Worksite Health Promotion

It’s easy to feel like your PBM holds all the power over you. In most cases, it does.

A landmark 2004 study compared what drug store benefits managers (PBMs) charge businesss’ plans to what they actually pay pharmacies.

Researchers found staggering overcharges - particularly for generic drugs. Regrettably, four years later, the situation has hardly changed. All too often, PBMs improve their own bottom line at the expense of the plan sponsor’s.

Chances are, it’s your health insurance vendor - not yourself - who contracts with the PBM to administer the prescription drug portion of your health benefits.

So how can you feel confident your firm is getting the best value and service? Begin by asking your health-plan broker these four questions about the current or prospective PBM.

1. How does the PBM calculate price?

Many PBMs gain hidden profits off your plan through a practice called “differential pricing,” says advisor Gerry Purcell.

In other words, the PBM compensates one price to drug retailers and then sets a lesser discount off the typical wholesale price (AWP) for your company’s plan. Example -

• the PBM compensates the drugstore the AWP minus 18%

• your plan and staff members pay AWP minus 15 percent for meds, and

• the PBM pockets the difference.

Now for some good news. You do have some leverage in this area. If your drug plan is covered underneath the ERISA umbrella, the PBM must disclose this info.

Ideally, you’ll find the rates are the same on both contracts. But if there’s differential pricing, insist your firm get the full discount.

2. What’s the PMPM?

One key cost figure PBMs can’t manipulate is the per-member-per-month (PMPM) cost of your plan. This number will show when your plan’s costs actually increased or decreased.

The PMPM is calculated by dividing the sum costs spent by the number of staff members enrolled in the drug plan.

It’s also a great tool for comparing different PBMs to see which is the most cost-efficient for the size of your organization, says Peter Reed of Managed Benefits Strategies.

3. can we get rebates, too?

Some PBMs receive money from drug companies that your brokers won’t tell you about - but could  be able to leverage to your plan’s advantage. Example -  A lot of PBMs get rebate checks from drug companies (typically 50 cents to $1.25 per claim) for assisting increase the sales of their products.

If you push hard enough for it, your broker may able to work an arrangement where you either -

• split rebates from your plan evenly, or

• let the PBM keep the entire rebate in exchange for a price break on administrative fees.

Important -  Ask to find out all the payment kinds the PBM gets from the drug firms. Rebates are often couched in the form of grants or classified as access fees or formulary fees.

4. How do changes in the formulary work?

In most states, PBMs can change your plan’s list of approved medications without prior notice.

The problem -  PBMs often make mid-year switches that save them money, but may not save your organization or workers a dime.

Example -  If the PBM adopts a mail-order-only coverage policy on a certain formulary drug, an worker who needs same-day access to the medication may  be forced to pay full price for it at a pharmacy.

Meanwhile, your plan is still charged the formulary price.To avoid such unpleasant surprises, insist the PBM give written notice of formulary changes, including the addition of new generics.

The best staff member recognition practices are often the simplest.  

Here’s one that’s lately been adopted at the publishing corporation where I work -  a progam called “See something good, say something good.”  It’s a way for employees to bring positive attention to things that their colleagues, managers and the company’s different departments do well.

How it works -  the company provides colorful index cards, placing them conspicuously in several commonly traveled areas in the building. When workers and supervisors want to publically recognize someone else’s efforts, they are able to grab a card and fill it out. It takes very little time.

When the index card is filled out, the employee drops it into a wrapped box (there are two in the building). the boxes are later collected and the cards displayed in a room the company uses periodically for meetings, presentations and quarterly employee appreciation events.

In order to build awareness and participation in “Say Something Good,” management put up fliers around the building, so individuals  from every department can see them, as well as visitors and job applicants who’ve come in for interviews.

The program, which was originally thought up by the head of our product marketing and advertising division, doesn’t cost anything apart from the cost of the index cards and paper. There’s minimal administration time, and it takes staff members only a moment or two to fill out a card on a fellow employee’s behalf.

But the return is a lot of, and the recognition possibilities are endless. It’s a good way to increase morale, encourage productivity and differentiate the company culture from work environments where the negative things seem to get the lion’s share of the attention.

When it comes to wellness programs, it can be tough to get past all the hype. Here’s how to avoid the three most common traps corporations fall into.

Trap #1. the “one-size-fits-all” approach

For good reason, your organization doesn’t simply copy other firms’ 401(k) plans or compensation designs. Yet, all too often, firms adopt ill-fitting wellness programs based on things that have worked elsewhere.

