The Mayor issued an executive directive in April 2006, adopting the San Francisco Shape Up at Work Strategies. This directive instructed all City departments to incorporate employee health promotion strategies into their mission statements. The Departments of Public Health and Human Resources and the Health Service System were to assist City departments to develop five-year implementation plans.

According to the executive directive, workplace wellness strategies benefit both the employer and the employee. Preventive health and wellness activities reduce the risk of chronic diseases and may increase productivity, which can reduce healthcare costs, workers' compensation costs, and absenteeism.

Shape Up at Work does not have a dedicated budget for program management or implementation. Although the Department of Human Resources hired a part-time intern to coordinate Shape Up at Work programs within City departments, City departments have participated in the program through existing resources.

The Reasons Employers Implement employee Health Promotion Programs

Many of the larger City departments have existing health and safety programs to reduce workplace injury and illness and associated workers' compensation costs. Additionally, some City departments have existing programs to promote employee health overall. For example, in 2004 the Human Services Agency developed in-house programs to reduce employee stress and promote wellness as part of their strategic planning process. The Police Department has a physical fitness program for uniform personnel, which is included in the Memorandum of Understanding with the Police Officers Association. The Municipal Transportation Agency has implemented an employee health promotion program that promotes general employee health and physical fitness. In general, though, the City has not had a coordinated program to promote employee health.

Employee Health Promotion Programs and the Associated Reduction in Employers' Health Insurance Costs

In the United States, employers are the largest provider of health insurance coverage for non-elderly adults. Health insurance costs for both employers and employees have increased significantly over the past many years with health insurance costs increasing at a higher rate than the Consumer Price Index.

According to a 2006 survey conducted by the Business Roundtable, an association of business executives, businesses implement employee health promotion programs to promote healthier employees, and lower the cost of health benefits. According to the survey, health insurance programs that manage employees' access to care have had limited success in containing healthcare costs.

Because the rate of increase in health care costs is continuing to rise, both employers and health plans have looked to other means to contain healthcare costs. Employers and health plans both consider employee health promotion programs as a possible means to change employee behavior, reducing risky behaviors that contribute to high healthcare costs and thus reducing these costs.

Employee Health Status and Reductions in Medical Claims Costs

Studies conducted by the University of Michigan have directly linked employee health status to medical claims costs. Medical claims costs, especially for self-funded health plans, directly impact the costs of health benefits. According to the University of Michigan's 2003 study of General Motors, gender, age, and existing disease increase medical claims costs.¹

According to the same study, an increase in wellness, measured by a 100-point "wellness" score ranking healthy behaviors, reduced medical claims costs. The wellness score was generated from three major components: (1) behavioral health risks, such as smoking, alcohol consumption, lack of physical activity, and other risks; (2) mortality risks; and (3) use of preventive health services. Employees with a wellness score greater than 92.9 on the 100-point scale, indicating that the employee had low behavioral health and mortality risks, had average annual medical claims costs of $867, which were 44.3 percent less than average annual medical claims costs of $1,251 for all employees participating in the study.

Impact of Employee Health Promotion Programs on Health Status

A 2006 University of Michigan study of employees at IBM found that employee health promotion programs improved employee health status.² According to the study, regular physical activity, a major component of health promotion programs, can reduce the risk of heart disease, diabetes, hypertension, and colon cancer. The study reviewed individual health risk assessments of 24,996 IBM employees in two different time periods (2004 and 2005) and found that employees participating in health promotion programs reported fewer health risk factors in their 2005 health risk assessment compared to their 2004 health risk assessment.

The health risk assessments evaluated the number of health risk factors for each participating employee, including physical inactivity, life satisfaction, perceived good health, stress, elevated cholesterol, smoking, overweight, blood pressure, and other factors. Employees were considered low risk if they had two or less factors, medium risk if they had three or four risk factors, and high risk if they had five or more risk factors.

According to the 2004 health risk assessments, of the employees participating in health promotion programs, 4.8 percent were considered high risk and 17.6 percent were considered medium risk. According to the 2005 health risk assessments, the percent of employees participating in health promotion programs who were considered high risk reduced from 4.8 percent to 3.6 percent, and the percent of employees participating in health promotion programs who were considered medium risk reduced from 17.6 percent to 15.4 percent.

According to the 2004 health risk assessments, 77.6 percent of employees participating in health promotion programs were considered low risk, with two or less health risk factors. According to the 2005 health risk assessments, the percentage of employees participating in health promotion programs who were considered low risk increased from 77.6 percent to 80.9 percent.

