for immediate release

March 25, 2009

St. John’s tailors new consumer-directed health plan for workforce

With traditional managed care losing effectiveness, employers and insurers across the nation are searching for solutions for the health care cost and quality dilemma.

St. John’s Human Resources and Health Plan leadership began discussions two years ago for a custom-designed health plan for employees that would encourage and reward healthy behavior and the proper use of medical resources. The goal was to keep premiums and deductibles low while continuing to address the needs of the chronically ill. Employees were asked to participate in the process through an online survey about health care and their benefit plan.

The result: St. Johns’ new Health Reimbursement Account (HRA), available to all employees as an alternative to the traditional HMO (health-maintenance organization).

“We wanted to design a plan that was something in between an HMO and a PPO (preferred-provider organization),” says Janet Pursley, R.N., interim operating director for St. John’s Health Plans. “PPOs increase members’ responsibility through cost-sharing via deductibles and co-insurance, but the deductibles are often so high that they discourage people from getting preventive care. With this plan, preventive care visits and services are covered 100 percent and a special health care reimbursement account is set up to help pay toward the deductible.”  

Employees have more control of how their dollars are spent. A single debit card is available to access both their new health reimbursement account and their flexible spending account funds to pay for health care needs.

Members earn additional incentive dollars for their reimbursement account by participating in healthy behaviors such as not using tobacco, exercising or meeting monthly goals with a wellness coach or disease management coach if they have chronic conditions like diabetes or asthma. Unused health reimbursement account dollars roll over to the next year.

During open enrollment last fall, about 15 percent of St. Johns’ workforce made the switch from the HMO to the new plan.

“Our new health plan premiums are lower than our current HMO option and our goal is to make sure all our co-workers have access to affordable health care at all times,” says CEO Kim Day. “This plan is designed to help our employees become better consumers of health care and to help us slow the rate of growth of our overall health care costs. As we continue to lower costs, our goal is to share these savings with our co-workers.”

As a self-insured company, St. Johns’ health care costs reflect the actual medical expenses incurred by its nearly 20,000 covered employees and their family members.

“Since St. Johns’ actual medical expenses in 2007 were below the cost projections used to set the 2008 premiums, the health system returned more than $1 million to co-workers last year through two ‘premium holidays,’ in which insurance deductions were not taken from paychecks,” explains Jim Brookhart, vice president of human resources for St. John’s Health System.

“This reduction in costs is attributed to a variety of factors, but the active role co-workers have taken when it comes to making healthier lifestyle choices and appropriate use of health care has helped,” Day says. “St. John’s has been working for a long time on improving the overall health of our co-workers, from developing world-class disease management programs to lowering premiums to co-workers who are tobacco-free and exercise regularly. This new HRA health plan takes that emphasis on improvement of health to a whole new level.”

The 2007 calendar year saw a reduction in hospital admission rates, lower inpatient medical expenses and an increased use of generic drugs among St. John’s co-workers and their family members.

“I think we have a responsibility to lead activities that both improve health care and control health care costs,” Pursley says. “St. John’s has a wealth of services that can help employers become more successful in improving the health of their workforce. As a health system, St. John’s has the ability to measure the impact this plan will have, so we are pleased to be able to pilot this new health plan within the Sisters of Mercy Health System and for other area employers.”

About consumer-directed health plans

While health care costs continue to rise sharply, most members are well-insulated from the true costs of care.

Even though employees are contributing more in absolute dollars for their health care, their share of the costs has actually decreased significantly over the past 30 years, Brookhart says. In 1970, employees’ out-of-pocket share of total health care expenditures was 35 percent. In 2007, it was only 15 percent.

Consumer-directed health plans (CDHPs) represent a small but ever-increasing portion of the health care insurance market. An estimated 5.5 million Americans are enrolled in consumer-directed health plans, according to the 2008 Employer Benefits Survey, an annual report released by the Kaiser Family Foundation and the Health Research & Educational Trust.

Consumer-directed health plans have grown in recent years as employers have sought ways to shift more responsibility for medical decision-making to employees and their families. The theory is that enrollees will forgo unnecessary services and shop for needed care based on price and quality.

These health plans generally include three components: a health insurance plan with a deductible, an accompanying tax-advantaged account to pay for expenses below the deductible amount, and decision-support tools to assist the consumer in assessing health care cost, quality and available treatment options.

The St. John’s plan goes well beyond those components, offering comprehensive disease management, wellness coaching and Web tools to help employees improve their health.

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