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September 19, 2007
Value-Based Health Benefits Payoff for P&G
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is Ceplenski
Senior Editor

Since the early 1990s, employees at Proctor & Gamble (P&G) had paid percentage co-insurance (versus a flat co-pay) for their drug benefits. Under P&G's health plan, there was no generic/brand differentiation in terms of employee costs. The company's goal, according to Susan G. Morris, Senior Manager, U.S. Health Benefits Design, for P&G was to maintain a 75 percent company/25 percent employee cost share. But things changed in 2003. That year brought the arrival of many specialty drugs along which were marketed directly to consumers (via television and other ads), and P&G began struggling to maintain the desired cost share.

In response, P&G created and implemented a new design in 2004 to rebalance that cost share, one centered around "value-based health benefits," Morris explained to her audience at the 20th Annual Benefits Management Conference & Expo in Dallas, Texas. The concept of value-based benefits was discussed earlier in the Tuesday keynote address by her co-presenter, Steve Priddy of The Institute for Health and Productivity Management.

The mission of his organization's "Initiative for Value-Based Benefits" is to "establish that employee health is an investment in workplace productivity and, thereby, in corporate performance." The "Health and Productivity Model" Priddy presented reflects the philosophy behind P&G health plan redesign. Under this model, employers design benefits and programs that provide incentives to employees to change their behavior. The change in behavior, in turn, reduces risks, and improves employee health, thus impacting medical costs and disabilities. All of this translates into enhanced worker productivity in the organization.

P&G's new plan included the introduction of value-based prescription tiers. "Level I" medications were defined as those "primarily used to preserve life or major body system functions." Under the new design, there was a 30 percent employee co-insurance for these drugs. "Level II" medications were "nice-to-haves" or those "not typically required to preserve life or major body functions." The categories of drugs in this level include acne treatments, hormonal replacements, contraceptives, antihistamines, ADD treatments for adults, antifungals and infertility treatments. There was a 50 percent employee co-insurance for these drugs. Meanwhile, employees owned the total cost for medications used primarily to enhance lifestyle related activities (such as appetite suppressants, smoking cessation enhancers or sexual function enhancers). P&G saw some immediate changes in employee behavior including drops in the number of prescriptions in nearly every category of Level II drugs as well as in the number of average monthly utilizers for these drug categories.

Another element to the plan redesign involved the development of a global health and wellness strategy, Morris explained. Healthy living messaging became a touch point throughout the work environment. P&G's "Healthy Living brand" is built on the following principles:

  • Partnership--working with employees and their families to maintain or improve their health and wellness
  • Quality--supporting initiatives that promote health care quality and help to identify the best health care providers for employees
  • Prevention--decreasing barriers to preventive health care in order to reduce the burdens and costs of illness

To help implement the brand, in 2006 alone, P&G began to offer the following preventive benefits and incentives:

  • A $40 incentive for employees who complete an online health risk appraisal
  • An $80 incentive for completion of weight loss and smoking cessation programs
  • A $160 incentive for completion of a one-to-one personalized condition management program (for conditions such as diabetes, congestive heart failure, coronary heart disease, and depression)

Some of the early program successes that P&G can report now include:

  • 40 percent of eligible employees have completed wellness assessments
  • 78 percent of those eligible for condition management have enrolled in a program
  • More employees have become compliant with taking prescriptions for their conditions (such as diabetes) while overall medical costs have dropped.

This last item is significant, Morris explains, because an increase in pharmacy costs with a correlating decrease in medical costs, such as hospital stays and emergency room visits, is the sign of a workforce that is responding to the company's program an changing its behavior for the better.

Morris says that P&G's results so far indicate that providing value-based benefits was a "journey worth taking," but that employer should use their own data to determine their best route. She noted that one of the first things P&G did to help determine its plan design was to conduct a "comprehensive analysis of health care costs, absenteeism, and disability drivers."

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