The results of these two studies suggest that employee health promotion programs contribute to increased wellness and that increased wellness contributes to reduced medical claims costs. Because medical claims costs impact employers' and employees' costs for health benefits, effective employee health promotion programs can have an impact on health insurance costs.

Employee Health Promotion Programs and Reductions in Workers' Compensation Leave, Sick Leave and Disability Leave

Several peer-reviewed studies reported in the Journal of Occupational and Environmental Medicine have found links between employee health risks and the employers' costs for disability leave, workers' compensation leave, and lost productivity. In at least two of these studies, participation in a health risk assessment or a health promotion program contributed to reductions in these costs.

Impact of Health Risk Assessments on Reducing Workers' Compensation Costs

A 2001 University of Michigan study found that smoking, poor perception of physical health, physical inactivity, and life dissatisfaction were associated with high workers' compensation costs.³ The University of Michigan's Health Management Research Center looked specifically at the impact of employees' overall health risks on the rate of workplace injuries and workers' compensation costs. In a four-year study of Xerox Corporation's employees, their health risks, and their workers' compensation costs, the University of Michigan found that employees with higher general health risks experienced a higher rate of workplace injuries and workers' compensation costs. Average claims costs for low risk employees were $2,179, for medium risk employees were $5,350, and for high risk employees were $15,162.

The University of Michigan study also found that participants in health risk assessments had lower costs than non-participants. According to the study, the Xerox Corporation's health risk assessment program serves as a gateway to health awareness materials and risk reduction programs. Workers' compensation costs for the health risk assessment participants decreased annually during the four-year study compared to workers' compensation costs for the non-participants, which increased slightly.

Impact of Health Promotion Programs on Reducing Sick Leave and Disability Leave

Peer-reviewed studies, published in the Journal of Occupational and Environmental Medicine, have found that employees with higher health risks are absent from work more often. In response to these studies, the University of Michigan Health Management Research Center looked at the impact of employee health promotion programs on reducing health risks and absenteeism.⁴ The study evaluated short and long term disability use among two manufacturing plants' employees over a six-year period, of whom more than 60 percent participated in health promotion programs. The health promotion programs included health risk assessments, on-site health screening, on-site and telephone wellness programs, medical vouchers, and telephone nurse counseling.

In the first year of the University of Michigan study, the percent of employees who were absent due to disability on any specific day was 2.65 percent for health promotion participants and non-participants. The daily absentee rate increased for both groups over the six-year period but increased at a higher rate for non-participants. In the sixth year of the study, 6.9 percent of employees participating in health promotion programs were absent due to disability each day compared to 9.3 percent of non-participating employees

The University of Michigan study also found that employees with high health risks had more annual disability days on average than employees with low or medium health risks. Low risk employees had an average of 8.5 disability days per year, medium risk employees had an average of 12.4 disability days per year, and high risk employees had an average of 19.7 disability days per year.

Components of Employee Health Promotion Programs

Many of the employee health promotion programs sponsored by public and private sector employers and by health plans have key components.

Health Risk Assessment

Many employers provide hard copy or on-line health risk assessment tools, allowing employees to identify their health conditions and health risks and access programs that target these conditions or risks. According to the Business Roundtable survey, 58 of the 73 survey respondents who offer employee health promotion programs, or 80 percent, offered some form of health risk assessment.

In many instances, the health risk assessment is provided by the employee's health plan or a third party vendor. The employee can choose if the results of the health risk assessment, which consists largely of self-reported information, are to be shared with the employer or the health plan. For example, Kaiser's health risk assessment is available to plan members on the Kaiser website and managed by a third party vendor, HealthMedia. The plan member participating in the health risk assessment can choose to not share the information with Kaiser or with the City.

Classifying Health Risks

The third party vendor administering the health risk assessment can aggregate employees' risk data for each employer. To ensure privacy, employee names can be excluded from the aggregate data. The aggregate data can then be used to profile employees' health risks, identifying the percentage of low, medium, and high risk employees within the work force.

For one public sector employer, King County, Washington, the vendor provides individual employee data with an identifier number that allows the county to track the employee's risk assessment, intervention plan, and medical claims experience. The employee's name is not included in the information, allowing for privacy.

According to the Business Roundtable survey, companies used the health risk assessment to classify health risks within the work force and to design targeted interventions to employees, such as smoking cessation or weight reduction programs. Although companies were aware of employees' privacy concerns and ready to address these concerns, the survey did not provide information on how privacy concerns were addressed.

