14-15_health care_oct 2004

Emerging Trends in Health Care
for Employers and their Employees
Designing Incentive Programs
That Work for Your
Organization
Incentives have long been a part of wellness initiatives. Recently, however, several developments in health care
benefits management are leading to the need to place greater emphasis on incentives to motivate employees. With the continued rise in health care costs and choose and use with little or no concern. Today, Deciding on the Incentive
yearly rate increases, employers are eager to try out many experts cite this lack of accountability and When deciding on the right incentive, many new health management programs that require responsibility, particularly related to health companies rely on what they’ve heard in the news or employees to take on more responsibility and behaviors, as a primary driver of the increases in a success story that circulates in their industry.
accountability for their health care utilization and health care utilization and costs. As a result, High-profile incentive – or disincentive – stories encouragement alone isn’t enough of a motivator for abound: “Scotts Miracle-Gro plans to fire smokers” Unlike programs that relied on past health care (BillingsGazette.com, 12/10/05) and “Northwest use and selected participants based on past claims, Health behaviors, whether bad or good, are Airlines plans to impose a health care premium new programs are focused on not only finding voluntary and, on a daily basis, employees decide surcharge on workers who use tobacco products” employees that have been sick, but also those that whether to subscribe to good or bad habits. While will most likely get sick in the near future. In order this decision-making process is complex, it can be Not only should employers be concerned about to help and intervene with employees on the road to influenced, especially when the person is open to adopting these types of incentives due to the legal poor health, employers need employees as engaged implications, but they also really should be more In this way, incentives can become a catalyst for focused on what incentive or disincentive would Employers realize that they have a choice: either change and can influence performance. They tap keep pushing costs off to the employees, or make into the “what’s in it for me” factor, and motivate Although premium discount incentives quickly are the true costs known to employees and help them individuals to make better choices, develop a better becoming one of the most popular incentive see clearly that there is a direct correlation between sense of accountability and create a willingness to methods, they are not a panacea and they have positive changes in health behavior and their ability comply with healthy suggestions and recommenda- failed in some organizations. Moreover, the debate continues about which works better – the “carrot vs.
The good news is that this has put an increased Employers certainly are realizing the importance stick” approach, with some experts believing that focus on implementing incentive programs along of incentives. Currently about 41 percent of with health management initiatives. The bad news is companies have incentives aimed at encouraging However, many experts favor a more balanced that some companies decide to create an incentive healthy behavior, up from 34 percent in 1996 approach, possibly a combination of carrots and program without thorough planning. Many choose (source: Hewitt and Associates). A 2006 survey of sticks. When considering which is best, companies an incentive program that has been “in the news” 435 employers by the Hay Group revealed some of need to think about their unique organization and its and seems to work at another company.
unique employee mix before determining which is Unfortunately, incentive programs are not a one- size-fits-all proposition; companies need to decide Before deciding on any program, employers what program will work best in their specific should ask several questions as they are preparing and planning for their incentive program: ■ What type of incentive will be needed to Why Incentives Anyway?
achieve 60 percent, 75 percent or 100 percent Our nation’s health care system, and in particular employer-sponsored health benefit plans, place little ■ What behavior do we want to motivate? I.e. for accountability and responsibility on an employee for employees to quit smoking, or for employees their present or potential future use. Employees However, increased use of incentives doesn’t have become conditioned, in part by the system, to 30 March/April 2007 I Benefits & Compensation Solutions™ I www.bcsolutionsmag.com
CHANGING FACE OF HEALTH CARE • SPECIAL SECTION ■ What are my options? Is it even possible for me but also includes feelings, attitudes and perceptions which we view as extremely favorable and attribute to use benefits-linked incentives such as a pre- of how they think or perceive they should feel.
this, at least in part, to our aggressive program – a mium credit, or is my only option merchandise Employees that are found to be high-risk through pre- tool that prospectively finds people, a solid communi- dictive modeling are then offered one-on-one health cations plan and an aggressive incentive.
