Change is rarely easy. We know this is true for individuals, and it is also true for organizations. However, when an organization changes to help its members, there can be exciting outcomes -- especially from a financial standpoint. Opportunities to save money or increase profit are always desired, but we often fall short in our strategy and fail to capitalize on change that may offer big dividends. One area that is often overlooked is employee health benefits. This article describes how one EMS system invested in its employees and saved money.
Finding Wealth in Health
Employees and dependents in poor health impact the budgets of U.S. companies. According to the Centers for Disease Control and Prevention, in 2005 more than 133 million Americans lived with at least one chronic health condition. Medical care for people with chronic diseases accounted for more than 75% of the country's $2 trillion in health care expenditures.(1)„ The Milken Institute reports that pulmonary conditions, hypertension, mental disorders, heart disease, diabetes, cancer and stroke are the leading chronic diseases from which Americans suffer.(2)
Unfortunately, how chronic conditions impact the company bottom line is not well measured by most industries, including EMS. Rising health costs, including health insurance premiums, are placing an increasing burden on businesses. Traditional cost-containment solutions have reached their limits, leaving many companies with no option but to reduce coverage, raise employee costs or drop coverage all together.„
For payers, brokers/consultants and wellness experts, it's often difficult to move clients to consider options that impact more than the direct cost of health coverage for their employees. Despite numerous studies documenting the impact of indirect health costs on productivity, customer service, morale and staffing, companies and their consultants often go for the lowest priced premiums year over year.(3,4)
Shopping for lowest rates and reducing benefits is often disruptive to patient care and can result in higher cost if members delay care, receive fragmented care, or rush to get all the care they can before the plan year ends. Smaller companies, such as EMS agencies, with little discretionary funds often feel that competitive bidding on lean plan designs is the only way to curb the health-care cost trend.
Companies have been slow to implement organized wellness activities despite the advice of consultants who say they will save money in the long run. The investment of up-front dollars in the hopes of achieving real long-term savings is not a gamble that many EMS agencies are willing to take. However, the nature of the EMS industry should compel all agencies to evaluate the benefit of health and wellness promotion beyond the basic health benefit package. Long-term, highly trained employees are an investment by each EMS unit. Health, both physical and emotional, is critical for optimal performance in this high-stress environment.
Direct vs. Indirect Health Cost
Health-care expenditures can be divided into direct and indirect medical expenses. Direct medical costs are fixed, and variable costs are associated directly with a medical condition or health-care intervention. These include the fees for services and products used in the care of the patient, and may include expenditures for hospital stays, physician and other health professional visits or encounters, emergency department visits, home health-care visits, dental visits, prescribed medicines, and medical equipment and supplies.„
Indirect costs are the costs of lost or reduced productivity resulting from morbidity or premature mortality due to a medical condition or treatment, as well as informal caregiving costs. Morbidity costs include lost productivity because of illness. Mortality costs include goods or services a person could have produced had they not become ill and died prematurely. The third aspect of indirect cost relates to lost productivity incurred by an employee (and thus their employer) who leaves work to provide care for a patient, usually a family member. Lost productivity resulting from chronic conditions exceeded $1.1 trillion.(5)
A Team Approach„
Our organization, the Montgomery County Hospital District (MCHD), an independent taxing entity located in Houston, began feeling the repercussions of rising health costs several years ago. MCHD has 202 employees, and we insure a total of 410 members, including spouses and dependents. MCHD serves the community as the provider of emergency medical and indigent care services. Although MCHD provides health services, there was little knowledge of the overall health status of its own population.„
In 2006, MCHD experienced its fourth consecutive double-digit health insurance premium increase. The increases were impacting the budget, jeopardizing the long-term financial health of the organization and negatively impacting employee satisfaction. MCHD's poor loss ratio was believed to be directly related to the overall physical and mental health of its staff. As with many health-care entities, MCHD wasn't a poster child for employee health. Large claims and soaring prescription costs for chronic conditions were making the most significant impact.„
In an attempt to support recruitment and retention in a tight paramedic market, the MCHD board of directors absorbed 100% of the 2006 increase. However, they knew the management team had to develop a long-term strategy to reduce the impact of future increases. Our goal was to develop an innovative program that would invest in employees and build a healthier community.
