Judges' Choice Award: Kathy Durbin harvests savings from online bidding

By Leah Carlson Shepherd
September 15, 2006

To reduce health care costs, most HR-benefit managers have turned to plan design changes, employing tools such as high-deductible plans and higher copays. But tech-savvy Kathy Durbin saw a different and innovative solution to the problem.

The director of benefits at H-E-B Grocery Stores, a retail grocery chain based in San Antonio, Texas, decided to streamline procurement, which was a timeconsuming, paper-based request for proposal process. Deploying an online procurement tool from HighRoads in 2003, she opened the doors to a larger pool of suppliers, better plan offerings and opportunities to save money.

H-E-B constructed an auction environment where dozens of insurance carriers bid on the company's business in real time. The process is completely transparent, and suppliers can see exactly how they stack up against their counterparts. Suppliers generally alter their bids two or three times, delivering lower prices. By the end of 2004, the auctions had saved the company more than $18 million in administrative fees, with a 6% drop in overall health care costs.

Now H-E-B uses online auctions for its entire suite of benefits, including COBRA, health risk assessments, disease management and long-term disability insurance.

Durbin comments: "We were caught in the same vise that everybody else was, in that costs were increasing so dramatically. We didn't want to just increase costs to the employees. We wanted to get at the root causes of medical inflation."

With that determination and modern approach, Durbin earned EBN's Judges' Choice Benny Award this year for outstanding work in the HR field.

Pinpointing health risks

Recent data revealed that obesity, diabetes and hypertension are widespread in H-E-B's workforce. About 75% of its employees are overweight or obese, and 80% have high blood pressure.

To mitigate those risks, H-E-B implemented disease management programs in 2004, addressing diabetes, heart disease, asthma and prenatal care. It plans to add a program for patients with mental illness.

The retailer's workforce appears to be healthier as a result. About 42% of its employees have four or more health risk factors this year, down from a daunting 74% in 2003.

"We were surprised that our [workers] had so many risk factors," Durbin says. "The good news is we are seeing those numbers reduced, so it is working." Durbin recalls, "It was extremely tough to get leadership to spend the bucks" on wellness, disease management and health care education. She used statistics and news coverage for ammunition.

"I forwarded them articles from leading publications and connected the dots for them by using the latest research to demonstrate what the problems were," she says. "For example, I showed them the increase in diabetes and obesity over the past 20 years and then tied it to our claims and health [risk] assessment data. It had quite an impact."

Incentives for prenatal care

H-E-B's workforce experienced about 3,000 births last year, compared to 2,000 in 2004 and 4,000 in 2000. Durbin remembers: "When the economy was so bad, people quit having babies, and now they're having babies again. It's amazing." H-E-B is trying to protect the health of these babies and moms through a prenatal program. It offers a $50 reward for entering the program and $100 for completing it, hoping to get more pregnant women involved. Still, only 55% of the pregnant employees participate.

"It's difficult to get in touch with people," Durbin explains. "You can't call them at work," considering that most of them are stocking shelves, operating cash registers or helping customers.

To overcome that roadblock, H-E-B started sending "congratulations packages" to expecting parents this year. They include coupons, healthy foods and information on the prenatal program.

Wellness carrots

After the disease management programs, the next step was to launch a wellness program called "Healthy at H-E-B" last year. Employees can get credits for healthy behaviors like regular exercise and eating five fruits or vegetables per day. They can use the credits to enter drawings for prizes.

Employees also can earn a $200 rebate on their health plan deductible, if they obtain two wellness credits and fill out a health risk assessment. With that enticing prospect, 70% of H-E-B's workers completed a health risk assessment last year, and 12% have registered to participate in the wellness program. The company enlisted 370 employees at various worksites to be wellness champions and raise awareness about the wellness program. It also started providing a debit card for health expenses, consumer tools and cost information on health care in 2004. The goal is to foster health care consumerism and betterinformed patients.

Durbin says, "We spent a lot of time" on educating and empowering workers in their health care decisions. Before then, "there was no barrier to go to the doctor and no questioning." The education is no small task, given that H-E-B has nearly 60,000 workers.

Cost-shifting

Durbin describes the company culture as paternalistic. "Each and every person counts, so there's a great deal of trust. Our people are very important to us. What we are working toward is a culture of accountability," she adds.

H-E-B did not raise employees' health care premium contributions from 2004 to 2006. However, it raised the deductible from $200 in 2004 to $450 last year and $500 this year. That increase is softened by the potential to earn the rebate through the wellness program.

In addition, the company raised the emergency room copayment to $75 in 2004, compared to a 10% coinsurance in 2003. However, the copay for urgent care clinics remained at $25, so workers would be motivated to use the clinics, which tend to be less expensive. Consequently, the company saw its use of emergency rooms drop by 40% last year.

Communication plan

As the company rolled out the benefit changes, an important element of the communication strategy was to start with the top leaders and work down the corporate hierarchy from there. The HR department wanted to win managers' support for the changes, and "we knew they were going to get asked the tough questions," Durbin explains.

She feels that forthright, easy-to-understand communications helped a lot. "We came out early, and we were very honest and open. [Workers] listened," she adds. "We were very careful to put it in everyday, common examples that they would understand." The messages were delivered in Spanish and English, since the workforce is 52% Hispanic.

As a result, "We got basically no noise," Durbin recalls. "We communicated so heavily. We got a few calls ... [but] it was minimal."

She admits: "Any time you've got to change benefits and you're increasing the cost, it's most important and most difficult to communicate why you are making the change. We're trying to help people see what's in it for them."

"Master at making changes"

Durbin says she enjoys "pushing the envelope with my suppliers and creating programs that don't exist and ones that help people with their everyday lives." She doesn't like "not having enough time and resources to do everything you want to do."

Inez Seaney, a Watson Wyatt senior consultant who has worked closely with Durbin in recent years, says Durbin "is an out-of-the-box thinker. She always strives to look forward, look toward the next thing. She's a believer in benchmarks."

Durbin also "is a master at making changes that are effective and balancing those changes with [employee] morale and the business needs of the company," Seaney adds. "She believes in two-way communication with [workers]. She questions everything. I think that's such a positive attribute. She doesn't take anything at face value. Could it be better? Cheaper?' She is demanding, but fair." Durbin became director of benefits five years ago. She previously worked in employee benefits, sales and administrative services at a telephone company and earned a bachelor's degree from Hillsborough Community College in Tampa, Fla. She chairs the National Business Group on Health's Council on Employee Health and Productivity and serves on the boards of directors at the Integrated Benefits Institute and the Texas Business Group on Health.

Looking ahead, she promises, "We're going to be very focused on preventive care and prenatal care" at H-E-B. - L.C.S.