Employment Resources

The almost $140 billion dollar a year prescription drug industry is an element of health care that simply can’t be ignored by managers and brokers of benefits as they seek innovative ways of bringing value to their employees and clients.

In American health plans, prescription-related costs are usually 20% to 30% of the total cost. Furthermore, prescription costs are estimated to be rising by 10% to 20% each year. Most employer-sponsored health care plans contain a prescription benefit.

It’s when the prescription benefits are utilized excessively that self-funded employers find themselves at financial risk. Americans increasingly are requesting more and more prescriptions from their health care providers, due in part to prescription manufacturers adamantly and aggressively pushing for usage of their pharmaceutical products. The middlemen in the prescription drug industry are the pharmacy benefit management companies that are trying simultaneously to satisfy both the drug distributors and manufacturers, and the employers and employees that are their end users.

The various aspects of prescription drug pricing must be understood thoroughly to understand the prescription drug industry fully. This is a lengthy and complex topic, but there are several key issues that can help benefit managers and HR professionals begin to better understand the industry.

One key issue is pharmacy benefit management, or PBMs. These create revenue in a couple of different ways, including drug margins and administering rebates or fees. Sponsors and employers are starting to question their PBMs as they’re understanding such revenue-generating issues and are exploring more and more ways to produce cost savings amid the rising cost of health care. Unveiling and understanding the prescription industry pricing model has brought many calls for the PBMs to change their model.

However, the PBMs and drug manufacturers aren’t the real bad guys in cost savings. Each has their own objectives, but the burden of these objectives is often shouldered by the sponsors, employers, and employees.

Real cost savings can be achieved by negotiated, aggressive prescription drug pricing. Considering today’s market, an employer seeing just an 8% to 12% cost savings to their prescription plan could actually manage to save some jobs they might otherwise lose.

Properly structured transparency pricing, especially when combined with real prescription plan management, has the potential to reduce an employer’s prescription risk and bring them substantial savings.

An August 2010 survey sponsored by UnitedHealthcare found that most Americans are concerned with their medication costs, but admit that they don’t know how much new prescriptions cost them or if there’s a less expensive option available to them. Consumers being unaware or unfamiliar with generic alternatives and less expensive alternatives means that many are missing a chance to save on their out-of-pocket drug expenses substantially. UnitedHealthcare has estimated that if members with fully insured plans changed to a generic brand or alternative lower-costing option, the result could be a yearly health care savings of more than $1 billion — $490 million of which would be savings on prescription co-pays.

Other highlights from the study included:

• Thirty percent of those surveyed admitted that they had not taken or skipped a dose of their routine medications due to the high cost of their prescription.
• Sixty percent of those surveyed said that they had concerns regarding the cost of their medications. Of those, almost 70% admitted that they often didn’t know the cost of their prescription prior to purchasing it.
• Yet, when the respondents were asked if they would be willing to switch to a lower-costing 94% answered yes.

The Desire for Information. The survey clearly showed that most Americans purchasing prescription drugs have an interest in learning more about their options, especially lower-costing options. There are several ways that employers can help their employees to understand more comprehensively how much their medications are costing them and discover ways to reduce their out-of-pocket prescription drug spending without compromising the medicinal effectiveness of their medications.

1. Employers might develop communications tailored to providing plan participants information about saving options, recognizing alternative lower-costing medications to their existing expensive medications, and advice and support on how to pursue other options. This can be in the form of a phone call, email, newsletter, or such.
2. A co-pay tier system can be very helpful in communicating the differences in value between drugs. The more fiscally and clinically advantageous medications should be placed on the lowest tier. These are the medications that have little, if any, co-payment. Meanwhile, the more expensive medications with higher co-payments should be placed on higher tiers. Plan members will be able to clearly see the difference in how much they pay for their existing medication and how much they could be saving with an equally effective lower-costing option. Seeing the difference in such a comprehensive manner can motivate the employee to consider trying a lower-costing medication option.
3. Pharmacists can be given specific messaging on what lower-costing and effective options are available to plan participants. As an employee goes to their pharmacy to fill a prescription, the pharmacist will see what alternatives are available at a lower-cost and be able to convey this information to the individual. If the employee feels that a lower-costing medication is desirable, then the pharmacist can contact the doctor that prescribed the medication to approve the change or, in some cases, make the change then and there.
4. A pill splitting or half-tablet program can reduce employee co-pay on medications by 50%. However, a physician must state on the prescription that the pills are to be halved or split.

