While debate swirls on healthcare as a political issue, companies must deal with it as an element of being in business. Decision makers factor in the different options available and how different choices affect the company’s profitability — making cost the central focus.
This leads to the most commonly heard question, “How do we control it?” But to David Berg, M.D. — whose healthcare management company, Redirect Health, owes its roots to his experience as an employer himself — that’s the wrong question. “The question should be, ‘How do we use it [healthcare] as a tool to grow our business?’” he says.
One of a company’s greatest assets is its work force, and productivity is tied to the health of that work force. “If the employee can’t produce in an efficient and consistent manner, you have a struggling company,” observes Jason Paul, founder and president of LifeCore Group, a company that offers wellness and other medical counseling programs. “Wellness is [important to] protect the integrity of employees’ health as the No. 1 asset of the company.”
Wellness programs benefit the employer in multiple ways. Offering them benefits morale and retention, says Todd Newton, principal advisor with Reseco Insurance Advisors — who has 17 years’ experience not just designing and implementing insurance plans but designing the wellness component that goes in conjunction with the insurance plan — noting it shows employees that the employer cares. Berg points to the “exponential ripple effect” of taking care of employees because “a happy, healthy work force helps provide better service for customers.” And John Keats, M.D., market medical executive for Cigna HealthCare of Arizona, notes they result in reduced absenteeism and presenteeism (being physically at work but impaired and therefore not working at normal productivity) as well as reducing the need to spend money on sick care. It should be noted that all personal information on individual employees’ health is protected under the federal HIPAA privacy rules; the healthcare providers may share only aggregate information with the employers.
Before we discuss the types of programs, let’s look at how businesses are funding their healthcare benefits.
Fully-Funded vs Self-Funded Health Insurance
Many employers have a fully funded health insurance program with an insurance company. In this traditional type of policy, every component is managed by the insurance company, and the policy holder pays the premium regardless of the claims. But there is growing interest in self-funded or partially self-funded healthcare insurance. With this type of policy, if a company’s claims are less than the premium paid out, the company keeps the difference.
Self-funded plans originated in Midwest when companies realized they were paying far more in premiums than their insurance company was paying in claims. The term has now become a catch-all that includes any type of participating claims contract, explains Reseco’s Newton. Companies with 10,000 employees or more can do full self-insurance, but there are a lot of variations for partially self-funded health insurance. “Employers want to be able to participate in claims but limit their liability,” Newton says, explaining the appropriate contract will enable an employer to have predetermined cost that would limit liability. “I’ve created products that provide protection for smaller employers, down to 50 employees.”
Called “unbundling,” the strategy in between fully funded and self-funded insurance allows an employer to purchase health insurance from an insurer but purchase all the claims management services separately from other vendors. Companies may opt for an unbundled self-insurance policy that is managed by the employer with an insurance broker and a third-party administrator, or one that is purchased through a third-party administrator. In both, the third-party administrator handles payment of the claims, but in the first, there is a separate reinsurance carrier that insures the risk and company choice of provider network, while in the second, it is the administrator that is on the hook for the risk and the company must use the administrator’s provider network. According to Newton, partially self-funded policies are the fastest-growing segment of the health insurance marketplace for companies of 100 to 200 employees, “for at least the past five years.”
LifeCore’s Paul emphasizes the importance of a third party, who can engage, monitor, track and aggregate the employees’ health data. An aggregate assessment enables a company to make best decisions about what to offer, and data can be compared even if some employees go to the health exchange. Without the third-party participation, he notes, “if a company changes a component or an insurance entity, it would lose the wellness data.”
Providers Share in Claims Risk
Another growing trend within the healthcare industry impacting the cost of healthcare for employers and individuals is the formation of accountable care organizations (ACOs) by doctors, hospitals and other healthcare providers who collaborate to achieve improved quality of care and improved patient experience with lower cost — and are held accountable to reach given goals. In an ACO, the healthcare providers themselves share in the risk of costly claims.
Formed in 2010, Cigna Medical Group was the first ACO in Maricopa County, according to Cigna’s Keats, who notes that an ACO is not an insurance product. He describes collaborative accountable care organizations (“CACs,” in Cigna’s terminology) as “one step on the journey” from the old paradigm of fee-for-service by which doctors were paid for everything done to the patient to rewarding doctors for doing what they want to do — keeping the patient healthy.
