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UltraLink - FOCUS...on benefits
December 2005
Can We Talk? HR and Finance Are Teaming Up
Traditionally HR looks to make corporate decisions that keep employees happy and CFOs are the ones scrutinizing the numbers and looking at ways to cut costs. With an increased pressure of higher compensation and benefits costs, those two sides of the organization are now being required to come together and strategize benefits spending and often it is HR that is learning the ways of finance.
Benefits costs are continuing to hit profits hard. Health care cost have gone up about 10 percent for each of the last five years and more companies are looking to offload some of the burden through shifting more of the costs to employees or evaluating some type of change to the program.
For those reasons, more and more HR professionals are getting trained in finance or actually coming through the finance department. Of the 40 percent or so of HR heads who come from outside HR, the largest portion comes from finance or accounting according to Wayne Brockbank, a professor and the director of the Center for Strategic HR Leadership at the University of Michigan's Stephen M. Ross School of Business.
The coming together of these two parts of the organization is not always idyllic. HR is still frustrated by being shut out of major decisions and one of the dangers of HR getting too close to finance is there may be no one left to be the employee advocate. One of the benefits to this collaboration, though, is better targeting of spending - taking into consideration the unique needs of an organization's workforce. Instead of focusing purely on the cost of the benefits to the company many organizations are focusing on employee satisfaction with the goal of finding cheap but effective substitutes.
Source: CFO Magazine, November 01, 2005
Increased Promotion of Generic Drugs Could Save Billions Annually!
Express Scripts, Inc. conducted a study on usage of name brand pharmaceuticals versus generic, examining six major classes of drugs including antidepressants and cholesterol-lowering medications on a sample of roughly 3 million Express Scripts commercial members.
Through their research they found that more than $20 billion could have been saved in 2004 if there was an increase in generic drug use. And they believe, if actions aren't taken, the loss for this year will be $24 billion and for 2006, $25 billion. On average a generic drug costs about $60 less per monthly prescription than a brand name medicine.
Health plans have been giving inducements to use generic drugs through lower pricing of co-payments which has increased the use of generic drugs by 50 percent but Express Scripts believes more can be done. They believe that drug advertisements for name brands as well as the fact that doctors don't really have any incentive to prescribe generic medicines is contributing to the problem.
On the other side of the coin... the brand drug industry's trade group, the Pharmaceutical Research and Manufacturers of America, stated that this report goes beyond Express Scripts just calling for increased use of generic substitutions. "Much of the increase in generic drug use advocated by Express Scripts involves switching patients to medicines different from those prescribed by their physicians. They are not generic copies of the prescribed treatments," said Ken Johnson, senior vice president of the trade group.
Source: The New York Times, October 25, 2005
Growing Trend - Charging Tobacco Users More for Benefits
In September United Benefits Advisors reported that 3.1 percent of employers surveyed nationally have adopted premium differentials for tobacco users. An additional 11.2 percent said they probably will adopt a differential in the next year, and 53.8 percent indicated that they need more information before acting.
Premium Standards Farms, Inc. provides self-funded health insurance to about 4,400 employees. As of January 1, 2007 their employees will be charged 15 percent more for health insurance than their tobacco-free co-workers. With tobacco users costing about 25 percent more to cover than nonusers they decided it was time to join the growing number of employers adopting premium differentials. They are giving their employees a chance to quit first. Starting in the next month and continuing moving forward, they will pay 100 percent for smoking cessation programs.
With more and more employers looking at this as an option, they need to decide whether they are going to take the carrot or stick approach according to R.J. Dutton Inc. an employee benefits advisory firm. The stick approach involves premium surcharges while the carrot approach involves comprehensive wellness programs that allow employees to earn lower premiums.
There is then the extreme. Howard Weyers, president of an insurance consulting firm just fired them. He announced two years ago that as of January 1, 2005 any workers still using Nicotine would be fired - and they were.
Source: bizjournals, November 7, 2005
CEOs Need to Address the Cost of Depression in the Workplace
Depressed employees use, on average, more than $4,000 per year in medical services versus $1000 per year than those without depression and it results in 400 million lost work days a year. "That's why employers have a huge stake in promoting treatment for depression," according to Keith Dixon, PhD and President of CIGNA Behavioral Health, speaking at the Picower Institute for Learning and Memory "On Depression" symposium.
While the direct costs of depression are high, the indirect cost of untreated depression is worse. According to the U.S. Surgeon General the indirect costs of depression are estimated to be $80 billion annually. These indirect costs show up in a variety of ways: absenteeism, poor customer service, flawed-decision making, poor productivity, etc... CEOs need to take notice and see that the treatment of depression is good business strategy.
CIGNA now offers a new depression management program as one workplace benefit that will promote treatment for depression and will be available January 1, 2006. The CIGNA Well Aware Depression Management program will readily identify members with depression and get them appropriate care. This program will pinpoint those that have been prescribed an antidepressant and he or she will be called by a behavioral expert who will evaluate whether additional help, such as therapy, is needed.
Source: FDA Law Weekly, November 3, 2005
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