Our Three Piece Solution
Self-funding is a great way to understand healthcare costs and provide a company the opportunity to benefit from any savings that a health care strategy might generate. We found out that reducing your healthcare costs when fully insured does not necessarily produce the benefits that you may hope for or expect.
A few years ago we reduced our healthcare costs by 8 percent and received a 22 percent increase in our premiums for the next year. At that point we decided we needed to do something dramatically different with our healthcare plan!
What we've settled on since those days is a very effective and cost efficient system that relies on three inter-dependent pieces. The first is self-funding, the second is a very active wellness system that rewards health, and the third component is an on-site clinic.
Because the system did not evolve as a single blinding flash of insight, it's probably easiest to explain it based on how it evolved. Like every company, we've struggled to keep rising healthcare costs from eating into our profitability.
Passing the increasing costs along to the employees has never been considered an option for us, one of the unique benefits we provide that differentiates us from other employers is having employees contribute only $1 per month for their healthcare coverage.
In 2007 when the company faced rising healthcare premiums, we knew we reached a point where we needed to get more innovative, so we created our own "think tank" for healthcare. About a dozen employees from all levels and areas of the company volunteered to research the existing literature and report to the group any ideas about how companies deliver their healthcare benefits.
We not only got a wealth of ideas, we also got ownership, and an increased understanding of the healthcare landscape and its many challenges. Starting small that first year (for the 2008 calendar year), we used the input of the committee to design and implement a health education and wellness program to help our 200 or so employees better understand how best to use our healthcare, how to stay healthy and maybe reduce their health care costs as well as those of the company.
Through our High Deductible Health Plan, the Health Savings Accounts (HSA) and the wellness and education efforts we had in place at the time, we saw an eight percent reduction in our overall healthcare costs.
This is the year our progress was rewarded with a proposed 22 percent increase in our premiums! So for the 2009 plan year we made the leap that our healthcare group had been discussing the previous year: we dropped our health insurance and became self-insured.
We kept the outline of the High Deductible Health Plan we had the year before, but switched from an HSA to a Health Reimbursement Account (HRA). This meant that instead of dividing more than $300,000 amongst every employee on our plan as we did with our HSA, we reimbursed only a limited portion of the healthcare dollars employees spent above their deductibles and the company "got back" whatever was reserved but not used.
The idea was that we'd pay less in the HRA plan. Although the HRA did require fewer dollars than the HSA plan ($225,000 versus $300,000), it was not an optimal solution and we continued to search for a way to use those dollars in a more strategic manner.
Without really knowing, we had put into place two important pieces of our three part solution, we had started down the path of trying to keep people healthy and we'd adopted self-funded healthcare strategy.
The third component to our model emerged from studying our data - which being fully self paid allows you to do with greater detail than if you're fully insured. When we analyzed where our 2008 healthcare dollars went, we saw that we had nearly 1800 primary care visits, each costing in the $125-150 range.
We also found that a relatively high proportion of our expenses went towards prescription medication. Because our workforce would soon grow to nearly 300 employees, we knew that as our employee base grew we'd see a corresponding linear increase in these fixed costs.
One way to control these expenses would be to find a provider willing to offer lower cost primary care or contract the services at a fixed rate rather than a variable rate. We also knew we'd have to find a way to avoid the astronomical markups on the costs of medication.
In 2009 we more aggressively researched the on-site "doc in a box" strategy. While we liked the concept, we did not like that the providers of these on-site clinics were all based out of town. They didn't know local healthcare or even the doctor they'd select for the clinic.
The clinic manager would run several regional facilities from a remote site. This all meant that for the provider it was a very low risk business venture. Unfortunately, for us it felt like an enormous gamble! If we were going to put a clinic on site, we wanted a partner who was just as motivated to make it successful as we were.
Around this same time our broker, BB&T Insurance Services, had been meeting with all the healthcare providers in the region with the goal of finding a partner for a slightly different model they'd been working on. BB&T understood that our goal in researching an on-site clinic was to address three interrelated issues:
- encourage employees to practice preventive medicine,
- reduce the costs associated with primary care visits, and
- better manage the costs of our prescription medications.
BB&T introduced us to key people at a major caregiver in our region, the Baptist Health System. They liked the onsite clinic idea and were very interested in partnering with us to expand their HealthWorx and Immediate Care Center strategy at the Appriss facility.
Our immediate reaction could not have been more negative!Inviting one of the local competing health care providers into our company to provide primary care (and be the source of referrals to other specialists) was a lot like asking the fox to guard the henhouse.We had many serious concerns, such as:
- Could a healthcare provider understand what we were trying to achieve?
- If so, would they be willing and able to help us drive down primary care costs and substantially reduce the cost of medications?
- Would every visit to the onsite clinic lead to a referral? Would they ever provide referrals to any caregivers outside of their own network?
- Will they share their expertise to provide proactive preventive care in order to keep our people healthy and OUT of the very kinds of healthcare facilities they operate?
It took months of communication and planning for us to become convinced that they not only understood what we were trying to do, they were every bit as committed to making it successful as we were. After much discussion, it became apparent that our health care strategy was their overall business strategy.
