Feature Stories - October 2005

Taking the Pulse of Healthcare:

A Look at Employer-Sponsored Health Benefits

by Jennifer Rachel Baumer

Rising Costs of Healthcare – What’s an Employer to Do?

Rising healthcare and insurance costs have an impact on employers’ bottom line. Being able to offer coverage also has an impact – not having a healthcare benefits package is frequently cited as a source of dissatisfaction among employees. According to a report by the Kaiser Family Foundation and Health Research and Educational Trust, "Employer Health Benefits 2004 Summary of Findings," healthcare premiums continued at a moderate rate of growth in 2004, increasing at double-digit rates. The average annual premium for employer-sponsored coverage rose to nearly $3,700 for individual coverage and nearly $10,000 for family coverage. At the same time, the percentage of workers receiving health coverage from their employer fell from 65 percent in 2001 to 61 percent in 2004, with 5 million fewer employers providing health insurance in 2004 than in 2001.

Offering a healthcare plan can mean the difference between getting the employees you want and not getting them. "It’s very important for employers to have a healthcare plan to offer potential employees," said Ty Windfeldt, marketing director for Hometown Health, a not-for-profit division of Washoe Health System. "With the unemployment rate so low, employers are really competing for high-quality employees, and one way to compete is by having a health plan."

The bottom line: If you’re an employer, you can’t afford to offer healthcare benefits, and you can’t afford not to. Employers are understandably concerned about rising premiums. Many feel healthcare providers are unjustified in raising their premiums and that doctors and hospitals overcharge. In their defense, providers point the finger at the very advances that make healthcare coverage so desirable. From pharmaceutical advances to bio-tech discoveries, everything costs more.

"The more high-tech the medical field gets, the more machines they’ve got doing things they’ve never done before, and there’s a cost associated with that," said Windfeldt. "Medical providers have to offset the costs of providing that technology."

Smaller businesses face additional challenges. Larger employers can spread their risk factors through a large number of employees, so if a few have health problems, it doesn’t have much impact. Smaller employers don’t have that option. "Small employers sometimes feel fairly vulnerable, while larger employers have the ability to provide some good cost-containment measures and take some action to regroup on healthcare costs," said David Dahan, CEO of Orgill Singer Insurance and Investments. "It’s less adverse when someone is seriously ill in a pool of 1,000 employees, versus when it’s one of three."Yet, a healthy labor force is obviously a bottom line consideration too – missed days and absenteeism are costs all employers feel.

Chambers of Commerce across the country are taking steps to help small employers provide the same benefits to their employees as larger businesses. Orgill Singer is the managing broker of a Las Vegas Chamber of Commerce program offered to companies with two to 50 employees. The programs are so diverse, there’s something for everyone, and by bringing approximately 2,500 employer groups together, small businesses suddenly have the bargaining power of large businesses.

"Altogether, they make up a power base which we actively manage," said Dahan. "With the support of Health Plan of Nevada [the plan provider] and the Chamber continuously managing the program, we get to see how it performs. And some of the greatest rewards are that it’s a collaborative effort and everybody is able to benefit from it."

It must be working – when the plan came up for renewal, 98 percent of the employers stayed.

Working Together: Employers, Employees and Healthcare Providers

Once an employer has a program, what then? How does the company defeat the ever-rising costs of continuing to supply healthcare for its employees? "We can do a number of things to control costs," said Windfeldt. "We have disease management programs for diabetes, asthma and congestive heart failure and we encourage individuals at risk for those diseases, as well as their physicians, to enroll." Already the programs are seeing success: re-admission rates for those conditions have gone way down.

Harry York, executive director of the Reno-Sparks Chamber of Commerce, suggested that businesses are starting to take wellness a step further, incorporating concerns about potential employees’ alcohol intake, smoking and/or weight factors into interviews, integrating wellness into job requirements. It’s a new concern businesses across the country are wrestling with and it’s not going to go away any time soon.