Your CFO might have seen data on the cost savings other businesss have achieved via certain wellness incentives. Or an old colleague of your Chief Executive Officer (CEO) swears by the program at his or her own firm.

In response, the top brass pushes for a copycat program - for example, offering smoking cessation incentives.

That may  be a good idea, if tobacco use-related illnesses are a key driver of your company’s healthcare costs. But how can you be sure? is it good enough to have your staff members undergo a health risk (assessment|appraisal}?

Usually, the answer is no.

Health risk (assessment|appraisal}s are a excellent beginning place, but it’s often a mistake to stop there. the assessments help you get a feel for what your employees’ baseline physical problems are before you attempt to design a program around them.

This creates rough outlines of what your program objectives should be and where to target worker initiatives. If you want the maximum bang for your wellness buck, you’ll have to dig a little deeper for information. Key places to look -

• your organization’s medical-claims breakdown for the last three years

• prescription-drug claims

• employee absence information

• employee assistance program use

• disability claims, and

• employee demographics (workers’ ethnic, gender, age and dependent coverage status points to greater - and lesser - health risks associated with each category).

Trap #2. Leaving the program on autopilot

A lot of wellness programs often get off to a good start and then fizzle out. Corporations are left wondering what went wrong. Their mistake -  They failed to revisit the program on an ongoing basis - at least every other year.

Why it’s critical -  Your cost-drivers can easily shift as employees come and go from the business.

Example -  This year, emphysema and other tobacco use diseases might  be your largest cost driver. But two years from now, it might be obesity and diabetes.

Unless you continuously track the program and adjust your goals as necessary, you may not be prepared to meet those new challenges.

Trap #3. Unrealistic expectations

Normally, it takes at least a year and a half for businesss to break even on the cost of a wellness program. as a rule of thumb, the average program cost per staff member per month to the business is about $3 to $5.

If, after three years, you still aren’t seeing results, something went wrong. Currently, the benchmark ROI after the third year of a wellness program is $4 to $5 saved for every dollar spent.

How can you manage the cost in the short-term? In many cases, businesss pass the cost of the wellness program on to the workers. for  instance, let’s say you want to roll out a wellness program effective January 1 (or whatever your first day is of the new plan year).

You can roll that $3 to $5 per employee per month cost directly into the employee’s monthly share of their health care premium. That makes the wellness program a budget-neutral expense for your organization.

But remember -  You get what you pay for - both in time and money invested. the less guesswork that’s involved in the planning and execution, the better the chance for success.

Variable compensation may be a excellent way to satisfy demand for higher pay while addressing  senior management’s need to improve productivity and keep base salaries under control.

But there are some major pitfalls.  Here are two proven ways to avoid the most common legal and return on investment risks.

Non-exempt employees

Beware when you use variable comp as a pay-for-performance strategy for hourly workers. Reason -  It’s easy to inadvertently run afoul of the Fair Labor Standards Act (FLSA) overtime rules.

Under FLSA, you must recalculate employees’ hourly wages to include all variable pay (such as individual or departmental bonuses) when figuring overtime compensation.

Failure to do so could cost your organization more in penalties and back-wage payments than the variable comp plan saved on the front end.

So it’s a good idea to double-check with Payroll to make certain the department knows to make OT adjustments after hourly workers receive bonuses.

Reward the right things

In order to make the criteria for bonuses easier for workers to understand and management to measure, many firms prefer using strictly objective measurements. Example -  the plan may pay out based on how much money workers save their department in a year.

But what happens if staff members cut corners - on safety, service, quality, etc. - to reach the goal?

At some firms, employees are still rewarded with extra pay, even though their actions potentially did more harm than good to the bottom line. for best results -

• set behavioral criteria for bonuses in addition to economic ones, and

• consider using a mix of firm-wide, departmental and individual economic performance measures.

Shopping for health plans through a broker is a fact of life for the vast majority of companies. But how well is your broker meeting your needs?

And how can you work together better to minimize costs while getting maximum bang for your organization’s benefits buck?

What’s New in Benefits and Compensation conducted an exclusive survey of 195 subscribers to find out how they view their company’s relationship with their brokers. Here’s what they said -

Half see room for improvement

The good news -  Almost half of your coworkers rate their relationship with their current broker as “excellent.” But that means the other half see some room for improvement.

Thirty-nine% of respondents rated their broker relationship as satisfactory and said they were at least “reasonably happy.” the remaining 11% noted “unpleasant surprises” while 4% are actively considering a switch.

Tools for making buying decisions

Of course, the No. 1 reason any organization works through a broker is to find the best deals on health benefits. But many of your peers pointed to a few areas where their brokers could help make their lives a little easier.