Health Programs and Interventions

Health programs can take a variety of forms. Frequently offered programs include:

• Flu shots
• Health fairs
• Health screenings
• Organized employee walks and challenges
• On-site work out facilities and exercise or yoga classes
• Discounts at private gyms
• On-site weight reduction programs, such as Weight Watchers
• Health and wellness information provided through websites, emails, and newsletters
• Nutrition information and healthy foods in vending machines and staff meetings

The use of health risk assessments allows for programs targeted to individual employee's needs, such as smoking cessation or weight reduction programs. In addition, health plans offer services that can include advice nurse lines, wellness programs and disease management programs.

Incentives

Many employers and health plans use cash or other incentives to encourage participation in health promotion programs. According to the Business Roundtable survey, 69 percent of survey respondents use some form of incentive, including cash rewards, athletic wear, pedometers, and public recognition.

The Reasons to Implement Employee Health Promotion Programs in the City and County of San Francisco

The City and County of San Francisco, as an employer, has incurred increasing costs over the past several years, not only for health plan premiums but also for sick leave, disability leave, and workers' compensation leave.

The City's Costs for Physically Inactive Employees

Through the 93Healthier Worksite Initiative94, the federal Centers for Disease Control address employee health promotion programs. To determine an employer's baseline costs for employee health risks, the Healthier Worksite Initiative has developed cost calculators, based on demographic data. These calculators allow the employer to estimate health care, disability, productivity, and other costs resulting from employee health risks.

According to the Healthier Worksite Initiative, physical inactivity contributes to the risks of developing diabetes, high blood pressure, and other illnesses. Based on the City's employee profile, the Healthier Worksite Initiative estimates that City employees' physical inactivity costs the City $4,704 per employee per year for medical care, workers' compensation, and lost productivity. Of this estimated cost, 95.6 percent results from lost productivity due to absenteeism or reduced job performance.

The City's Lost Work Hours for Sick Leave, Disability Leave, and Workers' Compensation Leave

The Administrative Code assigns central responsibility to the Department of Human Resources for managing workers' compensation claims costs. However, because City departments are decentralized, no single City entity is responsible for tracking or implementing programs to reduce workplace illness and injury, sick leave, or disability leave. City departments do not uniformly track sick leave, disability leave or workers' compensation leave among their employees. Of 42 City departments responding to the Budget Analyst's survey, only 32 City departments, or 76 percent, stated that they tracked sick leave and disability leave among the departments' workforce.

SF Stat tracks lost work hours dues to sick leave, disability leave, and workers' compensation leave. Charged with working with City departments to identify inefficiencies and improve performance, SF Stat consists of representatives from the Mayor's Office, the City Administrator's Office, the Department of Human Resources, and the Controller's Office. Over the past three fiscal years, the number of lost work hours due to sick leave and workers' compensation leave as a percentage of total work hours has declined, as shown in Table 1.1.

Table 1.1
City Department's Lost Work Hours due to Sick Leave, Disability Leave, and
Workers' Compensation Leave as a Percentage of Total Work Hours
FY 2004-2005 through FY 2006-2007

Source: SF Stat

Although City departments overall experienced a reduction in lost work hours due to sick leave and workers' compensation leave, several City departments had an increase in lost work hours. The Airport experienced a nine percent growth in lost work hours due to sick leave, disability leave, and workers' compensation leave. The Fire Department and Police Department each experienced a 2.7 percent growth in lost work hours.

The City continues to experience high costs for lost work hours due to sick leave, disability leave, and workers' compensation leave. In FY 2006-2007, the City's lost work hours were 6.6 percent of total work hours, resulting in an estimated $160 million in salary costs and lost productivity equivalent to 1,800 full time employees.

The City's Increasing Costs for Employee Health Plans

To provide insurance for City employees, retirees, and dependents, the City contributed $400.7 million in FY 2007-2008. This is an increase of approximately 10.1 percent compared to the FY 2006-2007 contribution of $364 million.

The City's Health Plans

The Health Service System manages the City's health plans under the direction of the Health Service Board. The City has one self-funded health plan, the City Health Plan, and three plans provided through third-party insurers: Kaiser, Blue Shield, and PacifiCare. The City Health Plan administrative and health care costs, as well as insurance premiums for Kaiser, Blue Shield, and PacifiCare, are paid from employer, employee and retiree contributions. The Health Service System Trust Fund receives all contributions and pays all health plan expenses.