Comparing ACOs with the now-familiar HMOs, Mark Stephan, M.D., medical director for Quality and Utilization with one of the newer ACOs here, Arizona Care Network (ACN), says the HMOs of the ’90s were also a network of providers to take care of the patient, “but their leading mantra was ‘cost first,’ at the expense of quality.” The notable difference between the two types of network is the ACO is physician-governed. “We put quality first, and expect that cost will follow if we do the right thing,” he says. In fact, he says the shared interest in quality is what underlies ACN’s successful partnering of a for-profit (Abrazo Health Care) and a not-for-profit (Dignity Health) delivery system. “It’s turning into a really beautiful relationship from a physician standpoint.”
ACN was initially formed around the Medicare Shared Savings Program but is now developing into a clinically integrated network that, Stephan says, is beginning to work on contracting directly with employers. “Most employers still have a commercial payer, so the employer is not managing the care, but needs a network of providers — physicians, specialists, urgent care, medical equipment — coordinated and integrated to deliver care.”
Higher quality care at a lower cost results from provider networks coming together and leveraging their collective resources and size. ACOs allow investment in technology, pooling resources, establishing best practices and integrating care. Notes Stephan, “Traditionally, patients get lost in the transitions of care, moving from primary care to specialists to the surgical center.” Data would not follow effectively with the patient as to what had been done before. But an ACO enables healthcare providers to make data available in a HIPAA-compliant way to the people who are part of a patient’s care team and thus reduce duplication of services and unnecessary testing as well as better involve the patient to discuss the outcome he or she is looking for and what alternatives exist to get to that outcome.
Unlike the Cigna Medical Group, which is affiliated with its own insurance carrier, ACN is an independent provider network and must work with whatever commercial carrier the patient has a policy with. “The challenge with a diverse pool of commercial payers is to get quality measures to line up, so we’re not trying to perform to different quality expectations,” Stephan says. As a network, they can negotiate quality terms to meet payment expectations — and, although Stephan shares that they don’t line up 100 percent, “they do for the most part,” he says.
“One of the big things that the Affordable Care Act did was allow this kind of physician network to form,” Stephan says, noting that previously, the Federal Trade Commission had not allowed physicians to work collectively. Now, he says, “You can work together and collectively negotiate, but it has to be based on quality and you have to report that quality.” Being able to leverage size and scale to invest in technology that allows for data sharing and better communication leads to better management of patient care — directly impacting ACOs’ goal of reducing the cost of healthcare.
Wellness Programs to Reduce Costs
“Healthier employees cost less when it comes to healthcare,” states Cigna’s Keats. Supporting what may seem intuitively obvious, several studies in recent years put the return on investment in well-designed and well-implemented wellness programs at approximately three to one. Keats notes that interest by employers in offering wellness programs has been “clearly growing over the last two years” and says, “We’re gratified to see more and more employers are realizing the benefit of these programs.”
Cigna has an entire team devoted to helping businesses develop programs to keep their employees healthy. The starting point is having the employees of the client company fill out a health-risk assessment form and undergo biometric testing for such data as body mass and blood pressure to help assess where they are with their health. A study Cigna conducted in 2012 found that, where an employer offered an employee assistance program (EAP) as part of an integrated behavioral health coverage (EAP, mental health and substance abuse, and medical coverage), 92 percent of participants for whom work productivity was a concern reported the employee assistance program had helped improve their productivity at work. Cigna’s Tobacco Cessation Program, one of its lifestyle management programs, had the success rate of 93 percent of those who completed the program remaining smoke-free for a year — with an estimated annual savings of future medical costs averaging $1,623. Through its “Your Health First” program, client company employees have access to a health coach who will address their entire range of concerns to help them reach their health goals — and nearly 90 percent credited the program with helping them take better care of their health.
For a company that is fully insured, wellness programs will help it reduce its claims for the insurance company but it will still pay its full premium; for a company that is self-funded, wellness programs will help it reduce its own claims. They are, however, a long-term strategy. “Wellness programs impact claims over time,” Newton observes. “Their benefit is making employees healthier.”
Another approach to wellness is espoused by David Berg, chairman of Redirect Health. Rather than focusing on single health goals such as smoking cessation or weight loss, Berg says, “For us the key strategy is to make healthcare believably easy and affordable, especially for the people who use it most.”
