Business owners know only too well the impact health care costs have on the bottom line. The statistics behind those cost increases are staggering: in Utah, almost 12 percent of the gross domestic product is spent on health care, according to the Utah Department of Health. Nationally, that figure is 16 percent of the GDP, while the federal government spends 19 percent of its budget on health care, and this amount is expected to increase by more than 70 percent by 2015.
For business owners, this situation proves to be a dilemma with no satisfactory solution.
“You want to provide health insurance so you have a healthy and productive workforce, and it helps make you competitive as an employer, but at the same time the skyrocketing costs have become unsustainable,” says Natalie Gochnour, chief operating officer for the Salt Lake Chamber. “We have businesses that provide health insurance to their employees, and they experience double-digit increases in the premiums each year. It’s become a significant cost issue for businesses.”
The rumblings of protest from the business community have led the Chamber’s board of governors to declare health care reform its top public policy priority, Gochnour says. “It’s all about costs, because it’s unsustainable,” she adds. “We’re very involved with policy discussions at the state level on how we fix our system.”
The Legislature, too, has focused its attention on health care, although state politicians have acknowledged that the situation will require more than one session to find a workable solution.
“We’re not going to pretend that there’s a quick and easy silver bullet,” says Senate Majority Assistant Whip Sheldon Killpack (R-Syracuse). “It is going to take time to make sure that we lay the proper foundation so it happens correctly rather than just making a knee-jerk reaction.”
As part of that “proper foundation,” the Legislature last year approved $600,000 in ongoing funds to improve transparency in health care reporting, Killpack says. The program would allow consumers easy access to information about health care costs from each facility, such as what treatment outcomes were expected and how much time patients were required to stay in a facility. “We feel in order to do a market-driven approach, transparency has to be in place up front,” he adds.
In addition to the work on transparency last year, the Legislature offered tax relief to those who purchased insurance and gave preference in the state procurement process to businesses that offer health insurance to their employees, Killpack says.
One of the most recent steps the Legislature has taken was in April, with the formation of the bi-cameral Health System Reform Task Force. By next session, the task force hopes to have the transparency network in place to gather and display data, lay parameters of what insurance products should be offered and how risk will be handled, Killpack says. “If we get the guidelines in place, that’s a pretty tremendous start.”
Business owners can help the task force in several areas, he adds. “The business community is in a tremendous position to help drive this by simply understanding that market solutions are very possible. We’ll be able to accomplish this quicker and more effectively than the federal government. Right now, I’m proud of what the Salt Lake Chamber is doing. Rather than just thumping their chest and talking about it, they’ve actually gone in and started rounding up businesses, saying, ‘We want a collective insurance pool and we want to handle things differently.’ They threw it out there and said ‘OK, insurance companies, who’s going to play ball with us?’”
Killpack is referring to the agreement with Humana that the Salt Lake Chamber announced in April. Humana now offers discounts to Chamber members with between two and 99 employees in a whole suite of various health care packages, which include medical, dental, prescription drug, vision, wellness, employee assistance programs (EAP) and life insurance coverage, Gochnour says.
The agreement with Humana is one aspect of a six-point “Prescription for Progress” health care reform program that the Chamber has implemented.
The other points of the Chamber’s program are leading by doing, or offering a consumer-directed health benefits plan to its own employees; hosting member-to-member health care forums; creating a health policy group to advise on health care policy options; supporting other community health care reform efforts; and creating a Utah Business Health Care Alliance “to create a purchasing coalition of like-minded employers that will use their purchasing power to shift the Utah health care market towards consumer-driven health plans.”
The Chamber is still working on forming the health policy advisement group and the Health Care Alliance, Gochnour says.
Killpack sees the Health Care Alliance as beneficial. “The business community will be very powerful in their ability to say, ‘Look, if we’re going to put money into assisting individuals with health insurance, this is what we want to see. Here are the products that we would like to see.’ And the market will adjust,” he says.
Simply requiring insurance companies to offer programs tailored to employers’ desires is only one front in the entire health care battle, Killpack says. Another prong of the attack is focused on consumers themselves.
“We have done a tremendous job, as a society, of shielding individuals from the actual costs of health care,” he says. “We have no idea of the magnitude of the difference of cost of an x-ray and an MRI. Individuals also need to look within and recognize that if we’re going to have true health systems reform, it’s not just going to require a change from industry, it’s going to require change from individuals and how we interface with our health care.”
