New Trend to Reduce Corporate Health Care Costs: Employers Realizing Savings Through Multi-Pronged Approach

Barbara Gniewek, Martha Priddy Patterson, Shane Heiser and
November 2, 2006 — 3,859 views  
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Employers are using a multi-pronged approach to control excessive benefits consumption and realize significant health care cost savings, according to a new study, Reducing Corporate Health Care Costs: Refocusing the Strategy, released today by the Deloitte Center for Health Solutions (the “Center”), a part of Deloitte & Touche USA LLP.

With employers spending in excess of $390 billion annually on increasingly expensive employee health insurance, many are adopting strategies to help curb costs that actively engage employees in their own care, including consumer-driven health care (CDHC) options, such as account-based consumer-directed health plans (CDHPs) and/or wellness and care management programs. The study features case studies that highlight employers’ innovative and successful approaches.

Reducing Corporate Health Care Costs: Refocusing the Strategy follows the Center’s release of the Reducing Corporate Health Care Costs 2006 Survey earlier this year.  That survey of 152 major U.S. employers found that while nearly 70 percent of the participants said they plan to implement a CDHP in the next five years, employers do not think that high-deductible plans alone will curb costs. Thirty-eight percent of respondents said their strategies for controlling health care costs include robust wellness programs and disease-management programs, and encouraging employees to become better health care consumers. This compares to only 21 percent of respondents in 2003.

“Employers have a real opportunity to start managing consumption and curbing health-care costs through consumer-directed health plans and other wellness and care-management programs,” said Tommy G. Thompson, the independent chairman of the Deloitte Center for Health Solutions and former secretary of Health and Human Services. “Employers that have implemented CDHPs expect to see their annual health care costs rise only 2.6 percent in 2006, compared to about 8 percent for employers with alternate plan designs.”

The impetus for employers to take the lead in battling rising health care costs is two-fold:

1. Managed care has not been as effective as promised and has created a system where consumers are disconnected from true health care costs and follow a “use-it-or- lose-it” philosophy that leads to over-utilization and unnecessary costs.

2. Work productivity is tied to healthier lifestyles. Employers are battling declining productivity due, in part, to employee absenteeism and to “presenteeism,” a condition in which employees perform less efficiently because of impairments or disabilities.

Conventional approaches to reducing annual health care cost increases – such as incremental cost shifting – have provided only temporary solutions. In contrast, CDHC encourages employees to change their behaviors and to become engaged health care consumers. Resulting long-term benefits include improvements in overall employee health and improved workforce productivity.

“To implement a successful CDHC program, employers must define a strategy that promotes behavior change,” said Barbara Gniewek, principal in the Human Capital Practice of Deloitte Consulting LLP, which developed the study in conjunction with the Center. “Plan design alone will not achieve measurable change. Successful CDHC programs must focus on engaging and empowering employees, instilling accountability, identifying and reducing ineffective care, rewarding efficiency and integrating care management.”

Among the companies with successful, innovative health care programs that are featured in the Reducing Corporate Health Care Costs study is Blue Ridge Paper Products, Inc. (BRPPI), one of the largest employers in Western North Carolina. BRPPI has more than 2,100 employees who work 12-hour rotating shifts. The employees are predominantly males over age 45 with one or more health and/or lifestyle issues.  Bonnie Blackley, director of Corporate Benefits, instituted new, creative ideas for corporate health care cost reduction, including on-site wellness and diabetes management programs, a benefits task force and a Population Health Management Program. BRPPI’s offerings include free education classes, free on-site monitoring, and incentives for setting and meeting health goals. As a result, BRPPI’s overall claim costs since 2003 have increased by just half the national rate. In 2004, costs actually decreased.

Barbara Gniewek, Martha Priddy Patterson, Shane Heiser and

Deloitte Services LP