Developing Wellness for the Mid-Sized Employer

1
Developing Wellness for the Mid-Sized EmployerA
CFOs Perspective

• GlobalFits Fourth Annual Wellness Summit
• May 13, 2010

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The ACW

• History
• Mission
• Membership
• Events
• www.acwell.org
• Special thanks to WellNow, BHS, and other ACW
  members for their input!

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Your Speaker

• Bill Lacy President CFO, Association for
  Corporate Wellness
• Over 25 years CEO, CFO, and other executive
  positions (Fortune 500, middle market, and
  start-up)
• EVP CFO-Finance and Admin, Business Health
  Services CFO-Planet Fitness PA
• President, ACW founder Entre Advisors, LLC
  GreatLife Wellness Centers, LLC
• Entered corporate wellness industry 2003
• Facilitated or lead over 100 of corporate
  wellness speaking engagements and panels
• MBA, Drexel University

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Corporate Wellness

• Reduce health care costs
• Boost productivity
• Corporate Wellness Components
• Reduce health care claims
• Absenteeism
• Productivity - presenteeism
• Worker Comp Claims / Work Site Injury /
  Ergonomics
• STLT Disability
• Mental Health
• Financial / Legal
• Other

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Todays Objectives

1. HCR corporate wellness highlights
2. Four corporate wellness models
3. CFOs perspective

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Health Reformation Highlights

• Ten year roll-out
• Wellness impacts
• Boost incentives
• New agencies / new regulations
• Greater need for sound Corporate Wellness
  strategies

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Health Care Reformation

• Increases incentives for employers to offer
  workers from 20 (current) to as much as 50 off
  their premiums for participating in such programs
  (effective 2014)
• Requires chain restaurants and vending machines
  to disclose nutritional information
• Provides additional resources for children,
  pregnant women and people trying to quit smoking
  (Lazarus, Los Angeles Times, 3/26)
• Source http//www.californiahealthline.org/articl
  es/2010/3/26/health-reform-law-steps-up-focus-on-p
  revention-wellness.aspx

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Health Care Reformation

• Establishes a National Prevention, Health
  Promotion and Public Health Council to coordinate
  federal efforts to promote healthy living
• Eliminates copayments for Medicare and Medicaid
  beneficiaries receiving preventive services
• Increases reimbursement rates for physicians who
  offer certain preventive services
• Provides grants to small business for
  establishing wellness programs
• Source http//www.californiahealthline.org/articl
  es/2010/3/26/health-reform-law-steps-up-focus-on-p
  revention-wellness.aspx

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HCR Grant Program

• 200 billion, five-year program to provide grants
  to certain small employers (fewer than 100
  employees) for comprehensive workplace wellness
  programs()
• () small employers that did not have a
  wellness program when the law was enacted
• Source http//www.shrm.org/Publications/HRNews/Pa
  ges/WellnessReformBoast.aspx

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Health Care Reformation

• In 2010 Employer-provided adoption assistance
  benefits under the IRC Section 137 are increased
  to 13,170
• Source http//www.towerswatson.com/assets/pdf/142
  4/TW-HC20Reform20Bulltn-BillPassed_3-22-10.pdf
  
• In 2011 New group health plans must provide
  preventive care without cost sharing
• In 2014 Employer government reporting begins on
  employee health coverage

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HCR Running Afoul of the Excise Tax?

• The health reform law is likely to give a
  short-term boost to the use of financial
  incentives in wellness plans, says Corporate
  Synergies CEO Thom Mangan. But employers should
  beware of triggering the 40 percent excise tax on
  high value or "Cadillac" plans that takes effect
  in 2018, for plans valued annually at more than
  10,200 for individuals and 27,500 for families.
  Employers spending on wellness programs would add
  to their health plan's value, pushing them closer
  to that trigger.
• "Those who are not early adopters in using
  wellness initiatives to curb the cost of their
  health insurance will end up being hurt if they
  try to launch a program in 2018 or later," Mangan
  notes, because "the cost curve does not come down
  for two to three years once you've implemented a
  wellness program."
• The excise tax will become a disincentive for
  employers to add to the cost of their health
  benefits and, as a result, health care reform
  could have a reverse effect on employers efforts
  to promote wellness and healthy behaviors, in
  Mangan's view.
• Source http//www.shrm.org/Publications/HRNews/Pa
  ges/WellnessReformBoast.aspx

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HCR Running Afoul of the Excise Tax?

