In 2008, while Congress was hammering out healthcare reform, automotive supplier BorgWarner was doing some deep thinking about its own healthcare strategy. Somehow the company had to slow down healthcare costs, which were rising more than the rate of inflation. Introducing more cost-sharing and giving employees better healthcare decision-making tools seemed to be the answer. But how? BorgWarner employees historically had not paid a share of premiums—the company covered 100%--so any change would be a milestone of sorts.
After much collaboration with its main healthcare supplier, Cigna, BorgWarner rolled out what ended up being one of the earlier models for consumer-driven health plans. It bumped up employees’ share of premiums from 0 to 20%, but cushioned the blow by stipulating that workers who completed a health assessment and were tobacco-free could cut their share to almost nothing. It introduced on-site clinics, wellness programs and personal health coaches, and winnowed multiple vendors down to one, Cigna.
The program saved BorgWarner almost $6 million a year. The company now spends on average $9,800 annually on healthcare per employees—14% less than the $11,500 average for large manufacturers, according to human resource consulting firm Towers Watson. Costs are rising at 4.4% per year, less than the 5% industry average.
The healthcare plan is in good enough shape that Michelle DuFour, senior manager for global benefits at BorgWarner, doesn’t anticipate any changes when the Cadillac tax goes into effect in 2018. The Cadillac tax is a 40% tax levied on employers who pay more than $10,200 in healthcare costs per employee and $27,500 per family.
BorgWarner is something of an anomaly for companies of its size. Nearly half of large employers (48%) will qualify for the Cadillac tax in 2018, according to an August 2015 survey of 140 such companies by the non-profit National Business Group on Health. That rises to 72% in 2020, if things stay as they are.
“We thought we would see greater movement toward consumer-directed health plans this year,” but that didn’t happen, said Karen Marlo, NBGH’s vice president.
High Time to Plan
Large employers are still hedging their bets to see whether Congress will make any changes to the tax before 2018, Marlo said, but “at this point they have to acknowledge it has not been repealed. It’s a large component of the Affordable Care Act, so they have to plan appropriately.”
Now is the time for large manufacturers to be “benchmarking” their plan designs, says Marlo: “Do they have similar plan offerings and cost-sharing arrangements to make sure they’re in alignment with their competitors?”
Employers should also be investigating how to best influence their employees’ consumer behaviors with price transparency tools and second opinion services, says Marlo. And they should be evaluating their wellness offerings, “which are harder to connect with healthcare costs. Some employers have had great success with their wellness programs, but they’ve invested in creating a culture at their company in being physically fit and eating healthy.”
Meanwhile, interest in the private exchanges, at least among large employers, seems to have dropped off. In 2014, 35% of NBGH survey respondents said they were considering private exchanges, yet in 2015 only 24% are.
“When private exchanges first came on the market, there was a lot of interest in them, but large employers have determined it may not be the right model for them,” says Marlo. “I think for the smaller and midmarket employers, they make sense because you don’t have a lot of market power. But if you have 50,000 employees, you have a little more leverage in terms of working with your health plan to negotiate fees and make changes in your plan design.”
BorgWarner has about 20,000 employees globally, including about 5,000 in the United States.
Cigna and BorgWarner together analyzed data to see what was driving BorgWarner’s healthcare costs, what health risks they saw in their population and what they could do about it.
“We came up with specific recommendations about what’s working well and what are the best practices, what other employers are doing and what are their options,” said Charles Smith, chief medical officer for Cigna National Accounts. “‘Here’s where we see some real opportunities, and here’s what you can do about them.’ That’s been part of an ongoing dialogue.”
Under the plan they engineered, workers earn points that they can put toward a reduction in their 20% premium. Earn more than five points, and you don’t pay anything.
Another key feature of the plan is “keeping things simple,” something employees specifically requested in surveys. Previously, BorgWarner had a variety of health and wellness programs for employees, “but they were fragmented,” says DuFour. “If there were too many numbers to call, and too many people to try to figure out who they need to talk to to receive the right service, then they just threw their hands in the air and say, ‘I’m not going to engage,’” says DuFour.
Medical, healthcare coaching and disability are now all with Cigna, so the personal healthcare coach has access to the patient’s medical history and prescribed drugs. The hope is that this will speed up the intake process and make it easier for the coach to suggest appropriate health and wellness programs.
The healthcare coaching is done through a BorgWarner-designated team at Cigna. “We asked them, on top of having the one number for health coaching, could we have that number be to a BorgWarner team-- people that are familiar with BorgWarner and our plan design,” says DuFour. “Right now we are doing a FitBit walking challenge across the U.S., as well as a few global locations, and we wanted to make sure that our health coaches were aware of that. So if somebody is struggling with weight, they can say, ‘Oh, did you know that your location’s having this walking challenge? Why don’t you participate in that as part of your routine.’” Healthcare coaches also visit BorgWarner sites for meet and greets and health fairs.
In addition, BorgWarner rolled out wellness clinics staffed by Cigna nurse practitioners or physician assistants at all of its large sites. Visits are free for employees and in some cases also dependents 13 and older. “We aren’t there to replace that relationship with the primary care physician, but boy, for episodic care like a sinus infection” it comes in handy, says DuFour. “When you work in production, people don’t want to take time off the line and away from work in order to sit in a doctor’s office.”
For smaller locations that don’t have a clinic, BorgWarner investigated offering telemedicine but decided against it because they would have had to enlist another vendor. “Cigna right now, their telemedicine program would require us to do all locations as opposed to picking our smaller facilities,” DuFour said. They talked to employees about the possibility of another vendor, but they were “hesitant,” says DuFour, because the outside clinicians would not be able to access their health history.
One thing BorgWarner is still tweaking is the online component of the healthcare plan. “We’ve had to think about how we can get our hourly people [online] that don’t have access to a computer at work or at home,” says DuFour. “We continue to struggle a bit with that, which is part of the reason why we don’t provide rewards for online coaching. We really want it to be over the phone.”
But overall, DuFour is pleased with how things have shaped up. “I think our numbers speak volumes that it’s not just through risk shifting to employees that we find our lower cost relative to our peer companies,” says DuFour. And by keeping costs down and showing them a clear path, “I think our employees feel like we have respect for them.”