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July 1, 2004
Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article, Compensation
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The old baggage car, improbably filled with heavy-duty exercise equipment, spends most of its time in the Union Pacific Railroad Museum in Council Bluffs, Iowa. It’s the last of its kind, used only for excursions of the railroad’s steam-locomotive-drawn "heritage" rolling stock. But from 1990 to 1998, it was part of a fleet of 17 such cars that were attached to special work trains. The trains housed and fed 150-member "system gangs," which roamed the railroad’s immense track system for weeks at a time. After a day of laying or repairing rails, roadbeds and signals, the overwhelmingly male laborers, welders, machinists and foremen had the option of throwing in a brisk workout on a treadmill or at a weight machine or free-weight bench.

    Or, of course, they could kick back with a dinner of fat-filled fried foods followed by beer and cigarettes. Nevertheless, the exercise cars reflected a genuine concern about employees’ long-term health before it was fashionable. But that was a different century, a different economy. In 2004, 15 years into a national health-care crisis, the costs and risks for UP are almost incalculably higher. With its aging, predominantly male and largely unionized blue-collar workforce, the 142-year-old company would seem to be a logical candidate for the kind of soul-sapping battle over health coverage experienced by so many old-line American corporations and smaller "old-economy" organizations. Which makes it all the more surprising to learn that Union Pacific is one of the best examples of a large American company that has successfully balanced the health of its employees with the need to boost its bottom line.

    Union Pacific estimates that during 2001, the last year for which a figure was calculated, its wellness program saved the company $53 million. That’s because more than 34,000 of the company’s 47,000 employees have voluntarily availed themselves of a free health-risk-assessment survey offered by the company. In 2003, 10,416 employees took the HRA and 6,642, prompted by health risks thus uncovered, enrolled in preventive health-education or disease-management programs. From 1990 to 2001, costs attributed to "lifestyle" factors such as smoking and alcoholism have dropped from 29 percent to 18.8 percent of the company’s total health-care bill. Among the employees who have taken advantage of the project, rates of high blood pressure, high cholesterol, smoking and excessive alcohol consumption have been significantly reduced.

    In 1997, the railroad commissioned a $75,000 study by Medstat, a company in Ann Arbor, Michigan, that provides research services for managing the cost and quality of health care. Medstat analyzed the company’s present and future workforce and predicted how its health-care costs would be affected by health and wellness efforts through 2008. Using a technique known as economic forecast modeling, it looked at four possible scenarios: What if the program disappeared? What if it stayed the same? What if UP realized a 1 percent reduction in risk? What if it achieved a 10 percent reduction over 10 years?

    Medstat’s rosiest scenario predicted savings per year of $77 million, but UP dialed back its expectations to come up with a figure $24 million lower because it didn’t think all the theoretical savings were realistic. It similarly scaled back its projected cost-benefit ratio to $4.53 saved for every dollar invested.

    In 1998, around the time the exercise cars were retired, the company contracted with 500 health clubs and gyms around its route system so that its employees could use the facilities free of charge. Recently, it instituted a pilot program providing a weight-loss medication, Meridia, to overweight employees to be used in combination with behavior modification, daily use of a pedometer and telephone counseling. And last year the company, which already provides the smoking-cessation drug Zyban, instituted the controversial policy of not hiring smokers. It does so on the honor system only and doesn’t include states where it operates and where it is illegal to prohibit employees’ off-duty use of legal substances. These states are: Oregon, Nevada, Arizona, New Mexico, Louisiana, Oklahoma, Wyoming, Nebraska, Oklahoma, Minnesota, Missouri, Tennessee and Wisconsin.

    Barbara Schaefer, a 26-year company veteran who is senior vice president for human resources, says Union Pacific does some cost calculations but that the numbers aren’t conclusive enough to release as proof of ROI. It declines to disclose either its health costs or the amount it spends each year--projected to average $1.9 million annually in the Medstat study--on its health and wellness programs. Arguably, UP’s strongest ROI data was collected at an early stage. In 1989, before the program was instituted, its employees had 17,954 encounters with health-care providers, at an average cost of $136.20 per encounter. In 1991, the number of encounters dropped to 17,291, at an average cost of $123.80. The company saved approximately $300,000. The program’s total cost was $110,000, yielding a benefit-to-cost ratio of 2.78:1.

