On Episode 66 of Health in 2 Point 00, Jess and I talk about money, money and more money. For one, Ciitizen, a health records company focusing on cancer patients, just closed a $17 million round. Limelight Health, which helps employers put together quotes for employee benefits, raised $33.5 million, and The Pill Club, an online birth control prescription and delivery service, raised $51 million. Jess also asks me about ADURO’s $22 million raise and why the employee wellness space is continuing to get so much funding. And again, be sure to find us at our booth at HIMSS! —Matthew Holt
“The Effect of Price Reduction on Salad Bar Purchases at a Corporate Cafeteria.” An excellent peek at the kind of steps that employers ought to take to improve eating habits in their work forces: subsidize the purchase of healthy foods. In this CDC study, reducing the price of salads drove up consumption by 300%. If this was a stock, we would all rush out to buy it.
Influencing behavior through both choice architecture and pricing differentials challenges many employers, however. There is a fear factor in play (“some of my people will be unhappy”), as well as financial issues, because the corporate managers responsible for food services often have their compensation linked to the division’s profitability. You make a lot more money selling soda than you do selling romaine. The same perverse financial conundrum appears when corporate food service companies run cafeterias. The on-site chef and managers typically operate on a tightly managed budget that leaves them little flexibility to seek out and provide healthier options.
A chef employed by one of the largest corporate food service providers in the country told me last year that he could not substitute higher protein Greek yogurt for the sugar-soaked, low-protein yogurt in his breakfast bar. When I asked why, he told me that Greek yogurt was not on his ordering guide, and he was not allowed to buy it from a local club warehouse and bring it in. In this same company, beverage coolers were stuffed to overflowing with sugar-sweetened drinks, all of which were front and center (and cheap), while waters and low-fat milk were shunted to the side coolers. In another scenario, health system leaders I met with last year all raised their hands when I asked if they had wellness programs and kept them up when I asked if they also sold sugar-sweetened beverages in their cafeterias at highly profitable prices. The irony was completely lost on them. They had to be walked through the inconsistency of telling their employees to take (worthless) HRAs and biometrics, but then facilitating access to $0.69 22 oz fountain sodas.
Say “employee benefits” and pensions and health care will jump to most people’s minds. Maybe life and disability insurance will pop up as well. But employers in Silicon Valley are going way beyond that. They’re providing housekeeping, cooking, babysitting and a host of other services as perks for their employees. According to The New York Times, here is what some California companies are doing:
At Evernote, a software company, 250 employees — every full-time worker, from receptionist to top executive — have their homes cleaned twice a month, free.
Stanford School of Medicine is piloting a project to provide doctors with housecleaning and in-home dinner delivery.
Genentech offers take-home dinners and helps employees find last-minute babysitters when a child is too sick to go to school.
To hear the employer representatives tell it, companies are providing their workers with services that make it easier to balance home and family life in an age when there are few stay-at-home spouses and work is stressful.
But a more likely explanation is economics.
Cheshire Cat: That depends a good deal on where you want to get to.
Alice: I don’t much care where.
Cheshire Cat: Then it doesn’t matter which way you go.
Alice: —So long as I get somewhere.
Cheshire Cat: Oh you’re sure to do that if you only walk long enough.
Lewis Carroll, The Adventures of Alice in Wonderland
2013 has arrived and employers now find themselves on the other side of a looking glass facing the surreal world of healthcare reform and a confusion of regulations promulgated by The Accountable Care Act (ACA) and its Queen of Hearts, HHS Secretary Sebelius. Many HR professionals delayed strategic planning for reform until there was absolute certainty arising out of the SCOTUS constitutionality ruling and the subsequent 2012 Presidential election. They are now waking up in ACA Wonderland with little time remaining to digest and react to the changes being imposed. A handful of proactive employers have begun, in earnest, to conduct reform risk assessments and financial modeling to understand the impacts and opportunities presented by reform. Others remain confused on which direction to take – uncertain how coverage and affordability guidelines might impact their costs.
