When Zero is a Good Thing
By Rebecca L. Bentz
Employee Benefit Adviser
May 1, 2011
The New Year began with a wince for many employers around the country as they saw their health insurance premium costs increase once again, some by double-digit percentages. The recession, medical cost inflation, and uncertainty over health care reform dealt a punishing blow to employer-sponsored health care programs, forcing the majority of organizations to pass some of the cost increases on to their employees. Still, despite the trying times, some employers were able to hold their rates steady.
J. J. Keller & Associates, Inc. and AZCO, Inc. are two Wisconsin-based companies that enjoyed a 0% increase in premium rates for 2011. Though the companies operate in different industries - AZCO is a contractor in heavy industrial construction, while J. J. Keller is a publishing and services company that serves a variety of markets in compliance matters - they employed remarkably similar strategies to control health insurance costs. Both organizations used a two-pronged approach to cost containment: advancing wellness initiatives, and enhancing employee communication and education. And both companies' trusted and long-term relationships with their benefits consultants were key in supporting these efforts.
One's greatest asset is one's health, and when it comes to keeping health care costs down, this is doubly true. With 60% of its workforce over the age of 40, J. J. Keller's demographics might seem contrary to its success with insurance cost control. But the majority of the J. J. Keller workforce also has five or more years of service with the company, and therefore has been exposed to the organization's long-term commitment to wellness.
"A lot of times, changing the trajectory of increasing claims is like turning the Queen Mary. It's difficult to do and doesn't happen overnight," explains Mark Zilavy, who works with J. J. Keller in his role as benefits consultant at Associated Financial Group. Zilavy says that a common thread with companies seeing success in controlling premiums is that many have had a wellness program in place for multiple years. That program is now gaining the momentum to have an effect on these companies' health plans.
J. J. Keller's approach to wellness is to make it an integral part of company culture. In addition to traditional wellness initiatives like fitness challenges and smoking cessation programs, the company provides a fitness center and walking trail for employees to use during their breaks as well as before and after work. Encouraging employees to make healthy choices doesn't stop there, though. The company has one of the longest-running Weight Watchers at Work programs in the state and offers employees the option to take a payroll deduction for the plan. J. J. Keller also subsidizes one-quarter of employees' cost for participation in the program.
Complementing the fitness opportunities and weight-loss program is the organization's decision to move its food service options in-house. The company added healthier food choices to the cafeteria and vending machines and now posts nutritional information for the lunch menu on the company intranet. The change allows employees to be more knowledgeable about what they are putting into their bodies, ideally motivating them to make healthier nutrition choices.
"When you think about what happened at Keller, it starts with a culture and philosophy that really has taken a good look at wellness," Zilavy says. Through its healthy living initiatives, the company shows that it is committed to associates' wellbeing. Perhaps the most visible proof of this is J. J. Keller's onsite wellness center.
The company's onsite InHealth Wellness Center is staffed by a nurse practitioner and is open during regular business hours, four days a week. Employees may use the center free of charge to receive primary and preventative medical care. The company's cost for wellness center services is less expensive than a regular office visit to even a PPO provider, with in-house lab costs estimated at 40% to 50% of the cost of using outside labs. Employee use of the clinic rather than outside health care providers has saved the company $150,000 in direct costs alone in its first 10 and a half months of operation.
While a trip to the doctor might normally require associates to take a half or full day away from work, employees are able to utilize the on-site center without such a time commitment. Quick appointment scheduling also allows employees to catch potentially serious health problems earlier. Doing so may mean they will not have to take time off of work because an infection or condition worsens. This saves money and, in some cases, early detection has even saved employees' lives.
On-site clinics will not work for all employers, however. The majority of J. J. Keller's employees are in one location. This concentrated employee base makes it easier for the company to direct its wellness initiatives. For organizations with workers scattered throughout several cities or even states, wellness efforts will need to be modified to fit each facility or geographic location.
Communication and education
While keeping employees healthy through wellness initiatives goes a long way in containing costs, companies must also educate employees about their health care options. When workers are better health care consumers, they make better choices.
"We've worked to develop a culture of employee responsibility to our health plan," explains Julie Bradley, HR manager at AZCO. "Implementing a consumer-driven health plan requires sharing information so that our employees become stewards of our health plan."
AZCO and the company's benefit adviser, Scott Smeaton, executive vice president of Hierl Insurance Inc., have focused on helping employees understand what they can and cannot control in the health care environment. Smeaton, a certified insurance counselor and certified risk manager, provides AZCO with a number of tools to help the company keep costs down and help employees focus on those health care aspects they can control.
AZCO offers four plan designs, so making a decision on which plan is best can be complicated for employees. To assist with this, Smeaton provides an online decision support tool specific to AZCO's plans. Employees log in and enter their personal demographic and claim information. The tool then shows employees how each plan will function in different circumstances. It projects net cost (premium per paycheck and out-of-pocket costs for a deductible), coinsurance and HRA contributions made by AZCO.
Smeaton and the company use national, regional and state-specific benchmark data to guide them in their health care plan design process. The 2010 data included 17,000 health plans nationwide. The company shares the financial results of its health plan with employees at least twice each year.
"If we're going to ask them to be stewards of the plan, they need to know how it's performing," Bradley says.
AZCO also updates employees throughout the year on utilization and wellness efforts. Smeaton creates brief Flash presentations designed to educate employees on their benefits. The presentations are customized to the company's plan and benefit strategy and delivered in a way that constantly reinforces the goal of making employees responsible for their health plan. Smeaton's firm also provides monthly newsletters that support the company's wellness efforts and discuss compliance-specific topics.
The next steps
So is a 0% health care cost increase sustainable? "Realistically, no," Smeaton says. If medical cost trends continue to increase at a rate of 9.5% to 11%, it would be very difficult to continue a 0% annual renewal over time. Many factors which play into premium cost are beyond employers' control, such as medical cost inflation, health care reform, and whether employers simply have a high claims year.
But both employers remain optimistic. "We believe that a combination of consumer-driven strategy and intelligent wellness programs, properly executed, can help contain health plan costs over time," Bradley says.
AZCO has reason to be hopeful. The company has accomplished an average 3.43% increase in health care costs since 2003. And while a 0% increase might not be realistic, 3.43% just might be, if the company continues its wellness and employee education efforts, Smeaton says.
J. J. Keller also has a positive outlook. It's likely the company's increase in premium costs will remain below the national average, thanks to their wellness efforts, including the onsite clinic, and its self-insured health plan design.
At J. J. Keller, a portion of the money saved on premiums will be invested in the onsite clinic, boosting the company's wellness efforts. But saving money on health care premium costs not only adds directly to the company's bottom line, it also improves morale - and healthier, happier employees are more loyal and productive.
"It takes a lot of hard work, but it's worth it when increases remain lower than national averages and when employees and family members thank you for playing a role in their health care," Bradley says. "I once had an employee thank us for saving his life through awareness. That's extreme, but I've also had other employees tell me they've changed their lifestyle habits because of the healthy food options and other wellness activities we provide."