Alternatives to Traditional Healthcare Plans

Established in 2002 as part of the Medicare Reform Act, Congress implemented healthcare savings accounts as a sort of medical 401(k), allowing employees to put funds into tax-deferred interest-bearing accounts to be used for qualified medical expenses. Employees can take the program with them when they change jobs.

"The savings account aspect and the higher deductible in these plans make the employees more responsible on how they go about spending that money and the number of times they go to the doctor," said York. "But it has to balance. You don’t want your employee to avoid going to the doctor. You want them to be healthy, but responsible, and not going just because the kids have runny noses."

Wellness plans are another option, urging employees to take the lead in their own health and healthcare. "It may sound superficial, but I think employers really need to promote healthy lifestyles, and that’s difficult in today’s age of, ‘I’ve got my right to privacy,’ and everything guarded and everything private. But clearly a healthy workforce that focuses on healthy lifestyles and preventing disease will ultimately have some long-term impact on the cost of providing group insurance," said Don Giancursio, vice president of sales and marketing for Sierra Health’s Health Plan of Nevada.

One of Sierra Health’s subsidiaries is Southwest Medical Associates, a medical group which salaries its doctors, a step in the direction of cost control that’s obviously popular, as 75 percent of Sierra Health’s membership chooses Southwest for primary care.

Hometown Health offers clinic-driven programs on campus at Washoe Medical Center, programs staffed by nurses and physicians who will actually contact the employee and say, "I’ve noticed you have diabetes. Let’s talk about what you can do to control it." Hometown Health also offers a hotline that members can use around the clock. A nurse answers each call and triages the patient over the phone, directing the person to appropriate healthcare settings.

"If an individual with heartburn calls the health hotline at 2 a.m. wanting to know if he or she should go to the emergency room, the nurses will walk that person through an algorithm and triage, find out what’s going on and direct him or her to appropriate healthcare," said Windfeldt. "It might be a home health remedy, or it may be a serious condition and we’ll dispatch an ambulance."

Outlook for the Future

Efficiency is the wave of the future, as one more way to lower healthcare costs. For example, the use of hospitalists. In practice in Europe for over 50 years, hospitalists are just becoming known in the U.S. These are physicians who spend 100 percent of their time in hospitals. Patients on a plan that utilizes hospitalists are assigned a hospitalist for hospital in-patient care. "The premise is that these physicians are doing hospital work all the time and they are more proficient and efficient than people who do it sometimes and see 30 or 40 patients in an office and only two or three in the hospital," said Dr. Sherif Abdou, M.D., president and CEO of Pinnacle Health System, LLC, which provides clinical and management services to healthcare providers throughout the U.S.

Patients are assigned hospitalists in one of three ways: by contract with their healthcare provider, by assignment by their primary care physician, or on a rotation basis when admitted through an ER visit. The arrangement means patients aren’t allowed to choose their own doctor when in a hospital situation, but it does increase efficiency and standards of patient care and leads to more consistent treatment.

One of Pinnacle’s subsidiaries works within the healthcare field to increase efficiency and lower costs. The group handles a range of support services for physicians, including traditional practice management and billing, standardizing the process and delivery of care inside primary care offices to provide clinical services, and make certain patients receive appropriate care. The group also works to set up electronic medical records, which saves time and lowers costs, especially when patients visit a new physician who instantly has access to their records and doesn’t duplicate tests and diagnoses.

"We need to educate employers the best we can as to why costs are going up across the board," said Windfeldt. "We can tell them things like, ‘For your employer group, your costs are higher than average because you have a higher-than-average trend of diabetes in your employee group. Here are some things we can do to lower costs.’"

Dr. Abdou believes information can also help lower costs. In addition to learning about their healthcare plans, employers need to have information about patient satisfaction throughout the continuum – from nursing homes to ambulances, home health agencies to hospitals, physicians to out-patient surgery centers. "Employers can push every one of those units and say, ‘In order to get a contract with us, you must provide your utilization data and patient satisfaction survey, your clinical outcomes and core data standardized by Medicare requirements or state requirements.’ Doing that will force a transparency of critical information that will change the face of delivery in healthcare."