Ninety percent of the cost of healthcare is incurred by only 10 to 15 percent of the population, Berg explains, and being proactive in the care of those individuals can make a significant impact on overall healthcare cost. “We identify, predictably and early — using predictive analytics — when something might happen, and not let it happen.” This might mean simply making sure a child with asthma goes into the weekend with a filled inhaler to lessen the likelihood of an emergency room visit, or providing appropriate support for someone with diabetes to help him or her avoid potential adverse health events.
The Redirect Health model is designed to help businesses redirect costs they incur back into their business, Berg explains. As CEO of Arrowhead Health Centers, he implemented what became the Redirect Health model in 2007 and, instead of paying what had been 20 to 25 percent premium increases every year, was able to lower the healthcare costs by 10 to 20 percent every year. “Our healthcare cost has not increased in six years, even though we’ve grown and have more employees,” he says.
A form of self-insurance, the plan is designed to make sure each employee gets the healthcare he or she wants. For the high-risk individual, there is the proactive involvement previously described. For low-risk individuals, says Berg, “We can do a lot on the phone. We have their medical records, and we can do triage.” The goal is to catch problems at the pre-disease state. Although the high-risk people do get a lot of care, Berg notes it is in the less expensive procedures — “Not in the hospital, where it’s expensive.” The program can be implemented by businesses as small as 10 employees.
Blue Cross Blue Shield of Arizona also puts a focus on wellness programs for its customers. This ranges from disease management to helping those at a low to moderate risk maintain that status to providing an online wellness site with menu planning help, webinars and more. “Employer groups approach us, and we provide information on what other groups are doing and how to make it part of their benefits program,” say Myrna Collins, health promotions executive, who works with the employer groups and says she’s seen increased interest as people realize quite a bit can be done in terms of chronic issues. She helps them assess the group’s needs and what to provide in terms of appropriate intervention, capture support of senior-level executives, and set up wellness teams. Key is to plan activities that employees can participate in. “We have more than 100 employer groups engaged in wellness. Our job is to guide the process,” Collins says.
Are the Employees On Board?
In any wellness plan, the crucial factor is employee participation. “Employers should focus on how to engage employees in wellness versus it just being a health insurance benefit,” says LifeCore’s Paul. Unlike the old model in which the employer picks the programs to offer and hopes most employees fit into the programs picked, LifeCore Group develops boutique-type structures that work with a given insurance product to allow more flexibility and creates programs that allow employees to engage in health-conscious activity based on their ability and interest.
In Collins’ experience, the level of employee engagement is also tied to senior leadership support. “Some groups have incredible buy-in — those where participation is modeled by the CEO,” she says. Another form of support is allowing time to be spent on strategy plans for the company, which can provide a level of programming it wouldn’t have otherwise. Both factors play a role in the experience of CARF International, a Tucson-based company Collins works with that has about 100 employees in the United States.
CARF’s move to a larger office building in 2010, which already had shower rooms, prompted building out an onsite fitness center. Soon after moving into the new building, CARF employees organized a wellness program that includes annual health screenings. Employee response has been enthusiastic. CARF reports that 90 percent of its work force in its home office participates in onsite health screenings, and 75 percent companywide. “We wanted to focus first on helping our employees to be aware of their health and fitness levels,” says Cindy Johnson, CARF chief resource officer. “Our CEO believed so strongly in the value of health screenings that we schedule them to accommodate his busy travel schedule.
“Next, we wanted to offer opportunities for employees to become more engaged in physical activities and wellness educational programs,” Johnson says. A conference room in the building is used for employee fitness classes four days a week — including a Zumba class that an employee volunteers to teach. Onsite educational classes round out the company’s wellness program and cover topics suggested in employee surveys. CeCe Wilson, who coordinates CARF’s walking program, notes that an employee suggestion led to providing complimentary fruit on days when an outdoor walk is scheduled, to encourage participation. The walking program now boasts an 85-percent retention rate.
“The idea of wellness is different to different people,” notes Paul. How an employer defines it determines how and what the company will be doing throughout the year to address healthcare with its employees, whether it’s a short, once-a-year program or one that continuously evolves.
