Health Care, Human Resources, and Manufacturing

Five years in, Lacks has healthier workforce

Faced with rising health costs, the manufacturer bet on its employees — and it worked.

February 19, 2016
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Lacks Enterprises saw its health care costs per employee rise by more than 30 percent over a two-year period, creating an unsustainable situation for the company.

Executives realized if a proactive solution wasn’t found soon, the dramatic rise in health care costs would eventually overwhelm the auto parts maker.

Jim Green, executive director of human resources, said in 2007, when Lacks first began to realize it had a problem, health care had become its fourth largest cost: $22 million annually.

“That is a significant spend for an organization,” he said.

Green said there were several factors contributing to the cost increase.

“The age of our employees was starting to grow, so we were experiencing more utilization of health care as our employees were getting older,” he said. “And just the cost of health care itself was being passed on to us.”

Green spent nearly a year and a half talking to others in the same situation and researching best practices before deciding on the best route for Lacks.

“It became apparent wellness is the foundation,” he said.

Green said 50 percent of people’s health care costs come from their lifestyle choices. Wellness programs often don’t work, however, so to ensure Lacks’ did, Green enlisted the help of Sandra Kuhn of Acrisure LLC, an insurance brokerage based in Caledonia.

“She knew the best practices for wellness programs and what would make them work,” Green said. “She walked us through the development process.”

For its pilot program, which launched in 2009, Green said Lacks chose a challenging plan that would require a lot of employee education and would probably meet the most resistance.

He said by selecting a challenging plan, the company put itself in the position of delving into employee resistance, allowing it to address all of the issues that likely would inhibit results.

“We did that for a year, and then we felt pretty comfortable rolling the plan out to the whole corporation,” he said.

Green said one of the most important aspects of Lacks’ wellness program is its requirement that employees participate in a blood draw and a biometrics analysis with a doctor.

“Folks who are doing paper health risk assessments, where someone is just going on the honor system — that isn’t worth the time it takes to fill those out,” he said.

He said employees need to receive an accurate picture of their health if they are going to take wellness seriously.

Green said another factor was tailoring its program so employees who aren’t necessarily athletic can still succeed.

“Earning points by playing in a softball league is fine, but what if you aren’t an athlete?” he said. “You want to have diverse opportunities to earn points and ways to engage as many people as possible.”

So Lacks developed a point system that included points for the blood draw and biometric testing, as well as for participating in activities such as a lunch-and-learn session about nutrition, volunteering in the community — which can improve emotional and mental health — as well as physical activities.

The company made it easy to participate by providing activities that take place during the workday, such as the lunch-and-learn programs and competitions such as encouraging employees to drink a certain amount of water in a week.

“Our wellness program is so much more than just playing in a sports league,” Green said. “It’s a holistic approach. There are plenty of opportunities so someone with any type of a lifestyle can earn their points.”

Accessibility is demonstrated by Lacks’ decision to open two onsite primary care clinics, which are run by CareATC.

“Our clinics are open and accessible to our employees so it’s easy to get an appointment,” Green said. “It takes away the excuse of ‘I can’t get in to see a primary care doctor.’”

Green said CareATC told him the first-year use by Lacks’ staff was the best it had seen for a launch.

“We went from 7,500 visits in our first year to over 11,000 in 2015,” Green added.

Besides focusing on wellness, Lacks has transitioned from offering employees two to three health care plans to offering just one high-deductible plan with a health savings account. Green said the goal is to encourage employees to become consumers of health care rather than just users of health care.

“When we gave employees choices, they weren’t going to choose a consumer model,” Green said. “They were going to stick with what they saw as an easier path — paying a higher premium and having a modest deductible.”

He said employees needed to have “skin in the game” in order to start making choices about how they spent their money.

Today, employees’ health savings accounts are tied to Lacks’ wellness program. For those who are committed to wellness, meaning they’ve earned all six of their wellness points, Lacks puts $1,300 a year into their HSA. For employees who are not committed, the company puts in $1,000 (numbers are based on family wellness commitment).

Green noted the company wanted to start out with a smaller gap between what it gives committed versus uncommitted employees to help with the transition to the high-deductible plan, but over time the gap will grow.

For committed employees, Green said the company plans to eventually contribute the maximum allowed by the IRS.

Green said other factors that have contributed to Lacks’ successful health care transition are continual education, appointing wellness champions at each facility, hiring two full-time staff members focused on wellness and health care programming, and partnering with Knova Solutions, which provides case managers for those employees who have the most health care claims.

Green noted that last effort has reduced health care costs significantly.

“The top 5 percent of the people actually spending money (on health care) at Lacks were spending on average $51,000; now they are spending $37,500,” he said.

He said the company has 123 employees currently working on a voluntary basis with case managers to reduce chronic disease events.

Five years in, Green said the results are in the numbers. He said Lacks’ health care costs in 2015 are on par with its 2013 costs. He noted the cost per employee went down 10.4 percent in 2014.

“Our claims in 2014 were down over $4 million,” he said. “Those claims are being used to finance the clinics and other organizations we partner with.”

The company plans to build on its success. It is working on plans to open a “people center” in the next couple of years that would include a gym, cafeteria, events and meetings spaces, and the company’s training department.

Lacks also will increase the services offered at its health clinics. Green said there are plans to add an allergist and dermatologist and possibly a physical therapist.

He also said the company will increase its focus on spouses and children.

“Dependents spend just as much or more than your employees,” he said.

Finally, he said education is essential. Lacks will focus on more nutrition-related programming and hopes to eventually add cooking classes for employees and their families to help them learn how to prepare healthy meals.

Green encourages other manufacturers to begin aggressively transforming how their company manages health care costs, noting, “If something is broken, you can fix it,” but also cautioning, “There are going to be tremendous health shifts coming. If you aren’t managing it yourself and you wait, there could be some significant consequences.”

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