• The City Health Plan is a managed care plan, providing services through a preferred provider organization. The preferred provider organization is made up of a network of providers who provide services to Plan members for an agreed upon price per service (or "eligible expenses"). Plan members pay a percentage of the price (or "coinsurance") when accessing services. Under the City Health Plan, members must meet an annual deductible before the Plan pays a share of eligible expenses. Members are only liable to pay their percentage of eligible expenses up to the amount of the annual out-of-pocket maximum expenses.
   
• Both Kaiser and Blue Shield are health maintenance organizations, or HMOs. Like the preferred provider organization, each HMO is made up of a network of providers who provide services at a discounted price. The members pay a monthly fee and a co-payment when they access services. Under the preferred provider organization, the member can access services from a provider who is not in the network but must pay the difference between the non-network provider's price for the service and the eligible expenses determined by the plan for such services. The HMOs, however, restrict access to providers outside of the HMO network.
   
• The Health Service System began contracting with a "flex-funded" health maintenance organization, PacifiCare, in FY 2007-2008. Under the contract between the Health Service System and PacifiCare, PacifiCare performs as a third party insurer. However, the monthly premiums approved by the Board of Supervisors each year are "target" premiums based on the projected costs that will be paid on a monthly basis. The Health Service System reconciles actual costs compared to the target premiums two times per year. If actual costs are less than the target premiums, PacifiCare reimburses the Health Service System. On the other hand, if actual costs exceed the target premiums, the Health Service System will be required to reimburse PacifiCare up to 120 percent of the target premiums. Although the Health Service System is not required to set aside reserves to pay for potential costs exceeding target premiums, the Trust Fund is liable for additional costs.

Previously the Health Service System administered a third HMO plan, Health Net, but discontinued the plan in FY 2007-2008.

Increases in the Health Plans' Monthly Premium Costs in FY 2003-2004 through FY 2006-2007

The City, as the employer, and City employees share the monthly cost of health plan premiums. According to the Charter, the City's share of the monthly premium cost equals the average monthly premium contribution of ten populous California counties surveyed by the Health Service Board. According to the Memoranda of Understanding between the City and the labor unions representing City employees, the City pays the full monthly premium for single employees, and contributes at least $225 for the monthly premiums of employees' dependents.

Each year the Health Service System surveys ten populous California counties and calculates the average monthly premium contribution. As shown in Table 1.2, the monthly premiums for two of the City's HMO plans, Kaiser and Health Net, increased at a faster rate than the ten-county average contribution between FY 2003-2004 and FY 2006-2007.

Table 1.2
Comparison of the City's Health Plans' Employee-Only Monthly Premiums
to the Average Employee-Only Monthly Premium for Ten California Counties
FY 2003-2004 through FY 2006-2007

Source: Annual Actuarial Reports

From FY 2003-2004 through FY 2006-2007, the City's monthly health insurance premiums have generally increased at a lower rate than the California Public Employees Retirement System (CalPERS) health insurance premiums.

• The City's Blue Shield HMO average annual increase of 7.9 percent and the Kaiser HMO average annual increase of 10.1 percent, as shown in Table 1.2, are lower than the CalPERS HMO monthly premiums' average annual increase of 10.6 percent. The City's Health Net HMO average annual increase of 13.2 percent, as shown in Table 1.2, exceeded the CalPERS average.
   
• The City Health Plan's average annual increase of 4.1 percent from FY 2003-2004 through FY 2006-2007 was lower than the CalPERS PPO monthly premiums' average annual increase of 9.5 percent.

Increases in the Health Plans' Monthly Premium Costs in FY 2007-2008

The employee-only monthly premium for Blue Shield and Kaiser increased at a greater rate than the ten-county average monthly contribution in FY 2007-2008.

• The ten-county average monthly contribution increased from $365.66 to $403.14 or 10.3 percent.
• The Blue Shield employee-only monthly premium increased from $354.12 to $413.29 or 16.7 percent.
• The Kaiser employee-only monthly premium cost increased from $368.49 to $410.07 or 11.3 percent.

In FY 2007-2008, the Health Service Board approved changes in the structure of the City Health Plan, separating out the monthly premium costs for active employees from the monthly costs for retired employees. As a result, the monthly premium costs for active employees increased by 13.6 percent from $548.64 in FY 2006-2007 to $623.03 in FY 2007-2008.

The City discontinued its contract with Health Net in FY 2007-2008 and implemented the PacifiCare flexibly funded health plan, as noted above.

