Cutting health care costs - WFC Resources

1 White Paper Series Solutions Cutting health care costs Cutting health care costs If there's an employer anywhere that's not struggling to cut health care costs in a creative way, without angering current workers or hurting their chances of recruiting new ones, we haven't heard about them. Many are Cutting their costs by passing more of them on to employees. We've searched our archives for other ways. In summary, here are some of the things we found that have worked to reduce health care costs for employers: Reduce stress Back in 1991, Northwestern National Life (now NWNL Companies). reported that their research had found stress to be an unrecognized crisis. The company surveyed 600 workers and found job-related stress and burnout was significant, particularly in companies that substantially cut employee benefits, changed ownership, required frequent overtime or reduced the workforce. Seven out of 10 workers polled said job stress had caused frequent health problems and made them less productive.

2 NWNL. researcher Peggy Lawless said their research showed the single largest cause of burnout to be lack of personal control on the job. A Mercer HR Consulting study conducted with Marsh, Inc. found 70% of 723 employers saying stress or depression was their highest- cost disability condition during 2001. What's working to reduce stress? Our database produced 103 documents when we searched using the keywords "reducing" and "stress," from flexibility (not rigid) to work-life support. A few others: meditation, backup childcare, work redesign (or reducing workload), training managers to be more supportive, and most important, giving employees some autonomy and control over when, where and how the work gets done. And a new eldercare model was shown to reduce stress in a three-year experiment by St. Andrews Resources for Seniors, a St. Louis non-profit. That group developed a continuum of services that included personal care assessment and planning, support groups, education and referral.

3 About 4,000. employed family caregivers participated and about 1,000 had in-person assessments. The findings: among users, 90% said the combination of programs reduced their stress (98% said it increased their caregiving skills.) The great majority of participating companies said the program had potential for reducing employee health care costs . 2. Decrease obesity In 2001 we learned that obesity added $395 per person to the health care price tag, more than smoking or problem drinking. The annual Mercer/Foster Higgins National Survey of Employer-sponsored health Plans found the average per- employee cost went from $4,430 in 2000 to $4,924 in 2001, even though general inflation that year was just over 2%. Compared with obesity's $395 annual cost that year, smoking is linked with a $230 increase and problem drinking with an increase of $150. "Obesity," said Rand study author Roland Sturm, "is like aging 20. years." The obese, said the report, spend a third more than people in the normal weight range on hospital and outpatient care , and their medication costs are 77% higher.

4 Said Sturm, "The very strong effects of obesity are clear.". A program called LEARN (Lifestyle, Exercise, Attitude, Relationship and Nutrition) was one behavior- modification program that worked for hundreds of organizations and thousands of employees. As the cost of obesity became more obvious, more companies were turning to weight management programs that involved both peer pressure and peer support. First Chicago NBD tried a wellness competition, with team members volunteering to help each other in making healthy lifestyle changes over a six month period. They were scored on weight loss, muscular flexibility (to show if they've exercised), decreased blood pressure and cholesterol levels, and smokers who have quit. Gift certificates went to the winners. Competition also worked for VSM Abrasives. The 135- employee producer of industrial sandpaper in O'Fallon, MO, was able to encourage 100 of the 135 to join a five-member team that had as its goal to lose more weight than any other team.

5 Weigh-ins were held every Monday morning, and the team that shed the most pounds in three months won $100 and a day off with pay for each team member. The winner: the Five Fat Sensitive Men, who lost a total of 113 pounds. The program, says president Brent Barton, "gave everyone an opportunity to make a permanent lifestyle change for the better. As [it]. progressed, our employees became noticeably more productive and confident." Now employees weigh in each quarter and as long as they maintain their previous weight they get $25. Anyone keeping the weight off for a year gets an extra $25 and a paid day off. So far this year, says Barton, he thinks the program has been responsible for reducing insurance claims by 10% to 15%. Companies can save millions by encouraging their sedentary, obese employees to exercise a little, says 2004 research by the University of Michigan, even if it's just a couple of times a week and they don't lose any weight. Researchers studied 25,000 General Motors employees, 30% of whom were average weight, 45% were overweight and 25% were obese.

