The Client

Eos Airlines, a boutique luxury airline flying between New York (its home base) and London, began operations in 2005, with its initial commercial flight in October of that year.

How We Helped

In January 2008, Eos entered its third year with a full-replacement set of consumer-directed health plans with Health Savings Accounts (HSAs). Eos’ unique plan design includes an annual HSA contribution, a funding match, and significant financial rewards for employees who improve their health or stay healthy. About 80% of the company’s growing number of employees (almost 400 in March, 2008) are enrolled in one of two high-deductible plans.

For Eos, equally important to the well-being of the company’s passengers (many of whom are celebrities) is the well-being of its employees. Pam Armstrong, Vice President of Benefits when the airline started commercial operations, designed, and implemented the unique program. Ms. Armstrong, a 20-year veteran of the health care industry and author of a book about health care for consumers (Surviving Healthcare, 2004), sought a benefits program at the company’s inception that would enable Eos employees to play an active role in their health and health care. The company’s support for its employees in these endeavors was equally important. “Our customers rave about our service. What we want is for our employees to rave about working for Eos, so we needed a health benefit that they would rave about,” Ms. Armstrong said.

Eos employees may choose between two virtually identical high-deductible plans. The difference between the two plans is that one provides 90% in-network coverage once the deductible has been met, while the other offers 100% coverage (offered on an employee buy-up arrangement). Both plans’ relatively high deductible of $1,250 encourages employees to think twice about unnecessary or overly costly care. Employees are highly encouraged to get regular checkups and preventive care, covered at 100%. Employees are also encouraged to partner with their care providers to get the best care, to ask good questions, and to use trustworthy indicators of high quality care when choosing treatment options, physicians, and hospitals.

Incentives Target Changes in Behavior

Eos offers an annual $300 HSA contribution to all enrolled employees. Beyond that, employees who want to contribute pretax salary amounts to their HSA are eligible for a 2-to-1 company match, up to $450 for single coverage and up to $1,200 for family coverage.

However, the most distinctive feature of Eos’ plan design is a substantial financial incentive bonus for all employees—and their spouses—if they qualify by achieving targeted health results through participation in the company’s wellness program.

Here’s how it works:

• All employees and their spouses are eligible to participate in a company-paid health risk assessment that includes biometric screenings. They receive a report pointing out the health risk areas that they need to work on and are assigned a personal risk score. Each participant earns the initial annual $500 incentive regardless of the score during the first year of participation, which is the baseline measurement year.

• To be eligible for the $500 the following year, participants must maintain a low risk score if they originally had a low total risk score, or decrease their overall risk score by 5% if they originally had a medium to high total risk score.

• The risk score is based on biometric measures including cholesterol level, body mass index, and blood pressure.

• Employees and their spouses do not need to be enrolled in one of the company health plans to be eligible for participation in the health risk appraisal program.
  

“Fifty percent of a person’s health status depends on lifestyle. If we can address lifestyle issues through financial incentives, people will pay attention, and we will all be better off,” Armstrong said.

The risk assessments are conducted in November most years, enabling the financial rewards to be sent to the HSA administrator in January, just after the next plan year begins.

A third party administers the health risk assessment. The third-party company tells Eos only which employees qualified for the incentive payment, without revealing how they qualified. If a participant is unable to improve his or her health risk score for medical reasons, his or her doctor may sign a statement to that effect and the participant will still receive the bonus for taking the risk assessment. Personal health and medical information are not shared with anyone except the employee or spouse participant. The employer receives a summary report of the group’s risks, with no names attached

In the beginning, premiums for the high-deductible plans implemented were about 20% lower than the company would have paid for more traditional coverage. The premium savings, Armstrong said, gave the company a way to fund all of the components of the wellness program and the contributions to HSAs.

Eos’ premium renewal rates for 2007 increased just 5% compared to an 8% trend nationally. For 2008, premium rates actually decreased by 14%, attesting to the power and value of the wellness program. By the end of the program’s third year, the company will save more than $1 million in health insurance premium costs.