■ Does senior leadership support my incentive Several of our own clients also have found success program? How will I respond to objections by The goal is to proactively find and intervene with with well-planned incentives. One client that only leadership if they tell me that they don’t believe employees who will end up needing health care – projected a 35 percent participant rate – due to before it becomes serious and costly. With this type employees being geographically dispersed – obtained ■ What is my budget for my incentive program? of program, participation is key. If the survey is not 50 percent participation in the One Care Street survey If cash, what is the long-term value of cash for completed, then the program loses its effectiveness – through the use of a lottery drawing for merchandise. the program, and will that value erode over potentially missing high-risk individuals. The goal of Another one of our clients had started out with a our incentive was to get as close to 100 percent premium credit amount, but the impact – around 80 ■ What’s unique about my company and target participation among our employees as possible. percent participation – was not significant enough. In population and that might impact the design of Our history with wellness told us that we would this approach, employees pledged to participate and an incentive program? I.e. average age of need a strong incentive – one that would be valued by then would receive a credit when they fulfilled the population, union vs. non-union environment, our employees and also start tying health accountability and responsibility to benefits. Also, In the next year, the employer changed tactics – it ■ Could this incentive program produce any with our highly distributed work force, we needed switched to a premium contribution incentive for both undesired effects such as encouraging people administrative simplicity in our incentive program. We employees and spouses as the way to drive to cheat or manipulate the system, or reward also had to consider our unique, entrepreneurial participation and use of the One Care Street program.
culture during the incentive-planning phase. This means that participants had to complete all the – For example, if a company offered to pay After considering the practical issues and asking requirements, or, if they did not, they would have to employees for each pound they lost by the end ourselves the practical questions, we decided to set pay the full amount of their employee or spouse of the year, this might encourage someone to up a premium-based incentive. If employees wait until the last month to try and drop as completed the One Care Street survey and either With this change, the organization’s participation much weight as possible, thus risking his or her accepted the initial health coaching call – if high-risk increased to more than 90 percent through the – or set and committed to achieving a health goal modification of the incentive. With this company, a While incentives are becoming key to any suc- during the following year – if low risk – they would premium contribution carried more weight, or cessful health management program, a company receive a $50 reduction in their monthly premium must ensure the following: There is complete execu- tive buy-in and the will to enforce any rules; the cost Incentives That Fit Your
does not outweigh the benefit of the program; there completion rate had been 80 percent. This would Organization
is a clear communications strategy; and the morale seem to be a “high enough” participation rate, but we Intuitively, incenting employees toward better and culture of the company will support this program.
felt strongly that the 20 percent that were not health makes sense. From the employer’s perspective, And it does not hurt – given the current legal participating were most likely our riskiest group and it is critical that careful thought and planning go into climate – to get direct advice from your own attorney had to be brought into the fold. After the incentive and even run the incentive by your certified public program, we achieved 97 percent survey completion, Before you start a program, determine the and among our health plan participants, we achieved following: What is the goal of your incentive program, what practical considerations should you take into Incentive Success Stories
Due to the high participation in the One Care Street account that apply only to your unique situation and When Scott Insurance – my organization – decided survey, 32 percent of the group was identified as high culture, and do you have the executive support and to try a new health management program, we knew risk, with 60 percent of that group engaging in health communications strategy to push the incentive that incentives were going to be an important part of coaching. What is the value of this high participation? the program’s success. We decided on a predictive With this incredibly high participation rate, our With proper planning and design, incentives can modeling and health coaching system, One Care company feels it has a greater impact on identifying positively impact your health care budget and make Street from The Haelan Group. The plan was to use a health risks within our organization. After two years, employees much healthier, productive and engaged in self-perception survey to find employees that were health outcomes within our employee group have considered high-risk or those that would most likely improved, including measurable change in health seek health care within the coming year.
behaviors. Although the size of our employee popula- With 10 years of experience in worksite health promotion, Dinamarie F. Van Cleave provides health risk management Unlike past wellness surveys, this type of survey tion surveyed precludes us from performing a mean- consulting services for Scott Benefit Services in Virginia, North asks a series of questions that not only finds high-risk ingful financial outcomes analysis, we have realized Carolina and Tennessee. She can be reached at employees based on more than disease symptoms, two years of negative health plan renewal rates, dvancleave@scottins.com or 919-345-5660. www.bcsolutionsmag.com I Benefits & Compensation Solutions™ I March/April 2007 31
Opportunities Abound to Improve and
Save on Pharmacy Programs BY JEFF HAWES, PHARM.D., RPH.,
PHARMACY BENEFIT CONSULTANT, PHARMACEUTICAL STRATEGIES GROUP The new year is shaping up to favor employers and health plans that want to improve and save on their pharmacy
benefit programs. Several factors indicate that 2007 brings tremendous opportunities for a slowing drug trend, whichis the yearly percentage of incremental increases in pharmacy expenses. By taking advantage of slower growth innewly introduced brand-name drugs and working with their pharmacy benefit manager, employers and health plans can take advantage of unprecedented generic drug opportunities while considering more consumer-directed benefits.