Health Plan Utilization and Monthly Premium Costs

According to business organizations, such as the Pacific Business Group on Health⁵ and the Business Roundtable, employers often expect employee health promotion programs to contribute to reduced medical claims costs. Reduced medical claims costs can result in reduced monthly health plan premium costs only if utilization and medical claims costs drive monthly premium costs.

For the self-funded City Health Plan, monthly premium costs are directly linked to utilization and medical claims costs. The PacifiCare health plan is a flex-funded plan, which reconciles actual costs with the target premium two times per year. Thus, a reduction in utilization and medical claims costs could lead to a reduction in health plan premium costs.

For the Kaiser and Blue Shield health plans, market rates and member profile, rather than utilization, drive monthly premium costs. The Health Service System does not maintain or monitor health plan utilization data, and although, according to the Health Service System, utilization is considered in annual health plan premium negotiations, actual health plan premiums are based largely on member profile and market rates.⁶

Because 83.5 percent of active employees are members of Kaiser or Blue Shield, reductions in utilization or medical costs will have minimal impact on the City's contributions for employee health plans. Consequently, employee health promotion programs intended to reduce health plan premium costs will have little impact on actual health plan premium costs.

Table 1.3
Participation of Active Employees in the City's Four Health Plans as of September 6, 2007

Source: Health Service System

Health Plans' Existing Health Promotion Programs

The City's three insured health plans - Blue Shield, Kaiser, and PacifiCare - and the City Health Plan offer some form of health promotion program that includes a health risk assessment, individually-designed programs to improve health, and incentives for program participation.

The three insured health plans' programs are not highlighted on the Health Service System website although information about the health promotion programs can be found on each of the health plans' websites. The Health Service System developed summaries of the health promotion programs provided by the four City health plans to distribute at the annual health fair in October 2007.

Table 1.4
Summary of the City Health Plans' Health Promotion Programs

Source: City Health Plans

All four City health plans offer key components:

• An online health risk assessment, providing results and recommended programs or health promotion plans;
• General health education and promotion programs, such as nutrition, weight loss, and exercise;
• A 24-hour nurse advice line; and
• Program incentives for participating and completing components of the health promotion program.

The City Health Plan health promotion program provides an online health risk assessment and individualized online coaching program. The program includes a variety of six-week programs on general topics, such as weight loss or smoking cessation, or a customized program for the individual member. Participants can receive cash awards, such as $200 to complete the health risk assessment that can be applied to a health savings account or flexible spending account.

The Kaiser health promotion program provides an online health risk assessment and results. Based on the results, Kaiser offers an online information program to support lifestyle changes and improve behavior. Classes, such as yoga, weight reduction, stress management, and other topics, are offered at the various Kaiser medical centers and clinics for a fee. Participants can receive award cards, ranging in value from $10 to $150 for completing programs.

The Blue Shield health promotion program provides online health risk assessment and results. The participant can then select a six-week health promotion program, such as nutrition or weight loss, that consists of quizzes, short articles, and other program tools. Participants receive points for completing programs, which can then be redeemed for cash or merchandise.

The PacifiCare health plan offers a health risk assessment as well as other health promotion and education programs. Participants can collect credits for participating in and completing programs, which can be used for savings on selected consumer goods and services.

All four health plans offer discounts for alternative care, such as chiropractor or massage therapy services. Behavioral or mental health services are also included in each of the four City health plans.

As discussed in Section 3 of this report, the Health Service System has begun to evaluate the health plans' wellness programs, as part of the Health Service System's Wellness Project, with the intention of evaluating gaps in existing programs and proposing program enhancements.

1 "Association between Wellness Score from a Health Risk Appraisal and Prospective Medical Claims Costs", Journal of Occupational and Environmental Medicine, Vol. 45, No. 10, Oct. 2003

2 "Effectiveness of an Incentive-Based Online Physical Activity Intervention on Employee Health Status", Journal of Occupational and Environmental Medicine, Vol. 48, No. 9, September 2006.

3 "The Association of Health Risks with Workers Compensation Costs", Journal of Occupational and Environmental Medicine, Vol. 43, pages 534-541, 2001.

4 "Influence of Participation in a Worksite Health-Promotion Program on Disability Days", Journal of Occupational and Environmental Medicine, Volume 44, Pages 776-780, 2002.

5 The Pacific Business Group on Health is a business coalition on health care, representing private and public employers that include CalPERS, the University of California, Stanford University, Pacific Gas and Electricity, and other employers.

6 Services provided under the health plan, deductibles and co-payments, and other health plan components also determine the monthly premium costs. If the health plan's components remain unchanged, then utilization, medical claims costs, and market rates determine the monthly premium costs.