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Success Story: SMB Turns to Consumer-Driven Plan for Health Cost Management

A SMB Human Resources Web Exclusive
By McLean Robbins
August 22, 2008

SMBs know better than any other how much of burden health care costs can place on their total expenses. Central Nebraska Public Power was no exception.

CNPP employs 98 people in five rural offices located across the state. It also provides benefits to 10 retirees under age 65. Most employees are union members.

In 2006, CNPP faced a dramatic decrease in revenue at the same time its health care costs were rising rapidly due to an aging workforce. With their union contract expiring at the end of the year, benefit managers knew they needed to move fast if they hoped to make a plan design change before their renewal contract was due.

Up stepped Rochelle Jurgens, assistant controller.. She had attended several conferences and heard about the cost-saving benefits of consumer-driven health plans, and she thought the same approach could work for her organization.

"Implementing a CDHP was the most effective solution for reducing our company's healthcare costs and the perfect match to meet the needs of our employees and their families," Jurgens says.

'A hard sell'

CNPP partnered with Meritain Health, its current vendor, to implement the CDHP, because Jurgens felt confident in Meritain's abilities.

Jurgens admits that convincing employees and the union representatives that a CDHP was in the company's best interest initially was "a hard sell. "When we first started talking about it, there was no interest at all," she says. "But when we started talking [more in depth], they saw the potential for employees to accumulate large sums of money for the future."

Conversely, CNPP's general managers were an easy sell, says Jurgens. "They were interested in anything with the potential for cost savings," she adds.

Donna Hofmeister, Meritain Health's director of product management, advises SMBs to be sure to include all decision makers in the plan design and education process. "They can serve as the 'champion' of these types of plans, promoting them to employees and conveying the benefits."

A shift in responsibility

"When implementing a CDHP, education and customization is key," says Hofmeister.

Jurgens and her benefits team rolled out the new program using packets of explanatory information, payroll stuffers, employee meetings, and onsite education. Additionally, they've opened their phone lines for questions, which Jurgens says has been both popular and necessary.

"Our employees have been excited to find that if they shop around, they can see huge savings," she says.

Her efforts paid off. In the first year, CNPP saw a 70% CDHP plan adoption rate. This resulted in a one-year, overall cost trend decrease of 12%, as well as a 34% decrease in medical and dental claims and a 42% decrease in drug costs.

"With patience, extensive education, and a dedicated benefits partner, any company can successfully implement this type of plan," Jurgens concludes.

The Plan:

HSA: Contribution of $3,600 for families and $1,800 for singles

Deductible: $7,000 for families and $3,500 for singles

Employees who chose the PPO plan paid a higher premium

Etc.: Incorporated built-in PTO and wellness benefits with a benefit of $780 for families and $400 for singles for those in the CDH plan only.

CDHPs for SMBs: Words of wisdom from Donna Hofmeister of Meritain Health

"CDHPs work for businesses of all sizes. When launching a CDHP, it is helpful to offer the plan alongside a more traditional product offering (like a PPO), providing employees with multiple options. It is important to price the plans appropriately, with the CDHP offered at a lower premium. It is then necessary to provide extensive education so that members are comfortable with how the CDHP works.

It is also essential to provide tools to help employees choose the most suitable plan. It is also important to promote a CDHP within the company, as many employees are unaware of the details and benefits. With a new health plan, just like a new product, it requires early adopters to spread the word about the benefits to their peers.

A CDHP should be combined with in-depth education and a wellness program to get the best results. According to a recent study by Purdue University, approximately 74% of health care costs are due to lifestyle-related behaviors and are therefore preventable. The most effective method to prevent escalating healthcare costs is to promote healthy lifestyles among employees by providing them with the right tools to encourage behavior change.

CDHPs help train people to be good consumers of health care, which can inspire healthy behavioral change. Coupling a CDHP with a wellness program is the perfect combination to help reduce rising health care costs, while promoting healthy lifestyles."

Read more: Central Nebraska Public Power's Rochelle Jurgens named CDHP SuperStar by CDH Solutions magazine.