While the full impact of recently passed health care reform legislation won't be felt by businesses for several years, the current high and growing cost of health care insurance isn't escaping anyone's notice. A June survey by the Council of Insurance Agents & Brokers showed that some three-quarters of its member respondents said premium increases for small accounts (50 or fewer employees) had grown by 11% or higher. For large accounts (501 employees or more) the increases were slightly less dramatic. Nevertheless, 31% reported increases in that range. Another 35% reported increases of 6% to 10%.

"We have a big concern for health care costs," says Steve Ewing, Herr Foods' benefits manager. That concern is reflected in the snack food maker's current 11-page strategic document for attacking health care costs, a plan it puts together annually with its health care partners. "Trying to bend that [health care] cost curve is a big influence on us annually."

While not explicitly stated, one idea that permeates Herr Foods' strategic document is that a healthy employee is a less-costly employee. That thought, at least in part, is driving manufacturers such as Herr Foods to implement health care plans that actively promote a healthy lifestyle.

"We're trying to transition from a sick plan to a health plan," explains Ewing. The manufacturer, whose approximately 1,500 employees straddle eight states, recently introduced biometric testing (screening for blood pressure, cholesterol and glucose) and health-risk assessments (HRA) to its employee population. Such efforts serve multiple purposes. One is the idea that if employees are made aware of their health risks, they will make choices to help reduce those risks. Secondly, the data can help Herr Foods determine the kinds of wellness programming to implement to improve the health of its employee population. Ewing points out that Herr Foods sees only the aggregate data of its employee population. CoreSource, its third-party health care administrator, manages the data.

"We want [employees] to live a longer, healthier life and, in return to us, our health care costs are going to be under control. We should be able to bend that curve by preventing costly health care expense down the road. So that's the transition we are trying to go through," Ewing says.

For Herr Foods employees, participation in the biometric testing and HRA was voluntary, but the company offered $5 per week reductions to employee health care contribution to those workers who went through the process. About 65% of employees participated in the effort, Ewing says.

"When you think about health care expenses, 20% of your employees cause 80% of your claims, and 50% of that 80% is directly related to lifestyle," Ewing says. "That's why we feel it's important for people to assess where they are at." Additional wellness programming includes a voluntary diabetes management program for invited employees. Herr Foods waives employees' copays on diabetes medication and supplies for participants who attend scheduled meetings with a pharmacist coach.

Ralco Nutrition, too, has been growing its efforts to improve the health of its employee population. Employees at the 110-person company are required to have an annual physical to be eligible for the company's health insurance. Like Herr Foods, the manufacturer introduced health-risk assessments to its populace. Fitness challenges, such as a walking program, give employees opportunities to earn financial contributions to their health savings accounts (HSA). More recently Ralco has embraced a more comprehensive approach to improving worker health with assistance from health-risk management company Smart HealthSense. "Becoming healthier is good for everyone," says Shelly Gniffke, Ralco Nutrition's human resources manager.

Herr Foods and Ralco Nutrition are not alone in aiming to boost the health of their workforce. According to a recent survey by the National Business Group on Health, wellness initiatives to improve employee health were cited among the top three most effective tactics to control health care costs, coming in just behind consumer-directed health plans and ahead of increased employee cost sharing. (The National Business Group on Health is an organization primarily composed of Fortune 500 companies and large public-sector employers. Seventy-two members completed the survey.)

Both Ralco Nutrition and Herr Foods apply the wellness focus in combination with other tools to control health care costs. Ralco, for example, last year increased the employee deductible of its health care plan. It also began offering an HSA to employees. Still, the manufacturer faced a potential 20% increase in its health care premiums in 2010. Instead, with some creative restructuring assistance from Smart HealthSense and the identification of an insurer who recognized the value of a healthier workforce, Ralco was able to bring down that premium increase.

In September 2010 Herr Foods was slated to conduct a dependent audit to assure that only eligible dependents are making use of its health care plan. It also employs a pharmacy step therapy program for four classes of medication: acid reflux, allergies, cholesterol and depression. The step-therapy program organizes eligible medications in a series of four steps, with the first step being the least expensive drugs in each class. In short, the program aims to assure that employees use the least-expensive but effective medication in those four classes.

The pharmacy program, which is concluding its third year, has reaped rewards for Herr Foods, which implemented a self-insurance medical plan in September 2009 but has always been self-insured for pharmacy. Pharmacy costs have increased by only 1% to 2% over what they were three years ago, Ewing said. "What we've seen by managing our pharmacy benefits is what we hope to see by managing our medical spend now. That's what we hope from wellness."

Ewing does not expect to keep health care cost increases to 1% to 2%. But the benefits manager said the hope is that the focus on wellness will keep health care cost increases to single digits, ideally, 5% to 6%. "Will we get to where we want to be? We think so," he says.

Still, Ewing adds, "Now with health care reform, who knows? If they think that health care reform is going to save us money, I think they are out of their mind."

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The Return of the Raise
Is This Good For Manufacturing