First and foremost, your coworkers say they’d love for their brokers to provide user-friendly - but thorough - return on investment data they can use to benchmark different plans.

It’s worth discussing with your broker how much arm-twisting the broker can do with medical plan carriers to get key data in your hands. Two specific areas of data benefits pros say they’d like help from brokers -

• obtaining and sharing claims cost data to compare to premiums, and

• benchmarking your typical plan costs against those of similar-sized firms in the region.

Unfortunately, claims cost data is often hard to pry loose from insurers, at least for smaller corporations’ plans.

Reason -  Without this data, it’s tougher to judge when your premium rate adjustment at renewal time is fair. Fewer than half of respondents (46.3%) say they’ve ever discussed such information with their brokers.

Obtaining benchmarking data on similar-sized plans helps you see how comparably your costs and plan designs stack up in your area. Roughly 43 percent of respondents say they’re armed with at least some of this info when it comes time to decide whether to stay with the existing plan.

Earlier renewals

It’s worth talking with your broker about ways to push for the earliest possible renewals - and strategies for making sure your carrier doesn’t hit you with any unpleasant surprises.

One notorious game insurance businesses play with corporations’ plans is to wait until the last moment to reveal the new premiums at renewal. That way, there’s less time for negotiation - or to shop around with the insurer’s competitors.

About 28% of respondents report getting their renewals about 30 days before the rate kicks in. Different brokers use different benchmarks for securing renewals. A minority of respondents (19.5%) have seen them as early as 90 days ahead.

Taking work off HR/Benefits’ plate

The benefits brokerage marketplace is highly competitive. Some brokers attempt to set themselves apart by offering clients so-called value-added services.

Among your peers, the most popular services are those which relieve the company’s HR/ benefits manager of time-consuming tasks. Some examples -

• analyzing  plan documents

• auditing (and, when needed, reconciling) carrier bills for errors

• monitoring plans for compliance (HIPAA, COBRA, etc.)

• offering tech support for a benefits intranet and/or staff member self-service software, and/or

• helping with staff member education.

Which costs your organization more -  staff members who miss work or ones who show up physically but take a mental PTO day?

For most corporations, it’s the latter. So why do even savvy senior managers and finance directors (we’re not just talking about the bean-counters) worry about absenteeism while downplaying so-called presenteeism as a drain on business productivity, not to mention the compensation and benefits budget?

In some cases, C-levels and supervisors seem to think that admitting that presenteeism even exists at the firm is akin to saying, “We’re a poorly run organization.” In reality, presenteeism exists in every workplace.

Virtually every worker, manager, supervisor and executive who has ever tried to “tough it out” at work when he or she has been sick has been a presentee on those days.

So has whoever who’s ever been distracted at work by non-work issues - whether it’s spending the day attempting to resolve an individual financial matter, checking on a sick child at home or constantly checking for scoring updates from a sporting event.

In short, unless we’re to believe that every staff member is productive every single day, no company in the world is immune from presenteeism.

Some organizations that don’t bury their heads in the sand about presenteeism still don’t track it. Why? Ordinarily, there’s a belief that chronic presentees eventually get rooted out of the corporation.

And short of watching over every other employee’s shoulder throughout the workday, it’s too challenging (and even counterproductive) to attempt to estimate the cost to the organization.

Here are some strategies that firms have used to not only measure the cost but also reduce the problem.

Creating a cost estimate

When your organization is like most,  senior management worries endlessly about health benefit costs without realizing undetected presenteeism is just as costly, but easier to control.

Consider these facts from a recent CSG study -  Almost 10 percent of the typical annually pay and benefits

budget is spent on non-productive (but treatable) employees.

Add in employees who call out at the last second and the percentage rises to 17%, as reported by SHRM.

But how do you estimate the actual dollars-and-cents cost to your firm?

Let’s assume you’ve 50 staff members, who make an average $40,000 a year. Over the during the year, the average staff member is non-productive 2.5 % of the time, due to assorted personal issues or minor diseases that serve as distractions.

In this instance, presenteeism costs your organization $50,000 a year. When you have a 5 percent presenteeism rate, the figure shoots up to $100,000.

While it’s impossible to entirely stamp out presenteeism, even small reductions in presenteeism add up to large bucks in controlling compensation and benefit costs.

The next step, of course, is doing something about the issue. Broadly speaking, the process ordinarily works in three phases -

• review current policies and procedures for things that accidentally increase presenteeism

• get supervisors and employees involved on the front end, and

• stress the importance of work-life programs to  upper management and supervisors.