    Although the company could commission a $250,000 statistical study putting a dollar value to each increment of employee health improvement since then, Schaefer has declined to do so. "I’ve got a few numbers," she says a bit sheepishly, adding that her figures are nowhere near conclusive enough to release as proof of ROI. What is more important, Schaefer says, is that health and wellness is a significant part of the corporate culture. "Our chairman is the inspiration," Schaefer says, referring to Richard Davidson, chairman and CEO since 1997. "He’s fired up about this initiative personally. He’s a former smoker who’s now a serious Atkins diet-ite. That’s because he’s a former cattle rancher who loves to eat as much beef as he wants."

    As the railroad chugs along making solid if not spectacular progress in employee health, it also has consciously pulled back from some of the more draconian methods many companies are trying, such as requiring employees to take a health-risk assessment as a prerequisite for health coverage and making smoking or excessive drinking off duty a firing offense. While the company maintains its relatively low-key internal concern about employee health, there is a firestorm raging outside. The shrinking umbrella provided by company-funded health plans has become a national obsession. Fueled by dire declarations of an "obesity epidemic" and a demographic time bomb consisting of middle-aged baby boomers nearing retirement, many companies are using employee health costs as a club during contract negotiations, or as a blame-the-victim tactic to rock employees back on their heels and force them to "take ownership" of rising rates.

    The computer company Cognex, near Boston, and the Kissimmee, Florida, Sheriff’s Department are organizations that have not only banned smoking on the job but also instituted a policy of not hiring smokers and firing anyone who is discovered doing so. Others, like the Bluefield Regional Medical Center in West Virginia and the Washoe County, Nevada, School District, have tweaked their consumer-driven health-care policies, "withdrawing" anywhere from $25 to $600 per year from each employee’s health savings account. The money is then paid back in installments if employees undergo voluntary health-risk assessments and address whatever risks are found by enrolling in company-sponsored disease- and risk-management programs.


"You can't do this stuff overnight,
just like you can't ban smoking in the building and expect that everybody will immediately quit."


    The beauty of this, health and wellness practitioners argue, is that their programs can be funded with the cash that stubbornly unhealthy employees leave on the table. The risk is that overweight or otherwise apparently unhealthy employees will be demonized by their coworkers for alleged lack of team spirit and/or driving up the cost of health care for everybody. "It’s the worst in small companies, where a few people can drive up the rates for everyone," says Donald Walizer, an organizational psychologist in Conway, Arkansas, who formerly worked as a benefits manager for a Fortune 500 company. "I’ve seen people get very, very angry" at coworkers who are perceived to be unhealthy.

    At least one company has pressed even harder. In 2002, Monongalia Health System Inc., a 1,400-employee health-care provider in Morgantown, West Virginia, announced the institution of what it calls its "tough love" policy. Any employee or spouse wishing to remain on the company health plan would be required to complete a 50-question health-risk assessment. Then he would have to attend free medical self-care training designed to "engage employees in taking more responsibility for their health-care status" and educate them "on health-care costs and the tools needed to make more prudent decisions when accessing health care." About 40 percent of the workforce complained that this was an invasion of privacy, an effort by the company to wriggle out of its obligation, an attempt to gather data that could be used against them at promotion or layoff time, or all of the above, the company reports. But after being reminded that the company health plan was a benefit, not an entitlement, the employees all complied.

    But tough love, as practiced by Monongalia and any employers that choose to emulate it, will not be an option at Union Pacific. "The risk of taking benefits away is that something catastrophic could happen, and that would break my heart," Schaefer says, adding that she can’t envision a situation at her company or any other where one part of the workforce is offered health coverage and another part is not. "I don’t want to be critical of someone else’s design, but I’m not going that way."

The road to wellness
    Union Pacific is unique," reads a 2003 corporate achievement award citation from the American College of Occupational and Environmental Medicine. "It is strongly committed to research to understand not only the effectiveness of intervention strategies in reducing health-risk factors, but also employees’ acceptance of various interventions. This focus on research is rare in corporate America, but one that makes sense for a mature workforce."

    In 2001, Union Pacific won a C. Everett Koop National Health Award from The Health Project, a private/public consortium chaired by the former surgeon general. In 2003, the U.S. Department of Health and Human Services gave UP its Innovation in Prevention Award for large companies. In both 1997 and 2002, the Wellness Councils of America, a nonprofit organization that has its headquarters near UP’s in Omaha, named the railroad a Platinum Well Workplace, its highest classification.