It’s just a fact that employers, especially those in highly competitive industries, must have a striking benefits package to remain competitive in attracting and retaining the best employees. You probably spend a great deal of time and money providing your employees with an attractive benefits package, but do they actually appreciate what you’ve invested? Do they even have the slightest idea of how much it costs you to provide them with it?

Sadly, most employers will find that their employees have no idea what they invest in providing good benefits. In fact, a number of surveys have shown that most employees vastly underestimate how much their employer contributes toward their benefits. These surveys also typically find that employees tend to have a negative attitude about the benefits their employer offers. Most employees tend to focus more on elements like cost-sharing methods and uncomfortably rising premiums.

The good news is that most employees don’t have this attitude because they’re ungrateful, but rather because they really just don’t realize how much it costs you to provide them with their benefits. Considering you want and need a return on such a major investment, you are left with figuring out how to better educate your employees on your side of the story. There are actually several low to no-cost ways that you can tell your story and help employees better appreciate their benefits.

Give Employees a Total Pay Statement. If you asked your employees to write down their total compensation, they’d probably write down their gross income. Even though what you pay toward an employee’s benefits makes up a substantial portion of what you’re paying to keep them, an employee rarely considers what you’re paying toward their benefits as compensation.

You can illustrate the value of total compensation by breaking it down into various parts with a total pay statement chart. You can outsource for custom total pay statements or do it yourself with a spreadsheet application. Either way, make sure to include any other compensation perks, such as employer-paid license fees, tuition reimbursement, on-site childcare, and so forth.

Include Cost as Part of Your Benefits Education. Most employers, whether it is during orientation for new employees or during annual enrollment periods, will provide at least one setting for employees to learn about their benefits. Employers shouldn’t miss out on the opportunity to also emphasize the value of the benefits being offered and to remind employees that benefits are part of their total compensation. Even if your insurance carrier will be conducting the training, you can always ask your representative to at least mention the total cost of benefits; what you, the employer, pays; and then the portion that the employee pays.

Consider Adding some Perks. Quantity, in having additional choices, can be just as important to employees as quality. Once you look at your benefits package, it might not seem attractive enough, or you might just want to add some additional incentives to help your employees see that their relationship with your business is valuable. Voluntary benefits and other perks like gym discounts, community service days, discounted pet insurance, and so forth have little, if any, cost to you. Keep in mind that adding choices, even if those choices involve 100% employee payment, can increase how much your employees appreciate their benefits. Your insurance agent can help you determine what voluntary benefits best suit the needs of your workplace.

In closing, it will be impossible for you to capitalize on your investment in benefits if your employees don’t appreciate what you’ve invested and what they’ve gained. Remember that it doesn’t take much effort to find out how your employees view their benefits. When benefits are being perceived poorly, it can be relatively inexpensive to make improvements.

On March 29, 2011, the IRS issued Notice 2011-28 to employers regarding the information reporting requirements on each employee’s annual Form W-2 of Health insurance coverage. This new reporting to employees is for informational purposes only. It is to inform employees of the cost of their health care coverage. Furthermore, the IRS has stressed that employer-provided health care coverage continues to be excludable from an employee’s income, and is therefore not taxable.

The PPACA (Patient Protection and Affordable Care Act), which was enacted in March of 2010, ensures that employers must report the cost of health care coverage on the Form W-2.

Helpful to Small Employers

With the new guidelines, the IRS provided additional relief for small businesses (filing fewer than 250 W-2 forms) by making the requirement voluntary for them at least in tax year 2012. The optional treatment for smaller employers will remain in effect until further IRS guidelines are issued.