Let’s look at each area to see how they work in real-life practice.

Unintentional effects

Three common ways many firms attempt to cut absenteeism often increase presenteeism -

1. Over-stressing attendance in employee’s annual reviews

2. Having supervisors check up on workers who take sick days to verify they’re really ill, and/or

3. Disciplining staff members for last-moment sick callouts.

From a practical and cost standpoint, the best solution could  be to switch from separate vacation and sick-day benefits to a single paid time off (PTO) bank.

When folks have no-questions-asked control over their off days, they’re sometimes more likely to use a PTO day if they’re sick.  Of course, you know that PTO carries some risks of its own.

Early detection

Fewer than one organization in 10 gets both managers and employees involved in the process of spotting and eliminating presenteeism.

That’s too bad, says consultant Mary Beth Chalk, because it can been done pretty easily.

Ask a sampling of employees to rate how energetic and productive they generally feel at work, on a percentage scale. Have supervisors estimate their staff as well. Then split the difference.

The result is a pretty good barometer of your organization’s current and future presenteeism risk.

Work-life balance

Anything you are able to do to promote work-life programs at your firm can have a positive effect on the bottom line. Proven ideas include -

• rewarding supervisors who support flexible work arrangements

• sending sick staff members home

• cover onsite flu shots, and

• actively promote your existing Staff Member Assistance Program.

Any benefits HR/manager can adopt these ways to make staff members feel more appreciated.

The common thread -  using your own communication skills as a powerful tool for improveing morale.

1. Put in face time

When time permits, managers may want to put in some “face time” with workers. This in and of itself is a type of staff member recognition. Example -  There’s a lot of value in simply walking around the building, chatting with workers.  Ask workers about the personal items they display at their workstations.

In the short-term, folks will notice and appreciate your interest.  Long-term, this may inspire ideas for rewards and incentive programs. the same technique works at  firms with multiple locations.  Make a site visit to get a feel for the morale. This is much cheaper - and often more effective - than designing a formal benefits survey.

2. Send ‘em personalized stuff

Looking for a simple way to show staff members that HR/Benefits cares? Develop a template from which you are able to send personalized “Welcome” letters to new hires or “Happy Anniversary” notes for employees’ business anniversaries.

3. Target overlooked employees

Most firms have employees (e.g. part-timers) who aren’t eligible for the 401(k), health plan and other company-sponsored benefits.  Small gifts help firms connect with these often-overlooked employees.

Example -  on the first day of spring, send them a packet of flower seeds and attached a note from Benefits. Burston-Marsteller Worldwide has used this simple, low-cost idea and gotten good results.

Looking for recognition ideas that get results?  Here are two keys to success -

The most common characteristics of high-ROI recognition programs - regardless of their monentary value - are their spontaneity and perceived value by staff members themselves.

In reality, the cost of some of most effective spot awards and bonuses often amount to less than 1% of base pay - and the awards don’t even have to be given in cash.

Less sense of entitlement

Part of the problem with traditional end-of-year or quarterly bonuses (apart from the fact that they cost businesss an average of 10% of base pay) is that employees expect to receive them for reaching certain objectives.

Sometimes employees simply expect it no matter what. for  instance, at many firms, an annual holiday bonus is viewed as an entitlement and people  inevitably grumble that it’s not high enough. on the flip side, with spontaneous awards and bonuses, employees are often pleasantly surprised.

Benefits advisor Ken Stahlmann spells out four keys to making the latter kind of awards work, even when they’re lower in cost -

1. Creativity is crucial

The most effective programs usually give out awards weekly or monthly. to avoid over-stretching the budget - and avoid a ho-hum attitude establishing in - creativity is a must.

One way that never gets old -  combining time off with a second, non-cash award. Example -  One firm gives a half-day off in combo with movie passes once a month.

Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to individuals ’s personal needs or interests. Two examples -

• one firm with many foreign-born, low-wage employees awards a $20 pre-paid phone card after 90 days of service, and a $100 card for outstanding work, and

• another corporation with a lot of sports nuts took a few top-performers to a ball game. Managers said it was the best $200 they’ve ever spent in terms of creating ongoing enthusiasm.

3. Add structure

The awards might seem spur of the moment, but top programs have a fixed budget and structure set before anything is handed out. Example -  One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise.

By letting individuals  bank points for more valuable rewards, the corporation saw a solid jump in retention.

Other organizations prefer to let staff members reward each other. for example, a small healthcare provider keeps a “goodies box” on-site - paid for in petty cash and stocked by staff members themselves.

