Cutting health care costs while improving quality

How Employers Can Slash the Cost of Health Benefits

Cut health care benefits costs and improve quality by arming employees with information. Third of a Three-Part Series. Read Part 1: Getting Rid of Zero Sum in Health Care Read Part 2: How to Renegotiate Your Company's Health Insurance Plan

In 2007, King County, Washington State, launched an intensive employee wellness and patient compliance effort targeting its 14,000 employees. Given the size of its workforce, health care was a significant cost center. According to Dow Constantine, the County’s top executive, “We were being eaten alive by runaway medical costs.”

In response, the County invested in a program that incented employees to change their behavior. After obtaining labor union support, the County invested nearly $7 million over the first two years developing the program and conducting employee outreach and education.

According to Constantine, the upfront investment saved the County over $46 million in the first five years (2007-11). “Our success was due in part to financial incentives we offered our employees,” says Constantine. “The effort returned $61 million in surplus health care funds to the county.”

The upfront investment saved the County over $46 million in the first five years (2007-11).

Reforming health care delivery is only half the equation for improving outcomes and reducing costs. The other half is “patient compliance,” where employees and their dependents take better care of themselves and access the health care system more responsibly. As King County demonstrates, improving patient compliance can dramatically reduce employer health costs and result in a healthier, more productive workforce.

Until now there has been little incentive to address patient compliance because no one in the health care system was paid to do so. However, as health care reform evolves toward a payment system that rewards better outcomes and healthier populations, employers should seize the opportunity and reap the potential benefits of fostering better patient compliance.


Health care Tops Manufacturer' List of Business Challenges
Health care costs top manufacturer's list of primary business challenges, according to the most recent NAM/IndustryWeek Quarterly Survey. (Respondents were able to check more than one response. Therefore, responses exceed 100%.

How Can Employers Involve Employees in Managing Health Care?

Though employers are limited in what they can do alone (due to patient confidentiality and prohibitions against firing or penalizing unhealthy or “non-compliant” employees), insurers can access employee health care data to facilitate programs that address problem areas and incent patient compliance.

Communication: Americans generally don’t like being told what to do. They dislike restrictive networks (i.e., requirements to use selected panels of providers) and only trust doctors to access their health care information. Thus, the way that employers announce upcoming changes is key to success.

Employers should avoid a business-as-usual approach, and instead use communications professionals to develop and implement their employee communications strategy. Employees’ spouses/partners must be involved in all health care communications, especially because mothers are often the primary family healthcare decision makers.

The CEO should lead the announcement meeting and present the proposal (it speaks volumes that the CEO is making this a personal priority). Consider using an experienced health care facilitator as a neutral broker. This will generate added credibility if the facilitator can answer questions that require a deeper working knowledge of health care and compliance programs.

Facilitated sessions must result in a mutually supportive pact with employees, spouses, and their families. This requires a frank discussion about the trajectory of today’s health insurance costs and what that means for future coverage absent real change on everyone’s part. Subsequent communications should include face-to-face meetings, emails and memos to employees and their spouses.

Collaborative responsibility: Employees are suspicious of initiatives that appear to center on improving the employer’s bottom line at their expense, especially around health care where employers have kept increasing employee shares and deductibles and reducing benefits.

To counter this perception, employers must be upfront with the data and explain to their workforce why their interests are aligned and how this can benefit the employees and the company. Employees must understand that without change, health coverage as they know it will soon be unavailable to them. They must understand that Obamacare exchanges, while helpful in reducing the uninsured, do not provide current coverage levels.

Employees must know that with their enthusiastic support and compliance, employers and insurers are willing to fight to maintain and even improve their coverage over time, assuming that employees assume responsibility and make significant changes as well and that results are seen in the cost data.

The company must clearly state its end of the bargain -- how it will take significant financial risk and spend money to implement the program and maintain coverage. Employees must also understand that, in return, they will have new responsibilities that, if done correctly, will improve their health, healthcare outcomes, and perhaps reduce costs over time.

Meeting benchmarks. Employers will enhance their credibility by maintaining current health care coverage levels for a stated period (say three years), contingent on employees and their dependents meeting certain company-wide goals.

For example, in the early 2000’s my company, Blue Cross & Blue Shield of RI, implemented Healthmate Personal Choices for its employees as a beta program. This program was driven by aggressive outreach to employees and their spouses to encourage health assessments and participating in at least two “improvement” programs.

Similarly, insurers can offer individual health assessments to employees and family members and suggest programs in needed areas, such as smoking cessation or weight loss. While quitting smoking and losing weight would be terrific, good faith attempts by participating in the program should be sufficient to be “compliant.”

Although published goals cannot target individuals, company-wide goals should be established and progress toward goals published to all employees on a quarterly basis. Some examples include the following:

  1. Every employee and dependent will have an online personal health record that can be accessed by health providers.
  2. Every employee and dependent will have an assigned primary care physician and an annual office visit.
  3. Particular expenditures and claims expenses (e.g., diabetes complications; other avoidable or preventable conditions) will be published with reduction goals.

Gaining Employee Participation in Health Care Cost Management

At Blue Cross & Blue Shield of RI, I found organized labor receptive to programs that focused on improving employee health. Moreover, they were willing to place obligations on members in exchange for clearly stated benefits. Employers should anticipate initial resistance due to years of mistrust in the present zero sum health benefits game. But this can be overcome through a data-supported approach and thoughtful communications.

King County learned this when it used the Puget Sound Health Alliance (Alliance) as a neutral party to develop research needed to prove the validity of the program. “The unions would never have trusted research if it had come from the county or the providers,” said Mary McWilliams, the head of the Alliance.

What I’ve described is more than a “wellness” program (most of which have had disappointing results). By following the approach in this article, more than wellness can be achieved, including better quality care and outcomes, at reduced costs, and with the right approach, incentives and employee buy-in. If successful, coverage can be maintained and even enhanced over time.

This probably sounds daunting. But considering the rising costs employers pay today for health insurance and how little value employers receive in exchange, these new approaches are worth doing, and done right, your employee base will be healthier and perhaps even more loyal.


Jim Purcell is the former CEO of Blue Cross & Blue Shield of Rhode Island. He is a healthcare facilitator and speaker on healthcare reform and ACO strategies for hospitals, businesses and physician groups.

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