By Jen Wieczner
Car-insurance companies reward good behavior: Drivers with
records free of 15-car pileups and tickets for doing 90 miles per
hour in a 55-mph zone pay cheaper premiums. Health insurers, on the
other hand, offer people little incentive to stay out of
harm's--and doctor's--way. But a growing number of health advocates
say that this is a mistake, and that the system would function
better if bodies were treated more like Buicks.
With policymakers still ironing out details of the nation's
health-reform plan, hospitals, corporations and consumers are all
trying to figure out ways to save on medical costs. While employers
and health insurers have tried to steer plan members to lower-cost
care and healthier behaviors in order to save the companies money,
employees often pay the same amount in premiums and copays no
matter what. Since employees generally don't see any financial
benefit from choosing the cheaper option--for instance, urgent-care
clinics over emergency rooms--experts say it is no surprise that
consumers are unwilling to do their employers any favors.
Some Fortune 500 companies and other employers--from JetBlue
Airways Corp. (JBLU) to International Business Machines Corp. (IBM)
to equipment manufacturer Caterpillar Inc. (CAT)--have begun to
experiment with new health-care models that allow employees to keep
some of the money they don't spend on health care, or that reward
or penalize them based on how well they manage their health.
Many of these plans more closely resemble auto insurance--with
healthier employees effectively paying less than colleagues who are
at greater risk for developing diseases related to smoking or
obesity. For example, 38% of companies planned to charge higher
premiums or deductibles in 2012 to employees who smoked, had high
cholesterol levels, didn't actively treat a chronic condition such
as diabetes or high blood pressure or failed on other health
measures, according to Towers Watson--the same way people with
speeding tickets pay higher auto-insurance rates to compensate the
plan for their greater risk of car damage.
Although healthier employees may not be paying lower premiums,
per se, while their unhealthier colleagues get penalized, they may
get to see some savings later on, as 80% of companies planned to
reward employees financially for healthy behavior (such as
participating in weight- or disease-management programs) in 2012,
according to Towers Watson. Such incentives often take the form of
deposits into an employee's health savings account, or HSA, say
experts, or removal of the premium penalties if employees show they
have quit smoking or lowered their blood pressure. Experts say the
rewards are the equivalent of lower premiums for safe drivers:
After IBM began offering employees rebates worth up to $300 a year
for participating in exercise and nutrition programs, the company
saved $190 million in health-care costs between 2005 and 2007, says
a spokeswoman. IBM employees spend up to 60% less on their overall
health-care bills than industry norms, according to the National
Business Coalition on Health.
This year, JetBlue launched an overhauled health plan designed
simultaneously to reward healthy employees and save the company
money--with crewmembers who participate in wellness programs
ultimately paying less for their medical benefits. Employees can
now earn up to $400 individually or $800 for a family by
participating in certain health programs, and workers with some
chronic conditions can snag an additional $250 individually or $500
per family if they enroll in a care-management program. In a letter
to employees explaining the changes, Chief Executive Dave Barger
said the airline's old health-care model was backward: "Our plans
are not structured in ways that are making us healthier--physically
or financially."
While reminding employees that they split JetBlue's health-care
bill with the airline, Mr. Barger linked the company's success to
employees' "smart decisions," writing, "I am convinced that solving
for 'health,' where controllable and possible, presents the
greatest chance of successfully arresting our rising health-care
costs." JetBlue didn't respond to a request for comment.
Other companies are trying to solve their employees' health
problems by waiving copays for generic drugs, second opinions and
preventive care, believing they will save in the long term, since
employees will be less likely to get sick. Some Cigna Corp. (CI)
health-plan members can now get free second opinions from the
Cleveland Clinic. Companies such as Dell Inc. (DELL), Caterpillar
and Marriott International Inc. (MAR) have eliminated or reduced
copays for certain medications and services, which has sometimes
resulted in fewer employee health claims, according to a report by
the National Business Coalition on Health. An
information-technology company that offered its workers free
services at the on-site health clinic not only lowered its health
costs but also saved its employees a combined $140,000, according
to Change Healthcare.
