From the May 2009 issue of Treasury & Risk magazine

Healthy Motivation

"An educated consumer is our best customer." That clever slogan popularized by New York clothing discounter Syms might work just as well as a catchphrase for benefits administrators aiming to influence the way employees use their company health plans this year. When employees at Ruby Tuesday are prescribed a new medication, for instance, they're encouraged to go online, either to the company's internal Web site or to that of health benefits administrator Cigna Corp., to weigh the pros and cons of using a generic version. With the lower-priced option, employees can fund up to $10 of 10% of the total price, instead of the minimum 25% co-pay.

The company--which has a large number of 20-somethings in its hourly workforce--offers a high-deductible consumer-driven health-care plan (CDHP) for corporate staff and management while subsidizing a stripped-down, dollar-a-day health program for servers typically earning under $2.15 an hour. Non-smokers employed by the Maryville, Tenn.-based restaurant chain get a 20% discount on healthcare premiums. It's all part of Ruby Tuesday's plan to get its workers covered--and motivated to reduce costs.

Ruby Tuesday is in good company. Employers' efforts to contain healthcare costs have borne some fruit. While benefits administrators report that many more high-deductible plans are being adopted, measures that require more cost consciousness on the part of consumers have already taken a huge bite out of the premium costs employers share with their workforces. Generic drugs are also becoming more popular with employees at companies like Ruby Tuesday. This points to a broader trend in which many employers--particularly larger companies--are diligently educating workers about the pros and cons of choosing different healthcare procedures and providers.

Employers are also busy watching for news of reform from Washington, of course. Under the employer mandate President Obama proposed during his campaign, employers would be required to either "play" by giving health coverage to workers, or "pay" by contributing to a public fund that helps subsidize health insurance for employees.

This is similar to the system that exists now in Massachusetts, observes Blaine Bos, a partner at Mercer. While few details of the latest proposals have emerged thus far, Bos says that this administration's approach to universal healthcare reform will be more transparent to the public than that of the Clinton administration, and that should make it much easier to get something passed. "Unlike in 1993 and 1994, folks outside the Beltway are being asked to be part of the solution-forming process," says Bos. Edward Kennedy, the Massachusetts Democrat who chairs the Senate Health, Education, Labor and Pensions Committee, has also reportedly consulted taxpayers about the health measure he is expected to introduce as early as next month.

Employers aren't waiting for new laws to create changes on the home front, however. Most large companies have accelerated their use of preventive care and wellness incentives, high-deductible plans, non-smoker discounts and other tools designed to raise employees' consciousness about healthcare costs, as opposed to just hiking their share of the bill.

"It takes a true paradigm shift to get the individual to take some responsibility," says Ruby Tuesday benefits director Belinda Kitts. "With virtually everything we do in our lives, we'll do research, ask questions, and dig into it, but if a doctor says, 'Take this pill,' we tend not to research or get another opinion."

Kitts is adamant about the need for such scrutiny, and Ruby Tuesday is doing everything it can to encourage its workforce to comparison shop for its health care.

If someone needs an MRI, Kitts wants that person to research the costs at different facilities. If they require surgery, she wants consumers to be able to compare procedure outcomes and related charges. That's why Ruby Tuesday's internal Web site offers links to sites such as Web MD as well as the Leapfrog Group, which offers information on hospitals nationwide, including patient safety ratings and the safety of selected procedures.

Ruby Tuesday's experience meshes with the findings of a broadscale survey of nearly 3,000 employers conducted just last summer by Mercer, which revealed that:

o For a fourth straight year, employers held health benefit cost increases to about 6% in 2008, which has meant shifting more costs to employees.

o Twenty percent of companies with 500 or more employees offered consumer-directed health plans in 2008, up sharply from 14% in 2007. Mercer also found that growth has been slower among small employers: just 9% of employers with between 10 and 499 employees offered a CDHP last year, up from 7% in 2007, the survey found.

The good news is that many of these strategies are working: Kitts says that at her company, the high-deductible plan saw costs go up only about 3% between 2006 and 2008, while a company PPO booked increases of 8% to 12% between 2003 and 2007. The change was so dramatic that Ruby Tuesday did away with its PPO entirely in January 2008.

Another important question for employers is whether the projection for an average 6.4% healthcare cost increase for the 2008 to 2009 period, which survey respondents provided to Mercer last fall, will hold up in the face of the global recession, says Bos. Survey results represent about 600,000 employers with more than 90 million full-time and part-time employees.

The current recession may be a long one, he says, lasting a total of 24 months or more, and bottoming out sometime close to December of this year or in 2010. Generally during a recession there is more utilization of care because consumers are not sure whether they'll have jobs and medical coverage going forward, he says. Exacerbating that situation is the new federal program subsidizing 65% of Cobra payments for up to nine months for employees laid off from Sept. 1, 2008 to Dec. 31, 2009.

Healthcare unit pricing also tends to spike during a recession, says Bos, as more providers and insurers pass along costs for uncompensated care provided to those with no insurance. "Will healthcare increases reach 14%? Probably not in a one-year spike," says Bos. "Could it go to 8% or 9%? It very well could."

If you ask Kitts, the only way for Americans to see a big shift in the cost of healthcare nationwide is to create consumer demand for better-priced services. Comparison shopping for the best healthcare solution is a sure way to foster price competition and reduce costs, she says. "When there was only one care maker, the only model was black. Introduce competition and consumers have a choice."

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