towerswatson.com Picture-Perfect Health Enhancing Employee Health and Wellness at Philips North America

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1 towerswatson.com Picture-Perfect Health Enhancing Employee Health and Wellness at Philips North America

2 Picture-Perfect Health Enhancing Employee Health and Wellness at Philips North America By Lucie P. Lawrence About Philips North America A diversified company serving professional and consumer markets Health Care segment creates products for home health care, women s health, radiology, oncology and patient care, including imaging systems Consumer Lifestyle segment brands include Sonicare and AVENT Lighting segment offers more than 3,000 products for municipal, business and consumer use Affiliate of the global, Netherlands-based Royal Philips Headquartered in Andover, Massachusetts More than 22,700 employees 50 facilities in 22 U.S. states 2012 sales of US$10.41 billion 31% of Philips global revenue Improving the quality of people s lives through products that foster health and wellness. It s what Philips North America is all about. While Philips has been satisfying customers with its innovations for decades, its employee benefit programs were lagging behind. A few years ago, leaders recognized that employees weren t living the company s mission, and the organization faced significant HR challenges. Many of our employees were disengaged with respect to their benefits, says Beth Grella, vice president of compensation and benefits at Philips. They didn t fully understand or appreciate Philips competitive benefits, and they didn t see the company as being committed to their health and well-being. There was also a general reluctance to trust leadership s efforts to change things. It didn t help that our benefit plan offerings were outdated and didn t adequately promote shared responsibility and consumerism. Our change management tools were ineffective, too. And most troubling: We didn t have good ways of identifying the drivers of employee health and productivity. There was no real health and wellness strategy. These were critical issues that were having a negative impact on the business. As with every company, Philips performance depends on the engagement, health and productivity of every member of its workforce. We didn t have the strategy or programs to support those things. We needed to make a change, and it was important for employees to understand and embrace the change. This would be essential for Philips to continue to innovate, promote our brand, improve customer loyalty and succeed over the long term. So Philips partnered with Towers Watson to craft a much-needed health and wellness strategy for improving workforce health and productivity. Its goals: Engage employees in managing their health, provide innovative tools for health improvement and help employees understand the value of their benefits. We had a lot of work to do, and we knew that a challenge of this magnitude required comprehensive planning and skillful execution, says Julie Thibodeau, benefits director at Philips. We brought in Towers Watson as a partner and advisor because of their vast market knowledge, change management expertise, innovative ideas, and grasp of health care reform and our company s culture. They became an extension of the Philips team. 2 towerswatson.com

3 Beth Grella, vice president, compensation and benefits, Philips

4 Philips senior benefits specialist Brenda Nichols with Chris Coviello, Philips senior benefits consultant, (right) and Towers Watson consultant Charles Whitmore Building the Foundation Philips formed a design team and also created a governance infrastructure as a way to get input from key stakeholders and secure their buy-in. The stakeholder team included representatives from each of the business units and operational functions. This representation was essential to designing a health and wellness strategy that would support the business and HR, Grella says. The members of this team became our change champions. They assessed how the strategy would affect their business, made the approval process move along smoothly and helped to propel change. To create a well-grounded strategy that would bring positive outcomes, the team developed a list of guiding principles and objectives. These included living the Philips mission, encouraging shared responsibility, reducing the rate of cost increases and ensuring that programs would provide optimal value to employees. The next steps were gathering information and benchmarking. We assessed Philips existing health program from several perspectives, says Cameron Congdon, Towers Watson senior consultant, looking at competitive positioning, cost effectiveness, population risk and employee engagement. The information collection process also included executive interviews. In these sessions, team members educated senior leaders and other primary stakeholders about the rationale for potential changes, explored what stakeholders viewed as critical success factors and gained their support early in the process. A Strategic Road Map Armed with this information, the team designed a comprehensive health and wellness strategy. We constructed the strategy carefully, with our eyes on the guiding principles. The plan needed to include programs and tools that would engage employees in making healthy choices and using health care services wisely, Thibodeau says. If it achieved what we hoped for, it would slow down the increases in our health care costs. The plan was very comprehensive. It included innovative health and wellness offerings that would not only meet the organization s needs as they changed over time, but also result in cost efficiencies. The strategy proposed a new, account-based health plan (ABHP) designed to motivate employees to manage their health care dollars and take control 4 towerswatson.com