"Luring people into the good behavior by making it free is
another way of sharing the savings on the front end with
employees," says Dave Fortosis, a consultant in Aon Hewitt's health
and benefits practice. Dell, for one, knocks off up to $800 in
annual premiums for employees who take a health survey and check in
with a health counselor once a quarter over the phone, according to
a company spokesman. Caterpillar and Marriott didn't return
requests for comment.
The basic "staywell" health-plan concept isn't new. Back in the
1980s and '90s, some employers tried awarding cash bonuses to
employees who spent little or nothing on health care. Publishing
company Forbes Media, for one, paid bonuses of $1,000 to employees
who filed no health-care claims, and a smaller prize to those who
had less than $500 in health expenses. Employees of the Mendocino
County School District in California received up to $500 back if
they racked up less than that in health claims.
But those types of bonuses fell by the wayside as employers
realized it wasn't the best idea to reward people for never going
to the doctor. "By and large, that approach fell into disrepute
because employees or their families were not getting the treatment
they needed," says Mr. Fortosis. "Employees and families were just
denying themselves care they needed so they could get a little
cash."
Indeed, those plans relied on a model that probably wouldn't
work for an auto insurer: After all, if you never take your car to
a mechanic, there's a greater likelihood it will have a major
breakdown in the future. But employers have continued to tinker
with and fine-tune the strategy.
Forbes's bonus model was a precursor for its current
consumer-driven health plan, featuring HSAs that the company wasn't
allowed to offer at the time because of government regulations.
These plans, which allow employees to save personally what they
don't spend on health care, are the wave of the future, some
experts say. "You own it. So you pay attention. And that's the
whole premise behind consumer-driven health care," says Margy
Loftus, Forbes Media's senior vice president for human
resources.
Such consumer-driven plans as HSAs and health-reimbursement
accounts, or HRAs, allow employees to get their savings back, says
Tony Holmes, senior health care consultant for Mercer, a firm
specializing in human resources. Companies such as Caterpillar and
Dell have sweetened the pot further, offering incentives worth up
to $900 for enrolling in an HRA, according to the National Business
Coalition on Health Report, since the companies directly benefit
when members use their health plans frugally, rather than to forgo
care entirely.
"It makes a lot more sense to have your programs do that every
time someone makes a decision, rather than sending them a check,"
Mr. Holmes says.
Caterpillar and Dell didn't respond to requests for comment.
Some health-care experts feel that these new models perpetuate
the old 1990s problem by discouraging some workers from caring for
their health. But even employers with traditional health plans,
which provide broader coverage at set monthly premium rates, have
tried to encourage their staff to be thriftier with them.
"We've seen their executive leadership tie what their company
spends on health care to the company's ability to invest in new
facilities and bonuses," says Douglas Ghertner, CEO of Change
Healthcare, which makes health-care cost comparison tools for
health-plan members. The logic: "Going to the lower-cost provider
may benefit our company as a whole and consequently benefit you as
an employee, because we'll have more money to pay in bonuses
because we're paying less in healthcare," Mr. Ghertner says.
Pinnacle Financial Partners in Nashville, Tenn., for one, has
been educating employees about finding lower-cost health providers
and prescriptions because all employees are also owners of the
firm. "So they have a vested interest in helping reduce expenses
for themselves and for the firm overall," says Stacy Gammons, a
Pinnacle human-resources specialist.
The new health-care models, say experts, so far fall short of
allowing employees to share directly in the cash they save the
company. But that may soon change, says Mr. Ghertner, as employers
have begun to discuss paying employees a percentage of what they
save the company on health care--for example, 20% of the cost
difference between a $4,000 CT scan at a hospital and the same scan
for $1,000 at an outpatient facility, or a potential $600 back to
the employee. "I think you will start to see employers over time
explore it," Mr. Ghertner says.
Write to Jen Wieczner at AskNewswires@dowjones.com.
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