• "We're strongly encouraging companies to step up
  their wellness efforts today to better control
  their future health spending, making it more
  likely they'll avoid the tax," Mangan advises.
• In a March 2010 letter to Congress, the Society
  for Human Resource Management urged lawmakers not
  to count the value of supplemental benefits such
  as wellness plans toward the excise tax
  threshold.
• Source http//www.shrm.org/Publications/HRNews/Pa
  ges/WellnessReformBoast.aspx

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Corporate Wellness Models

1. General
2. Data-Driven
3. Safeway
4. Hybrid

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CFO/Companys Culture Model Type
Model Type How Analytical? Degree of Immediate Savings / ROI How Wellness Orientated How Much Budget?
General Low Limited Need Low Low-Medium
Data-Driven High Moderate Need High High
Safeway Moderate Immediate Need Moderate Minimal
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Basic Model

• Description
• Wide variety of offerings
• Costs
• Per event or intervention
• Results
• Difficult to track
• Limited ROI

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Data Driven Model

• Description
• Input, Analysis of Biometric and/or Claims
  Experience
• Costs
• High initial investment Software, data analysis,
  interventions, tracking (12 - 14 / PEPM)
• Results
• Strong predictive modeling capabilities
• Future ROI

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Data Driven Model
Changes toPolicy Plan Design Vendor Contracts
Claims Data
Plan Updates Refinement
Employee Health Programs
HRA/Biometrics
Multiple Stream Analysis
Tracking Outcomes Reports
Focus Groups
Administration Incentives Cultural Changes
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Long Term Return on Investment (ROI)Data Driven
Model
32 studies
14 studies
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Data Driven Model

• Strong Reporting!
• Examples
• Medical conditions contributing to highest number
  of claims
• Leading single health risk indicators
• RX claims analysis
• Health risk profile vs. national average
• Unmanaged medical spend

