Benefits managers' new role: selling cost cutting to employees

Business & Health, March, 1993 by Sean T. Barry

As many companies find themselves forced to reduce their health benefits or ask employees to share the cost, their benefits managers are faced with breaking the news to employees..Indeed, in order to satisfy two constituencies--upper management, whose primary goal is cutting costs, and employees, who want comprehensive coverage--benefits managers have had to become more creative about selling cost cutting strategies to employees.

That involves making employees understand why they have to contribute to the cost of their health benefits and, often, convincing them that managed care doesn't necessarily mean lower quality.

Many benefits managers have taken the lead in confronting a system that seems hopelessly out of control. With an average increase of 10.3% in the cost of health benefits in 1992, according to A. Foster Higgins & Co. Inc., New York, benefits consultants, it would seem as though they have little choice.

"With annual increases of that magnitude," says Helen Darling, manager, health care strategy and programs, at Xerox Corp., in Stamford, Conn., "how many times can you go to senior management and say that you need an additional $30 million for next year's budget? If, in a period of tight resources, that's the only message you can take to them, you'd better realize that it's time to do something about it."

Overcoming resistance

While many benefits managers see the shift to managed care as a crucial part of cost containment, they sometimes need to go to great lengths to change employees' perceptions about HMOs. For Bull HN Information Systems Inc., in Billerica, Mass., that meant a trip to the HMO's facilities.

"The problem," says Suzanne Mercure, manager of benefits planning at Bull HN Information Systems Inc., a systems integration company, "is that you have employees who are all along the health care learning curve. As a result, you get a mixed reaction to managed care, and credibility becomes an issue." Many employees are aware that health care costs have risen sharply in recent years and recognize that a change is needed, but others believe that any change the company effects is purely cost driven.

"We felt that we should begin to educate employees about the fact that it is an issue bigger than Bull," says Mercure. To do that, Bull first had to determine what its employees thought about health care.

Through extensive surveys of its more than 6,000 U.S. employees, and through meetings at plants and offices from Billerica to Phoenix, Bull discovered that total freedom of provider choice was important to employees. "But it's interesting," Mercure says, "what happens when you begin to ask them how they choose their doctors. 'Well, he has a good reputation,' they might say. Or 'Oh, you know, my brother used him and he liked him.' It's largely hearsay."

Bull began its education program by showing its employees how organized systems of delivery, in which the choice of physicians and services is carefully regulated, kept the escalation of health care costs down to 9% to 11% annually. By comparison, traditional indemnity plans had cost escalations of 18% to 22%, Mercure says.

To help it take advantage of those savings, Bull contracted with Kaiser Permanente and The HMO Group, which assisted in selecting managed care services in the areas in which Bull operates. (By contracting with The HMO Group, a nationwide organization of independent, local HMOs, Bull gains access to its members.)

The HMO Group and Kaiser helped coordinate and organize care with such providers as Harvard Community Health Plan (HCHP), in the Boston area; InterGroup, in the Phoenix area; and Group Health HMO, in the Minneapolis area. "We believe health care delivery is a local business," Mercure contends, "and we were very committed to having vendors that were really close to the delivery of the service and involved with the delivery of care."

Once relationships were established with the HMOs, Bull needed to shift its workforce from the indemnity plan to the local managed care options. By restructuring its contribution strategy, beginning this year, Bull created a financial disincentive to remaining in the more costly indemnity plan--a higher deductible.

"From our perspective, this was the best way for us to be able to maintain the comprehensive benefits that our employees value so highly while encouraging them to become a part of this change. Do they perceive it that way? Perhaps not. But anytime they feel that they have to pay more for what they want, they perceive it as a cut-back," Mercure says. Yet many employees, particularly those in Bull's manufacturing operations in Massachusetts, were leery of the shift to managed care.

"We thought that the best education would be to get them out to an HMO site, to see for themselves," Mercure says. Given the common misconceptions about managed care--that it is socialized medicine--Bull decided that showing its employees firsthand was the easiest--and most straightforward--way to dispel any myths Bull employees might have about HMOs.