As the recession grinds on, employers are trying to contain costs while boosting productivity, both admirable and understandable goals. But these two goals can be at loggerheads when employee benefits are targeted, according to professionals at Morneau Sobeco’s Emerging Trends 2009 seminar.
Employee health and wellness plans may appear to be an easy place to conserve capital, and employers may be tempted to just shave some of the coverage by, for example, raising deductibles on drug plans.
The results can be disastrous, not only for employees, but for the company.
In one case study, the employer boosted the deductible, assuming that since the drugs being used were a necessity of life, staff would simply suck up the extra cost.
The savings to the employer were higher than anticipated, in the short term, but only because many employees could no longer afford their medication. In fact, the study found use of almost all major pharmaceuticals dropped precipitously.
Anti-inflammatory drug use took the biggest hit, declining 45%. Drugs to combat more serious conditions declined too, though, as hypertension drug use fell 26%, antidepressant use declined 26% and, perhaps most dangerous of all, anti-diabetic drug use fell 25%.
“People didn’t still go out and buy what they needed,” says Joy Sloane, partner with Morneau Sobeco. “The reductions were quite significant.”
With these conditions being under-treated at best, or completely untreated at worst, employee health suffered, leading to an increase in acute events, which required hospitalization.
Not only were these employees not contributing to productivity, but their co-workers productivity fell as well. The company saved money on the drug plan, but the costs associated with falling productivity were greater.
“If we’re making things difficult for our employees, because we’re just looking at the financial outcome, then the impact to our organization may be very significant, in that we’re probably costing more dollars in missing people at work, and lost productivity,” Sloan said.
Paula Allen, executive vice-president, Morneau Sobeco, says a healthy and happy workforce is counted as a company asset in the eyes of capital markets participants.
“It’s a better deal to invest in the company that has a platform for sustainability,” she says. “I prefer to invest in a company that is making strategic decisions in terms of where they are investing in health.”
An example of such strategic planning can be found at Pitney Bowes, which recognized its staff had a higher prevalence of diabetes. The company gave employees access to name brand pharmaceuticals, because it wanted staff to have access to the newest medications and treatment options.
And, the firm went a step further, dropping its drug plan deductible for diabetes drugs altogether.
Management expected healthcare spending to rise, but believed the costs were justified. After two years, the company found healthcare costs had actually declined by 7% because there were fewer acute health incidents: Emergency room visits declined by 26%.
As a result, Pitney Bowes has applied the same policies to hypertension and asthma, and the company’s healthcare costs total just 61% of industry benchmark, Allen says.
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(05/25/09)
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