Benefits October 16, 2015

Employer Finds Small Steps Can Create Wellness Program Success

After giving employers pedometers, Blue Cross and Blue Shield of Tennessee found it doesn’t take great strides to cut costs and improve employees’ health.
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When you are a health care insurance provider, one may expect your company to be a model for good employee health, but at one time, that wasn’t so for Blue Cross and Blue Shield of Tennessee (BCBSTN).

The company acquired OnLife, a wellness company, in 2006, and began offering its services to employees. But, as Catherine Bass, director for analytics and reporting for OnLife, tells PLANSPONSOR, a bomb threat in 2008 was the jumping off point for a more comprehensive wellness offering.

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“There was a bomb threat to one of [BCBSTN’s] Chattanooga buildings, and employees had to evacuate,” she explains. “Traveling down the stairwell, Vicky Gregg, president and CEO at the time, noticed people were struggling physically to get down the stairs; they were panting. Outside they were lighting up cigarettes while still out of breath. She thought, ‘How are we going to get our constituents to take care of employees’ health when we don’t take care of our own?’”

At the same time, BCBSTN was experiencing double-digit growth in health care costs each year, and there was a high percentage of overweight employees—more than 50%, which was higher than the 31.1% adult obesity rate in Tennessee. “Controlling costs and helping employees on their personal journey to wellness and living healthier was our goal when we started our wellness program in 2008,” Tyler Sanderson, director of Total Rewards at BCBSTN, tells PLANSPONSOR.

NEXT: Creating a culture of wellness

In addition to offering a health assessment, BCBSTN allowed wearing tennis shows in its dress code, employee activities are tracked via an online portal, wellness coaching is offered online and on site, and the company started incenting good behaviors. “It really made wellness a part of what employees do and not just something that happens once per year,” Bass says.

In 2009, the company also put together a different health plan package. “This is when high-deductible health plans (HDHPs) started becoming more popular with employers,” Bass says. “A lot of BCBSTN’s enrollment was in the preferred provider organization (PPO) option, which was a huge cost for the company. The health plan package was restructured to make it more attractive to choose the HDHP option. The company’s theory was that people will take more ownership of costs and what they are paying with more visibility of costs up to the deductible.” Take-up of the HDHP option increased from 10% in 2009 to 38% in 2013.

However, to help employees out, the company offered an employer contribution into a health savings account (HSA) of $750 per year for single, and $1,500 for family. “It was a strong signal that the company is committed to doing what is best for employees,” according to Bass.

At the time, construction of one building to house all Chattanooga employees was in process. Sanderson says the building includes walking work stations, at which employees can plug in their laptop to walk while listening in on webinars, for example. It also includes walking trails both outdoors and indoors and an onsite fitness center right in front. He adds that in the cafeteria, healthier choices are the most economic for employees. “We are giving folks choices and education to help them make healthy choices,” he says.

A BCBSTN employee told PLANSPONSOR, “If we did not have a gym on campus, I would not work out. Because we do, I go down on lunch break and get on the treadmill, or I can jog outside. Workout facilities are accessible, and the staff in the gym are knowledgeable.”

NEXT: Small steps, big results

In 2010, BCBSTN introduced its Actiped program. Every employee was given a free pedometer and the company introduced an incentive program. A website tracks how many steps they have and how they are on-track to reach their goals. Employees receive points for steps and for doing activity inside as well as outside of the work-based wellness program, such as participating in Weight Watchers, dong group exercise at gyms, and participating in marathons, Bass explains. These points translate into dollars, and the maximum incentive is $200 per quarter. “For example, if employees take 40,000 steps per quarter, they get 10 points, outside events are 15 points each, and if they go to all onsite fitness classes, they can get 200 points.” Health coaching and watching educational videos also earn points.

BCBSTN encouraged each employee to set a goal of 10,000 steps per day, but what it found is that even moderate walkers (those who completed less than 5,000 steps per day) created big results. About 67% of employees participate in the Actiped program, Sanderson says. When the company looked at average claims costs of non-participants, it was $520; for moderate walkers it was $377, and for those who recorded more than 10,000 steps per day it was $155.

“This shows you don’t have to make huge strides, just moving is what it’s about,” Sanderson says. In addition, participants had fewer emergency room visits and inpatient hospital stays, and their body mass index (BMI) was lowered. And, as if walking was making employees want to be healthy in other ways, participants reported a likelihood to smoke was less and to eat the recommended amount of fruits and vegetables.

Bass notes that normal activity among participants was about 2,500 steps a day, but even that was enough to see benefits. “It is a lesson for other employers to set small, achievable goals in their wellness programs. I’m sure they would love to have all the other bells and whistles—a cafeteria, a fitness center—but they can get results by doing something as simple as encouraging employees to walk,” she says.