5 Sage Advice The Philips North America benefits team offers the following words of wisdom for organizations crafting a health and wellness strategy. Ask and listen. Before creating programs that might not appeal to employees, ask them what they want. Listen carefully to what they say, and act on it. Be patient, and don t move too quickly. Understand your employees and the organization s readiness for change. Bring people along at a comfortable pace. Communicate, communicate, communicate. Consistent, transparent communication is vital. It s the key to having employees understand what the organization is doing for them and what s happening every step of the way. Don t minimize the importance of data. Data form the basis for everything you do and allow you to make smart decisions. Use a data warehouse to assess employee population needs and program effectiveness. Good reporting provides transparency into how and why you spend money. Be empathetic. Change is difficult and changes to health and wellness programs are among the most difficult because of how they affect families. Keep this in mind as you make changes and communicate. Changes that seem small to leadership can be enormous for some employees. Be flexible. Understand that a strategic plan will change, and that s okay. This is an organic process, so adaptability is essential. Engage senior leaders and secure their buyin. Leaders need to be active participants in developing the strategy and willing to serve as role models. If they re committed to the strategy and comfortable with the pace of change, employees will see this and feel more comfortable themselves. of spending decisions. In addition to an increase in employees cost for PPO plan participation and a new tobacco-use surcharge, there would be company-provided flu shots, personal health assessments and other wellness incentives. It all looked good on paper. But before finalizing the strategy, HR conducted a survey to explore employees attitudes about their health care benefits and their reactions to the proposed changes. To validate the survey s findings, Towers Watson conducted focus group sessions in 16 locations across the U.S., talking with 500 employees to delve more deeply into their opinions. It was an eye-opener, Grella says. We found that our employees just weren t ready for this type of change. Philips had offered the same health care benefits for such a long time, and employees needed time to understand what we wanted to do and how the changes would affect them. We saw that making the proposed changes right away would be very difficult. We needed to shift gears and proceed slowly to give people the time they needed. Instead of implementing the strategy immediately, we decided to devote one year to change management. It was clear from the survey and focus group results that employees needed to think about how their lives would change before we began implementing the new strategy. We needed to build employees trust while educating them on the fundamentals of health care cost and delivery. We resolved to spend time examining and reacting to their concerns, and giving them information at the pace that worked for them. Chris Coviello, senior benefits consultant at Philips, echoes Grella s sentiments on realization and resolve. Throwing a new ABHP at employees was clearly not the way to garner their support for the plan. We needed to begin by educating them about how it actually works, and about how this approach would be beneficial to them and their families. The Power of Change Management The benefits team with input from leadership and employees got to work developing a change management plan. Its elements included periodic communication that would prepare employees for the changes to come. Thibodeau says, Our Towers Watson consultants helped us understand that for employees to begin thinking differently, we d need to communicate with them openly, honestly and frequently, and also be available to answer their questions. Strategy at Work 5