When we opened the Appriss/Baptist 800 square foot onsite clinic in early 2010, we had the third key component of our model. We had become self-funded, we were highly focused on wellness and preventive care and we had an on-site clinic.
Our clinic was the first of its kind in the Louisville area, designed to be a full service primary care, wellness and medical home to Apprise employees and their families. The convenient location increases the likelihood of preventive care for employees and their families and the free visits and free generic medications provide great incentives to use it.
The logic behind the clinic lies in the simple fact that there's a fairly low break-even point between the fixed costs of the contract versus the employer's share of outside primary care visits. In other words, because the per visit costs are less at the clinic, you don't have to have that many patients substitute clinic appointments for outside appointment before your cost of primary care comes down.
Clearly the success of the clinic depended upon its utilization. Our goal was to get over 35% of our primary care visits to switch from outside doctors to the clinic so we'd pay for the costs of the professionals and the clinic supplies.
Assuming only a slight increase in total primary care visits, any percentage above 35% would have actually represented a decrease in the primary care cost portion of our total healthcare spend. If we were to achieve about 70-75% transfer of primary care visits to the clinic in the first year, we'd not only pay for the contract and the supplies but also the reconstruction costs incurred to house the clinic.
After opening on April 14, 2010, the clinic has had 298 visits by 268 patients. Ninety (90) percent of the appointment times have been filled. Over 85 percent of the Appriss employees eligible to use the clinic or a family member have used the clinic. Of those who've used it 96 percent report a favorable experience and would recommend it to others.
Because of the immense impact of the clinic, our overall healthcare spend decreased almost 10 percent while the size of the workforce increased. Another advantage of having the clinic on site is that it serves as the headquarters for our Health Incentive Program, which will provide a longer term payoff for both employees and Appriss.
Our goal is to promote higher levels of employee engagement in their health and well-being, so we can all stay healthy for a longer time. To encourage these behaviors we crafted a plan where part of the money we save on healthcare is shared with people who maintain their biometrics.
Twice per year every employee on the plan (and his/her spouse or partner) has the chance to earn cash rewards for maintaining or improving their current level of health as measured by four key predictors of chronic illness (those being blood pressure, bad cholesterol levels, body mass and glucose levels).
The goal is to keep people healthy and to avoid the slide into any predictable chronic illnesses caused by simple neglect.An employee can earn $50 for each of the factors that do not get worse between semi-annual assessments, or stay in the healthy range.
That's a potential $400 in "health dividends" each year. If there are two adults on the plan, they can each earn $400 annually. With this plan we financially reward healthy behaviors. We see these incentives as a better investment of the dollars we had previously been giving away (through our HSA) or using to supplement only the greater users of healthcare (as in our HRA).
In our most recent assessment, we paid out $80,000 (or about 80 percent of the maximum possible) for maintenance of the key biometrics. At that rate, we'd invest $160,000 annually to reward healthy behaviors, rather than distributing 250,000 to 300,000 dollars in HRA or HSA plans that do not shape desired behaviors.
Appriss offers a number of other benefits and initiatives that support our overall health effort such as on-site fitness programs, reimbursing half of employees' gym memberships, providing healthier food and snack selections at meetings and in vending machines, nutrition and wellness classes, and convenient onsite delivery of a healthy foods through a Community Supported Agriculture (CSA) program.
With the constant changes in health care policy, practices, rules, and regulations we cannot predict whether or not this approach to health care will continue to be successful. For us, for now, the three piece solution appears to be a very effective strategy.
We know that it has been well received, has had a favorable impact on overall health care costs, focuses on the employees' health and well being, and the on-site clinic is highly used and greatly appreciated by many employees and the families. And can you think of anything else that an employer can offer, is perceived by the employees as a benefit and can actually save the company money?
Appriss is a "Software as a Service" (SaaS) company that started in 1993 in Louisville Kentucky. We provide technology based solutions to keep people safe and informed and help agencies prevent crimes (please see our bios and company description).
Today we consist of about 325 employees and we've won a variety of awards related to our fast growth, family friendly atmosphere, and we've been consistently named one of the best workplaces in Kentucky.
About The Author
Rick Cartor holds a Ph.D. in I/O Psychology.We've had some key learnings along the way:Direct discretionary dollars towards rewarding the behaviors or outcomes you want employees to demonstrateFind collaborative partners that understand and support your long term goals. BB&T, Baptist, Principle Bluegrass.
Put great care in selecting qualified professionals who fit your population and are fully certified to work with both adults and kids. Working parents and their spouses really appreciate the convenience of the clinicUse incentives to promote the use of the clinic. Think of your clinic as a cost savings versus a way to earn back some healthcare dollars.
If you use a local healthcare provider, be sure to include a second network to ensure that your employees retain discounted care options. Review and make sure that all other rewards, policies, procedures, practices are consistent with the goals and values of your health care stratgy
Be flexible regarding the number of clinic hours and the times its open. You may need to adjust to better meet employees needs Make appointment making easy Expect complaints - most offices and clinics expect about a 4-6% complaint rate.