To win corporate buy-in for the consumer-driven health care and wellness strategy, Armstrong said that she illustrated the likely growth of health coverage costs over the next 15 years. Nationally, employer-sponsored family health coverage cost an average of $9,950 per employee in 2004. Armstrong also explained that, with a modest average annual increase of just 8%, the price tag would balloon to about $34,000 a year by 2020.

“I said, ‘How are you going to afford that? It’s not reasonable. We have to do something,” she had told the Eos Executive Council. “And we compete against international carriers, so we also have to consider how their health care costs compare to ours.” Based on Pam’s presentation, the Eos executives agreed to implement the highly innovative approach to employee benefits she proposed.

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The following quotations are from interviews about the Eos health benefits done with company executives and employees in March 2008.

“I would say the positive aspects of the program were pleasantly surprising. It’s one thing to understand the theory, but then to see it all unfold with people you know is a very satisfying and rewarding experience… All of us gravitate to putting a lot of weight on a personal recommendation from someone we know, respect, and trust. And knowing, respecting, and trusting someone requires a relationship that takes time to develop. So having said that, from this brief sound byte, this is one COO who can tell you the program is well thought out, it does work, and it benefits the company, the shareholders, the employees, ultimately the customers, and the community. So I think we have empirical evidence that it works, and it’s something that other executives should seriously consider.”

Gil Morgan, Chief Operations Officer
LISTEN TO THE INTERVIEW

“I’ve been in the industry for over 23 years, and I can tell you [the Eos health benefits plan] is a very exciting concept in the way it’s been put together here, and the way that we actually carry it out. It’s also something that I’ve seen—it’s been on the forefront for a long time, but most companies just can’t get there ‘cause they don’t have the courage or they’re afraid to break an old paradigm… One of the things that works for us that I would encourage other companies to think about is don’t just go into it, “You have a high-deductible health savings account, that’s the program.” Find creative ways to encourage your employees to get healthier, ‘cause it’s really not about the $500 [annual health incentive bonus]. That’s small change if people get healthier. If people aren’t as sick and don’t go to the doctor as much, we can reduce our costs. And I—well, I’ve been here a year. My predecessors are the ones that set this up, but I can tell you that when we did our renewal and got our premiums for this coming year, for 2008, [we have] a 14% reduction… probably a combination of many things, but I think that it is a program that appears to be something that’s working.”

John Turnipseed, Chief People Officer
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“Most of all, [the health plan] benefits me. It seems in a traditional plan, it’s just like—we have a blanket agreement with XYZ insurance company, and what’s the cheapest we can get for a good rate. Here, of course, we have a higher deductible, but the incentive is on me to actually improve my health, and I have improved my health score dramatically in the past year just following those guidelines they gave me. So in the long run, it might seem that it’s a cost savings, but for me it seems like it was a life savings—it improved my quality of life.”

Benjamin Jooste, Flight Attendant Instructor
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“The kicker is they want you to be healthy. Right? And people aren’t. I think people don’t take their health seriously enough, and it’s put on the employer to pay for the health care that’s gonna take care of you, because you’re not taking care of yourself. I think where it can be better is just the way they’re running it. The more healthy you are, the more money you get in your health savings account.”

Rene Grey, Air Transportation Ground Instructor

“It’s really important that the money [in my HSA] is actually mine, and when I move on to another company I can keep that money, and I can use it next week, next year, 10 years from now… I wouldn’t be scared of it. I’ve heard a little bit about flexible savings accounts where you put in a certain amount and it’s use it or lose it. I mean this is much better because I can accumulate for the next 50 years, and then use it later on and have a good amount built up for when I really need it for prescriptions or whatever.”

Danner Hickman, Revenue Management Senior Analyst
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This case study was written prior to the announcement in April 2008 of the company’s filing for bankruptcy resulting from increased fuel costs and other airline industry related issues.)

(Case study write-up adapted from a November 2006 article published in Inside Consumer-Directed Care by Atlantic Information Services, Inc. and an article in the January/February 2007 issue of Health Promotion Practitioner.)