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AIS's Health Business Daily
Featured Story April 30, 2008 Johnson & Johnson's Consumer-Directed Health Plan Is More Than a Band-Aid for EmployeesReprinted from INSIDE CONSUMER-DIRECTED CARE, a biweekly newsletter with timely news and insightful analysis of benefit design, contracts, market strategies and financial results. By Bruce Goldfarb, Editor, (bgoldfarb@aispub.com) A corporate-wide culture of wellness and sophisticated marketing to a health-conscious population eased the transition to consumer-directed health (CDH) when New Brunswick, N.J.-based Johnson & Johnson introduced a health reimbursement arrangement (HRA) to its non-unionized salaried staff in January 2008. 'This is a major change," Rosa Sexton, J&J's director of strategic benefits planning, tells ICDC. "It's a whole new way for [employees] to think about the delivery of health services." In January, J&J replaced the point-of-service plan it had offered for the past 10 years to its 43,000 white-collar workers in the U.S., mainly located in New Jersey, Pennsylvania, Florida and California. Under the old plan, employees were responsible for a flat $15 copayment for physician office visits. "When they put their $15 down, they didn't know what things cost," Sexton says. "In the new plan, they're going to learn about the cost of services. They also have the opportunity to earn incentives to offset some of their coinsurance." The new benefit, which Sexton describes as a "custom-designed HRA plan," offers employees an HRA and a health plan, with four tiers of funding and deductible levels based on an employee's salary. For the typical employee, the HRA is funded with $1,000 for a family ($500 for an individual). Once the fund is exhausted, employees pay 20% coinsurance up to a $4,000 maximum annual out-of-pocket limit for the family in the most prevalent benefit design ($2,000 for an individual), after which the company pays 100%. In every case, all preventive care is paid 100% by the health plan, with none of the costs taken from the employee's HRA account, Sexton says. Prescription drugs are also handled separately and do not come out of the fund. All of the other health benefit programs were eliminated by J&J, although employees in some parts of the country have the option of enrolling in an HMO. Sexton says that about 70% of the company's entire work force is enrolled in the new account-based plan. "That's a much higher participation rate than we would have gotten if we offered it on a choice basis," she says. Three firms were selected to administer the program for J&J; Aetna Inc., CIGNA Corp. and Horizon Blue Cross Blue Shield of New Jersey. "Aetna has by far the largest share of our program," Sexton says. "Horizon Blue Cross is only in very selected markets." Health Plan Builds on Reputation J&J successfully introduced the new benefit plan by building on its reputation as a health care leader and provider of information for consumers and employees, consultants say. The company "leads by example by usually promoting and implementing new cost-containment programs first to their own employees before marketing them to the retail public," says Rob J. Thurston, president of HR Consulting Group, based in Provo, Utah. "They walk their talk" Although J&J has offered a wellness program since the late 1970s, by the mid-1990s only 26% of its employees participated in the program, according to the company. In 1999, the company began offering a $500 annual discount on health insurance premiums for employees who completed a health risk assessment and participated in a wellness program. Participation in the program reached 93%, says Sexton. To ease the transition toward the new plan, J&J relied on a technique used to market its products to the public — brand extension. Since the company's health and wellness program is known as Healthy People, the new health plan is called Healthy People HRA — folding it into an already recognized entity. The new program is a change for the company as well. "It's a completely different strategy toward how we fund benefits and getting people educated about consumerism," Sexton explains. "We do have a highly educated population, and they are health-aware. We've done a lot over the last two years in the way of education in preparation of introducing the new benefit program." |
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