Southwest Bank CEO Vernon Bryant wears a Fitbit, walks the stairs at his Fort Worth offices, and lets employees in on his progress. “It’s not unusual for him to say in a meeting, ‘I walked this many steps today,’” Carol Anderson, the bank’s senior vice president and human resources manager, says. So when the bank decided several years ago to aggressively try and contain employee healthcare costs and, by extension, health insurance premium, Bryant was all in. The payoff from various measures, ranging from raising deductibles to offering incentives like gift cards for healthy activities: annual health premium increases ranging between 5 and 7.7 percent in the last seven years, including one year with no increase.
The downside of that: “It’s a curse,” Anderson jokes, because employees expect it.
Is it possible to flatline employee health claims and insurance premium? “There’s a lot of things you can do with plan design,” says Ross Carmichael, an executive with Higginbotham, the Fort Worth benefits consulting firm that’s helped Southwest with its plan. “Where you’re seeing big savings, what you’re doing is avoiding big claims.”
Here’s a look at three Fort Worth companies and what they’ve done to put a lid on claims and contain premium.
Southwest Bank The bank, which has 300 employees and 14 locations today, began making changes to its plan after the bank’s sale in 2007.
Bryant formed a wellness committee the following year and, a fan of smoking cessation, implemented a cessation program even though the bank didn’t have many smokers. In 2008, Karen Burge joined the bank as vice president and senior HR generalist, joined the wellness committee, and began helping implement changes in the health plan. In 2009, the bank began gradually increasing its plan deductible, to the $2,500 today from $750 originally.
In 2011, the bank implemented a patient advocacy program through Compass, a firm that offers one-call research services to plan participants. An employee who needs an MRI, for example, can call or email Compass, which will research choices and costs among providers. Compass agents will also review medical bills and help with prescription medications. “That has worked well for us,” Anderson says.
Incentives are at the heart of the bank’s plan. Employees get $50 off their monthly insurance premium for being non-smokers or completing a cessation program. They receive another $50 monthly off their monthly premium for completing a screening and four of nine activities: survey from insurer United Healthcare; telephone or online coaching; using Compass; participating in a community event; participating in educational events like cooking classes that promote healthy habits; preventative care; receiving a flu shot or mammogram; physical activity such as running a 5K or working out three to four times per week for 30 minutes each time; or participating in one of the bank’s four annual health challenges.
Those include “Sugar Busters,” or ways to reduce sugar from diets; “Maintain Don’t Gain” around the holidays and Super Bowl; and a fruits and vegetables challenge. Statistics show consumers gain five pounds on average during the holidays and keep that on through the Super Bowl, Anderson says.
The employee with the highest number of points at the end of each of the challenges wins a gift card, and all employees who participated are entered into drawings for prizes. The company also holds an annual drawing for a $500 gift card open to employees who participated in all four challenges.
There are additional financial incentives. United Healthcare gives $75 gift cards to employees who come to the free on-site screenings. It gives another $25 gift card for completing the survey.
The company’s also reviewed what’s sold in vending machines at its offices, reducing items like chips and putting in nuts and trail mix.
Southwest’s claims ratio over seven years - claims payable as a percent of premium income, or what United Healthcare receives - is 76 percent on average, 93 percent the highest, and 62 percent the lowest, Anderson says.
The bank annually considers whether to go self-funded, a conversation Higginbotham likes to start at 250 employees, with a minimum 600-700 making sense.
“It hasn’t made sense yet,” Anderson said. “We look at it every year.”
David’s Supermarkets Former David’s executive Chuck McGowen still remembers the first meeting he had with two consultants from Gus Bates Insurance over his company’s health plan. “I was belligerent,” McGowen says. ”I apologized” later.
McGowen was facing a 20-30 percent premium increase, or about $200,000-$300,000. David’s had an unhealthy, older employee group with inconsistent preventative care, high drug spending, and large hospital claims, he says. The company wasn’t communicating effectively with employees on their health plan. And to make matters even worse, David’s was working with a third-party administrator it accused of stealing money from the plan.
“I’ve got the biggest problem in the world on my hands right now,” McGowen remembers confiding to a friend, who then put him into contact with Bates. Morris and managing director Justin Phipps showed up in khakis and boots for the Friday afternoon meeting at the company’s Grandview offices in 2008.
“Our employees believe there was this magical thing called insurance, which paid for everything,” McGowen says.
The company implemented numerous measures to clamp down on claims. The result: Containment of total plan costs to a maximum 10 percent over the initial base, in any given year. Employees were paying $38 per week in premium when David’s was sold last year, up from $30 seven years earlier, McGowen said. “We did this at a time when the Affordable Care Act drove the costs up,” McGowen says.
