STAFF REPORT

Operations Committee, August 2, 2006

Employee Health Improvement Project (HR07-01)
Update Council on the status of the Employee Health Improvement Project and advise Council of the next phase being launched in FY07
Speaker:  Dale Johnson
 

From:  Valiria Willis, Director of Human Resources
Prepared by:  Dale Johnson, Employee Benefits Manager
Approved by:  William B. Coleman, Jr., Town Manager
Approved by:  Benjamin T. Shivar, Assistant Town Manager

We have made good progress toward our goal of being able to use group specific data to analyze costs and identify how we can use our employee health insurance benefits program to positively impact employee health.  Acknowledging that this kind of project normally takes anywhere from three to five years to accomplish, we now have more than three years of data, and we have used this to guide us in making a number of changes.

There is still a lot to be done if we are going to continue to reduce health insurance costs for the long term.  Cost is certainly a major concern, but we also strive to provide a comprehensive benefit that gives employees good choices, provides incentives for them to be better consumers of their healthcare dollars, and to improve their ability to more proactively manage their own health and the health of their dependent family members.

The Town of Cary self-insured our employee health plan beginning July 1, 2002 and after two years of collecting claims data, we began our analysis to establish a baseline to be used for future comparison and decision-making, dividing the project into three phases.  With Phase 1, we compared our data to relevant benchmarks, looked at member utilization, and identified problem areas.  As a result, we were able to get a good indication of what appeared to be our major cost drivers.  This led us into Phase 2.

In Phase 2, we evaluated benefit plan design that would further engage employees in understanding health plan costs and how to be better health care consumers.  We considered alternative approaches that would positively impact the budget and improve efficiencies.  As a result, we introduced the 3 plan levels, (basic, core, and premium).  Each plan is differentiated by increasing levels of copayments, hospital deductible and coinsurance, and payroll deductions.  Employees choosing the basic plan are eligible for a town contribution to a flexible spending account.  The choices have been very well received by employees and have given them the option to choose the plan level that best meets their needs as well as helping them to be more aware of the costs associated with health insurance.  We have also seen a significant drop in our loss ratio (actual costs vs. budget), due in part to the three different plan levels that tie costs to utilization.  We also changed administrators to Blue Cross and Blue Shield of NC (BCBSNC) on July 1, 2005, allowing us to take advantage of significant network provider discounts.  The combination of these changes resulted in no rate increase in health insurance for FY07.

T these are short term successes, however, and we must find ways to effect long term cost control and the improvement of the health of the members of the plan.  We have now begun Phase 3 – developing specific, targeted programs that will positively impact employee health improvement and change behaviors.  We expect this to result in further engaging employees and their family members in pursuing a healthier lifestyle and will incorporate the importance of healthy living into the culture of our organization.

We have formed a strategic planning team that includes staff from the Employer Health Partnership division of BCBSNC to lay the groundwork for this third phase.  We will be relying on the many resources already available to us through this partnership with BCBSNC and will be working with contractors as necessary to utilize their expertise in the areas of health coaching, health education, holistic disease management and improvement, and program coordination.

Fiscal Impact:  Costs associated with Phase 3 of the project are already funded through the self-insurance fund.  In addition, it is fairly well established in the health industry that for every $1 spent on health improvement and disease management, there is a return of at least $3 in cost savings.

Staff Recommendation:  Receive the update on the Employee Health Improvement Project and enter it into the official Town Council records.