The fast track to better health: while disease management programs focus on the 20 percent of the workforce that drives 80 percent of health-care costs, population health management programs focus on the remaining 80 percent of employees who are currently healthy. The initiatives provide education and other programs to help healthy employees stay that way

Risk & Insurance, August, 2005 by John Williams

Health insurance, wellness and disease management programs often originate within HR departments. This makes obvious sense for a number of reasons.

However, as the price of health care soars, more and more companies are asking their risk management departments to step in and take responsibility for these initiatives.

"Health-care costs are negatively affecting bottom lines, so CEOs and CFOs are asking risk managers to do something about it," says Gregg Lehman, CEO of Gordian Health Solutions, a Tennessee-based consulting firm that offers population health management programs.

One organization that involves risk management in health initiatives is the city of Gainesville, Fla.

In 1990, the city's risk management department began reviewing its health insurance premiums. "They saw how much they had increased and were anticipated to increase," recalls Kathryn Parker, consulting wellness director for the city. They found that more than 60 percent of employee health-care claims were lifestyle-related. As a result, the risk management department created a wellness program called "LifeQuest," which has become very popular among the employees. Of the city's 2,200 employees, 2,000 participate in at least one element of the program each year.

Parker recently attended a conference where she talked with a man who had been an intern in the city's budget department a few years earlier. The man related that his supervisor at the time, who didn't believe in the value of the LifeQuest program, asked him to determine the program's ROI. He and two other students did their master's thesis on the program and found that, for every one dollar the city spent on LifeQuest, it saved seven. "Interestingly, that supervisor eventually became the city's risk manager and is now a strong proponent of the program," relates Parker.

Florida's Polk County government is another organization with active risk management involvement in health-care costs. Michael S. Kushner, director, risk management, handles the health plan for the county, which runs about $30 million a year.

"We copied a program that the risk management department in Asheville, North Carolina, created," says Kushner. Asheville created a pharmacist counseling program for diabetics. Results: The cost per year for diabetics who were in the program dropped from about $6,000 a year to just $1,000 a year.

Polk County created a similar program in 2004. Under the program, the county waives all of the costs of medications and tests for diabetics if they participate in an education program that involves counseling with the county's on-site pharmacist. "We found that physicians often weren't providing patients with all the information they needed," explains Kushner. "For example, we found that a lot of our diabetics had never been taught how to use a meter to test their blood sugar."

Many didn't even have a meter, because they didn't know it was necessary to test their blood sugar. The county currently has 200 diabetics in its program. "We don't have hard numbers yet, but I already know we are going to have excellent results, and it will lower our costs significantly," he says. The county plans to adopt similar programs for employees with high blood pressure, asthma and--eventually--high cholesterol.

DANGLING THE CARROT

One of the pivotal decisions that organizations must make when introducing wellness programs, disease management programs, population health management programs or other initiatives designed to improve or maintain employee health is whether or not to incentivize employees to participate.

Research seems to suggest that incentives are necessary in order to ensure maximum levels of participation.

John Erb, a senior manager with Deloitte Consulting of Miami, Fla., says it succinctly: "The use of incentives is a no-brainer. The reason is that, if people were actually taking care of themselves in the first place, there would be no need for things like disease management programs." That is, according to Erb, you have to offer some kind of incentive for people to be willing to make the effort to change their behaviors.

Cheryl Agranovich, president of Solon, Ohio-based WellCorp, a population health management program provider, agrees. "While people realize it would be great to have better health, we're like big kids," she admits. "For example, we want to eat a lot and not exercise. As such, incentives are necessary."

And another reason incentives are important: "Employers need to be willing to put their money where their mouths are," adds Erb. "If employees are going to save money for their employers by making behavioral changes, then the employees should be able to participate in some of the savings."

What kinds of incentives make sense? You can give away prizes, but ideally, incentives should be cash-based, according to Agranovich. More specifically, they should be linked to the cost of the health benefits program. "When employers do this, we definitely see higher participation rates." In fact, research conducted by WellCorp shows that, if employers offer incentives worth $50 or more, they can achieve participation rates of 75 percent to 100 percent.