MCHD partnered with McGriff, Seibels and Williams Inc. (MCHD's insurance broker) and Humana (MCHD's insurance carrier) to build a comprehensive solution. McGriff and Humana possessed a shared vision with MCHD and were excited to support the objective. Together they developed a data-centric, multifaceted approach to the problem.„
Data gathering was the first step. MCHD provided incentives to employees to complete the online Humana health assessment. Employees received individual health status information and goals. The organization received aggregated data to be used to develop initial wellness objectives and baseline data. MCHD used SurveyMonkey independently to assess specific health issues.
Employee-Health Survey Results (self-reported)„
22.8% considered themselves in poor health
16.5% considered themselves in fair health
40.5% were overweight„
35.4% were obese
34% met the government recommendations for physical activity per week„
17% of males„
29% of females
7.3% of males had proper nutrition
18.4% of females had proper nutrition
Work Stress(6 or higher on a 10-point scale)
75.6% of males
60.5% of females
43.9% of males„
47.4% of females
Consumer-Driven Health Plan
After much research, MCHD offered a high deductible health plan with an associated health savings account as an alternative to its traditional PPO plan. The goal was to offer incentives for employees to become better informed health consumers on decisions regarding generic drugs, outpatient services, preventive strategies, etc. If participants took advantage of the programs, the company and employees would save money.
But educated decisions were not enough. In order to see real results, MCHD needed to create a healthier community through focused wellness initiatives. The solutions needed to be employee driven, with high-yield objectives and incentives for participation. On top of all this, they had to be fun and sustainable.
A wellness team was formed, consisting of employees from across the organization. Managers were initially involved to help get the group started, but quickly turned decision making over to the team. Humana consultants and a local company assisted the team with planning and execution. An initial budget of $360 per full-time employee was allocated to the program.„
The wellness programs have provided more opportunities for employees to be involved in decision making and organizational leadership. A recent employee assessment showed increases in satisfaction, engagement and loyalty. Although a direct correlation between our new programs and improved employee ratings has been difficult to demonstrate, informal interviews with employees suggest that program participants are genuinely appreciative of the commitment MCHD has demonstrated to their personal wellbeing. We plan to incorporate additional survey tools to assess how our employees value the program, as well as find out what other types of support they would like to have in the future.
The initial budget allocation for the wellness team was $72,000 (approximately $360 per full-time employee). This included administrative, program and reward costs. Because only half of the staff participated, actual expenses totaled $35,800 in the first full year.„
The immediate return on investment was substantial. MCHD budgeted„$190,000 for health-care premiums, a 12% increase based on the previous years' experience. The actual renewal quote„ was a 2% reduction in premiums --„an actual savings of $27,852. This resulted in a budget savings of $217,852.
The reduction in premium costs is directly attributed to the claims experience during the previous 15 months. Better-than-benchmark utilization of prescriptions, preventive care, and overall per-member, per-month cost allowed MCHD's claims-to-premium ratio to drop from 86% to 66% despite an increase in high-cost claims. The consumer-driven health plan option is thought to be responsible for a nearly 60% increase in the generic drug utilization rate -- 8% higher than the peer benchmark rate.
These are only first-year results. However, the sustained successes in healthier employees should continue to reduce pharmaceutical claims and will help blunt the impact of a couple high-cost cases. Recent outcomes information indicates that medical cost trend has remained lower than industry at approximately 6% year after year.
Based on the success thus far, the wellness program received continued funding support. As the program moves forward, MCHD plans to require participation in annual health assessments and„Humana programs„ to qualify for reimbursement. The program needs annual aggregated data to judge progress and identify future objectives. We have partnered with the health plan (Humana) and consultant (McGriff, Seibels and Williams Inc.) to jointly obtain and evaluate the data for future opportunities.
MCHD is exploring options, including ongoing health fairs and preventive screening. There is a short-term goal of expanding wellness opportunities to family members. There are also plans to increase participation with additional fun, competitive events.
It is never too late to evaluate and reconsider how your agency handles health insurance. Developing a more modern approach might make employees happier and your budget healthier. An employee survey regarding health-related issues might be an effective way to gain initial insight on your health-care needs. A health assessment is critical to all employers looking to move beyond a direct-cost only solution. Finally, decision makers within the organization must be involved. Although programs can become self-sustaining once they have taken root, without leadership's involvement early in the process, it is unlikely that a culture of wellness can develop. Incorporate health and wellness issues into leadership meeting discussion. Benefits are a large proportion of any company budget. It deserves attention both inside and outside of the HR department.„
Allen Johnson,MPA, is CEO of Montgomery County Hospital District. Contact him email@example.com.„
Mark Netoskie,MD, MBA, is the medical director for Humana Health Plans.