Cigna Executive: Wellness Programs Vital to Controlling Employers’ Benefits Costs

The fate of employer-provided health insurance is up in the air, but wellness and disease-management programs remain the key to holding down employers' benefits costs, according to a top executive with Cigna Corp.

"It's safe to say that the industry...would say very consistently, and I think quite loudly, that these kinds of programs add a lot of value and are very helpful in keeping costs in check," said Dave Guilmette, president of the national segment for Cigna Corp. (NYSE: CI), the fourth-largest U.S. health insurer based on enrollment.

Eliminating such programs, which help support people with chronic conditions, would cause "a significant uptick in costs."

Under the new health care reform law, individual and small group plans must spend at least 80% of premiums on medical care costs, while large-group plans must spend at least 85%. Starting Jan. 1, 2011, insurers must annually report the share of premium dollars spent on medical care versus profit or administration and provide rebates to members when less than this percent of dollars is spent on medical care. Companies want to ensure their spending on wellness and disease-management programs and nurse hot lines, among others, are counted as medical costs. Whether their requests are granted depends on how federal and state regulators rule on the gray areas up for debate.

About 80% of Cigna's U.S. health business is providing administrative services only for large employers that self-fund their employees' health benefits. Its national segment comprises employers with 5,000 or more employees.

Starting in 2014, the law requires employers with 50 or more employees that do not offer coverage to their employees to pay $2,000 annually for each full-time employee over the first 30 as long as one of their employees receives a tax credit.

Will employers stop offering group coverage once the penalties kick in? Larger businesses are looking into the question, Guilmette said.

They are studying variables such as how to compensate employees as part of the overall "economic equation," Guilmette said. An employer pays a salary, possible bonus, and health benefits, to their employees, he said. If the employer doesn't offer that benefit, the value associated with it goes away, and the employer must pay the $2,000 penalty, Guilmette said.

The penalty won't go to the employee to help them buy coverage through one of the insurance exchanges, but instead to the government. Cost of coverage to the employee will be "every bit as much as it is today, but there will be an underlying subsidy," Guilmette said. In 2014, family coverage through an exchange could cost $25,000 a year, he said.

Cigna is preparing for the changes in the employer-sponsored market, Guilmette said. For now, it's focused on helping employers get the most value for their benefits and holding down their costs by helping to keep their employees and families as healthy as possible, he said.

Health-coaching programs, such as smoking cessation or weight management programs, whether offered through high-deductible health plans or traditional plans, are having a positive effect on an employer's return on investment, Guilmette said.

Cigna has more than 1 million members enrolled in its high-deductible plans linked to a health savings account or a health reimbursement arrangement.

Members must pay $1,000 to $2,000 before the plan starts reimbursing for medical expenses so the member is "much more sensitized" to the cost of a drug, a scan or a basic office visit, Guilmette said. Cigna is posting cost and quality comparison tools on its website to provide members with the information they need to make the right decisions, he said.

To see the entire interview with Guilmette go to http://www3.ambest.com/ambv/displaycontent/MediaArchive.aspx?RC=173186

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])