Opportunity for Benefits Communications

Employers can utilize health care reform as a chance to better communicate with employees regarding their health and wellness benefits. The new requirements will help employees gain a better understanding of the cost, and value, of their coverage. Many employees are going to be surprised at the cost of their health care benefits, and employers can use this opportunity to open a discussion about health care cost containment. They can also emphasize the investment the company makes in each employee in the form of benefits.

Whether employers are listening or not, alarms are sounding that the American workforce is increasingly growing more dissatisfied and disloyal. If businesses continue failing to recognize and respond to such trends as the job market improves, then they could potentially lose key workers to more astute competitors and suffer the consequences of decreased employee productivity.

The above warning stems from the results of MetLife’s 9th Annual Survey of Employee Benefits Trends, which was conducted in the fourth quarter of 2010. The study wasn’t all doom and gloom. It also found some promising data for employers, such as the fact that employers can help restore lost loyalty, encourage their workers to stay with them, and drive engagement by having a well-designed employee benefits package. Some other key findings of the MetLife study included:

• Of all the employees surveyed, 36% hoped to be working for a different employer within the year.
• Increased workload and decreased job security were factors that drove down job satisfaction and loyalty and were the main reasons cited by workers considering a job change.
• Fifty-one percent of workers reported that they were satisfied with their current job. This was an 8% drop from 2008 numbers.
• At only 47%, the number of workers feeling a strong loyalty to their employers hit a three year low.
• Down eight points from 2008, only 33% of workers felt a strong loyalty from their employers.

Despite the change in how employees view loyalty and job satisfaction, the 51% percent of employers that believe their employees have a very strong sense of loyalty to them hasn’t wavered. Considering that a large percentage of workers are now seriously contemplating a job change in the near future, loyalty and retention should be priorities for employers. It was only a few years ago that employers were actually highly focused on retention as they were prepping for the massive amount of Baby Boomers nearing retirement. However, due to low voluntary turnover rates during the recent recession, many employers have put retention efforts on the back burner.

Rebuild Loyalty. The MetLife study found that 71% of employees satisfied with their benefits also reported that they felt very loyal to their employer. Employers can focus on benefits to rebuild loyalty and boost employee engagement and satisfaction. Benefits have long been an important element to attract and retain new and existing employees of all ages. Most employers usually understand how important health benefits and salaries are to creating employee loyalty, but many overlook other benefits like retirement benefits and Life, Dental, and Disability insurance as loyalty drivers. In fact, the MetLife study showed that only 37% of employers recognized these non-medical benefits as loyalty drivers.

Focus On Benefits. As with most things in life, employees of different age groups will have very different perspectives on their benefits package. One-size-fits-all packages simply aren’t sufficient for the modern diverse workforce. Employers should think about flexibility, choice, and customization to best engage their entire workforce. Some of the study’s generational findings may be helpful for the design or redesign of benefits:

• Workers between the ages of 21 and 29, or Generation Y, are the most anxious to leave their current job.
• Workers between the ages of 30 and 45, or Generation X, are the least satisfied with the benefits offered by their employer.
• Workers between the ages of 45 and 54, or younger Baby Boomers, are most frustrated with their retirement prospects and could threaten workplace productivity.
• Workers between the ages of 55 and 65, or older Baby Boomers, are financially unprepared for retirement.

Employers also need to be careful that they aren’t dismissing or overlooking the value in voluntary benefits. The MetLife study showed that it’s extremely important to workers, especially Generation X and Y workers, that they have a choice of benefits that meets their specific needs.

One last point to consider is communication. After all, employees are much more likely to value and appreciate their benefits when they realize just how much you’ve invested to provide them.

You spend much time together, and share the burden of difficult decision making. But it’s not your spouse – it’s your business partner. Your business partner is a tremendous asset to your company. So, how do you protect your business in the event of your business partner’s death? Planning ahead for this scenario may be one of the most important things you do as a business owner.

The death of your business partner can affect more areas of your business than you anticipate. You might be prepared to have conflict between your concerns and those of the deceased’s family. But you should also be prepared for problems such as suppliers wanting to back off; creditors requesting payments and refusing to extend additional credit; customers being afraid to do business; and maybe even some employees leaving your company.