When someone spots a peer going the additional mile, he or she pulls out a prize and awards it.

The program is a gigantic hit -  It’s immediate and personal, yet structured.

4. Don’t let good intentions backfire

Most spot awards go over well. But keep these four issues in mind -

• for most cash or cash-value awards, there are tax implications (just as with traditional bonuses)

• Awards need to be spread around or else resentment can creep in

• Be certain honorees don’t mind being the center of attention (some firms have accidentally alienated individuals  they tried to reward), and

• Make certain the reward is something people  actually want. One firm that awarded a VIP parking space next to the CEO found no one used it. No one wanted the CEO knowing what time he or she came and left.

Looking for ways to increase morale, productivity and retention? Spot awards could  be the way to go.

They’re the most popular recognition incentives among staff members, a recent study  shows. the best part -  the incentives ordinarily amount to less than 1% of base pay. That also can makes this option attractive to C-levels. and the awards don’t even have to be given in cash.

Spontaneity grabs ‘em

Traditional end-of-year or quarterly bonuses cost corporations an average of 10 percent of base pay yet often have a lower payoff in morale and retention.

Reason -  Employees appreciate them less because they expect to receive them for reaching certain goals. By their nature spot awards are spontaneous and compensated out immediately. Honorees are pleasantly surprised and see the organization values their work.

Here are four keys to successful spot bonus programs, as reported by benefits consultant Ken Stahlmann -

1. Creativity is crucial

The most effective programs ordinarily give out awards weekly or monthly. to avoid over-stretching the budget - and avoid a ho-hum attitude establishing in - creativity is a must.

One way that never gets old -  combining time off with a second, non-cash award.

Example -  One firm gives a half-day off in combo with movie passes once a month. Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to people ’s personal needs or interests. Two examples -

• one firm with many foreign-born, low-wage employees awards a $20 pre-paid phone card after 90 days of service, and a $100 card for outstanding work, and

• another firm with a lot of sports nuts took several top-performers to a ball game. Managers said it was the best $200 they’ve ever spent respecting creating ongoing enthusiasm.

3. Add structure

The awards might seem spur of the moment, but the most effective programs have a fixed budget and structure set before anything is handed out.

Example -  One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise. By letting individuals  bank points for additional valuable rewards, the company saw a solid jump in retention.

Other organizations prefer to let employees reward each other. for  instance, a small health care provider keeps a “goodies box” onsite - compensated for in petty cash and stocked by employees themselves.

When someone spots a coworker going the additional mile, he or she pulls out a prize and awards it.

The program is a immense hit -  It’s immediate and personal, yet structured.

4. Don’t let good intentions backfire

Most spot awards go over well. But keep these issues in mind -

• for most cash or cash-value awards, there are tax implications (just as with traditional bonuses)

• Awards need to be spread around or else resentment can creep in

• Make sure honorees don’t mind being the center of attention (some firms have accidentally alienated people  they tried to reward), and

• Be certain the reward is something people  actually want. One firm that awarded a VIP parking space next to the Chief Executive Officer (CEO) found no one used it. No one wanted the Chief Executive Officer (CEO) knowing what time he or she came and left.

In the last few years, there’s been a lot of publicity about the fast-growing crime of identity theft. More than half happen in the workplace. Benefits and compensation files are the most vulnerable targets.

The scariest part -  Victims of benefits-related ID theft often make out worse than those who fall prey to the more common variety. the bad guys are ahead of investigators after such thefts occur, and are often very good at covering their tracks.

Also, because benefits ID-theft is a relatively new type of crime, there’s no well-established system for victims, plan sponsors and vendors to set things straight after the fact.

401(k) accounts a prime target

Not surprisingly, employees’ 401(k) accounts have become the primary target for benefits thieves. an alarming MSNBC news report showed just how easy it could be for thieves to tap into an employee’s 401(k) accounts -  When an web-based account gets hacked into or account paperwork falls into the wrong hands, it takes only several mouse clicks to wipe out the victim’s retirement savings.

With average credit-card or bank account fraud, victims need only call their card issuer or bank, report the crime and refuse to pay for an item. But 401(k) theft is much, much harder to resolve.

Three huge obstacles -

1. Money in 401(k) accounts isn’t federally insured, like a bank account.

2. 401(k) accounts rarely - when ever - come with automatic identity theft protection from the provider, like credit cards.

3. Even when the theft is successfully resolved, the situation becomes an ERISA nightmare for plan sponsors, because your company also has to account for the way the theft affected the growth of the employee’s account before the money was restored.