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Administering Benefits Programs at a Public Co., Nonprofit, Government Agency

Running the benefits programs for employees of a company or government agency is a job that should involve close annual scrutiny as to whether purchasing insurance packages is money well spent.

The San Diego Business Journal talked with three such administrators at Cohu Inc., Scripps Health and the city of San Diego to see how they approach the challenges of their jobs.

Denise Logue is a benefits analyst for publicly traded technology equipment manufacturer Cohu in Poway. On the job for four years, she works with benefits package brokers to decide which provider bids offer the best deal for the company and its employees.

“We start in December and January with brokers and put a (health care benefits) contract out to bid,” said Logue. “This year we made a move from one dental carrier to another because their rates were going to go up.”

But for consistency, the company tries to stay with the same coverage carriers year to year, she says, so employees aren’t forced to change doctors. Aetna Inc. has been the company’s provider for the past six years.

Each year, during “open enrollment,” employees are asked to choose among the options available for coverage, be it a health maintenance organization, aka HMO, plan, or one of two preferred provider, or PPO, offerings.

Sharing Burden of Cost Increases

“PPO rates are fairly high,” said Logue, noting that all but 20 employees opt for the HMO coverage. This year, to deal with higher costs, the company decided to raise the co-payment amounts for doctor visits and prescribed drugs, while minimizing the increases in insurance costs deducted every two weeks from employee paychecks. Those costs for family coverage will increase $8 per two-week pay period to $97.29. While office visits were kept at $20 a visit, specialist visits increased from $20 to $30. That move was seen as reasonable, she says, since similar co-pays at other companies range from $25 to $50.

Keeping the increase in payroll deduction for health care as low as possible was key, says Logue, when the current tough economic times are considered.

The company pays 81 percent of the HMO insurance plan cost to cover employees and their dependents. For its PPO plans, employees have to pay any amount exceeding the amount the company pays in the 81 percent of HMO coverage cost.

Logue figures the 81 percent cost coverage for an employee and his or her family is a good deal, considering some other companies don’t pay for any dependent coverage and others contribute only 50 percent.

Overall, when compared to companies with a similar employee profile, does Logue think Cohu’s latest plan is a good deal for employees?

“I believe it is,” she said.

Credits for Wellness Participation

Bob Melendy is Scripps Health’s Human Capital Services executive. He cites the nonprofit’s effort, started four years ago, to cut health care insurance costs with its hugely successful wellness program.

The program, which theoretically cuts medical insurance costs by producing healthier employees, has resulted in a dip in need for insured medical treatment. Employees save on their medical coverage by earning credits through competitions involving daily and weekly physical activities, healthy eating and stress reduction practices. At year’s end, credits are tallied to determine who gets a $40 monthly credit in health care costs.

“They really take advantage of it,” said Melendy. “It’s an opportunity that we have that other organizations don’t.”

While Scripps spent $2 million on wellness credits this year, Melendy says analytics show it saved $4.3 million in costs associated with it, for a net savings of $2.3 million.

As a big in-house extra, Scripps genome researchers take employees’ DNA samples to determine what disease risk factors they have, enabling participants to change their lifestyle habits to minimize those risks.

Staff Use Scripps’ Facilities

Melendy offers some other cost-conscious medical care statistics tracked at Scripps:

• Ninety-five percent of the employees use Scripps facilities for their health care, notes Melendy, adding, “By keeping it within our own system, we’re able to do it more economically.” Self-insured, Scripps gives care to its employees through its network of participating physicians and contracted specialists.

• Seventy-three percent of employees enrolled in Scripps’ coverage use generically prescribed drugs, which are the much less expensive alternative to brand-name drugs.

• A savings of $3.8 million reported in 2007 by eliminating coverage to unqualified people found to have “migrated” into its medical coverage.

• Big Pharma is paying for nearly 50 percent of drugs Scripps prescribes to uninsured, underinsured and indigent patients, a government requirement for the big drugmakers to take part in the lucrative Medicare program.

Currently, Scripps is setting up “employee care centers,” says Melendy, where employees can see a physician and get advice on treatment with their primary care doctor without going to a much more expensive emergency room.

City Workers Facing Higher Co-Pays

Valerie VanDeweghe is the city of San Diego’s deputy director of risk management.

“We’re gearing up for open enrollment,” said VanDeweghe. “We’ll have a new system where employees select benefits online instead of through the old way by telephone.”

The goal is to bring more consistency to plans offered, since historically they haven’t offered the same benefits.

“It’s just easier to communicate, easier for everybody,” she said.

A key strategy is to increase co-pay rates for doctor visits to $15 from $10. Generic drug co-pays will go from $10 to $15 and brand-name drug co-pays will go from $20 to $30.

“It puts the onus back on the user,” said VanDeweghe. “Then they hopefully make a good decision on whether they need the service and when they don’t. It’s to rein costs in. We don’t want to make it (co-pay rate) so high that they’re not going to go in to get the service they need. We would not want a $50 co-pay.”

Other changes include the addition of a hospital visit co-pay to a plan without one, and reduction of the number of days prescriptions are covered on co-pays to 30 days.

Those moves are calculated to save employees 2 percent to 4 percent in costs. But depending on the plan coverage, costs will go up from 5 percent to 40 percent, she says.

Kaiser’s plan will cost 5 percent more, but she says that’s good news. During the past few years its annual cost increases have averaged 9 percent. However, it would have been a 9 percent raise this year if not for the co-pay adjustments.

She says costs for two other city health insurance providers are going up: Health Net’s is up 43 percent and Sharp HealthCare’s is up 7 percent.

Mark Larson is a freelance writer for the San Diego Business Journal.

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