- Approximately 50% of total claims costs were for illnesses and accidents that might have been preventable or modifiable through behavioral changes
- The company was paying what it considered to be retail prices for hospital and medical services that could be obtained wholesale through preferred provider arrangements.
As a result of these discoveries, Sony embarked on an Employee Wellness Campaign for 1992, designed to raise the health-consciousness of its employees as well as stabilize the cost of providing health care coverage. Two major features of this campaign are the addition of coverage for preventive care under Sony's indemnity plans and the provision of incentives in the form of flex benefits credits for employees who take advantage of certain health screenings. These credits can be applied to the following year's flex benefits' elections.
"Over the last several years, we had experienced a 15% to 16% increase in the cost of health care to our employees," explains Alfred E. Hayes, vice president of benefits and administration at Sony's Corporate Human Resources Group in Park Ridge, New Jersey. "During that time, the concept of wellness coverage was being raised by our employees and by our benefits committee members. Consequently, we decided to look at the demographics of where we were with our claims—what claims were heavy compared with industry standards, what risks were prominent and what we were paying."
To conduct a thorough study of its claims, in mid-1990 Sony retained Hewitt Associates of Bedminster, New Jersey. Because Sony's health care plans are self-insured, it was merely a matter of having its benefits administration company turn over three years of computer tapes for analysis by Hewitt's corporate physician.
Hewitt ran the tapes through its Health Information Systems, which examines several factors: The types of claims submitted, patterns of claims utilization and costs of claims. That information then was compared to similar employer data and adjusted for Sony's particular medical plan design, employee demographics and geographic locations.
What they found was that one-third of the claims resulted from what they believe to be modifiable conditions. Further, the study showed that about half of that group—17% of all employees—were responsible for 50% of all of the medical claims.
Supplied with that information, Sony "first looked at the risks we have with actual claims, to find areas we could do something about," says Hayes. Smoking, alcohol abuse and not wearing seat belts figured high on the list of risks that could be reduced through behavioral changes. Other potentially preventable risks included medical conditions such as heart disease, induced by stress-related factors like high blood pressure and high cholesterol levels.
Believing that early detection and treatment of some medical conditions might lead to lower claims costs in the long run, Sony adopted many wellness features in its 1992 medical coverage plans.
First, Sony initiated improved coverage for preventive care and wellness programs, regardless of whether employees enroll in an HMO or in one of three indemnity plan options. For 1992, this coverage includes:
- Annual blood screening. Sony employees age 30 or over are reimbursed in full for the cost of obtaining a blood-pressure reading and blood tests, which include testing of cholesterol levels, blood sugar and red blood cell count. (At some locations, testing is available on site at no cost for all employees, regardless of age.)
- Annual pap smear. Female employees are reimbursed in full for the expense of having a pap smear once each year. Additional pap smears in a year also are reimbursed in full if recommended by the employee's physician.
- Mammograms. Female employees are reimbursed in full for a baseline mammogram anytime after age 35 and then once every two years after age 40. Employees are reimbursed for mammograms given on a more frequent schedule if recommended by the employee's physician.
- Physical exams for children covered by health insurance up to age seven. Reimbursement is 100% for children younger than age two and 80% from age two to seven for routine baby and child care exams, including the cost of immunizations. However, the annual benefit maximum for each child is $150.
- Smoking cessation programs. For employees who smoke, 80% of the cost of completing a program to stop smoking is reimbursed. The benefit maximum is $300 for each program, and no more than two programs will be reimbursed over an employee's lifetime.
Previously, these types of preventive care and wellness coverage were available only to employees enrolled in the company's HMO option, says Hayes. However, he points out, "HMOs aren't available at all locations and only cover about 20% of our employee population. Employees have been asking for this coverage, and the need became more pronounced and visible to us over the last several years."
For all of these new coverage, no deductible is applied. In addition, employees choosing to have a blood screening, pap smear and/or mammogram can earn up to $130 in additional flex benefits dollars for 1993. Fifty dollars in flex credits can be earned with a blood screening and $40 each for a pap smear and mammogram.
"Each employee receives a flexible benefits allowance each year, and these credits are added to that allowance," Hayes explains. "It will make it easier for employees to buy insurance coverage or reduce the cost of their contributions toward that coverage."