6 For the obese, health care costs averaged $3,000 a year; for the overweight that number was $2,400, and for the normal weight group, $2,000. For those workers who did not exercise, health care costs went up by at least $100 a year. But for the group that added two or more days of light exercise to their schedule, costs went down by an average $500 per employee per year. The exercise lasted for 20 minutes and while it was considered "light," it was hard enough to increase heart rate and breathing. The conclusion: "Physical activity could offset at least some of the adverse effects of excess body fat, and thus help moderate the escalating health care costs .". If the company's entire workforce had taken part in the exercise the potential savings could have reached $ million annually. Just getting the most sedentary obese workers off their chairs twice a week would have saved GM about $790,000 in a year. 3. Introduce wellness and prevention As early as 1992 we were hearing about the benefits of wellness programs.

7 At that time as many as two out of three businesses with more than 50 employees had some form of health promotion program targeting America's favorite vices alcohol, drugs, fat-filled foods and a sedentary lifestyle. Standard Telephone, Cornelia, GA, created their health promotion program because of shockingly high insurance claims for heart disease, diabetes and stress-related illness. A Travelers Insurance Co. survey that year found 65% of Standard's employees' families' overall health had improved over the past year, reduced emergency room visits saved $22,500 and Standard reported a significant drop in premiums. The City of Glendale, AZ reported their low-budget wellness program had saved the city millions. Risk manager Allen Iampaglia said the city had been rotating tires and changing the oil on police cars but allowing overweight, out of shape, stressed-out police officers to chase citizens at speeds of 90 miles per hour. When he began to promote wellness as a way to cut health costs , some fought for shifting the cost to employees instead.

8 Iampaglia asked what that would accomplish if an employee refused to seek prenatal care because it was too expensive and wound up with a $50,000 hospital bill for a premature birth. His program provided health screenings, education, lab work, literature and a full-time nurse, contracts for use of a nearby fitness center, a monthly health magazine free to employees and on-site mammography all at a cost of $ per employee. During the years the program was in force, the City had practically no rate hikes and three refunds totaling $1 million from its health insurance provider. That same year, we wrote about the LA Times, which allowed onsite self-help groups and found participants with chemical addictions, overeating and other physical and emotional issues recovered faster than non-participants with the same issues. In 1994 we heard again how important fitness, wellness and prevention were in reducing medical costs . A. 10-year study that began in the '80s found workers who took advantage of Steelcase's wellness programs cut their medical bills in half.

9 The study, then the longest running evaluation of its kind, was conducted by the University of Michigan. Steelcase announced the findings to their 8,000 employees, saying if all workers adopted low-risk behaviors, the savings could amount to roughly $20 million over three years. Every three years since 1985 the University evaluated 4,000 Steelcase workers (75% men, average age 44) and the results showed that when high-risk employees changed their health habits their average yearly claims were cut more than half, from $1,155 to $537 in three years; claims for employees who stayed high-risk rose about $500. Employees who started out low-risk and stayed that way had little change in their claims, but those who slipped from low- into high-risk behavior more than doubled theirs, climbing from $655 to $1,513. One lesson learned, says Dr. Edington: keep tabs on those low-risk employees or some are bound to fall back to high-risk and high cost . Also in 1994, a Brown University study concluded that if business simply encouraged employees to walk for exercise, the improvements in coronary heart disease costs alone would save the country billions of dollars a year on health care , lost wages and related expenses.

10 The study plugged two statistics into a model of health care costs ; one was the higher risk of coronary disease in sedentary people; the other, the fact that 40% of the population at that time was sedentary. They assigned some costs to walking (10% of the cost of an annual physical could be called exercise counseling, the new exerciser would need an $80 pair of walking shoes that would last four years, and some people would hurt themselves and need medical care ) and figured out how much people should walk. If every sedentary American walked one hour a day, five days a week, they concluded annual savings at about $20 billion. Of course many would decline, so they went a step further. If each walker was paid $5 per hour to do so, the savings would still be more than $4 billion. 4. Retirees' health care costs are a burden for many companies, and it was also in 1994 that we wrote about Coors Wellness Center which targeted those 40 and older some as old as 80.