It is beneficial to explore what choices you have should your business partner suddenly pass away. One of the first choices you consider may be to liquidate the business and distribute the assets. The obvious problem with this plan is that you are eliminating your own source of income! Furthermore, the assets of the business may sell for a small percentage of their worth.

A second option would be to take on the deceased’s heirs as your new business partner(s). The problem with this plan is that often it was the special relationship you had with your associate that made the business work. Replicating the chemistry, skill set, and perspective you shared with your business partner is unlikely to happen with their heirs.

A third option for the future of your business would be to sell your share to the deceased’s heirs. However, this option is usually not viable, as the disagreements begin with the purchase price and continue through the rest of the negotiations.

Finally, you could buy out the surviving heirs and maintain the business on your own. This might be the most desirable to you, but again, you will be subject to disagreements over purchase price and other terms. Plus, you will have to come up with the money to purchase the other half of the business.

So, what is the ideal solution? A properly funded buy-sell agreement. A buy-sell agreement is a legally binding contract which dictates exactly what will happen if one of the business partners dies or becomes disabled. You can make all the decisions ahead of time, so both you and your business partner can make the decisions for the future of your business. The contract can be as simple or complex as it needs to be, but most importantly, it will either set a purchase price or provide a formula that will be used to value the business in case of a buy-out.

The death of your business partner and friend will be a difficult time for you and their family. Having to negotiate the future of your business at such a difficult time can be avoided by having a buy-sell agreement already in place. With this agreement, you can provide fairly and adequately for the deceased’s family members, value the deceased partner’s share of the business, avoid placing a financial burden on the business, and prevent bad feelings between the parties. Consult an attorney or financial advisor to talk about planning for the future of your business, before it becomes a greater burden at an already difficult time.

Whether the economy and business is good or bad, employers in all industries pay careful attention to labor costs. As far as labor costs go, lost productivity due to disabling injury or illness is one of the main cost drivers. In fact, the 2010 Total Impact of Employee Absences survey by Mercer/Kronos showed that unscheduled disability absences account for around 8.7% of U.S. payrolls. This percentage is comparatively over half of the 13.6% of payroll that accounts for the cost of health care.

According to the 2010 CIGNA Integration Value Study, which compared both non-integrated and integrated medical and disability plans, employees who suffer a short-term disabling injury or illness and that have disability and medical coverage spent fewer days on medical leave and away from work than those that didn’t have an integrated program. Other key points from the CIGNA study included the following about employees that have an integrated health and disability insurance program:

• This group had a 20% lower absentee rate than employees with only disability coverage.
• When compared with employees without an integrated plan, this group had an 11% greater return-to-work rate.
• This group needed an average of 13 fewer days of short-term disability leave than employees without access to an integrated program.

Direct and Indirect Savings through Medical and Disability Programs. Each day of disability for a business with average benefit offerings, an average hourly loaded wage of $29.71, and a 60% short-term disability benefit costs the business approximately $159.00. A business with 5,000 medical and disability-covered employees could see around 2,500 fewer disability days, which would add up to a productivity and direct cost savings of almost $400,000.

Don’t Forget the Value of Chronic Care. It’s also important for employers to remember that illness and injury prevention doesn’t cease after the employee starts a long-term or short-term disability absence, as one medical condition can often lead into or cause another to develop. Multiple studies have shown that a chronic care program is an important aspect of an employer having an integrated approach. For example, a different CIGNA study on chronic care showed that employees participating in chronic care programs were absent four fewer days and had a higher return-to-work rate after a disability than employees not participating in chronic care programs. The benefits of a chronic care program, such as coaching, support, and education, can be instrumental in preventing employees already going through a difficult time from seeing their situation drastically worsen.

In closing, it’s clear that reining in employee absentee-related cost is vital to a company’s financial bottom line. Research like CIGNA’s Integration Value Study shows that integrated programs are key to having a coordinated effort in not only assisting employees to return to work, but also to stay on the job and healthy. The greater opportunity that integrated medical and disability programs offer to employees to lessen disability absence and improve their health is a win-win for employee and employer alike.