Lower Brand Drug Growth
could realize generic utilization rates (the rate at employers that implemented CDHPs came within an Last year marked one of the lowest approval rates which generic drugs are dispensed to program average of 2 percent of their initial targeted cost- for newly branded drugs. Only 17 drugs were beneficiaries versus brand-name drugs) of 60 approved compared to prior years in which the aver- percent by the end of the year. Experts universally Given these statistics, it is no surprise that anoth- age was closer to 28. In addition, many pharmaceuti- recognize that such a benchmark is a highly er survey conducted by the Society for Human cal manufacturers face a shortage of future pipeline desirable goal for pharmacy benefit programs.
Resources Management discovered that one of the drugs, which is impacting their financial well-being.
Research supports the general formula that for every top strategies for health care cost containment Drug maker Pfizer, for example, laid off 10,000 work- 1 percent increase in generic dispensing, plan selected for review by 54 percent of surveyed ers due, in part, to future financial shortfalls. Other sponsors save between 0.5 percent and 1.0 percent employers was to increase member cost sharing for manufacturers are talking of similar actions. Still oth- pharmaceuticals with premiums, copays and coin- ers are discussing the possibility of mergers, with the The FDA currently reports that roughly 76 percent surance. Many of these plans couple the CDHC strat- most recent rumblings involving Sanofi-Aventis and of all prescription drugs have generic counterparts.
egy with promoting higher generic drug usage by Bristol Myers Squibb. Some analysts predict that this Because generic drugs are FDA-approved, clinically increasing member out-of-pocket expenses for shortfall in pipeline drugs will be compensated for in equivalent drugs with substantially equivalent bene- brand drugs while making no changes to generic coming years since more than 2,000 drugs are cur- fits, there is no good reason for patients or program drug cost liability, or even eliminating it entirely by rently in clinical studies, some of which will hit the sponsors to pay more for brands if a generic for the covering the entire cost of generic medications.
These are realizable strategies for pharmacy bene- What this means for pharmacy benefit payors is Plan sponsors should work with their PBMs to fits, even without adopting a total CDHP that that 2007 is an opportunity to “catch up” after years counter the effects of direct-to-consumer advertising includes medical coverage, requires better member of major brand drug growth, while preparing for anoth- that leads their beneficiaries to adopt the false notion communication and adds more member responsibil- er wave of new drugs in the years to come. This year that brand-name drugs are the best option for treat- ity for the choices they make in conjunction with should give high-volume pharmacy payors a well- ment. It simply isn’t true and does not work in the deserved breather and time to plan for the future.
best interests of patients or plan sponsors. Plan spon- Together, these three factors – lower brand drug sors must be aware, however, that not all brand-name growth, higher generic drug utilization and Higher Generic Drug Utilization
consumer-directed benefit models – will make 2007 While brand drug growth is slowing, generic a very good year for pharmacy benefit program drug growth is at an all-time high. Here is where drug Consumer-Directed Benefit
payors that take the time to better educate their payors have a clear opportunity to save big money on members, and that work closely with their PBMs to their pharmacy costs, while ensuring the health inter- A national survey conducted by Pharmaceutical take advantage of these unique, and possibly ests of the people they serve. New generics for block- Strategies Group in 2006 indicates that only 22 buster brand drugs continue to hit the marketplace.
percent of national employers are offering a Popular drugs like Allegra, Pravachol, Zocor, Zofran consumer-directed pharmacy plan. Of these, about A trained and seasoned clinician, Jeff Hawes consults with and Zoloft all became available in generic form in half offer the CDHP on a strictly optional basis. Yet, employers, health plans and other organizations to help maximize the value of their pharmacy benefit management 2006, while other heavyweights such as Ambien, when offered in this way, only a small portion of program. Prior to joining PSG, he had P&L responsibility Coreg, Lotrel, Norvasc and Wellbutrin XL may become employees – 6 percent – elect the CDHP option. This for the pharmacy benefit as a hospital pharmacy manager is a missed opportunity. Research shows that CDHPs and as a pharmacy director for a large managed care plan. Prior to this, he focused on delivering solutions to the Some pharmacy consulting experts are predicting can have a significant impact on both medical and managed care marketplace as a clinical account manager for that well-managed pharmacy benefit programs pharmacy expenses. PSG’s survey indicates that 32 March/April 2007 I Benefits & Compensation Solutions™ I www.bcsolutionsmag.com
CHANGING FACE OF HEALTH CARE • SPECIAL SECTION Turning a Vicious Circle Into a
Virtuous Circle
BY WILL ROBINS, PRESIDENT, ADVANCE FUNDING LLC Self-administered health care plans face a vicious circle of ever-escalating costs to employers, dissatisfied
patients/employees and economic deprivation on the part of health care providers: ■ Doctors do not know when or how much they Enter advance funding
source this function to an advance funding provider will get paid by health care plans, particularly Advance funding introduces an economic incen- just as they outsource the administration of the plan if they are out of network. Consequently, they tive to break this vicious circle. The process is raise their prices inordinately. When they get paid less than they charge, they are forced to ■ The TPA immediately notifies the advance Some numbers may help to illustrate advance sue the patient to recover the shortfall.
