, but will also greatly reduce their stress levels when it comes to sorting out complicated health insurance matters.

Brenna also recommends dedicating a bulletin board to physical and mental wellness resources that can be updated by the broker or the company's wellness committee. She says having a single place where employees can turn for information can help to keep stress and worry at bay.

"Wellness goes so far beyond what we eat and how we move," Brenna says, so it's important to post information and resources on a variety of topics. "One of the big things is, how do we relieve stress? What if people have a death in the family, where do people go for that sort of thing? Financial crisis, where do you go? All of those things affect employees, and they affect their health."

Vary premiums based on health status.

Currently, employer-based insurance plans allow companies to vary the cost of their premiums by as much as 20 percent based on the health of each employee. In 2014, health care reform will increase the maximum spread to 30 percent, which could further motivate your employees to get healthy.

Depending on your employee base, however, premium reductions are not always the biggest motivator. Brenna recommends working with your broker to offer discounted premiums or other incentives for employees who take a health risk assessment and go to a preventive care appointment. She regularly collaborates with clients to define the most motivating incentives for their individual companies.

"Every company is a little bit different," Brenna says. "We have a client in northern Minnesota that was going to give a premium reduction and couldn't get as much participation, so they decided to give employees who did their health risk assessments and preventive appointments a gas card, because most of the people who work there drive trucks. They couldn't use it for cigarettes or anything, it had to be for gas -- and the employees were ecstatic. That was an incentive that was specific to that company that got the employees excited."

Benchmark your coverage.

In 1997, 30.5 percent of employer-based health insurance enrollees were at companies that paid 100 percent of their premiums for single coverage, and 13.9 percent were at companies that paid 100 percent of their premiums for family coverage, according to a Minnesota Department of Health analysis. In 2006, those numbers fell to 19.1 percent for single coverage, and 9.9 percent for family coverage -- a wise decision for employers, according to Martin. Though competitive health care benefits can be a huge advantage in attracting a quality workforce, Martin cautions employers against offering best-in-industry coverage.

"At one time, it used to be a desire to be a plan of choice, where you were known as the best health insurance plan out there. Now, we're trying to be competitive but not necessarily be top of class, because if you're top of class, then you might actually attract the worst risks," Martin says. In other words, people facing chronic health conditions that require regular medical treatments know the cost of their care is expensive, so they may flock to a company if they know that it offers full premium coverage.

RJF's Scroggins agrees: "Benchmarking is huge, and companies have to decide if they want to be competitive with their competition, or not so competitive, or much more competitive than their competition. ... Looking at how much the employees pay, the cost of the total plan and the plan design are great ways to get an evaluation of where a company's plan sits in comparison to others like it."

©2010, Enterprise Minnesota. All rights reserved. Reproduction encouraged after obtaining permission from Enterprise Minnesota. Additional Magazines and reprints available for purchase.

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