Capital Region Business Journal

Health-care costs were rising as much as 35 percent a year for the nonprofit Wisconsin Business Development Finance Corp., and CEO Joe Wolfe didn't think there was much a small company like his could do to stop them.

Employers in the capital region and around the state are trying new tools to combat exploding health-care costs, which hit an average of $8,605 per employee last year in Wisconsin and are 25 percent higher than the national average, according to Mercer Human Resource Consulting, an international consulting firm with headquarters in New York and an office in Milwaukee.

This year, Madison-based WBDFC doubled its employees' deductibles from $500 to $1,000 and increased copayments for office visits from $10 to $20.

To make the plan more palatable, the organization increased from $1,500 to $2,000 its contribution to the Health Reimbursement Accounts employees use to cover dental, vision and other health-care costs. Employees also can carry over up to $500 in the HRA accounts from one year to the next.

"If we can reduce the company's costs, give them some more money in their own accounts, let those accounts roll over for future years, we were convinced it was a good thing," Wolfe said.

The result was a 7 percent net reduction in health-care costs this year for the company, which has 28 employees in five offices around Wisconsin. And Wolfe said the savings on premiums helped employees, who now pay 20 percent of the premium for the preferred-provider plan.

"They were assuming more risk, but they were willing to do that," Wolfe said.

The Kaiser Foundation's Employer Health Benefits 2004 Annual Survey found that premiums nationally experienced four straight years of double-digit growth, and that can have dramatic effects on businesses.

A survey by TEC International, an organization of chief executives, found that nearly one-third of the 200 executives polled in Wisconsin said high health-care costs had slowed hiring.

Even the state of Wisconsin, long known for its generous health benefits, is requiring government employees to pay a larger share of their health-care costs as lawmakers wrestle with massive budget deficits.

General Motors, which has an assembly plant in Janesville, is reportedly facing a $1 billion increase in medical costs this year. The automaker's chairman has said those costs add about $1,500 to the price of every vehicle.

Japanese competitor Toyota has tried to deal with escalating health-care costs by opening its own pharmacies at plants in the United States.

In Wisconsin, Sussex-based Quad/Graphics has taken matters into its own hands. The printing company, one of the nation's largest, set up its own primary-care clinic in 1990 as a way to control costs.

The company, which has since built two larger medical centers, spent about $6,000 per employee on medical costs in 2004, one-third of the average Wisconsin company.

But with 12,000 employees, Quad/Graphics has the resources and a large enough work force to do what many employers can't. Smaller businesses have looked to other strategies to get a handle on health expenses.

The Kaiser Foundation survey found growing interest among employers and insurance carriers in consumer-driven health plans that include individual tax-free accounts, like the arrangement being used by WBDFC.

Employees use money from the accounts to pay for medical care. Once the money is gone, they must pay out of pocket until the deductible is met.

About 6 percent of companies said they were "very likely" to offer such an arrangement in the next two years. Twenty-one percent reported being "somewhat likely" to do so.

Health Reimbursement Accounts give employers the most control. Only employers can contribute to HRAs, and employers decide what services are covered. Employees may be allowed to carry a balance over from year to year. HRAs are not portable if an employee leaves the company.

Beginning last year, Health Savings Accounts became available as another way for employees to save and pay for medical expenses free from federal taxes. HSAs have more specific requirements and must be paired with health plans that have a minimum deductible of $1,000 annually for individual coverage or $2,000 for family coverage.

Unlike HRAs, both employees and employers can contribute to HSAs. An employee may carry a balance over from year to year, and the account is portable if an employee moves to another company.

Wisconsin business groups are pushing for state legislation that would allow employers and employees to also claim a state income tax deduction for money they put into an HSA. Gov. Jim Doyle vetoed a bill during the 2003-2004 legislative session that would have provided that option.

HRAs and HSAs differ from Flexible Spending Accounts, which allow employees to save money pretax for expenses such as deductibles, copayments and over-the-counter drugs.

Employees must forfeit whatever money they don't use in the FSA each year. Efforts in Washington to get rid of the "use it or lose it" provision have failed.

Companies also are focusing more on wellness, based on the idea that healthier employees ? those who choose exercise over a night on the couch and carrots over potato chips ? mean lower medical bills. Efforts are aimed in particular at those who are overweight, who smoke or who have chronic conditions such as diabetes.

A survey of more than 500 major U.S. employers released earlier this year by the benefits consulting firm Hewitt Associates showed that companies no longer view shifting costs to employees as a way to address rising health-care costs.

Webcrafters Inc., a Madison-based printing company with about 650 employees, has offered health risk assessments to employees for the last decade, but participation hovered around just 20 percent.

"We really needed to educate our people about their own problems to try and avoid catastrophe and to give them the resources to better manage their own health," said Judy Peirick, vice president of human resources.

Health risk assessments, which can include testing as well as questions about habits and family history, are used to identify employees with at-risk conditions and offer suggestions for changes in diet and lifestyle to improve health.