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MEDICAL CODITIONS CONTRIBUTING TO HIGHEST NUMBER
OF CLAIMS
LEADING CONDITIONS REPRESENTING HIGHEST of MEDICAL CLAIMS LEADING CONDITIONS REPRESENTING HIGHEST of MEDICAL CLAIMS LEADING CONDITIONS REPRESENTING HIGHEST of MEDICAL CLAIMS LEADING CONDITIONS REPRESENTING HIGHEST of MEDICAL CLAIMS LEADING CONDITIONS REPRESENTING HIGHEST of MEDICAL CLAIMS LEADING CONDITIONS REPRESENTING HIGHEST of MEDICAL CLAIMS LEADING CONDITIONS REPRESENTING HIGHEST of MEDICAL CLAIMS
Condition 2006-1 2006-2 2007-1 2007-2 2008-1 2008-2
Arthritis 14.95 17.57 24.23 17.01 16.19 20.39
Asthma 10.75 14.87 14.39 12.88 9.48 12.70
Back Pain 27.16 34.45 34.88 33.86 31.60 32.09
Chronic Heart Failure 9.80 12.58 4.90 8.85 4.06 9.98
Chronic Obstructive Pulmonary Disease 7.40 13.38 9.22 10.42 6.10 13.02
Coronary Artery Disease 32.19 24.23 16.67 19.12 18.11 18.27
Depression 21.86 23.16 23.76 29.67 32.49 24.61
Diabetes Mellitus 27.91 16.99 12.70 12.52 10.25 10.75
GERD 16.51 15.80 16.16 18.15 22.41 19.64
Hypertension 34.68 41.71 37.43 36.34 40.13 41.21
Lupus 8.08 8.31 9.69 8.05 8.46 9.38
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LEADING SINGLE HEALTH RISK INDICATORS
  BASED ON 572 HRA Takers, 295.15 population
average PMPM and 2,630 insured
High Risk Factor High Risk HRA Takers High Risk PMPM gt Average PMPM High Risk HRA Takers PA Rate County Rate National Rate
Physical Inactivity 198 308.95 34.6 70.2 70.2 71.7
Obesity (BMI) 132 361.75 23.1 28.4 NR 26.7
Waist Circumference 147 356.79 25.7 NR NR NR
Underweight 7 1,123.52 1.2 NR NR NR
Health Perception (Poor) 12 384.98 2.1 4.2 3.1 3.8
Health Perception (Fair) 55 373.00 9.6 12.1 10.8 10.6
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TOP TWENTY PRESCRIPTIONS BY EXPENSE ON FORMULARY (2008) TOP TWENTY PRESCRIPTIONS BY EXPENSE ON FORMULARY (2008) TOP TWENTY PRESCRIPTIONS BY EXPENSE ON FORMULARY (2008) TOP TWENTY PRESCRIPTIONS BY EXPENSE ON FORMULARY (2008) TOP TWENTY PRESCRIPTIONS BY EXPENSE ON FORMULARY (2008)
Description Primary Treatment Purpose Claimants RxOn RxOff
NEXIUM CAPSULES DELAYED RELEASE GERD  102 156,968.07 0.00
APOKYN FOR INJECTION   Parkinsons Disease lt 5 124,155.15 0.00
NORDITROPIN CARTRIDGE INJECTION   Growth hormone deficiency lt 5 60,017.29 0.00
HUMATROPEN CARTRIDGE KIT   Diabetes lt 5 42,973.63 0.00
LIPITOR TABLETS   Elevated Cholesterol 48 41,668.55 0.00
LIPITOR TABLETS (Different NDC) Elevated Cholesterol  36 41,249.75 0.00
SINGULAIR TABLETS   Asthma 63 41,146.92 0.00
Azithromycin   Bacterial Infections lt 5 36,733.79 0.00
COPAXONE   Multiple Sclerosis lt 5 30,385.34 0.00
VALTREX CAPLETS   Cold Sores 33 30,299.21 0.00
ADVAIR DISKUS INHALATION POWDER Asthma  36 24,588.50 0.00
ATRIPLA TABLETS   HIV lt 5 23,778.74 0.00
PLAVIX TABLETS   Myocardial Infarction, Cardiac Conditions 18 23,716.94 0.00
ZETIA TABLETS   Elevated Cholesterol 25 23,200.32 0.00
YAZ TABLETS   Oral Contraception 53 23,176.72 0.00
ASACOL TABLETS DELAYED RELEASE   Colitis 6 22,508.43 0.00
VALTREX CAPLETS (different NDC)   Cold Sores 37 22,020.70 0.00
LOVAZA CAPSULES   Elevated Triglycerides 20 21,428.07 0.00
HUMIRA PEN KIT   Arthritis lt5 21,254.98 0.00
NIASPAN TABLETS   Elevated Cholesterol 10 17,342.18 0.00
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Health Status and Risk Factor ProfileComparisons
with National Averages
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OUTCOMES Management By Spend Levels
Percentage Managed by Medical Spend Percentage Managed by Medical Spend Percentage Managed by Medical Spend Percentage Managed by Medical Spend Percentage Managed by Medical Spend Percentage Managed by Medical Spend Percentage Managed by Medical Spend Percentage Managed by Medical Spend Percentage Managed by Medical Spend
Benefit Year Medical Spend Level Medical Spend Level Claimants Managed Managed GT-Medical Paid Un-Managed Medical Spend Un-Managed Medical Spend
2006 gt0 lt10K gt0 lt10K 2470 297 12.0 3,171,287.57 2,576,919.33 81.3
gt10K lt25K gt10K lt25K 95 24 25.3 1,445,916.49 1,039,812.77 71.9
gt25K lt50K gt25K lt50K 21 7 33.3 684,597.01 457,464.42 66.8
gt50K lt75K gt50K lt75K 5 0 0.0 311,530.89 311,530.89 100.0
gt75K gt75K 12 2 16.7 2,217,711.20 2,054,033.17 92.6
                 
