Articles
CEO Crash Course
Developing a Strategic Health Benefits Plan
BenefitsNews.com, June 2003
by Jack R. Scanlon
Of the many worry lines creasing CEOs' foreheads these days, the cost of health care has got to be causing the deepest furrow. Employers have been faced with double-digit health care increases four years running. For many companies, the cost of covering employees is taking ever-larger chunks out of profits, leaving some to question how much longer employers can continue to absorb higher health care costs.
Employee health care benefits have shifted from a human resources issue to a CEO priority. But to many CEOs, health care administration and planning is uncharted territory that requires the counsel of an experienced and learned guide. As a result, many benefits administrators are finding themselves faced with a daunting new task: providing their bosses with a roadmap for successfully navigating the increasingly complex - and business critical - benefits landscape.
Benefits administrators who find themselves in this position would do well to give the entire C-suite a crash course in employee health benefits. Offer a brief lesson in how the situation got to where it is today and then recommend a strategic plan designed to help maintain the employer-based health benefit model. We've mapped out the essentials, but it's up to you to get the CEO to take action.
How did we get here?
During the early and mid-1990s, managed care became a popular and effective method of controlling costs. But by the end of the decade, many of these improvements were diluted by the larger imperatives driving the booming economy.
One of the primary forces was the competition for scarce labor. To attract skilled workers, employers increased wages and enhanced benefits, abandoning health plan cost controls in favor of improving access. Health plans broadened their provider networks, eroding discount levels. Utilization review requirements became voluntary, making it increasingly difficult for health plans to manage the costs associated with new treatments and technologies.
To sustain the employer-based health benefit model, employers must treat health care differently. CEOs must help their employees embrace a new role: that of participant in the design and use of their benefits programs rather than just a passive user. To achieve that aim, CEOs must endorse a strategic plan that embodies some or all of the following:
* Create incentives for employees to enroll in plans with a smaller, select group of providers, thereby ensuring robust provider discounts. Many health plans are now implementing tiered networks, where the most cost-efficient providers are identified and promoted to members. Tiered networks can be gradually phased into your health benefit plan and need not be regarded as a punitive measure when introduced.
* Make the true cost of care more apparent by increasing employee costs at the point of service. For example, eliminating co-pays in favor of co-insurance might encourage employees to weigh costs when making coverage choices.
* Build incentives for patients to comply with their treatment plans. Much of the cost, now and in the future, will be driven by patients with chronic and other high-cost conditions. In fact, a recent analysis of our large employer claims data confirms that only 11.5% of patients consumed 80% of health care costs. Your health benefits program should include a case management component that identifies employees with complex or chronic medical conditions and provides clinical management and guidance. Patients should be given financial incentives to comply with this guidance.
* Reward healthy behavior and promote wellness. If these concepts are to have real meaning, they must be integrated in your benefit plan in an appropriate mix of preventive benefits and support services. For example, employers can match employee flexible spending contributions for smoking cessation and weight-loss programs.
* Commit to fully funding employee communication initiatives that proactively explain and reinforce plan design changes. Use multiple communication channels with feedback mechanisms to ensure that employees understand their benefit plans and options.
* Empower consumers by adopting concepts embodied in the newer consumer-driven health care models, such as health reimbursement arrangements (HRAs). Employees who are more engaged in managing their own health care will make better-informed decisions, resulting in healthier outcomes at lower costs. An HRA also provides a means by which employees can be rewarded for desirable behavior.
* Structure health plan contributions to minimize adverse selection. Your employee contribution policy should encourage healthy employees to opt in, not out, of the group medical plan.
* Develop tools that quantify success and serve as a platform for ongoing improvements in your medical cost trends and employee satisfaction. Make sure you have access to all of the data you need to make informed decisions.
Implementing a strategic plan for the provision of employee health benefits will require a dramatic shift in how companies think about health plans. The managed care initiatives of the 1990s should be allowed to mature. In addition, CEOs and benefits managers need to be open to more sweeping, substantive changes if they're intent on holding down costs. A strategic plan provides a road map for implementing change, measuring results and maintaining control over costs. And of course it will also help to improve the health and morale of your employees, thereby boosting productivity and contributing to the bottom line. E.B.N.
Jack R. Scanlon is the senior vice president of research at First Health. An economist with over 25 years of experience in health care, he co-founded Affordable Health Care Concepts in 1983. Prior to that, Scanlon served as Director of Research of California's Governor's Office of Special Health Care Negotiations. He counsels First Health clients in analyzing and managing their health care costs.
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