The In’s and out’s of Employee Benefits

DFN: Why do companies provides benefits? This article gives some insights into company motivations and highlights some trends.

The Power of Incentives
By Sander Domaszewicz, Missy Jaeger and Seth Serxner

Holding down healthcare costs by intensifying efforts to change employee behavior requires HR leaders to articulate what’s driving cost, what the opportunities are for improvement, what needs to change and how success will be measured. Here are some of the important elements of a successful employee-engagement approach.

While comprehensive healthcare reform in the United States won’t take effect earlier than 2013 — if at all — organizations still battling the recession must continue to make significant healthcare cost reductions in the face of uncertainty.

Past recessions gave rise to innovative, often untested, new solutions such as point-of-service plans and managed care. The ongoing economic crisis is a genuine opportunity for more innovation.

One emerging concept is to intensify efforts to change consumer behavior as a means of driving down healthcare costs. Indeed, the concept goes well beyond the educational efforts many employers and health plans have initiated, now that leading-edge employers have seen the link between behavioral change and improved outcomes for quality, cost efficiency and individual risk.

And so their strategy is to provide more aggressive incentives for behavioral change.

Encouragingly, a recent Mercer Survey on Recession and Reform noted an uptick in the percentage of employers considering a variety of ideas that would change behavior. Among the initiatives employers said they are likely to adopt for 2010:

* Eight in 10 (80 percent) will increase employee communication/education aimed at reducing cost or improving health;

* Nearly half (45 percent) will implement programs to improve treatment and medication compliance;

* Three in 10 (29 percent) will introduce contribution-based incentives; and

* Two in 10 (21 percent) will implement consumer-directed health plans.

But the success of any health strategy relies on an organization’s ability to articulate what’s driving cost, what the opportunities are for improvement, what needs to change and how success will be measured.

Therefore, programs that are intended to change behavior have to be built on a compelling case of ways behavior is leading to inappropriate use of resources, inefficient use of employer and employee contributions, avoidable costs and poor quality outcomes.

A promising engagement approach is to reward the consumer both for taking action and achieving positive results. For example, the incentive benefit would require taking a health assessment and undergoing biometric screenings. There would be several ways to achieve the target:

* Meeting age/gender-appropriate biometric levels (based on results from biometric screening, not self-reported data);

* Actively engaging in programs and activities tracked by vendors, such as disease and lifestyle management, online programs and courses, and community activities such as local fitness center memberships or 10k race events;

*Scoring "low risk" on the health assessment that uses a combination of self-reported behavior risk items and biometrics; and

* Self-reported level of risk improvement from the prior year’s assessment.

Incentive structures such as lottery systems and deposit contracts work best for organization-wide campaigns, such as weight loss or smoking cessation, when the employer wants a lot of employees to consider joining the effort.

With the lottery system, members accrue points for certain activities that can make them eligible to win large and small payoffs scheduled at regular intervals. Deposit contracts require participants to make an upfront bet. They put their money on the line and can double their money if they hit their goals — or lose their money if they miss.

One example of a deposit-contract strategy, reported in the Journal of the American Medical Association, involved participants at the Philadelphia Veteran Affairs Medical Center, who were given the opportunity to contribute between one cent and $3 for each day of the month, with the amount refundable at the end of the month if they met or exceeded specific weight-loss goals.

As an incentive to contribute, the participants would see a 1:1 match for their money and an additional fixed payment of $3 per day.

Both approaches provide participants with regular feedback on progress toward reaching their goals via text messages, e-mail or online tracking. These techniques create incentives for changing both behavior and outcomes.

Here are a few examples of the wide array of approaches that employers have implemented:

Rewarding outcomes

A large grocer based on the West Coast has spent at least five years adopting a culture that reinforces a healthy workforce. The program applies only to non-bargained employees, the majority of whom are enrolled in account-based consumer-directed health plans.

The health plan sponsors high-performing networks, which are more narrow than a traditional PPO network and are typically comprised of physicians selected on the basis of their quality and cost efficiency.

Among the program’s elements are independent health advocates available to help employees with health issues; free fitness center memberships; healthy menus provided by the cafeteria; and support programs offered for weight management, obesity, breast cancer and prostate cancer.