NEXT: Results of overall wellness program

Since starting its wellness program in 2008, BCBSTN has been able to keep its costs fairly neutral—going from double-digit cost increases each year to a flat trend by 2012. The company also measures the return on investment (ROI) of its wellness program, something surveys have found only about one-quarter of employers do.

Bass says the company measures costs per member per month (PMPM) and has found members who do not do any components of the wellness program cost $476 PMPM; those who do at least one component cost $354 PMPM; two components lowers the cost to $260 PMPM and three lowers cost to $241 PMPM. “Again, this shows a little extra makes a big difference for both employers and employees,” she notes.

BCBSTN also measures employee engagement with the wellness program. In 2008, 26% participated in the wellness program; currently, 98% participate—an impressive number, considering most employers cite participation as the biggest wellness program challenge. According to Sanderson, communication is the top reason for such a high participation rate, followed by the incentives. One of the things the company does to motivate employees to participate is to promote the success stories of people losing weight, Bass adds. Life-sized posters, with a summary of an employee’s story and before and after pictures, are placed in the gym.

Sanderson says employees have reported a 56% improvement in their activity levels; 26.7% quit smoking; and nearly 47% improved their nutrition. Today, only 6% of BCBSTN employees are smokers. However, although their health was getting better, employees continued to report high stress.

So, the company has been working in the last year and a half to alleviate stress by offering yoga classes and massages with costs supplemented by the company, as well as adding a financial wellness program. Employees can learn how to budget and how to utilize all the resources and benefits offered by BCBSTN. The Foundation for Financial Wellness, a nonprofit organization based in Colorado, helped the company implement its financial wellness program.

“Like most things in life, this is a journey,” Sanderson says. “It’s not something for which employers will have a positive ROI in the first year. But, what we see is satisfaction and engagement of employees, and that’s a very tangible and important outcome of wellness programs.”

Administration October 16, 2015

Company Stock Can Still Be a Prudent Investment

A recent court decision put fear in DC plan sponsors about offering company stock in the plan lineup, but it can still be a prudent investment if they keep in mind certain considerations.
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Like most things in life, including company stock as a defined contribution (DC) plan investment option comes with pros and cons.

Giving a workforce the chance to buy company stock can instill in employees a sense of ownership, says Krista D’Aloia, vice president of Fidelity Investments, and it may increase their incentive to be productive. “Employee ownership of company stock may contribute to improved employee morale, and financial benefits for both employees and employers,” D’Aloia tells PLANSPONSOR.

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Company stock continues to be an important part of the U.S. DC market, according to Fredrik Axsater, global head of State Street Global Advisors in defined contribution—constituting about 10% of all DC assets. “What is changing is that plan sponsors are increasingly reviewing their company stock plan,” he tells PLANSPONSOR. Of SSgA’s retirement plan clients, only one is eliminating company stock, Axsater says, and many others are reviewing the option and considering the use of a third-party fiduciary.

But the number of plan sponsors offering company stock seems to be dropping. More and more plan sponsors are backing off from offering company stock in their defined contribution plans, according to Stephen Moser, a retirement consultant for RetireAdvisers Services at Pension Consultants. “Our experience with our own clients confirms this trend,” he tells PLANSPONSOR. He also cites a study of Vanguard plans showing that one-third of sponsors who had previously offered company stock no longer do: From 2005 to 2014, the percentage of participants using company stock in their portfolio decreased by 42%.

One reason is a spate of recent lawsuits—among them, Fifth Third Bancorp v. Dudenhoeffer—that may make retirement plan sponsors leery. “The Fifth Third Bancorp v. Dudenhoeffer ruling last year is certainly causing sponsors to evaluate whether or not they want to continue to offer company stock in their DC plan,” Moser says.

A presupposition of prudence once protected plan sponsors when they hardwired company stock into the plan by mandating the investments in the plan documents. “That’s no longer the case,” Moser says. “Now sponsors must show actual prudence and regularly examine the company stock to make sure it’s appropriate for their participants, just like they do with other investment offerings in the plan.” Understandably, plan sponsors have a stark reaction to the removal of that protection. “It scares many plan sponsors,” Moser says.

NEXT: Considering a third-party fiduciary

Other court cases have brought to life an additional layer of risk that can come from offering company stock as a DC investment option, says attorney Kyle Halberg, a research analyst in ERISA services at Pension Consultants. Citing the Supreme Court decision in Tibble v. Edison, Halberg points out that the fiduciary to a retirement plan has more than just a duty to ensure that the investment decisions are prudent at the time that an investment option is added to the plan’s lineup.