Peirick said Webcrafters was experiencing double-digit increases in health-care costs and decided to do more to get employees to focus on their health.

So company officials gave $50 to any employee who agreed to undergo a health risk assessment. Participation shot up to between 70 percent and 75 percent.

Webcrafters has used data from the health risk assessment results to develop programs such as a weight-loss competition and an effort to get workers to eat five servings a day of fruits and vegetables.

"It shows employees that you're committed to it when you'll do these things on work time and that you're willing to support them at that," Peirick said. "It's a different message when you say, 'Here it is, but you've got to figure out how to do it all on your own.' "

Weyco Inc., a health plan administration company in Okemos, Mich., took an employee health initiative to the extreme, implementing a policy Jan. 1 forcing employees to choose between smoking and their jobs. A few workers quit rather than go along with the idea, but about 20 smokers kicked the habit and stayed at the company.

Some capital region employers have enlisted workers' help in figuring out what programs will work.

Webcrafters designated a wellness committee, which came up with a "back of the bathroom door" campaign to educate employees about healthier living.

Lodi-based Alkar-RapidPak's committee developed an exercise program that allowed employees to earn points for how much exercise they did to compete for weekly prizes; a low-fat cookbook is also in the works.

"Some of it is just common sense that healthier employees will be lower cost," said Dave Smith, vice president-finance and chief financial officer for Alkar-RapidPak. "But it's not even just the lower cost from the health standpoint. Their attendance is probably better. Their performance is better."

Alkar-RapidPak, which has 260 employees, also increased prices on unhealthy snacks sold from its vending machines and offer lower-fat options such as apples for a reduced price.

The company offered an incentive to get workers to participate in health risk assessments: a $10-a-month discount on health insurance premiums.

"I think that's a big motivation factor. Costs are so high and any little bit that can help lower the premiums, they'll do it," said Jeanne Kohl, an Alkar-RapidPak engineering administrator who is on the wellness committee.

One thing employers may find frustrating about wellness programs is the lack of quantitative results, Smith said.

Alkar-RapidPak started doing health risk assessments in 2003, and its wellness programs have been running for a little over a year.

"It's really hard to tell how much that's done to our costs," he said. "You'd love to be able to say, 'Well, all these wellness initiatives have had this impact' and you can't really tell."

Tim Wolff, senior manager for human resources and benefits at The Swiss Colony, said that while simply changing a company's health plan can produce some immediate cost savings, he thinks focusing on prevention is the only way to get a handle on health-care cost increases.

He cited the company's smoking-cessation program, which has prompted seven workers to kick the habit.

"That could be pretty significant," he said. "You prevent a lung cancer 20 years down the road."

The Swiss Colony, with work sites in Monroe and Madison, tries to motivate employees to exercise, holding wellness fairs with motivational speakers and bringing in yoga and Pilates instructors to teach occasional classes. The company also has negotiated reduced rates for YMCA memberships.

Some employers are working to change other habits that contribute to increased health-care costs.

Webcrafters instituted a $50 copayment for employees who go to the emergency room and are not admitted to a hospital, because records showed a pattern of visits to the ER, Peirick said.

"There's urgent cares in this community open 24 hours a day, seven days a week," she said.

The incentive appears to have worked, and the company has seen a drop in ER visits during the past two years.

The company also lowered its prescription drug costs by switching to a three-tier drug plan that encourages employees to buy generics or prescriptions on a preferred list of brand-name drugs if no generics are available.

At Alkar-RapidPak, employees with diabetes are charged only the copayment for generics, even if the drugs or supplies they buy are brand name, to prevent more expensive hospitalization.

"We want them to be consistent with their treatment," Smith said. "One of the most important things is to make sure that they're staying up with that."

Alkar-RapidPak, Swiss Colony and Webcrafters are all members of The Alliance, an employer-owned, nonprofit health-care cooperative founded in 1990 by seven Madison-area employers to control health-care costs.

Nearly 160 employers are part of the group ? including Lands' End, Rayovac Corp., Trek Bicycle Corp. and Winterthur North America ? and more than 100,000 of their employees and dependents have coverage through its self-funded health plans. The Alliance also negotiates preferred rates for health-care services with providers throughout south-central Wisconsin.

Since 1994, the Alliance has also co-sponsored a health insurance program with chambers of commerce in Dane County to provide coverage through Group Health Cooperative for businesses with between two and 99 employees. More than 300 employers participate in the program, called A-CHIP, which covers 2,600 employees and their families.

The program gives Cascade Asset Manage-ment, a Madison recycler of computers and electronics with 25 full-time employees, a much better rate on its health insurance than it would be able to negotiate on its own, said co-owner Jessica Peters-Michaud.

"At that level, we wouldn't be very competitive in terms of getting a good rate ourselves," she said. "It's really been a lifesaver for us in terms of just being able to exist and offer the kind of benefits that we want to our employees."

Health care costs

By Jenny Price

What do you think? Add your comment to the forum

Resources

Add your comment to the forum

Printable format

E-mail this story

Index of advertisers

Directory