Consumer-Directed Acceptance
Editor’s note: The following article is based on a presentation at NACUBO’s Thought Leaders Program “Changing Demographics, Changing Workplace,” held in February 2009 in Scottsdale, Arizona. A white paper covering the ideas shared by presenters and participants at this event is also available. “Harnessing Value from Changing Workplace Demographics,” by Bobbie Dillon, examines how to bind different values, needs, perceptions, and work styles present in a multigenerational workforce into a cohesive, productive organization that can thrive in today’s challenging economic environment.
In additon, a May 27th webcast will offer an opportunity for participants to interact directly with the author Ellen Horsch, vice president of administration, Michigan Technological University; colleague Kirk Beyer, director of human resources, Gustavus Adolphus College, and Robert O'Brien, national practice lead for higher education, Aetna, Inc. Check here for registration information as the date approaches.
An institution’s benefits program can provide flexibility in adjusting total compensation to attract and retain the best faculty and staff. At Michigan Technological University, we worked with campus leaders to introduce a high-deductible consumer-directed health plan with a health savings account (HSA) component and enrolled more than 35 percent of our faculty and staff population in the first year. These dramatic changes did not happen overnight, and they required a strategic, comprehensive review of our total compensation and benefits and a methodical approach to assess employee acceptance and education needs.
Michigan Tech in Context
Michigan Tech is a small research university serving 7,000 mostly residential students with approximately 1,200 staff and 400 faculty members. Given that we are located in a somewhat remote part of the Upper Peninsula, our health-care options are somewhat contained. At the same time, this often affords our employees an opportunity to establish strong relationships with community providers.
Early in 2000, we honed in on what had become a steady escalation of health-care costs in recent years. As HR director at that time, I knew we needed to do something to better contain these costs. I began working with our university faculty senate specifically on the issue of our high individual stop-loss insurance coverage. Through the process of working on this common interest, we formed a strong partnership and decided to formalize this working group.
The Benefit of an Advisory Group
In May 2000, we created a benefits liaison group (BLG) comprising key professional staff and university senate representatives. The mission of this advisory group is to provide the best possible benefits program within the university’s available resources. To that end, one of the group’s charges is to annually review the university’s benefits package in the context of current economic constraints and to provide recommendations for changes to improve the quality of benefits and reduce costs.
With double-digit increases becoming the norm in recent years, we knew we needed to gravitate to a model in which employees shared more of the costs. We also knew that we needed to create employee awareness and understanding about the true costs of their care if we were going to be successful in asking them to share more of the burden.
Starting in February 2001, one of the BLG’s goals was to “shift employees from unaccountable consumers into the role of informed consumers with the tools to plan and manage their own health care.” One of the first actions we took to raise the cost-consciousness of employees was to switch from having employees pay a flat $10 co-pay for office visits to paying a 10 percent co-pay. That one small change suddenly motivated employees to start shopping around and begin asking questions about fees for service.
In FY2003, the BLG recommended a reduction in projected benefits costs by $750,000 based on the following:
- Share the burden for health-care cost reduction among employee, providers, and the university.
- Expand choices by replacing the current health-care plan with more options.
- Maintain accessibility by avoiding exclusive provider arrangements and retaining out-of-state access.
Pairing Compensation and Benefits Strategies
Separately, in June 2008, we formed a compensation strategy task force consisting of faculty, staff, and academic administrators. The charge for this group was to make philosophical and tactical recommendations on the structure of total compensation and to benchmark our offerings with organizations with whom we compete for talented faculty and staff. One overarching goal for this group is to keep a compensation structure that is cost-neutral to the institution yet maintains total compensation foremployees.
One realization stemming from the review of this task force was that the university needed to take steps to increase salaries to be in line with market values. The task force recommended that the BLG focus on increasing employee flexibility and choice to allow individuals of different ages, family status, and life stages the ability to customize salary and benefit packages to maximize their ability to meet personal needs and goals. The task force also charged the BLG with developing one or more scenarios to shift Michigan Tech’s compensation from benefits to salaries, with a long-term goal of reducing the benefits rate from 45.2 percent to between 34 percent and 36 percent, a rate similar to other Michigan and national universities. This action would ultimately help Michigan Tech compete with other institutions in attracting and retaining world-class faculty, staff, and students, and would better position the institution to compete for external funding of its research and scientific initiatives.
In September 2008, the BLG presented its benefits recommendations to the executive team. The BLG proposed focusing on greater flexibility and choice by the individual, suggesting two choices in health care: the current health plan and the option of a high-deductible consumer-directed health plan paired with a health savings account forwhich we proposed setting our employer contribution at $1,500 for families and $750 for single employees. A key point of this second option is that all preventive care would be covered at 100 percent.
In October, our president accepted the recommendations and notified all employees of the change in benefits that would become effective as of January 1, 2009. In his letter, President Mroz stated: “We will conduct an analysis after all employees have selected a plan option to determine if there are increased costs to employees or a decreased cost to the university. If there are, we will likely proceed with a midyear salary adjustment.”