The substantial amount of labor and hours involved in open enrollment season is known all too well to benefit administrators. But, are you making it harder than it should be? Administrators can make the open enrollment process go much more smoothly, and with a lot less intensive labor, by simply assessing the effectiveness of past enrollment processes before the new season begins. Let’s look at four practices to help you assess your process and determine what adjustments can be made to make the process more efficient.

1. Taking Advantage of the Pre-planning Phase. Begin by clarifying your business’s objectives. You can then evaluate benefit plan designs. Whether it’s health savings accounts, consumer-directed plans, reimbursement accounts, or so forth, the important point is to determine what options best fit your business’s goals and employee pool. Other considerations during the pre-planning period should include your budget for benefit administration costs, what and how technology will be utilized to make the enrollment process as efficient as possible, and whether the administration of benefits will be outsourced or done within your business.

2. Developing and Fine-tuning a Project Plan. Your project plan should be defined clearly and stipulate the following elements:

• The dates for the enrollment period.
• What resources are at your disposal and how they are to be allocated?
• A checklist of all tasks.
• How much lead-time will be needed for the addition of new employees and, if applicable, changing vendors or carriers.
• The training schedule for customer service reps and benefit staff members.

Additionally, it’s always prudent to have a contingency plan in place and to oversee the development of the project plan at each stage.

3. Educating Employees on Maximizing Benefits. A 2010 MetLife Employee Benefits Trend Study showed that employees remain extremely interested in communications with their employers regarding financial advice, retirement planning, and other benefit options. In fact, the overwhelming percentage of employees feel that communication has become a very important piece of the enrollment process.

Employers should provide their employees with the education they need to make wise health care decisions and the tools necessary for them to navigate the health care system successfully. There are a number of ways you can accomplish these goals, such as benefit calculators, health and wellness fairs, in-service meetings, direct mail benefit information, and online benefit tools.

It’s also important for employers to communicate the overall value of offered benefits to employees. Your employees should be informed about trends in the insurance industry, whenever you add more value to their health care plan, and how much you are contributing for the offered benefits.

4. Foresee the Tasks to Follow Open Enrollment. Employers should foresee and properly plan for the tasks that will need to be accomplished during the post-enrollment period. If not properly planned for, these tasks can create just as many problems as those that need to be done before and during the open enrollment period. Make sure to address the following points:

• ID card distribution
• Payroll (payroll feed schedule, timing of the last payroll period, and payroll deduction automation)
• Quarterly audit schedule with the carrier
• Follow-ups on carrier inaccuracies
• starting a plan for the next year

The total annual economic cost of overweight and obesity in the United States and Canada, in medical, excess mortality and disability costs, has reached $300 billion, according to a report from the Society of Actuaries (SOA). The SOA reviewed 500 separate research articles published over the last three decades on the topics of obesity and overweight, and their connection to various health conditions. Medical conditions with a statistically significant relationship to obesity and overweight include cardiovascular impairments, diabetes, hypertension, cancer, kidney disease, osteoarthritis and sleep apnea.

Looking at the U.S. alone and based on BMI (body mass index) measurements, just over a third of the adult population is considered overweight and nearly another third is considered obese. These figures, overall, represent an increase of about 50% from the early 1960s in the number of Americans who are overweight or obese. As to the impact of overweight and obesity on U.S. businesses, the following data emerged:

• At least 43% of all health care spending by U.S. businesses is associated with obesity. The impact varies considerably by disease, with obesity driving health care spending for diabetes the most.
• Annual workers’ compensation claims costs for overweight employees are 80% higher than for employees with a BMI in the normal range. This increase jumps to 161% for obese employees, and continues to rise with BMI.
• Several studies looked at health care expenditures based on BMI. Not surprisingly, in all cases annual per person health care expenditures rose along with the BMI measurement. One of the studies, which examined data from 1989 to 2002, estimated annual additional medical costs of $1,458 for obese women and $406 for obese men.
• Overweight and obesity increase disability rates, as well as the time needed to recover from disabling medical conditions.
• The total cost attributable to lost productivity from excess death and disability and work-related injuries as a result of overweight and obesity is approximately $177 billion annually in the U.S.

