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Do Companies With the Lowest Healthcare Burden Just Have Heathier Employees?

A couple of days ago I featured the 2008 Towers Perrin Annual Health Care Cost Survey, which summarized that next year's gross health care expenditure is expected to rise by an average of $577 per employee, to an average total cost of $9,312 per employee.

Here's a nugget buried towards the bottom of that report.  The TP survey divided respondents in its annual health care cost database into three categories -- low-performing, average-performing and high-performing companies. Performance designations were based on relative costs and cost increases, as well as whether an organization is meeting its health benefit objectives in such areas as efficient purchasing, employee engagement and managing health risks in the employee population.

Here's the TP findings related to high performers and low performers:

"Among high performers, 45% have cost increases of 5% or less -- evidence, in Towers Perrin’s view, that active management of program performance is an exercise in the “art ofTp_low_perfomers_3  the possible,” and an increasingly urgent mandate for companies still experiencing double-digit growth rates. The cost spreads between high-performing companies and low performers can be significant and can have a tremendous impact on an organization’s profits and positioning in the marketplace. And if left unchecked over a number of years, the competitive differential can become a significant business threat to the organization.

Here's what the TP report identified as behaviors separating the high performers from the low performers:

"Commitment to employees -- High-performing companies are highly committed to employees -- supporting employees’ ability to make sound health care decisions, taking steps to motivate employees to manage their health care purchases responsibly, and working to manage health risks and conditions in the employee population overall.

Managing by measuring --  High performers are far more rigorous than low performers in developing and documenting their health care strategies. They also manage by fact. For example, the vast majority of high-performing companies conduct extensive measurement of program costs versus less than half of the low-performing group.

Ensuring critical success factors are in place -- While the 2008 data show that all companies are doing more than ever to ensure that critical success factors -- such as senior leadership involvement, support from managers and supervisors, and disciplined execution processes -- are in place, high-performing companies are much more committed to these program pillars.

Increasing accountability -- High-performing companies design their programs to make the true costs of care visible to employees, and hold them accountable for the decisions they make at the point of care, using, for example, coinsurance rather than copays to share costs with employees

Engaging employees -- High-performing companies require employees to be more accountable for their decisions, and take steps to help employees do that by expanding communication initiatives and providing a variety of tools and resources to support employee awareness, understanding and action.

Building a culture of health -- High performers are much more likely to say they’re committed to building a culture of health in their organizations and to report that their employee education efforts are succeeding. For example, a strong majority of the high performers say employees accept their roles and responsibilities under their health plan, are comfortable with the level of risk under the plan, and understand and use decision support tools."

So those are drivers that allow companies with the lowest heathcare burden to keep costs down.  It's a good list, and I need to dig in a little bit more to ensure we are doing everything we can at our company.

Only one thing bothers me.  Look at the graph above.  The companies with the good cost structures have a cost per employee that is 20% cheaper than the high cost companies.  Yet on average, the annual cost increases of the low performers is 7%, vs. 5% for the high performers.

Is it possible the companies with the lower cost structure just have healthier employees?  Average age, blue collar vs. white collar, geography, etc. all come into play. 

The truth, as it always does, probably lies somewhere in the middle.  The factors above are things we should all pursue, but at the end of the day, the overall health of the employee base is what it is.  That takes years to change...

Comments

Chris

Certainly, one potential problem with the Towers-Perrin conclusions is the companies with lower cost structures have healthier employees. But there's also an issue of whether they've really identified causation.

First, there's the potential that all they've measured is the "treatment on the treated" effect. That is, companies that have room to improve their cost structures are the ones who adopt these identified practices. The implication that other companies can reduce their cost structures by adopting these practices may be false, simply becuse they have already reached their lowest cost solutions.

Second, it's possible they're simply picking up a correlation, and not a causal relationship. To call all of these practices drivers of lower costs is a bit naive - it is more likely that one (or a few) of these drive lower costs, and the rest are simply spuriously related.... Or even worse, there is an undocumented factor that is driving the lower costs, and also causing the implementation of these practices.

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