Case Study - Maximizing Value
Our client's Executive Vice President of Human Resources was going to be forced to make some tough choices regarding health care. Working within a service delivery environment with a population of over 95,000 domestic employees, the organization had been hit by a significant increase in health care costs. At a recent board meeting, health care had been identified as the third largest spend for the corporation with costs rising at nearly 15% per year. This projected an increase in the cost of health care of nearly $60 million the following year.
The company brought on a health care consultant to help them redesign their benefits plans. They did a major consolidation of health care plans and made some across the board decisions regarding employee contributions to the plans. The company shifted an additional 10% more cost to their employees, making their total contribution 15% and increased co-pays within plans as well. When the announcement was made employee reaction was significant. The increase in employee contribution meant a very real change in compensation for employees and their frustrations were palpable.
A committee, sponsored by the EVP of Human Resources and the CFO, was developed incorporating team members from both risk management and employee benefits as many of their costs regarding worker's compensation and disability claims were also rising. Their initial plan included an in-depth analysis of their total claims. The following conclusions were made:
- Workers compensation and short-term disability claims were continuously rising at over 11% per year.
- Health care costs were rising by an average of 14% per year over the past 3 years.
- 17% of their employee population was responsible for 78% of their health care cost.
- Claims related to obesity, heart disease and diabetes were three major cost areas for the company.
- Increasing the employee contribution for health care from 5% to 15%, a 200% increase, was having a measurable effect on employee morale.
- Employee feedback communicated that the workforce had increasing stress levels, as employee responsibilities increased, especially around the busy holiday season.
OHWM explored the situation affecting this employer in a consultative capacity. OHWM recommended shifting the company's health care strategy from primarily a "curative" focus to include a "preventive" focus as well. The company adopted OHWM's Health Improvement Model as a key component of the new health management strategy, which included a complete wellness and fitness benefit to meet the current challenges facing the employer.
Most importantly, IFCN was able to provide proof that their program met the needs of the company's objectives. Specifically, OHWM:
- Enabled the company to continually analyze and understand the health risk's facing this employee population
- Offered a communication strategy to reach the entire population and specifically the 17% of employees with particularly high risk factors.
- Strategically deployed programming focused to their largest risk factors. In this case the largest risk attributing to major health care costs was obesity, diabetes, and heart disease.
- Established that fitter employees would decrease worker's compensation and incidental absence costs.
- Demonstrated a direct correlation between physical activity and decreased risks for heart disease and risk factors related to obesity.
- Created a solution that offered ample diversity to reach all of the employees and their family members, who made up 37% of the health insured lives.'\
- Provided the company with an attractive "give-back" to employees who were being asked to contribute significantly more towards health care costs.
- Contained ancillary benefits to the corporation including employee stress reduction, employer differentiation, and minimal administration time.
- Provided proof of an ROI estimated at 300%.
In order to maximize the impact of the benefit, the OHWM program was launched a few months prior to the date the new health care contribution structure went into effect. This was communicated as both a "give-back" to the employees being asked to contribute more towards health care costs as well as a chance for employees to take some control over their own health and impact on health care costs overall.
18 months after the implementation of OHWM, the EVP of Human Resources passed a directive to gauge the current state of their total health care picture, which included a look at the success of the OHWM program.
Within the first year, OHWM had received activity directly from12% of their population, nearly 11,500 employees. These employees participated in a number of on-line activities including Health Risk Assessments, diary keeping, weight management programs as well as hands-on tools like walking initiatives, fitness clubs, Lunch and Learns and more. Of this group, within the first year, over half had begun an exercise program based on their experience with the new benefit. With the initial 5,750 more employees working towards a healthier lifestyle due to the company's implementation of IFCN, the company performed a more in-depth survey of the results. The following information was discovered:
- Employees participating in new exercise programs were nearly $700 less expensive per year. This was a total savings to the company of $4,025,000 per year.
- Exercising employees had nearly 25% less workers' compensation claims. This resulted in a net savings of nearly $1,440,000 for the company in one year alone.
Through out the entire population, the following changes were recorded:
- An average of 1 fewer sick days per employee per year
- 73% felt access to a wellness benefit made them feel better about their company.
- Decreased number of employees reporting high stress levels by 15%.
Within the first 12 months, the OHWM program had paid for itself several times over.
This report was compiled and presented along with the annual executive benefits review. The success of the original health care cost containment project was obvious. Smart plan strategies were polished up by an attractive preventive strategy resulting in significant cost savings and a competitive edge for the company against competitors still struggling with health care costs rising at double-digit rates.