Strategy of Two Leading Corporations: Tame CDHP Health Plans

DMEC Staff@Work

Building Compatibility with IDAM Programs

A new model for healthcare delivery has pushed its way to the table: consumer-directed health plans (CDHPs). These plans are the fastest-growing model for healthcare delivery, driven largely by the promise of cost savings for employers. The CDHP category has grown every year for several years.
Taming Health Plans

Early adopters included smaller employers that were intentionally shifting costs to employees. But large employers are adding CDHPs as an option now, with some even implementing a “full replacement” in which CDHPs with multiple options are the only model, eliminating popular past models such as preferred provider organizations (PPOs). According to the National Business Group on Health, “full replacement” was expected to grow nearly 50% in 2015, reaching 32% of employers surveyed. Key factors that make high deductible CDHPs effective as cost-management vehicles are:

  • The “defined contribution” benefit format facilitates employer spending limits; and
  • Employees typically have a health savings account (HSA) to personally manage all medical spending below a high deductible, which is expected to motivate plan members to reduce their costs by avoiding unnecessary tests and procedures.

Several studies show that CDHPs do reduce total medical cost and utilization compared to traditional health plans.2 But is the new model akin to “savings inside a black box”? Does it impede employer access to aggregate medical data that is used for wellness programs, disease management and other prevention efforts that are often consolidated with integrated disability and absence management (IDAM) efforts? Will CDHPs upset the applecart for wellness, productivity, and IDAM by displacing historically popular health plan models such as PPOs?

Employer IDAM efforts to reduce lost time have a history of tension with medical cost reduction efforts. For example, some early managed care plans would not approve physical therapy for nonoccupational low-back pain, because most of these cases resolved in six weeks without treatment. In some cases, employers saved hundreds of dollars in medical cost but lost thousands in disability.

Employers learned how to work with health plans over issues like this; self-insurance became one important strategy. Today, under CDHPs, employers must develop new coping strategies, and employees must learn a new knowledge base on “appropriate care.” Motivating employees to make appropriate healthcare decisions is one key approach.

The Integrated Benefits Institute (IBI), commenting on its literature review of CDHP studies, noted “consumer-driven plans likely contribute to reduced medical costs through lower utilization. Some of these financial gains may come from employees foregoing or delaying beneficial care.” One ominous conclusion from IBI: “avoiding beneficial care also will negatively affect absence and performance at work-the value of which may exceed medical treatment savings.”

Have consumer-directed health plans brought employers full circle to the dawn of the managed care era, with valuable aggregate medical data locked up, but now with employees holding the keys, rather than health plans?

“Cummins Inc. and Kraft Heinz Company… made key decisions that avoided traps” that can occur when employers provide consumer-directed health plans as an employee option.


Taming CDHPs: Cummins & Kraft

Many CDHP early-adopters were driven to capture medical cost savings and used features of this model to transfer cost to employees. However, CDHPs also can be designed for compatibility with IDAM programs, so employers can keep the IDAM-wellness productivity alliance intact.

Two major corporations, Cummins Inc. and Kraft Heinz Company, have shown how. Both corporations made key decisions that avoided traps. Maintain Employer Medical Spending. Because some employers implemented CDHPs to transfer costs to employees, CDHPs have a reputation as a “take-away” strategy. Unions and other employee groups may oppose introduction of CDHPs; Cummins had to win over skeptical employees.

Cummins implemented full-replacement CDHPs for its nonunion employees in 2010. It rolled out full replacement to the union in 2012, after promoting its generous CDHP design: first-dollar coverage for preventive services and low annual employee contributions of $800 family/$325 individuals. A value-based design was applied to pharmacy, which became a zero-dollar cost for employees under some conditions.

These design elements reduced employee out-of-pocket cost, which Cummins supported in the belief that improved adherence to medication and chronic condition management would reduce overall costs. Over several years of health plan evolution, Cummins reduced employee premiums/contributions by up to 78%.

Kraft provided a generous system of employer contribution to employee HSAs, including sliding scales with higher support for lower-earning employees. This matching-contribution system resulting in higher employee contributions to their HSAs at every pay scale and higher HSA balances providing greater medical and financial security.

With higher balances in their health savings accounts, employees have more confidence to undertake needed care, whether preventive care or beneficial treatment.

Incent Healthy Behaviors. Both employers also provided substantial incentives for healthy behavior. When implementing a health account system prior to rolling out its CDHP, Cummins reduced health plan premiums for employees who participated in a health risk assessment (HRA). Employee can accumulate health account funds that remain available for postretirement healthcare needs.

