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The changing landscape of employee benefits

How consumerism-driven plans can be implemented successfully

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"Even the best vision in the world will not make a difference unless the leader can achieve the buy-in and motivation of the rest of the organization to implement it," Jay Conger wrote in his "Leader's Change Handbook." While this could be said of any industry, it certainly rings true in the employee benefits industry, where, considering the rising costs of health care, real change is needed.

Health care cost increases are not just a southern California phenomena. Throughout the United States, employers are challenged by medical insurance rates rising at more than twice the rate of inflation.

The good news is that there is a "vision" to significantly lower employer health care costs and improve employee health. This vision, a change afoot in the industry, is helping employees look at their personal health and health care purchasing differently. It's about real, resonate consumer engagement. Yes, it's about behavior change -- made possible with changes to employee benefit programs.

Increasingly, employers are seeing the financial connection between employee health and their bottom line, while employees are also beginning to recognize the link between their personal health and their health care costs.

Awareness and vision are just the beginning of the solution. How do we get the buy-in and motivation needed to make this vision a reality?

Gaining awareness on the part of employers and employees presents an opportunity in employee benefits programs to help combat skyrocketing costs and make possible affordable care in the future. To that end, there is a way to align both companies and employees by engaging them in the costs and spending associated with the services they receive.

The approach is consumer-driven health care done right, combined with personal and effective wellness initiatives. Combined correctly, this approach provides meaningful financial incentives to employees, leading to lower health care utilization now and into the future.

To do it right, senior management needs to understand and embrace the initiative.

Let's start with understanding what consumer health care is.

The concept of consumer-driven health care generally combines a high deductible health plan with an adequately funded consumer spending account for employees and families to spend on health care services as necessary. These accounts are known as health reimbursement arrangements, or health savings accounts. They have some differences, but both allow unused funds to roll over from year to year -- helping employees save for future expenses. Done right, preventive services are covered at 100 percent. Done right, these plans are not a cost shift of expenses to employees. Done right, these plans create health care cost awareness within employees and empower them to make financially prudent decisions about how and where they seek services. This awareness results in actions that may bring health care costs down:

¥ There is a reduction in needless medical care.

¥ People with chronic illness are more likely to follow treatment regimens.

¥ Healthy people have the incentive to stay healthy and utilize their annual preventive check-up benefit.

Consumer-driven health care has shown a lot of promise for companies willing to take the step. Companies that have implemented a consumer-driven health care strategy have seen their medical cost increases reduced to the low single digits on a percentage basis compared with their prior 9 percent to 12 percent medical claims trend.

However, despite these figures, consumer-driven plans have not been widely adopted by organizations in Southern California. We live in an area dominated by HMOs and their familiar co-pays. And while most companies have not adopted consumerism, they have employed strategies that increase deductibles and co-pays with little effect on the underlying causes of rising expenses. As a result, employees who are paying more each year out of pocket for their insurance are quickly losing sight of why medical insurance is called a "benefit."

Because the notion of changing from something familiar to this new vision can be overwhelming, advisers should guide their clients through this process every step of way. It is not enough to introduce and then hand-off the implementation of this solution to the employer client. An employee benefits specialist needs to educate the employers and assist with a successful implementation plan.

As employee benefits specialists, Barney & Barney designed the Consumerism Readiness Initiative to properly prepare clients to implement a consumer-driven plan, including a seminar series that took clients through the value proposition of consumerism and breaking down the four key program components:

1. What is consumerism; types of consumer-driven plans; how they work.

2. How to design a consumer-driven plan for your organization and employees.

3. How to Implement and communicate about your consumerism plan.

4. Real behavior change: How to build consumers once you have a plan in place.

Integral to the success of the Consumerism Readiness Initiative has been the participation of nationally recognized consumerism expert John Young from CIGNA health care. Having worked with consumer-driven plans for over a decade, he knows what works and what doesn't. Together, we designed a curriculum to educate and engage clients on the practices and strategies to mitigate escalating costs and instill a comfort level when implementing these plans.

The result has been that clients have gained enough knowledge to feel comfortable implementing a consumer-driven plan when it makes sense for their organization.

Now, the vision is in sight with the collective efforts of employees to make better choices around not only their health care, but how they live their lives every day.


Munkholm specializes in employee benefits solutions at Barney & Barney LLC, one of the largest and oldest risk management and employee benefits insurance brokerages in California.

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