An Ounce of Prevention
Among the proposals for health care reform is offering incentives for people to undertake healthy lifestyles. Research shows that businesses that offer health programs, whether it’s help to quit smoking or a discounted gym membership, see a corresponding decrease in insurance claims.
“One of the problems we have is that we as a nation are not healthy,” says Tauni Everett, manager of media relations for Regence BlueCross BlueShield of Utah, the largest health insurer in the Intermountain Region, with 3 million members. To combat that, “the very best thing a business can do is engage in vitality programs.”
To practice what they preach, in 2004, Regence BlueCross officials implemented a vitality program in their own company. This ranged from fitness challenges to discounts on health food in the company cafeteria. “It has really worked,” Everett says. “Our employees have lost thousands of pounds, we have hundreds that have quit smoking with lasting success, [and] at this point, more than 40 percent of our cafeteria sales qualify for that healthy discount. Company participation in healthy programs rose from 11 percent in the first year to 46 percent last year.”
As a result, “company wide our claim costs are down 20 percent,” Everett says, and Regence hasn’t increased premiums for three years. “Consumer-driven health care — [meaning] you take care of yourself and your premium costs will go down — works. We figure our company is pretty much living proof of that.”
In Utah, Regence officials are working with the legislative task force to help bring about a resolution to the health care issue. “We’ve got some serious problems with the health care system that we really do need to address, especially in terms of costs,” says Chet Loftis, Regence’s director of legislative and regulatory affairs.
Increasing efficiency by allowing medical records to be transferred among different hospitals, changing the reimbursement system to pay for outcomes rather than activity and giving consumers credit when they remain healthy — all these are issues that are being considered, Loftis says. “The thing that everyone can agree with is that where we’re at right now is unsustainable, and we’ve got to think about how people can be healthy and for consumers to get value. [The legislative task force] brings a lot of folks together on an important issue and we have the opportunity to talk things through and figure out how we can make things better.”
Overall, the required health insurance that the task force envisions would cover preventative health matters and catastrophic illness, Killpack says. “If it’s more comfort care…maybe the individual should have more responsibility in that, rather than having everybody else using that shared risk pool pay for that comfort.”
Even as the task force moves forward, Killpack sees the business community as an integral part of the process. “Regardless of how you want to look at the need and importance for health systems reform, it’s always going to come back and impact business,” he says. “No matter how you look at it — if you look at the wellness standpoint of individuals — that impacts business. If you look at it from the terms of a percentage of costs of every product or service that gets delivered, it impacts business. This is huge policy concern for the business community.”
As health care costs shoot upward, business owners have sought non-traditional methods of covering themselves and their workers. Insurance companies have responded with offerings such as health savings accounts. These programs have become increasing popular. Almost 6.2 million Americans had HSA-eligible health insurance in 2008, an increase of about 35 percent over 2007, according to a study released in April by the American Health Insurance Plans. In Utah, 4.2 percent of people under age 65, and with private health insurance, are enrolled in HSA-eligible plans.
“The real predominant plan right now is the PPO (preferred provider),” says Steve Neeleman, CEO of HealthEquity, a Draper-based company specializing in health care accounts, but he adds that the fastest growing segment in the industry is consumer-driven health care plans.
Companies that have at least half their employees enrolled in a consumer-driven health care plan have about half the increased costs as other companies, according to a 2008 study by Watson Wyatt.
The idea behind a consumer-driven plan is to make health insurance more comparable to automobile insurance, Neeleman says. “You want the insurance for unexpected, expensive events, but you would prefer to pay out of your own dollars, preferably tax-free dollars, for routine care.”
This type of insurance still allows a health care network such as a PPO offers, but the deductible is higher, he adds.
Health savings accounts are one type of consumer-driven health care, he says. The minimal deductible for health savings plans are $1,100 for an individual and $2,200 for a family, about twice that of a PPO.
An HSA allows a person to open an IRS-sanctioned bank account and put in up to $2,900 tax-free for an individual and $5,800 for a family. The amount can be increased each year.
Most HSAs also offer free preventative care and discounts for routine care, Neeleman adds, and the policy pays costs once the deductible is reached. “The account is used to pay for routine items under the deductible in a tax-free way, [and] to save for retirement, because you can continue to accumulate the assets.”
The advantage to HSAs is a savings of 20 percent to 30 percent on premiums, according to national statistics, he says. Another plus is that consumers decide how their money is spent.
“One of the things that consumer-driven plans do is shift more opportunities to the consumer to be able to save money, so they can save or keep the money they don’t spend, and ultimately that drives down costs to the employer,”