2007 gt0 lt10K gt0 lt10K 2195 311 14.2 3,016,351.03 2,339,834.50 77.6
gt10K lt25K gt10K lt25K 102 25 24.5 1,512,136.63 1,138,961.32 75.3
gt25K lt50K gt25K lt50K 16 5 31.3 481,874.61 329,618.39 68.4
gt50K lt75K gt50K lt75K 8 5 62.5 501,913.89 201,238.47 40.1
gt75K gt75K 10 4 40.0 1,517,035.51 1,062,039.43 70.0
                 
2008 2008 gt0 lt10K 2142 342 16.0 3,064,841.89 2,357,333.54 76.9
gt10K lt25K 99 30 30.3 1,504,210.38 1,089,835.87 72.5
gt25K lt50K 22 7 31.8 743,840.45 517,180.18 69.5
gt50K lt75K 3 2 66.7 166,780.51 53,514.88 32.1
gt75K 10 4 40.0 1,773,380.57 1,227,000.87 69.2
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Safeway Model

• Description
• Results
• Benefits
• Wellness Program cost neutral
• Provides greater employee accountability
• Immediate ROI
• Works with any size firm

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Safeway Model Overview

• History
• Why Does It Work?
• Based upon Auto Insurance Model
• Good drivers pay less Healthy employees pay less
• How can my company save moneyimmediately?
• Wellness program subsidized by unhealthy
  employees

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Safeway Model Overview

• Self insured
• Strong executive support
• 3rd largest supermarket chain in N.A.
• Publicly traded (NYSESWY)40 Billion in
  revenueover 1,400 stores
• Total health care costs 1billion (about 2.5
  of revenues)

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Safeway Model Overview

• 70 of Health Care Costs behavior related
• 74 of Health Care Costs due to the following
  four diseases
• Cardiovascular (80 preventable)
• Cancer (60 preventable)
• Diabetes (80 preventable)
• Obesity (90 preventable)
• 78 of employees surveyed rated plan good or
  excellent 76 asked for more incentives

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Safeway Model Overview

• Automobile insurance model
• Personal responsibility
• Bad driving behaviors higher premiums
• 780 ind (1,560 family) insurance rebates if
  employee passes four measures.
• Greater weighting to Smoking Obesity and less
  to BP Cholesterol
• Tested every 12 months
• if employee fails (or made appropriate progress
  employee can qualify for rebate (full year) if
  passes test the next time

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Safeway Model Results

• Cost contained since 2005
• Total workforce approx. 233,000 workers
• 25,000 employees participate on a voluntary basis
  (75 of Safeways non-union workforce)only 11
  of total workforce...significant savings could
  still be realized!
• Company plans to phase in its 200,000 union
  workforce over next six years

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Safeway Model Challenges

• (Radical) Change to company culture
• Administration
• Requires third party

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Safeway Model Case Study

• 781 employees
• Average health insurance premium 8,600
• Average incentive 1,720
• Year one full incentive for participation
  (Biometric based HRA)
• Year two and beyond compliance with Biometric
  tests
• 1 claims reduction year one 5 years two and
  three.

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Safeway Case Study - Results

• Year One
• 70 Participation
• 98,460 Wellness Program (180 / PEPYrobust)
• 402,516 cost reduction
• 39,872 claims reduction (1 of total claims)
• Year One ROI 4.49
• No absenteeism, no presenteeism included

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Safeway Case Study - Results

• Year Two
• 70 Participation 20 did not pass tests
• 98,460 Wellness Program (180 / PEPYrobust)
• 590,701 cost reduction
• 199,361 claims reduction (5 of total claims)
• Year Two ROI 8.02
• No absenteeism, presenteeism included

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Recap
Model Type How Analytical? Degree of Immediate Savings / ROI How Wellness Orientated How Much Budget? ROI (2 yrs)
General Low Limited Need Low 0 - 1,000 PEPY Undefined
Data-Driven High Moderate Need High 144 - 168 PEPY 3.48
Safeway Moderate High Need Moderate 0 Save 8.02