Linda Anderson felt compelled to try offering a wellness program last year for employees at Neighborhood Housing Services of Chicago in an effort to contain health-care benefit costs that were spiraling out of control.
The non-profit organization, which provides counseling to first-time homeowners, saw a 16 percent increase in health insurance-related expenses in 2006 from 2005, said Anderson, the agency’s director of human resources. She scoured the benefits literature and learned about early successes big companies were reporting with new wellness initiatives.
“I wanted to take the information I found about programs for large employers and model that for our smaller environment to produce some of the same results,” she said.
In December, about a third of the agency’s 93 workers received confidential health reports on the findings from an onsite blood draw, said Anderson. Among the 27 workers who participated, several learned about health problems they didn’t know they had and pursued follow-up visits with their primary-care physicians, said Anderson. Interactive Health Solutions, the Arlington Heights-based wellness program provider, also offered professional health coaches to boost employee compliance in their medical care and recommended lifestyle changes.
More options
Neighborhood Housing is among a new crop of small businesses tapping wellness programs — as well as consumer-driven plans — among the newer options in health-care benefit choices that, until recently, mostly larger companies have adopted. Like their bigger counterparts, proprietors of smaller firms have been hit with consistent double-digit annual increases in health-care costs since about 2000 and are desperate to find affordable ways to maintain the benefit, said Robert J. Nielsen, managing director at Mesirow Financial, a Chicago-based financial services firm. Competition for good workers locally has made it imperative for companies to include health insurance for recruitment and retention, he said.
“Small employers can’t afford not to offer health insurance,” said Nielsen.
Indeed, only about 59 percent of smaller companies nationwide this year provided health insurance for their staff compared with about 68 percent in 2000, according to a national employer survey conducted by the Kaiser Family Foundation, a Menlo Park, Calif., non-profit that focuses on health care. And a Chicagoland Chamber of Commerce member survey in 2004 showed 68 percent of small-business respondents offered health benefits to their workers.
The chamber is expected to release a report in January from a state-funded study of health-care insurance for small businesses that will include recommendations on how employers can stabilize health-care costs and make them more predictable in the future so they can provide the benefit to their staff, said Jerry Roper, president. The report’s suggestions will include offering wellness programs, discounts on health club memberships and paying for flu shots and annual exams, he said.
“If we don’t solve the health insurance problem for small companies, our future local economic development will be a disaster,” Roper warned.
Wellness programs are aimed at finding red flags early and treating or preventing health problems that could result in expensive medical claims and reduced worker productivity, benefits consultants explained. With consumer-driven plans — sometimes called health-savings accounts or health-reimbursement accounts — employers set aside pre-tax funds for each employee as repayment for health-care expenses not covered by their insurance plan. Funds left over in the account at year-end either roll over into the next year and accumulate for the worker or revert back to the company. If healthier workers have fewer medical needs, more money remains unspent in these accounts.
HSAs are different from health-care flexible spending accounts already offered by many employers. The flexible accounts have a use-it-or-lose-it provision that wipes out the account to zero at year’s end if the pre-tax funds set aside in the account aren’t spent during that period.
Smaller employers are opting for HSAs in greater numbers in the Chicago area because more vendors are targeting them with better pricing and data is mounting to demonstrate their merits, said Tom Terrill of Thomas Terrill Inc., a north suburban Lake Bluff insurance brokerage agency. He estimated about half of the small businesses he’s assisting with health-plan renewals are adding a consumer-driven component to their existing benefits. Even companies with as few as two to 10 employees are signing up, Terrill said.
Destiny Health, which combines elements of both wellness and financial reimbursement in its products, in the last two years has doubled the number of Chicago-area small-business employees enrolled in its plans to about 31,000 workers, said Stuart Slutzky, vice president of product development. Aetna has boosted sales of its health-savings account product by 10 percent to small-business owners in Chicago this year compared with 2006, said Gary Oslowski, a vice president. And while most of Humana’s local small-firm clients are enrolled in traditional PPO and HMO plans, smaller employers increasingly are asking about rates for the insurer’s consumer-driven and wellness plans, said Michael Kasper, president of Humana’s Illinois market.
Drawbacks of plan
Insurance brokers caution one downside to consumer-driven plans is the challenge of educating employees about the sometimes complex financial mechanics involved. Workers’ financial responsibilities can differ from plan to plan, and if they don’t pay attention, they may not reap the intended cost savings, said Terrill. “It’s a disruption to explain these new plans to employees and some employers don’t want to bother,” he admitted.
Additionally, financial savings may not occur overnight with many wellness or consumer-driven plans. Benefits managers may have to wait two years or longer before they see improvements in reduced medical claims or lower insurance premiums that theoretically should result from a healthier workforce, according to Nielsen. Putting the right incentives in place can inspire workers to get healthy, he said.
Kirk Hardy devised a financial incentive for employees at The Paper Tigers Inc. in Bannockburn to line up for a voluntary blood screening in the company’s new wellness program in 2005. If workers declined to participate, the company would take out a bigger chunk from their monthly pay than the $200 it was already withholding for health-insurance coverage, said Hardy, administration director for the company, which distributes pulp and paper products to the packaging industry.
The result: 100 percent compliance among its 70 employees, recalled Hardy. Many workers who learned about previously unknown health issues followed up with their doctors, he noted.
The ripple effect was startling. The wellness program’s introduction contributed to about half of a 40 percent reduction in health-care insurance expenses Paper Tigers incurred that year, Hardy revealed. Annual health-care costs fell to $288,000 in 2005 from $470,000 the year before, he said.
Treacy Marketing Group was also an early adopter of these newer plan options among small businesses, but in owner Beth Treacy’s case, it backfired. The downtown Chicago marketing firm enrolled its 12 employees in Destiny Health’s integrated product in 2004. Workers there loved the innovative plan because it focused on incentives to keep them healthy and save them money, said Treacy. However, she was forced to revert back to a PPO-HMO plan in 2006, when her firm couldn’t afford the rate increase Destiny Health proposed for the coming year, explained Treacy. She was quoted a more affordable rate from Humana during the renewal bidding process.
“Unfortunately, it all came down to money,” Treacy confessed.