6 To deepen employees understanding of the company s benefit program, the team created a theme Enhance and developed collateral materials based on this theme. By posting these materials on the company intranet and distributing hard copies at each work site, HR made sure the information reached employees who didn t have access. Leading up to open enrollment, Philips used a mix of communication channels and media to reach all workforce segments. The goal: Encourage all workers to learn about the benefit offerings and enroll in the benefits best for them. The channels included brochures mailed to employees homes, e-cards, in-person presentations and an intranet video. The benefits team distributed a calendar in which each month carried a subtheme and featured a related benefit, as well as information about relevant products and services. Employees needed to take ownership of their health. And it was important for them to fully understand how the ABHP could help them manage their health and their health-related spending more effectively, says Brenda Nichols, senior benefits specialist at Philips. The ABHP was a new offering, and there was high anxiety in the workforce about the plan s high deductible. So we developed numerous communication vehicles to explain the financial elements of the plan. People wanted transparency, and that s what we gave them. How High Performers Tackle Today s Cost-Related Challenges With economic challenges persisting in the U.S., and landmark reform transforming the health care landscape, the efficient operation of employers health benefit programs has never been more crucial to business success. And some companies are leading the way in navigating this complex environment. The 2013 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care found that the most successful companies separate themselves from their competitors by making significant strides in six areas: health improvement, engagement, accountability, provider strategy linkage, technology and promoting healthy work environments. There s a lot to learn from these high-performing companies, by looking at what they ve been doing and where they re headed. Best performers are defined as organizations that have maintained health care costs at or below the Towers Watson/National Business Group on Health median trend for each of the last four years. They re taking a number of significant steps this year to improve the efficiency of their health care programs, including: Focusing on communication to help employees make smarter health-related decisions and leveraging popular technology, such as social media, to give employees the best available information on health care providers Consolidating vendors to improve the delivery and coordination of health management programs, and incenting providers to invest in new technologies to improve the coordination of care Emphasizing transparency in provider prices, quality and results Investing in case management to more proactively and effectively manage high-cost cases Placing more responsibility on employees and tying financial incentives to measurable improvements in their health and that of their spouses Improving provider payment methods while placing greater responsibility on providers to deliver high-quality, efficient care 6 towerswatson.com

7 The Payoff Once the HR team felt confident that the workforce was prepared for change, the team began to implement the new strategy with remarkably positive results. The results have exceeded my expectations, Grella says. After just two years, our health care costs are beginning to level off, instead of continuing on their upward trajectory. We ve eliminated a good deal of unnecessary expenditures and replaced them with offerings that are valuable to our employees. Also, in the second year that we offered the ABHP, 30% more employees enrolled in it than in the first year. That s quite an impressive jump, which tells us that more and more people have come to understand the plan s value. And our most recent survey found that most employees believe we re taking the right steps to support their health. This confirms to us that we took the right approach and that the strategy is working. It s engaging our employees in the health and wellness conversation, and helping them to recognize and appreciate how the organization supports their health and wellbeing. But the work doesn t stop there. With the help of Towers Watson, the Philips benefits team is building a new health and welfare administration system to make enrollment go more smoothly and streamline benefit management. They re also continually beefing up the health and wellness strategy with innovative new tactics, such as health assessments and flu shot clinics, designed to engage employees in adopting healthy behaviors. Our health and wellness strategy will evolve. We ll look at the market and make decisions that make sense for Philips, Thibodeau says. We expect to see a steady increase in enrollment in our ABHP as we offer more wellness incentives and explore delivering more health care services onsite. Our new strategy is aligned with Philips products, as the benefit offerings incorporate more of our products and services. This creates a strong link between our external and internal brands. Grella adds, We ve learned that we re a stop, think and change kind of organization. Thanks to our valuable partnership with Towers Watson, we ve navigated significant changes successfully. Those changes are delivering even more positive results than we expected, in terms of increased employee engagement in health-related expenditures and cost savings. And we re continuing to make improvements. These initiatives will help Philips maintain a high-performing, healthy, productive workforce. In today s world, more than ever, a company needs that to keep its brand strong and competitive. Now we re truly realizing our goal of being a leader in promoting health and well-being for our customers and our employees. Julie Thibodeau, Philips benefits director, (center) with Towers Watson senior consultant Cameron Congdon and Laura Doyle, senior manager, compensation and benefits, Philips Strategy at Work 7

8 About Towers Watson Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of benefits, talent management, rewards, and risk and capital management. Copyright 2013 Towers Watson. All rights reserved. NA towerswatson.com