The incentive strategy is tied to testing and outcomes. Participants can receive a significant incentive if they complete and meet, or surpass certain biometric screening scores — cholesterol, blood pressure and body mass index — and certify that they are tobacco-free.

Rebates are given to individuals who did not pass the tests on the first round, but passed or made progress on a repeat test after 12 months.

Healthcare costs subsequently decreased by 30 percent — with 18 percent savings from plan-design changes, 8 percent from pharmacy-plan-design changes and 4 percent from "all other." The trend has remained flat since 2005.

Breaking the Inertia

A mid-size Southern healthcare-services firm was having difficulty getting its health-savvy workers engaged to improve their own health. Employees already had access to — but relatively low utilization of — a variety of programs that included health assessments, biometric screenings, lifestyle management, tobacco cessation, weight management, disease management and fitness.

To spur engagement, the company increased the two PPO plan deductibles from $200 to $500 and from $500 to $800, respectively. The amounts were doubled for family coverage. This was a sobering message for an entitled group, but the "sugar with the medicine" was that employees could "earn back" their lower deductibles by taking advantage of the health programs already offered to them.

Results were dramatic. More than 90 percent of workers got engaged and earned their way back to their earlier deductible amounts. A health-incentive account was used to fund the incentives.

In fact, the shift in participation was so dramatic that additional opportunities to earn incentives are being added for the next plan year, including the use of age/gender-appropriate preventive care and education about health and benefits issues.

Accelerating Wellness

A large supplier of propane was challenged by the lack of results with its wellness program. As a result, the organization implemented an initiative that mandated all employees get physical examinations, blood-pressure screenings and cholesterol and glucose tests; as well as required women to get annual gynecologic care, including Pap smears; and required women older than 40 to get mammograms. It also eliminated cost-sharing for generic drugs and reduced cost-sharing for brand-name medications that manage diabetes, blood pressure, asthma and cholesterol.

Workers and their covered spouses were given a year to complete the screenings, which would be covered in full, or they would lose their insurance.

As a result of the initiatives, about 90 percent of the employees met the requirements. Compliance with prescriptions for diabetes, cholesterol, blood pressure and asthma management rose significantly, and overall healthcare costs increased by only about 3 percent.

Must-Dos of Implementation

As with any major change-management process, a lot of risk is inherent in implementing new incentive approaches. While the recession has created strong impetus for change, it can also cause leaders to be fearful of the downside economic risk if the program fails to control cost.

Lessons learned about successful implementations can guide the course of action, so be sure to:

* Create a compelling, data-driven rationale for change that includes what’s driving costs, how behavior can affect those costs and how this strategy will create the desired change. Model the range of potential participation levels, the cost of incentives and the return on investment to support the business case.

* Obtain buy-in and active engagement from executives to serve as role models and explain why behavioral change is needed. Improved compliance, program participation, health status and outcomes as corporate goals are the ultimate statement of commitment.

* Identify a realistic time frame for change, based on the amount of change required, the approach selected and the financial value of the incentives. Identify the implications if changes are not made or are made more slowly.

* Ensure the plan design is consistent with messages about wanting to achieve cost-effective and appropriate outcomes.

* Ensure that your health plan, pharmacy-benefit manager and other vendors are capable of managing the design ideas you have developed. Vendors must be able to share and integrate data from the risk assessment, screening results, program-participation reports and health-plan data to determine levels of compliance. Ideally, the program should operate from a single technology platform.

* Develop a strong communication campaign based on the population’s ability and readiness to change. All participants need to clearly hear the purpose, desired results, what actions they need to take and how they will personally be affected by incentives.

* Define and commit to a measurement and evaluation method so the organization has a common understanding about how success will be measured initially and over time.

The recession is forcing tough decisions about how to slow the impact of high healthcare costs and the effects of federal healthcare reform remain to be seen. Incentives can be an effective lever for changing behavior that will ultimately result in improved personal awareness and health status, better quality of care and more efficient use of health resources.

Sander Domaszewicz is a principal in Mercer’s Total Health Management specialty practice and an expert in consumerism. Missy Jaeger is a principal in the THM specialty practice. Seth Serxner, Ph.D., MPH, is a principal in the THM specialty practice and an expert in program measurement and evaluation.

January 1, 2010
Copyright 2010© LRP Publications


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