Now more than ever, employers are relying on data to detect health-care trends and encourage their employees to lead healthier lifestyles.
These days, the news headlines are seemingly dominated by crisis strategies involving dramatically slashed employee pay and benefits at companies that are grappling with bankruptcies, emergencies and collective bargaining. Meanwhile, behind the scenes, stable companies are increasingly partnering with employees to reduce risk and generate sustainable performance.
Helping employees "get a life" by voluntarily turning around high-risk lifestyles can generate dramatic savings in employee-benefit costs. Using data to identify the biggest drivers of benefits costs can lower expenses and lead to healthier employees.
Welcome to the new reality where, now more than ever, employers are making use of technology and consumerism to cut costs and permanently redefining the employer-employee relationship in the process.
These partnership strategies are an especially good fit for companies that sell high-margin products, or are in stable industries or have large populations of high-risk employees.
Last summer, for example, Pamela Hymel came to computer networking and Internet infrastructure company Cisco Systems in San Jose, Calif., with a cost-cutting strategy based on the company's shared interest with its employees. Her concept is simple: Promoting healthy lifestyles and better self-management of chronic medical conditions will give employees richer lives, says Hymel, Cisco's senior director for integrated health. Because employees with chronic conditions generate a disproportionate share of medical and disability costs, they hold the key to reducing an employer's costs.
In practice, this approach requires a chess player's skill for incremental program development, building data systems to analyze where cost increases are coming from, linking diverse programs into an integrated network and changing corporate culture.
In her third month on the job, Hymel launched her first project last October, her so-called "Health Connections" program. It includes a branded portal exclusively for Cisco employees managed in partnership with WebMD, a health-information provider based in New York. "This is going to be the cornerstone of trying to get a handle on employees taking charge of their lifestyle risks," says Hymel. "It will give employees access to a number of different support tools."
The Web site includes an online health-risk appraisal that employees can complete in 15 minutes, for their own use. It also provides general, anonymous data to identify trends in health risks among Cisco's employee population. The site will also provide employees with the opportunity to obtain hospital-quality evaluations and other data to help them select health plans during the open enrollment season.
Within three months, 40 percent of Cisco's U.S. employees had taken the risk-appraisal survey on the company's branded WebMD site. That's not as many as Hymel had hoped, but survey vendor Ingenix says it's a good response, considering the survey wasn't aggressively promoted.
"We'll be using that information to launch our full health-care programs," says Hymel.
The employees working for Cisco Systems present Hymel and her lieutenants with an opportunity and a challenge: Claims data reveal the young employee population, as expected, has a low rate of chronic conditions. That means medical costs are lower than average and may remain so in the near future. But it may also mean Hymel doesn't have the low-hanging fruit of excessive health costs that quickly yield exciting cost-reduction statistics.
Still, with health-risk appraisal data in mind, Hymel says, "We're trying to uncover risk factors that we could begin to address so they don't turn into chronic diseases over time."
Younger employee populations aren't necessarily healthier, however. Hymel's previous employer, a Boise, Idaho-based call-center operation owned by Hughes Electronics, had exceptionally high benefit costs despite having a workforce with an average age of just 28. Approximately 14 percent of the call center's 1,000 employees had high blood pressure, 21 percent had high cholesterol, 22 percent smoked and 19 percent were obese, weighing in with an average body mass index of 35 or more.
Those rates were three to five times higher than the overall average among Hughes employees in some categories. The unit also had an exceptionally high number of lost days and pervasive "presenteeism" (employees who are physically present but less productive due to illness or other factors) problems due to high rates of obesity, depression and pain. In addition, those workers rated by supervisors as being in the lowest 10 percent by performance also had two or more health risks.
To help employees reduce their personal lifestyle risks, Hughes provided health-enhancement programs, a focused employee assistance program, a migraine program, basic back education and programs for pregnant employees. "In the first year, we were able to show a net savings after program costs of $95 per employee per year, averaged across all the employees in the unit," says Hymel. "Overall, the entire unit also saw a decrease in short-term disability of 6 percent and a decrease in workers' compensation costs of 5 percent."
News Corp. bought the unit in 2003 and liked the risk-reduction approach enough to apply it in two other call centers that the company acquired later on, Hymel says.
Pitney Bowes, the Stamford, Conn.-based mail- and document-management company, also understands the power of accurate data to help managers cut the cost of employee benefits. Pitney's advanced medical-data system can identify sources of benefits costs while protecting the privacy of individual medical information.
When most companies were shutting down their in-house medical clinics at the start of the outsourcing boom in the early 1990s, Pitney Bowes went in the other direction. The company's data indicated the clinics could help rein in lost-time from minor non-occupational events as well as on-the-job stressors at Pitney's manufacturing plants.
In-house follow-up studies validated the strategy, having documented substantial savings thanks to the work performed by the clinics.
In 2004, Pitney Bowes went a step farther, enhancing its data systems by adding predictive-modeling software capabilities.
"The predictive-modeling results showed the health burden on our population and the costs that were driven by the lack of drug-taking compliance," says Assistant Medical Director Brent Pawlecki. "It also showed we had a population in our Connecticut manufacturing operations in which about 50 percent had some form of a chronic condition."
While other employers used restrictive tiered pharmacy systems to corral employees into buying generics and drugs approved by the health plan, Pitney Bowes instead liberalized its tiers for employees with diabetes and asthma. The new system made more effective drugs affordable for employees, who improved their treatment regimens and drug-taking compliance, says Pawlecki.
The program has also brought positive bottom-line results for the company: Within its first year, total medical costs for treating diabetes came down by 6 percent, and costs for treating asthma came down by 15 percent. Even overall costs for pharmaceuticals came down. Although the company paid more for daily medications, employees had fewer emergency-room visits requiring the most costly drugs used in a medical crisis, says Pawlecki.