funding provider of any claim it receives that ■ The health care plan finds its costs rising fall into a particularly difficult category (such ■ On May 1, Jones goes to see Doctor A, who is inexorably, so it rations the dollars it has as out-of-network claims) and what the TPA not in the health provider network set up by budgeted for health care by simply delaying Jones’ employer, the Smith Corporation.
payment. Thus, if the budget for May was 100 ■ The advance funding provider immediately ■ On May 5, Doctor A files a claim for $125 with but the claims were 120, all claims are put into contacts the health care provider and offers to Efficient TPA, the third-party administrator of pay the bill less a discount, typically 10 the Smith Corporation’s self-administered resulting in 20 claims deferred to June.
percent to 30 percent, and send the payment ■ The third-party administrator finds itself ■ Efficient TPA immediately decides that it will blamed for the rise in costs and suffers client ■ If the health care provider accepts, it agrees to pay $100 on the claim and on May 6 notifies churn, which, in turn, compels it to bring in relinquish all future claims against the patient.
Fast Pay Inc., the advance funding provider.
new clients by making unrealistic projections ■ The health care plan agrees to reimburse the ■ On May 6, immediately upon notification from about controlling and pricing health care advance funding provider in 30 days.
Efficient TPA, Fast Pay Inc. calls Doctor A and ■ Upon getting paid by the health care plan, the offers to pay $80 on the claim; the check to be ■ The patient, who thinks of the health care plan advance funding provider will share a portion overnighted and received the next day, May 7, as a right or a perk, finds himself having to co- of the discount. For instance, the TPA might pay part of a health care bill – the part that ■ Doctor A accepts, and agrees not to pursue the TPA maintains is “too high” and not compensation for the fast turnaround of the claim, and the health care plan might get 50 ■ The employer who sponsors the health care percent of the discount as an incentive to ■ On May 7, the Smith Corporation’s health care plan finds that, far from earning appreciation enter into the advance funding arrangement.
from employees, having to pay the “too high” ■ On May 8, pursuant to a prior agreement, Fast portion of a bill produces resentment.
The vicious circle is now broken. The health care Pay Inc. pays 10 percent of the $20 discount, provider gets paid an acceptable amount immedi- So there is a perfect vicious circle spiraling out of ately, the patient no longer has to pay any portion of discount, or $10, is remitted back to the Smith control: Doctors don’t know when or how much they the bill, the TPA earns revenue from creating the will get paid so they raise their prices; TPAs cut the entirely new business of fast turnaround and the portion they will pay; health care plans respond by In economic terms, the $20 discount that Doctor off-loading part of the payment onto their employees Put another way, rather than ration the amount it A accepts is the cost of the inefficiencies in the and by delaying payment of their share, so the doc- is willing to pay by putting bills in a queue, the system. By introducing an economic incentive — fast tor raises his prices again to cover the lower remu- health care plan can ration payment by the amount payment — Advance funding strips out these neration, longer waiting period and the cost of of discount it earns, such that the greater the dis- inefficiencies and makes the entire system a collecting the un-remunerated portion of the bill.
count the health care provider is willing to give, the Now a new round begins where the TPA makes even To learn more about Fast Pay or to contact Will Robins, see further cuts in what it will authorize, the health care This is not a function that a health care plan eas- their ad on page 14 of this issue. plans delay payment even further, and the patients ily can provide – the public relations aspects as well face even more collection efforts by health care as the operational requirements are daunting. In effect, self-administered health care plans can out- www.bcsolutionsmag.com I Benefits & Compensation Solutions™ I March/April 2007 33

Source: http://www.machc.org/cv/Work_Site_Tool_Kit/5)Designing_Incentive_Programs.pdf