Workers absorbing costs

Major employers continue to pass more of the costs of healthcare onto their workers, even as they seek to improve their employees' overall wellness, according to Modern Healthcare's third annual Healthcare Purchasing Power survey.

A total of 35 employers participated in the 2010 survey. To qualify, employers must have a minimum of $1 billion in annual revenue. The survey was co-sponsored by the Leapfrog Group and the National Business Coalition on Health.

The survey results indicate that employers are still grappling with rising healthcare costs. The survey covered fiscal 2009, so changes mandated in the federal healthcare reform law had not yet come into play. Still, in interviews, participants said they are gearing up for such changes in various ways.

Read a related commentary by Leah Binder, CEO of the Leapfrog Group

Read a related commentary by Andrew Webber, president and CEO of the National Business Coalition on Health

General Motors Co. topped the list, with healthcare expenditures of $4 billion in 2009. General Motors covered 850,000 people last year, at a cost of $4,700 a person. General Electric Co. fell to the second slot, after coming in at No. 1 in the survey last year. GE reported healthcare expenditures of $2.2 billion in 2009, up from $2 billion in 2008. GE had 537,000 total covered lives in 2009, down from 566,000 covered lives the year prior.

Catholic Health Initiatives took the No. 3 spot, up from fourth in last year's survey. The Denver-based hospital system reported $355 million in healthcare expenditures for 2009, an increase of nearly 11% over 2008, when it spent $320 million. For 2010, the system expected to spend $349 million, a decrease of 1.7%, but for 2011, it expected healthcare expenditures to grow once again, to $371 million, according to the survey.

This is the first year GM participated in the survey, and it will most likely be the last time it is on top. GM filed for bankruptcy protection in 2009 and was rescued by the federal government, which then went on to initiate a massive restructuring. Under an agreement made in 2008, GM agreed to shift its retiree healthcare benefits to the United Auto Workers Retiree Medical Benefits Trust at the end of last year. As a result of this change, GM this year provided health benefits to only 210,000 people, a 75% decrease in covered lives in one year.

GM made substantial changes to its plan offerings as well amid the restructuring. It canceled coverage for Medicare-eligible retirees and reduced plan offerings for salaried workers to two health savings account-qualified high-deductible health plans. The automaker also canceled vision coverage for salaried employees, according to the company. About 66% of the company's workers are under a union contract.

After a turnaround, GM announced on Nov. 3 that it has commenced a $13 billion initial public offering, expected to take place Nov. 17.

GM is an anomaly in the Purchasing Power Survey. Other employers reported attempts to rein in healthcare costs by changing benefits and shifting more costs to workers. Only seven of the companies surveyed—including Catholic Health Initiatives—estimated that their healthcare spending would fall in 2010. Meanwhile, 22 of the companies said they laid off workers either in 2009 or 2010.

The cost-shifting trend reflects other recent employer benefit surveys. For instance, family health premiums in 2010 rose 3% overall, but workers' shares leapt 14% because of more cost-sharing, according to the Kaiser Family Foundation's 2010 Employer Health Benefits Survey, released in September.

Mercer, a benefits consulting firm, found that 57% of employers will ask employees to pay at least a greater share of the cost of coverage in 2011, according to a survey of more than 1,000 employers.

“This is higher than we've seen in the past,” says Chris Renz, partner at Mercer. Typically, 30% to 40% of employers report plans to push more costs onto workers, he says.

For the first time, Modern Healthcare asked respondents if they made substantial changes to health benefits, and if so, what those changes were.

Twenty respondents said they made no substantial benefit changes last year, while 15 employers said they did make changes.

Of those companies that made major benefit changes, by far the most common change was to increase workers' deductibles, co-insurance, physician co-payments, out-of-pocket maximums and other cost-sharing. Goodwill Industries International, for instance, for the first time required employees to contribute toward monthly premiums, the company said.

Some employers also jettisoned their health maintenance organization plans, preferring to offer high-deductible health plans or stick with preferred provider organizations, according to the survey.

Via Christi Health, a five-hospital system in Wichita, Kan., took a different tactic. The system began providing full coverage of preventive services starting in January 2009—nearly two years before the federal health reform law began requiring insurers to cover the full cost of preventive services.

The decision was a natural one for Via Christi because it operates the hospitals and physician offices where its employees receive care. Preventive care they can receive at no cost includes flu shots, mammograms and annual physicals, says Catherine Green, health and welfare benefits coordinator for Via Christi.

So far, the problem hasn't been paying for this benefit, it's been getting employees to use it, she says. “Unfortuately, it costs us very little,” Green says. “People still don't uptake on it. We can't get past the inertia.”

Via Christi plans to hire a health and wellness manager in the first quarter of next year to help encourage people to take advantage of the free preventive-care services the system offers, she adds. The goal, as reflected in the healthcare law, is for people to get preventive care now so they don't need expensive hospital care later.

Wellness initiatives of all kinds remain popular among employers, Renz says.

“I wouldn't diminish the wellness part of it,” he says. “Wellness is absolutely very high on the list. It's No. 1 on the list of long-term strategies to lower healthcare costs.”

However, Renz says, wellness programs have evolved. “There's an increased focus on workplace culture and worksite policies.” These include more non-smoking campuses and a resurgence of on-site biometric testing. “Often times, the wellness focus is not part of the health plan,” he says.

Carolinas HealthCare System, a 12-hospital system based in Charlotte, N.C., launched its wellness program this year. The system provided health benefits to more than 46,000 people in 2009, and that number is expected to grow to 52,500 in 2011. It spent $143 million on health benefits in 2009, and estimates that figure will rise to $174 million in 2011, according to survey results. Carolinas HealthCare ranked ninth on the Purchasing Power survey.

The system's wellness program, called LiveWELL Carolinas, offers employees the opportunity to save between $200 and $600 each year for fulfilling up to 10 wellness criteria. Workers receive the credit in their paycheck. The program is a Web-based initiative through WebMD. Criteria include regular exercise, quitting smoking, using seat belts and completing health questionnaires.

The program is “definitely popular,” says Jennifer Sergent, benefits specialist for Carolinas HealthCare. The system won't get participation results until later this fall, she adds.

Like some other survey participants, Carolinas HealthCare also is shifting costs to workers. These included in 2009 new inpatient and outpatient deductibles and slight increases to office and specialist visits, the system reported. More recently, it has added a tobacco-user plan rate and a spousal rate. If a spouse has coverage through his or her employer, but chooses to gain coverage through Carolinas, the family must pay a $15 surcharge per pay period, Sergent says.

Carolinas HealthCare also will begin offering free preventive care in 2011, she adds. For many employers, this change is required in the federal healthcare reform law.