Statistics such as these strengthen the case for making efforts in the workplace to enable and motivate employees to get and stay fit. Such efforts don’t necessarily have a big price tag. Fortunately, there are many inexpensive ways to buck national obesity trends in your workplace.

• Encourage employees to choose the stairs instead of the elevator by making stairwells attractive or using them as a place to post employee photos, brief interesting news articles, or funny anecdotes and comics.
• Hold daily afternoon work breaks, and play 10 minutes of dance music with someone leading the moves, followed by a piece of fruit for everyone.
• Install bike racks in preferred parking positions or permit employees to store their bikes inside the building during the workday.
• Stock vending machines with water and healthy snacks.
• Sponsor a company softball, bowling or soccer team.
• Organize employees to participate as a group in fundraising walks or runs that take place in your community.
• Check with local gyms or fitness facilities for the availability of group discounts for your employees.
• Become an active partner with your health benefits carrier in promoting to employees any wellness, nutrition and/or fitness programs and information that is provided by or covered under your company’s health care plan.

In addition to the potential of improved employee health, a side benefit of many of these ideas is that they can generate employee team building and goodwill. And, happier employees are likely to be healthier, too.

If your benefit department is frequently tied down responding to medical claim complaints from your company’s health plan members, it can be a huge burden for the department to handle and create widespread dissatisfaction. Many medical claim issues tying up the system are the result of poor communication and poor information. There are a few simple methods that can be put into place to simultaneously relieve the burden on your benefit department and decrease confusion and increase satisfaction among plan members and providers.

Benefit Orientation for Members. Some people may retain information from just reading it, but many of us retain information better if more than one sense is used during the learning process. This means not only reading a pamphlet, but seeing and hearing the information too. Another problem with retaining information is that people tend to pay less attention to that which isn’t immediately relevant or useful to them. The result is that members don’t absorb what they view as irrelevant and often don’t remember the new rules when an unexpected benefit issue arises in the future. One way that you can get around these two problems is by presenting scenarios during your orientation sessions. For example, new benefit rules could be presented by the group leader using fictional examples of applicable situations. This element of presentation can make participants more at ease to ask questions, better help them relate the information to their own lives, and retain the information for future use.

Benefit Orientation for Providers. Although orientation sessions for health care providers aren’t very feasible in highly urban areas, it can be workable in smaller communities. You might invite local hospital billing and admitting personnel and a local doctor or clinic’s office personnel to an insurer orientation session. Affording provider personnel this opportunity to hear new plan rules and ask questions can help them smoothly integrate the new plan rules into their office procedures and distinguish your particular health plan rules from the countless others they see.

Choose a Health Plan with an Interactive Website. Many medical claim problems are the direct result of a hospital admission office or doctor office not being able to check the specific rules of a company’s health plan or verify a member’s eligibility. The connectivity of a health plan with an interactive website can solve many medical claim problems by allowing providers to determine rules, note policy benefit changes, and determine eligibility with a simple click.

Review Medical Claim Problems and Issues with the Insurer. Direct your HR personnel to keep a running log of all medical claim complaints and their status. Problems that are persistent should be sent to the insurer with a request for resolution. This makes your HR personnel the intermediary contact for medical claim problems and the insurer responsible for follow up and apprising you of any resolution results. The time it takes to resolve the issue, number of complaints, types of complaints, and other data collected during the process can be excellent evaluative tools. Do keep in mind that HIPPA privacy rules must be complied with any time your personnel works with health information. So, if you use a third party insurance broker to communicate with the insurer, then you must have an agreement with the broker that confidential health information will be handled in a HIPAA compliant manner.

Playing the Advocate. Your HR personnel will always be the member advocate with the health insurer and play a middleman or referee role between the two. That said, the clarity and increased satisfaction brought from initiating the above techniques should cut down on the frequency with which this role must be played.