If reform is indeed a thousand mile journey, many remain at the bottom of the rabbit hole – wondering whether 2013 will mark the beginning of the end for employer sponsored healthcare or the dawning of an era of meaningful market based reform in the US. HR and benefit professionals face a confusion of questions from their companions — CFO’s, CEOs, shareholders and analysts.
I had an amazing day on Friday. It started with a phone call from a local physician, one who I have never seen as an outside-the-box thinker, who was very excited about what I am doing. He feels much of the same frustrations as me, and thinks my approach to the problem is intriguing. He asked me lots of questions – many of the ones I keep asking myself, actually – and had some good thoughts on the answers to some of these questions. Apparently, there is quite a buzz around town about what I am doing, and most of that buzz is positive. That’s quite reassuring.
Then I got an email from a local business, asking me if I would consider being the doctor for their 100+ employees. I spoke to them on the phone and was very much encouraged by their insight and enthusiasm. They have seen their costs of insuring their employees go up dramatically over the past few years (as have all businesses, including mine), and are looking for a way to tame this cost. They were even more excited about the possibility of working with me when I pointed out two things they didn’t realize: 1. That a contract with my type of practice would, along with a high-deductible insurance policy, qualify them for the requirements of the ACA (thus avoiding the fines), and 2. My focus on care on the continuum (care outside of the office between visits) would have a potentially big impact on reducing absenteeism. This is exactly what I was dreaming about a few months back when crystalizing the ideas of my practice, so the reality of having an employer contact me about this is incredible.
Both Barack Obama and Mitt Romney have tried to claim the high ground as Medicare’s number one defender. In his latest column, the New York Times’ Paul Krugman argues that next week’s vote “is, to an important degree, really about Medicaid.” And writing on Bloomberg View, columnist Ezra Klein takes an even broader stance, concluding that “this election is all about health care.”
But health care isn’t all about the election, despite politics’ seeming ability to draw every sector into its gravitational pull.
In fact, many of the most significant stories in health care from the past two months haven’t come from the campaign trail — where candidates have mostly rehashed their existing policies — but from the private sector, as employers and providers have made aggressive, and sometimes unexpected, deals and changes. Reforms that will continue regardless of who’s sitting in the Oval Office next year.
Here are some of those stories.
Top Employers Move to Defined Contribution
As previously discussed in “Road to Reform,” Sears Holdings and Darden Restaurants have made plans to shift away from their current “defined benefits” — where they choose a set of health insurance benefits on behalf of their workers — and roll out “defined contribution” instead.
Under that model, firms pay a fixed amount for employees’ health benefits and allow workers to choose their coverage from an online marketplace, such as the Affordable Care Act’s health insurance exchanges or the emerging number of privately run exchanges.
In theory, the model would slow employers’ health costs while allowing employees to have more control over their own health care spending. And Sears and Darden’s announcements aren’t wholly unexpected, given that many employers have signaled their interest in making a similar shift.
But given the long-entrenched employer-sponsored health coverage model, some employers needed to be the first movers before the rest would be ready to follow.
Will they? That will be a major industry issue to watch across the next months.
Someone once showed me an analysis that demonstrated that the sum of workers’ salaries and benefits has stayed remarkably constant in real terms over the last two decades. This means that companies have compensated for the increasing cost of health insurance over time by holding back on wage increases.
You can understand this. After all, if companies are not able to increase the price of goods and services they sell to the public, they need to hold factor costs relatively constant. So if it was costing them more and more to provide health insurance to their workers, an offsetting amount would have to be removed from possible wage increases.
This dynamic is still in place, but it is showing up in a different way, by shifting costs to workers in the form of higher deductible health insurance policies. Deductibles are different from co-pays, where you plunk down $15 or $20 for each appointment or prescription. With deductibles, you pay the first costs incurred as you and your family make use of the health care system, the entire cost of the office visit or of the prescription, until a preset amount is reached. After that level is reached, you still pay the co-pays. A recent story in the Washington Post documented this trend.
Currently, this kind of high-deductible policy is often combined with health saving accounts that are funded by the employer. These accounts let patients buy medical services and drugs with pretax dollars. So, although your insurance plan might require you to pay more of a deductible out of your own money, you could still use the HSA to cover those out-of-pocket expenses.