When he works with an employer, Paul starts by asking what level of health engagement the employer would like to see from the employees — 85 percent, 50 percent or 20 percent. He has found that most employers initially choose the 85 percent. “But then we explain what’s involved to achieve this. Generally, what they’re willing to do will only get them 20 percent.” Which is to just offer wellness information or offer to pay for a predetermined product or service.
For a program to be successful, the employer needs to create a structure, mind-set and cultural mind-shift in the company. “Wellness is part of protecting the company’s human capital.” Noting that it’s difficult to implement a program if leadership is not part of it, Paul says another key component is a financial structure. In Paul’s experience, 86 percent of employees say they are interested in wellness programs but don’t have time to participate — yet 70 percent of those people would be motivated by reduced cost or a financial reward. The crucial element — which a financial incentive encourages — is the attitude of making wellness a priority.
“If the employer can accommodate the employees onsite or with a flex schedule, it’s helpful in getting employees to engage in wellness activities,” Paul says, but notes, “True wellness is not achieved at the place of work.” For wellness that addresses an individual’s whole well-being, that person must look at the application of wellness in how he lives his life, which includes such things as working out as well as use of healthcare services.
Paul puts the focus, then, on effort rather than outcome, and works with groups to create a program that accommodates everyone’s ability, availability and interests. “We ask employees to do what they can to influence their health, and therefore control their cost and the employer’s cost,” he says. For the employee’s efforts, the employer pays for benefits — and employees who do not put out any effort pay more themselves for their benefits. “This empowers the employee to make a choice to influence his health and put forth effort. If he doesn’t make the effort, the effect would be him paying more.”
Convenience & Care: Onsite Clinics
Frances Ducar, president of Healthcare Solutions Centers, says she has seen interest in onsite healthcare increase tremendously in the 12 years she has been working in wellness and preventive care. “It engages the employee to be excited about taking responsibility for his own healthcare,” she says, pointing out that many find it hard to take time off work to visit a doctor.
Healthcare Solutions Centers offers onsite healthcare clinics for self-insured companies with at least 300 employees, providing nurse practitioners for primary care but also including specialists and lab work in its model and thus being able to streamline the number of visits over a traditional approach — saving both time and copays. Also, she notes, the onsite nurse practitioner can be an advocate for the employee, having time to work with him as a patient to both follow up and teach him how to deal with issues related to his healthcare. With wellness programs and disease management, Ducar notes, “You may not need a specialist if you get your health under control.”
The company can also work with companies as small as 40 employees, providing a visiting nurse practitioner onsite for a few hours a week — “We recommend four-hour blocks,” Ducar says — and allowing those employees to visit the clinic it maintains at its corporate office that also handles overflow and times when company clinics are closed. And HSC offers all established patients full-time access to telemedicine, through electronic records.
Reseco’s Newton also points to the more personalized interaction with the healthcare practitioner and the increase in productivity from less time off needed to visit a doctor’s office as advantages in the growing trend of onsite clinics. Additionally, he notes that companies with onsite clinics “don’t submit claims to an insurance company, because they are already paying a fixed cost for the clinic, so there is reduced claims cost.” It does require a private space, and there is an up-front cost, but he says statistics show they have success in reducing claims cost. “It probably pencils out cost-effective for companies of at least a couple hundred employees.”
Who, What, Where, When and How Much?
Access to healthcare services is an issue that onsite clinics address. UnitedHealthcare has another approach. MyEasyBook, which UnitedHealthcare piloted in Arizona last year, is a shopping service that offers information on a variety of factors, such as location, fees and hours. Focusing on health savings account (HSA) and health reimbursement arrangement (HRA) plans that have high deductibles, myEasyBook “empowers consumers so they have access to care,” says Beth Soberg, UnitedHealthcare’s president and CEO for employer and individual accounts. “Savings can pass through to the policy holder (the employer),” Soberg says, explaining that the service removes barriers by enabling employees to see a doctor at times and cost that work for them. “Increased usage for wellness and managing chronic conditions improves the claims experience for the employer.” Additionally, she notes, it encourages employees to “think like consumers, shopping providers and receiving discounts as they apply their HSA and HRA accounts.” As employees hit their deductible slower, it reduces claims — which impacts the insurance rate.
Many changes are taking place in how healthcare is consumed, how it’s delivered and how it’s paid for. But for the employer, says Berg, “Healthcare is not a negative expense that needs to be controlled but an investment to help grow the business.”