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Navistar Healthcare Cost Trends 'Flat' to 'Negative'

This is part of a special advertising section highlighting case studies featuring successful strategies in benefits.

Monday, March 1, 2010
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The words "flat" and "negative" don't normally have a good connotation, but they get lots of applause from shareholders when they're referring to cost trends. Navistar International Corp., a global leader in the manufacturing and sales of commercial trucks, buses and diesel engines, has been able to contain its healthcare costs, which have remained flat and have even gone down at times, since 2005.

Navistar faces the challenge of unusually high active-employee and retiree costs due to the rich benefits offered through the company's inclusive culture, contracts with multiple labor unions and a legal settlement with retirees. And like all employers, the company also faces rising drug costs and increasing utilization.

Keeping these factors in mind, Navistar's healthcare cost trend is even more impressive when compared to the national average of approximately 6 percent.

How do they do it? By making smart business decisions about managing employee health and productivity and collective bargaining -- backed by predictive modeling based on their own experiential data.

Navistar Director of Health and Productivity Dan Pikelny's goal is to bend the curve of the company's healthcare trend.

"My challenge is to reduce our healthcare costs and deliver better performance for our shareholders, while at the same time keeping a healthy and productive workforce and helping to provide for a good quality of life for our employees and families," he says.

Data-Driven Decision Making

By partnering with Thomson Reuters, Navistar is able to determine its net costs, track cost trends over time and benchmark costs in comparison to other companies. Navistar uses Thomson Reuters Advantage Suite data and related analytics to support a number of high-impact initiatives that have contributed to its very effective trend management:

* Evaluating disease-management and wellness initiatives;

* Identifying targets for disease-management and wellness initiatives; and

* Developing custom plan-design modeling tools to support the collective-bargaining and benefit-planning processes.

To improve its employee health and productivity, Navistar implements a three-pronged prevention strategy: primary programs focus on wellness for healthy employees; secondary programs concentrate on those at risk; and tertiary programs consist of disease- and case-management.

For disease-management and wellness programs to be successful, companies need to take a data-driven approach to optimize both program function and impact.

"Thomson Reuters' data helps us either localize programs or create initiatives on a global scale," says Pikelny.

This information helps Navistar determine the employees and diseases it should target to impact the most change and save the most money. Knowing what will be the most effective, the company can institute programs to affect certain clinical issues or specific geographic areas. This targeted approach has paid off with 90 percent of Navistar employees enrolled in one or more wellness, lifestyle or disease-management programs.

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Custom Plan Modeling

Navistar has a significant union workforce and participates in contract negotiations every few years -- and it interacts with multiple unions. To support its collective-bargaining process and analyze different benefit scenarios for its union employees, the company developed its own actuarial model using Thomson Reuters' data. "One of the good things about a developing model like that -- using our own data provided by Thomson Reuters -- is that we can show the union their own experience as we jointly work to reduce costs and increase flexibility of the union health plans. It's a predictive model based on real information," Pikelny says.

Whether making business decisions concerning health and productivity or custom plan design, Pikelny's most valuable piece of advice for other employers: Use your own data. "Don't just assume that because somebody else did something, that same strategy is going to work for your employee population."

HIGHLIGHTS

Organization: Navistar International Corp.

Headquarters: Warrenville, Ill. 

Primary Business: A market and technology leader comprised of four segments: truck, engine, parts and financial services.

Benefits Challenge: The company faces high active employee and retiree costs, plus rising drug costs and increasing utilization.

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