David’s, which had about 200 employees who were covered by the insurance, took between two and three years to implement solutions designed to steer employees to better decisions in drug purchases, places of care and treatment choices.
The company changed the drug co-pay to encourage use of generics, moving generic usage to 80 percent from 30-40 percent, which Morris says is normal.
Like Southwest Bank, the company also hired a one-call concierge service that shopped costs for services like MRIs.
It implemented a deductible discount for use of surgical center networks that package physicians and facilities. And to further combat large hospital claims, David’s moved its plan to cost-plus pricing, putting limits on various covered expenses. Such plans often base their permissible payments on what Medicare pays.
To communicate the changes, McGowen went on a road show to David’s 26 locations, pulling employees in, in groups of four to eight at a time.
“We were saying in order for this to work, you’re going to have to pay more,” says McGowen, who has since retired from David’s. “It made them better consumers of the product. The majority of people who had (the insurance) didn’t know what was in our policy.”
McGowen acknowledges his biggest fear was upsetting employees. That’s why many employers satisfy themselves with big increases in health premium instead of attacking the problem, Phipps says. “They’re driving the costs up so much by not making these changes that eventually the companies can’t afford to make the changes,” he says.
McGowen sold employees on getting regular physicals and establishing primary care relationships instead of using emergency rooms for every problem. “That was a big cost factor,” McGowen says. “We see that in every group,” Morris says. “People don’t get their physicals.”
After completing the changes, McGowen continued to do the road shows every year. He also sent out quarterly newsletters updating employees on progress in the health plan and engaged store managers in the effort to communicate the changes.
“We were able to build loyalty,” McGowen says.
Virtuoso Virtuoso, a Fort Worth-based leading luxury travel network that creates itineraries for travelers, was facing a “hefty renewal” for its health plan in 2010 when it went on the offensive.
“Our broker was not providing any tools,” Marie Zervantian, human resources director of the company, which has 240 employees, 220 covered by the insurance, says. “We went shopping for a new broker.”
Working with Higginbotham, its new broker, Virtuoso brought costs down by raising the plan deductible and setting aside pre-tax dollars to fund the plan, what’s known as a Health Reimbursement Arrangement allowed under federal law.
“That was a significant savings for us,” Zervantian says. The company raised it to $3,000 from $1,500, but it’s kept the employee share the same, at $1,500, using premium savings it won by raising the deductible, Zervantian says.
“We wanted to be able to attract and retain talent,” she said.
The company, like Southwest and David’s, also hired the Compass concierge service to research costs and provide referrals to employees. “These are expensive things,” Zervantian said.
By containing costs, the company has averaged 1.8 percent average annual increases in health premium over the last five years, she said. In that time, the company has saved a total $500,000 in premium that’s it’s used to fund the Health Reimbursement Arrangement.
The company also continues to pay 100 percent of the premium, Zervantian said. “We feel it’s important,” she said.
The company, which as 80 employees at its Fort Worth headquarters, and other offices in Seattle and New York, had been seeing consistent hikes in its plan costs. “Everybody was seeing rate hikes,” Zervantian said. “We would be puzzled, quite frankly, as to why increases were happening.”
Under the changes, “our employees have become very savvy consumers,” Zervantian said. The concierge service, for one, is a big saver. “It’d be very difficult for employees to call around to different providers,” she said.
The company provides wellness exams and biometric assessments. And it provides gift cards as incentives for participation in various wellness challenges. One prize: trips to Canyon Ranch, an Arizona spa that’s one of 1,100 properties in the Virtuoso network.
The company also reimburses employees for the costs for fitness club memberships, yoga, and even soccer league fees. “Something that gets you up and going,” Zervantian said.
Companies are taking advantage of wellness programs to keep employees healthy.
Driving Healthcare Costs Down
Many employers are aggressively attacking employee healthcare costs, rather than continue to accept rising insurance costs. Some ways:
- Raising deductibles.
- Consumer Driven Health Plans featuring high deductibles with health savings accounts that allow employees to put aside money pre-tax for healthcare expenses.
- Pairing such plans with pricing transparency and telemedicine service. Compass is one transparency tool. A consumer who needs an MRI, for example, can call Compass, and it will generate a list of nearby providers and their prices. Telemedicine allows more conversations by phone, cutting costs.
- Wellness plans and health risk management. Offering employees incentives such as discounts on health premium and gift cards for undergoing screenings, quitting smoking, and participating in wellness challenges.
- Paying for fitness memberships.
- Self-funding plans once an employer reaches a certain size.