“The fiduciary also has a duty to continually monitor the investment lineup to ensure that those investment options are prudent on an ongoing basis,” he tells PLANSPONSOR. “Before deciding to add company stock to your DC plan’s investment lineup, ask yourself whether you will be able to fulfill that ongoing duty to monitor the investment, and in the event that its performance is suffering, replace it with a more prudent alternative.”

Halberg says it can be hard for a company official to separate the two functions, as the same person is likely have an interest in protecting the stock that is in the plan’s lineup, and is a fiduciary to the retirement plan.

As questions mushroom around how companies evaluate their company stock investment option, Axsater emphasizes that a third-party fiduciary always has a process, so outsourcing this function can be a boon to the plan sponsor. This division at State Street Global Advisors has expanded over the last year and a half, and the company now oversees $60 billion in company stock assets as a third-party fiduciary.

Plan sponsors must make sure their plan committees follow a prudent procedure for choosing and monitoring all the investments available in the plan, Moser cautions. “They need to review the Investment Policy Statement, the plan documents and the written procedures used – and document, document, document!” he says. The process, the findings, the actions resulting from those reviews must all be documented. And any time a plan sponsor is concerned about accusations of conflicts of interest, the committee may also want to consider hiring an independent fiduciary to evaluate the company stock.

Plan sponsors also need to show they are actively helping participants avoid over-concentration of their investments in one area, perhaps by setting a cap on ownership of company stock, Moser suggests. More than half of Vanguard plan sponsor clients restrict employee elective contributions or exchanges into company stock, he notes, with the most common threshold at 20%. 

NEXT: The duty of prudence

Companies that provide employer contributions in the form of company stock have another task: “It’s important to allow immediate diversification of those contributions into other investments,” Moser says. “And educate, educate, educate! Educate those who have high exposure to company stock in their portfolio with a targeted campaign to make sure they understand the risks of over-concentration. Educate participants holding stock about the process of how to move out of company stock holdings if they wish to do so. And educate all participants about the importance of diversification and asset allocation, possibly providing them with asset-allocation models based on risk tolerance and age.”

The plan fiduciary’s paramount consideration, when weighing the offer of company stock, is the Employee Retirement Income Security Act (ERISA) duty of prudence and the duty of loyalty, Halberg says.

The fiduciary must act as a prudent person would act in the same situation, and answering whether allowing company stock in the investment lineup is a prudent decision is not easy, “especially as someone who is going to be inherently biased toward an optimistic outlook on your company’s future,” Halberg says.

Halberg cites the recent Court of Appeals case, Tatum v. RJR Pension Investment Committee, to highlight the complexity and potential liability of using company stock in a DC plan. The company chose to divest the stock of the recently spun-off Nabisco company, a decision that “seemed reasonable on the surface,” Halberg observes. “After all, isn’t it inherently risky to be offering an individual company’s stock in your investment lineup? The committee thought so, and decided to divest without giving it much more thought.”

But after the stock was removed, it increased in value by nearly 250%, moving some very unhappy participants to sue the plan. The 4th Circuit held that the prudence test requires a determination that a prudent person in the same situation would have made the same decision, rather than that they merely could have made the same decision, Halberg says, a decision that raised the bar with respect to the fiduciary duty of prudence. “It should give pause to any fiduciary who is considering adding company stock to their plan,” he says. “Again, it’s hard to take off those rose-colored glasses that led to that initial reaction, saying, ‘Of course my company’s stock is a prudent investment.’”

NEXT: Company stock's silver lining

If there are any silver linings to some of the court decisions, Moser says the Fifth Third ruling adds some protection for plan sponsors. Regarding publicly traded stocks, it says that “allegations that a fiduciary should have recognized from publicly available information alone that the market was over- or undervaluing the stock are implausible as a general rule, at least in the absence of special circumstances,” he points out.

A plan committee that takes no action based on inside information about company stock in the plan is also afforded some protection by the Fifth Third ruling, Moser says. “A plaintiff must plausibly allege an alternative action that the defendant could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.”

The process for deciding whether to keep company stock in the plan or not resembles the way individual participants decide how to allocate investments in their accounts: it’s all about risk versus reward. “On the reward side, providing participants with company stock aligns their goals with those of the company, provides them with a sense of ownership, and helps increase loyalty and decrease turnover,” Moser says. “On the risk side, perceived exposure to fiduciary liability due to stricter standards for loyalty, prudence and diversification can be a powerful deterrent.” 

The recent court cases haven’t actually increased the overall risk of liability for most plans, Moser says, “but they have made it more important to pay attention to the policies, procedures and investments in the plan,” he observes. “Deciding what level of risk is acceptable in order to gain the rewards of company stock ownership by participants is an individual decision for each plan sponsor.”

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