Workplace Culture

Employers Adding Value to Good Employee Health

By Lisa Beyer

Nov. 27, 2011

In 2006 Lafarge North America, a global supplier of construction materials with 12,000 employees in the United States and Canada (70,000 worldwide), took a close look at the data related to its health care program. The goal was to find ways to save money by restructuring medical plans without putting an undue burden on employees.

“One of the interesting pieces of information we found was that employees with certain chronic diseases, such as diabetes, hypertension and asthma, were not being compliant with their health care,” says Philia Swan, director of health, benefits and employee insurance for Reston, Virginia-based Lafarge. “To encourage better self care, we lowered copays for those medications and went from a 35 percent compliance rate to 80 percent today.”

Additionally, Lafarge’s medical plans pay 100 percent for preventive care in-network, such as mammograms and prostate screenings, and even pay employees $75 for taking the tests.

“We send out postcards on an employee’s birthday to remind them that it’s time for their annual check-up or screening,” Swan says, noting that compliance reached 95 percent in 2011.

Lafarge is among a growing number of employers taking what is known as value-based health insurance—an employee-centered approach that often begins with reducing or even waiving copays for preventive and maintenance medications. According to researchers at the University of Michigan’s Center for Value-Based Insurance Design, “the basic premise of value-based insurance design is to remove barriers to essential, high-value health services.”

Center co-director and professor Dr. A. Mark Fendrick, says the failure of patients to take needed medications costs about $100 billion a year in the U.S., partly as a result of hospitalizations that could have been avoided.

“With a comprehensive value-based approach, employers are basically saying there are certain things you, as an employee need to do, and you can benefit financially by doing them, but if you are not willing to take a role in improving your health, our plan will be more expensive and perhaps a bit unattractive,” says Jim Winkler, large employer segment leader in the health & benefits practice with consultant Aon Hewitt in Norwalk, Connecticut.

According to Winkler, there are three phases to a value-based approach, and most early adaptors are in the first phase, which involves reducing or eliminating costs around specific medical conditions that have, or may in the future have, a negative effect on an employer’s health insurance costs. According to Aon Hewitt’s 2011 Health Care Survey, about 23 percent of employers use a value-based approach for their prescription drug plans and another 55 percent plan to adopt the approach within three to five years.

Winkler notes that in the second phase, low cost or free medications come with strings attached: the employee needs to take part in a disease management program. Aon Hewitt’s survey reports that about nine percent of employers using the value-based approach are at phase two, “but I think we’ll see more of this moving forward,” Winkler says.

Phase three adds a level of complexity to the plan, because surgery that might be covered at 80 percent after the deductible has been met may not be covered at all if the employee hasn’t taken steps to prevent it. For example, an employee with a back injury may need to take part in weight loss coaching and physical therapy prior to being approved for surgery as a last resort. Winkler acknowledges this phase is administratively complex, adds a new layer of information to already challenging employee communications and may be unpopular, at least initially.

“Employees with chronic diseases that fall under the value-based approach appreciate phase one, because it costs them less money, however, healthier employees may be less than thrilled because they are not receiving any monetary benefits,” Winkler notes. “That’s why moving to a broader approach where disease management is required is the next step, and a logical one, for employers to take.”

A survey released by the non-profit International Foundation of Employee Benefit Plans in November shows that 37 percent of multi-employer and public employer plans use a value-based health insurance strategy: 15 percent have just begun, and 23 percent have various components of a value-based initiative. Just three percent believe they have achieved a culture of health by taking a value-based approach.

The survey reports that diabetes and heart disease are the conditions having the most impact on productivity and health care costs. Obesity is another top concern that employers plan to address.

“Ideally, the real emphasis of value-based health care is not on cost containment, but on a holistic system of keeping healthy people healthy,” says Sally Natchek, senior research director at the Brookfield, Wisconsin-based foundation, which provides education and information on employee benefits, compensation and financial literacy education.

“You provide incentives to change employee behaviors—use urgent care instead of the emergency room or take your annual cancer screening,” Natchek says. “But you also have healthy food choices in the employee cafeteria, you communicate more with employees so they understand the costs of prescription drugs and the options they have, or how to be better consumers of health care.”

Natchek emphasizes that the goal is not to reduce plan costs initially, but to prevent high future costs. And she believes a value-based approach provides a competitive advantage for companies. “If you can work for someone who provides your cholesterol medication for free, that builds loyalty,” she says.

Says Lafarge’s Swan: “We’ve invested more than $7 million in incentives, communication programs, and a disease management project with The Cleveland Clinic, and in return we’ve seen a reduction in health care costs, increased productivity, and an upward trend in retention.”

SeeChange Health Insurance Co., based in San Francisco, is the first commercial payor to focus exclusively on offering value-based benefit plans to the health care market. SeeChange Health selected HealthEdge’s HealthRules product suite for its ability to design, implement and update a variety of benefit plans. For information on HealthRules, go to:

Lisa Beyer is a writer based in Florida.

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