Communication and Education Roll-Out
After employees received notification about the change in benefits and information about the different health-care options, representatives from the benefits office and Aetna were available to assist employees with making the health insurance plan choices that would best fit their needs. During the next several months we held campus forums to discuss the new health insurance plan options, ran articles in our staff and faculty newsletter, and developed a Web site to aid employees in making educated choices. After the enrollment period was completed and the analysis was done to determine cost changes resulting from the change in benefits, the human resources director notified all benefit-eligible employees that their salaries would be adjusted up by 1.45 percent—thereby making good on the president’s promise to enact a salary adjustment based on the cost savings.
During initial planning stages, the BLG anticipated that only 10 percent of employees might switch over to the new option. Instead, an astounding 35 percent opted for the consumer-directed/HSA option from the start. Worth noting is that the individuals who opted for the consumer-directed plan were not our youngest employees only, but rather, reflected the breadth of our population, including some individuals with existing medical conditions. Perhaps our early steps of laying the groundwork to raise the cost-consciousness of employees had sunk in, allowing them to build confidence in making educated choices as health-care consumers.
What is too often missing in many employer-provided health plans is a focus on helping employees understand their benefits package. The whole point of a consumer-directed health plan is to get employees to take charge of making decisions that are in their best interests. While as an employer you can offer the option, unless you explain the value of a consumer-directed health plan, employees won’t realize the full benefits and employers won’t achieve the full potential of employee acceptance. Working methodically to instill employee confidence and having a well-thought-out communication strategy for launching your plan are vital to its success for employees and employers alike.
Ellen Horsch is vice president for administration at Michigan Technological University, Houghton. E-mail: eshorsch@mtu.edu.
Aetna’s Consumer-Directed Success
Consumerism, also known as consumer-directed health care, is credited with helping to reduce health-care spending and making consumers part of the solution to managing costs by putting them in charge of their health care. According to Robert O'Brien, Aetna's national practice lead for higher education, consumerism operates on the belief that when employees share the cost of health-care services with their employer, they are more sensitive to the cost of care and more engaged in decisions about their care.
"Take Your Institution to a Healthier Place," a recently published Aetna white paper authored by O'Brien, notes that up to 70 percent of health-care expenses are often preventable. When well designed and executed, consumer-directed health plans (CDHP) promote cost-consciousness and discourage inappropriate care without deterring consumers from seeking needed care. One contributing factor to a successful CDHP is offering 100 percent coverage of preventive care along with programs to help members take steps toward a healthier lifestyle focused on wellness and disease prevention, says O'Brien.
As for its own foray into consumerism, last month Aetna released results of a study of health care claims and use for members of its consumer-directed health plans. The study of 2.6 million Aetna members (410,000 in an Aetna HealthFund plan) demonstrates that Aetna HealthFund shows sustained savings for employers over a five-year period, with members getting the care they need. The results also show that Aetna HealthFund members are seeking increased levels of chronic and preventive care, using generic drugs more often, and accessing online tools and information at higher rates than PPO members while experiencing lower annualized medical cost increases. The results also show that Aetna HealthFund members had lower emergency room use than PPO members, suggesting that members are becoming better informed about where to access health care.
The Aetna HealthFund study included 200 plan sponsors who offered an Aetna HealthFund Health Reimbursement Arrangement (HRA) and/or an Aetna HealthFund Health Savings Account (HSA). The study looked at 2.6 million members across the spectrum of Aetna medical products, including 410,000 Aetna HealthFund members.
Key survey findings include:
- For full replacement HRA and HSA plans, employers saved $21 million per 10,000 members over the five-year period.
- For employers who offer Aetna HealthFund plans as an option, they experienced savings of $7 million per 10,000 members over the five-year period.
- For employers who offer Aetna HealthFund plans as an option and implemented the strategies that Aetna identified as best-in-class, they achieved savings of $23 million per 10,000 members over the five-year period.
Last year, Aetna identified several strategies that have proven successful for employers, including fostering a culture where employees and senior executives are engaged health-care consumers, implementing a focused and ongoing employee education campaign, offering wellness programs and incentives for healthy behavior, providing 100 percent coverage for preventive care, and carefully constructing a plan with the right mix of member responsibility. While these strategies continue to be successful, Aetna found another approach that can help employers achieve success: encouraging their employees to enroll in the consumer-directed plan option. This can be done by offering the consumer-directed plan option at the lowest cost, lowering the required contribution, or increasing the fund amount.
Survey results also show that Aetna HealthFund members:
- Seek preventive care more often than the control matched PPO population. Furthermore, Aetna HealthFund members had 10 percent lower primary care physician use for non-routine services and 15 percent lower use of specialist care.
- Access the same or higher levels of screenings for diabetes and breast and cervical cancer, compared to members in traditional PPO products.
- Use the prescription drugs necessary to treat chronic conditions such as diabetes, congestive heart failure, coronary artery disease, and high cholesterol at similar or higher rates than PPO members.
- Use consumer tools and information at twice the rate compared to PPO members.
For more information, go to www.aetna.com. Or contact Robert O'Brien at 860-273-0794; e-mail: obrienr@aetna.com.