From 2010 to 2013, Kraft applied a $250 monthly health plan premium surcharge for not participating in the HRA; participation in the HRA exceeded 99%. Another $50 monthly surcharge applied beginning in 2011 for not participating in disease management referrals for diabetes, asthma, chronic obstructive pulmonary disease, coronary artery disease, or coronary heart failure.

In 2014, Kraft implemented a two-tier premium, with the lower premium for employees participating in biometric testing plus the health plan health assessment (HA) (employee spouses also are required to participate in the HA). Kraft provides a maximum incentive of $1,000 per employee per year for Healthy Living Rewards, with $800 the most common payout in 2014. If employees contribute at least $500 of personal funds, they can receive a company match of $500, plus the health incentives of up to $1,000, for up to $1,500 in company contributions to their HSA.

IDAM-Friendly Design. When configuring their CDHP programs, both Kraft and Cummins had special features to promote health and productivity.

Kraft implemented the AetnaOne Premier suite of services in 2010 and has continued up to the present. Aetna-One is Kraft’s delivery vehicle for several programs: online health portal, health information access for employees, disease management, health coaching, and smoking cessation. Added to Kraft’s program roster in 2014 were the Sonic Boom Wellness Program and Castlight Health’s transparency tool to provide healthcare decision support plus incentives. This constellation of programs looks very similar to an IDAM effort at an employer with conventional health plans.

Kraft’s program has produced some impressive results. From 2010 to 2013:

  • The percent of employees at “very high” or “high” risk decreased by 6%.
  • STD reoccurrence decreased 17%.
  • STD incidence decreased 34%.
  • The average STD claim duration decreased by 3%.

Cummins has built innovative programs in its quest to expand beyond a narrow focus on healthcare service delivery and claims cost reductions. In 2012, Cummins began redesigning its health plan around a comprehensive patient-centered medical home (PCMH) approach. This approach mobilizes disease management and prevention programs within the broader context of lifestyle medicine, emphasizing physical activity, nutrition, sleep, and stress reduction.

The goal is to build out to a longer-term set of health outcomes to include absence, disability, and performance. Going beyond “health as cost silo,” Cummins is exploring strategies to tie the value of employee health to the productivity and bottom line of operating units.

An early step toward this goal involved securing population health data to inform wellness, disease management, and other programs. Prior to this, health plans had claimed ownership of the data and wouldn’t share it with Cummins. Moving forward, Cummins established an integrated data warehouse for medical, pharmacy, and related population health information, and all new suppliers were required to supply data.

Like other employers, Cummins used incentives and programs to engage employees. But Cummins also set out to engage physicians with the lifestyle medicine approach applied in its patient-centered medical homes. The company is enlisting and developing a core of high-performing physicians who are certified in Lifestyle Medicine through programs of the American College of Preventive Medicine and The American College of Lifestyle Medicine Foundation.

In 2014, Cummins launched its Comprehensive Health Improvement Program (CHIP) to introduce the lifestyle medicine approach to employees. For eight weeks, meeting twice a week during lunch, CHIP takes groups of 30 to 50 employees through lifestyle training led by presenters from Express Scripts and from Take Care Health. CHIP emphasizes a “plant-strong” diet high in antioxidants and nutritional value, with an “eat more, weigh less” strategy for sustainable change that can survive the urge to binge after the end of training.

The first group of employees to go through the eight-week training received before and after screenings on nine key biometrics. The group had across-the-board reductions in all nine areas, including total cholesterol (9%), glucose (1.1%), systolic (4.2%) and diastolic (5.0%) blood pressure, body fat (3.9%), and waist circumference (4.4%). This group was representative of the entire population, including some healthier and some less healthy employees.

As the training program rolled out to more employees, the program achieved some exciting successes that helped create positive word of mouth. “We’ve had individuals come off their medications in just a few weeks,” said Dr. Dexter Shurney, Chief Medical Director of Health and Wellness Benefits.

The CHIP program, the patient-centered medical home, and the data warehouse are all intensive programs that will require an extended period to fully implement. Shurney estimates that it will require 10 years for the entire initiative to reach maturity and have its full impact on employee health and productivity.

Not “Off the Shelf”

Clearly, the initiatives at Cummins and Kraft are not simple implementations built on one or two programs. They introduced several innovative new programs. But these two corporate leaders have demonstrated that employers can implement consumer-directed health plans in an IDAM environment.


1. National Business Group on Health. (2014, Aug.). U.S. employers changing health benefit plans to control rising costs, comply with ACA. Article can be retrieved at:

2. B Gifford. (2014, Nov.). Consumer-Directed Health Plans: The Challenge to Managing Workforce Health, Performance and Productivity. San Francisco: Integrated Benefits Institute. References #7-#12 are studies of CDHP savings.

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