"We found that the most influential person in a person’s life is her spouse or significant other. So it’s best to get the information in their hands."


    The main initiative that has kept the railroad out of the public health-care debate and off the picket lines is called Health Track. All of Union Pacific’s employees are given both the motive and the opportunity to improve their vital statistics in 10 distinct categories: obesity, fatigue, inactivity, diabetes, smoking, stress, high blood pressure, high cholesterol, asthma and depression.

    Health Track is promoted during shift changes, at safety meetings, at company-wide functions and in newsletters. Corps of employees who volunteer to be health mentors are trained to help their less-enthusiastic colleagues through the programs. For example, UP safety captains frequently coach and encourage their co-workers through the smoking cessation process, emphasizing that slips and backslides are an expected part of the process. Twenty-six occupational health nurses at 20 of the railroad’s far-flung work sites from New Orleans to Pocatello to Portland are also responsible for spreading the message.

    CEO Davidson got caught up in one such wellness dragnet while visiting with maintenance-of-way employees near Houston last year. "Our nurse came around to measure blood pressure and body fat, and I got in line," he says. "She had this electronic device that measures fat somehow, and when she tried it on me she said ‘You exceed the upper limits.’ That put me over the edge." Since then, Davidson says, he’s cut back on carbohydrates and sugars and lost 25 pounds.

In transit
   
The railroad got into the health and wellness business in 1987 at the behest of the late Michael Walsh, then UP’s CEO and an avid runner and outdoorsman. A first-floor mailroom at headquarters was cleared out and a small exercise facility, available to all UP employees, was installed. The company contracted with private fitness centers along the UP system to admit its employees for free. To service roving track workers, the exercise cars were built and rolled out.

Change for the better

 
In 1990 Union Pacific calculated the percentage of its employee health-care costs that were due to chronic conditions and poor habits. Since the institution of Health Track, the percentage has gradually dropped.
 
 


Source: Union Pacific
 

    A 1990 evaluation produced the news that nearly a third of UP’s health costs were sparked by lifestyle factors that were at least theoretically subject to change. As health-care costs continued to zigzag upward, the railroad launched its first attempt at lifestyle modification. In Health Track’s first iteration, third-party providers were hired and pilot programs were launched to administer health-risk assessments. UP used the information gathered to alert employees who were deemed to be endangering their health by neglecting four risk factors.

    Over the next few years, as health costs continued to soar, the programs were expanded to address seven other health-risk factors. The programs were extended to all UP workers and their covered spouses, promoted heavily during work hours and integrated into the railroad’s safety-promotion program. It was also integrated into the company’s disability-procedures program in an effort to incorporate health and fitness into its aggressive return-to work-program.

    Adjustments were made and failures acknowledged. It was discovered, for instance, that promotional literature worked better if mailed to workers’ homes rather than distributed at work. "We found that the most influential person in a person’s life is her spouse or significant other," says Jackie Austad, UP’s director of health and wellness. "So it’s best to get the information in their hands." UP has also found that weight-reduction programs, including subsidized Weight Watchers meetings, are as effective for its employees as for the population as a whole. Still, 54 percent of its employees are overweight, an increase from 40 percent since 1990. (In 2000, The Centers for Disease Control and Prevention classified 64 percent of American adults as overweight.)

    Although far from ready to surrender, company officials figure that "awareness" is still no match for an aging, mainly male workforce relying increasingly on high-tech devices rather than brawn. Since the mid-1990s, smoking has been prohibited in progressively larger swaths of company property. It has long been forbidden in locomotives, shops and offices, and next year will be against the rules in outdoor switching yards and on rights-of-way as well. UP’s new Omaha headquarters building, due to open this summer, will have a large, well-equipped exercise center and a cafeteria with a section devoted to healthier foods.

    Next year, Schaefer says, the railroad will try nudging its non-union workers toward health by using the health savings account financial-incentive method. But the fine line between information and coercion, company officials say, will never intentionally be crossed. Marcy Zauha, UP’s director of health and safety, says it takes time. "You can’t do this stuff overnight, just like you can’t ban smoking in the building and expect that everybody will immediately quit." What she tries to do is to give employees information and then ascertain their level of health awareness. "Are they someone who’s not yet ready to change?" Zauha asks. "Or are they somebody who’s ready to make a change right now?"

Workforce Management, July 2004, pp. 30-34 -- Subscribe Now!

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