To receive these extra flex dollars, the health screenings were to be performed between January 1, 1991 and August 31, 1992. Appropriate forms for each test must be obtained, certified and returned to the employees' HR representatives by September 10, 1992.
Hayes believes these new provisions will raise employee awareness of potential health risks, as well as provide an incentive to undergo health screenings to detect high-risk medical conditions. Although for 1992, these incentives are available only to Sony employees—not their dependents—Hayes says the company will consider expanding the coverage in coming years.
To help employees further assess their individual health pictures, Sony also gives them the opportunity to receive a customized health risk appraisal.
Through Staywell Corp., an independent third party, employees were mailed a three-part health assessment questionnaire in the fall of 1991. Called Health Path, the study solicited information about the individual employee's health, such as pulse rate, blood pressure and cholesterol levels, as well as behaviors related to diet, smoking, alcohol use and exercise. Employees choosing to participate received a confidential report rating their health habits and identifying those that could be most harmful to their health.
"Each report gives employees an estimate of their health age, based on their health practices," Hayes elaborates. "Someone might be 40 but have a health age of 45 or more because he or she smokes. The report suggests the person stop smoking, and also provides three areas of risk where there's a chance of modifying behavior."
Hayes says Sony is encouraged by the questionnaire's reception—it received a response rate of 36%—and will consider making it an annual or biannual part of the overall wellness campaign.
To further involve employees in the concept of wellness and the benefits of participating in preventive care, Sony also produced and mailed to each employee's home an audiocassette tape on wellness. Called "Sony's Flex Steps to Good Health in 1992: Lend Us Your Ear," the tape shares tips and facts on leading a healthy lifestyle.
Using a game-show format called Health Quest—similar to Jeopardy—the tape leads listeners through a series of health categories: exercise, nutrition, cancer prevention, smoking, safety, stress and kids' health.
Under the topic of nutrition, for example, a panel of contestants is presented with the answer: "A high level of this substance in the diet contributes to elevated blood cholesterol." A contestant gives the question, "What is saturated fat?" and the game-show host elaborates for the audience by adding, "A diet high in saturated fat—the kind found in most meats and whole-milk dairy products—can boost cholesterol. Heredity also can play a role." A brief discussion of Sony's preventive care coverage and the importance of testing cholesterol levels follows.
Another category, safety, gives the answer: "The leading cause of death among teens and young adults." The question: "What are car accidents?" The game-host elaborates again: "Many deaths and serious injuries could be prevented by wearing seat belts. In fact, many states require it. So, if you're listening in on your car radio, make sure you buckle up every time you drive."
In addition to raising the health-consciousness of employees, Sony is attempting to control the rising cost of medical care by introducing the preferred provider organization (PPO) concept. To establish the pilot PPO, Hayes says the company looked for an area with a large concentration of employees and a well-established network of hospitals and physicians. He says that California became the ideal geographic location for several reasons, the greatest being that the majority of the 4,500 employees there already received services from providers within the Benefit Panel Service network. A review of past claims showed usage of those network hospitals to be above 80%, while network physician usage topped 70%.
Now, by using physicians and hospitals within the Benefit Panel Service network, California workers who choose one of the three indemnity plan options will have lower deductibles and higher coinsurance.
Using a physician within the network lowers office-visit copayments to $5 to $15 and provides an 85% hospital copayment— 5% more than out-of-network coinsurance. Annual hospital deductibles are reduced as well, by $50 to $200 for a single employee and by $150 to $600 for a family, depending on the medical plan option.
"Most employees can continue to use their own doctors, and we get an automatic reduction in the cost of those services," says Hayes. "Most employees will receive lower deductibles and higher coinsurance payments overall."
The benefit of this PPO to Sony, says Hayes, is an anticipated savings in claims costs of between 15% to 20% for 1992. He says, however, that for these new initiatives overall, it will take much longer to realize the full benefits of these cost-savings efforts. Hayes estimates that the cost of the preventive care and wellness program initiatives will run into "hundreds of thousands of dollars" initially, and will take several years before that expense is offset in lower claims' costs.
"We don't expect to reduce our overall medical claims' costs, but to keep them from skyrocketing," Hayes says. "Inflation in medical costs isn't going away, so we want to control that increase. We believe that employees who take care of themselves properly are going to become more useful to the company. These initiatives are designed to produce a more healthy, productive group of employees in the long run."
Personnel Journal, September 1992, Vol. 71, No. 9, pp. 40-44.