By: Mark Fitzgerald And Jennifer Saba
If only newspapers could grow revenue and circulation as fast as they are incurring health insurance costs, happy days would truly be here again, financial executives say.
“Health care costs have grown substantially, in excess of our revenue growth,” says Alan G. Silverglat, senior vice president and CFO of Pulitzer Inc. “Inflation in the health care arena has been in the double digits ? and we haven’t seen that on the revenue side. I don’t think our experience is any different from other companies.”
It sure isn’t.
“I’ve been battling double-digit increases for seven to eight years,” says Bruce Backer, director of benefits at Denver-based MediaNews Group. And looking down the road, he doesn’t see much changing: “What’s going on in the marketplace that’s going to change it? They’re not going to stop developing new technology or new drugs or address the uninsured. Why would it stop? I think it may slow down, but I don’t think it will stop.”
Financial and human resources executives interviewed at a dozen newspaper chains big and small repeat essentially the same story: Health benefit expenses are soaring to the point that companies can’t come close to bearing the full cost. If it’s any comfort, newspapers are no different than any other employer: Soaring health insurance costs are confounding all American businesses.
Like those businesses, newspapers for years now have made employees feel their company’s pain by paying more of the health insurance tab. So far, that has meant newspaper employees generally pick up about 20% to 25% of their health insurance premiums.
At many papers, however, employees soon will be paying even more out of their own pockets, in exchange for lower overall premiums. Forget 20-buck co-pays for office visits or lab tests. Think the high deductibles you’ve got on your automobile insurance.
“What’s your deductible on your car insurance? $500? $1,000?” asks J. Holland Powell, president and CEO of Selma, Ala.-based Benefit Development Group. Powell’s company runs human resources functions for companies, including the newspaper chains Wicks Communications, Boone Newspapers and MainStreet Newspapers. “You have a high deductible to keep your premiums down, right?” he asks. “Well, totaling your car [costs] less than having a heart attack, yet you’ve only got a $20 or $25 deductible on medical.”
Medical benefits are probably the most valued by employees ? yet paradoxically cause the most workplace friction.
The autumn open enrollment periods at newspapers can be particularly fraught with tension. Consider the response of Greg Ebel, the vice president of human resources at The E.W. Scripps Co., when he’s asked how the company communicates changes in its benefits each fall. “Very carefully,” he says.
After all, Ebel adds, when an employee’s pay is going up, say, 3% or 4%, but health insurance costs are galloping along at 9%, 10% or more, the company faces the task of educating workers about the health care market, and what individuals can do to control their out-of-pocket costs. Scripps, which is self-insured, picks up 80% of total health insurance costs, Ebel says.
“Every single bargaining table we go to, this is an issue,” Linda K. Foley, president of The Newspaper Guild-CWA, says of health insurance costs. Local Guild contracts with newspapers across the country reflect the steady pressure to shift costs to employees, and to cut retiree benefits, she says. Every paper, Foley says, has already instituted such cost-cutting measures as setting co-pays to encourage purchase of generic rather than brand-name prescription drugs. “We’re beyond all that now, because the costs are still escalating,” she says. “It seems they’ve squeezed everything they can out of it.”
Many locals have been successful in tempering or at least delaying increases in employee out-of-pocket costs. Guild journal- ists at The Providence (R.I.) Journal, for instance, pay 15% of the premiums for their plans, a rate well below the industry average. At Tribune Co.’s Baltimore Sun, the Guild contract signed last year calls for employees to pay 25% of their health insurance plan premiums. The contract says that share, widely considered the industry average, cannot be increased by more than 4 percentage points in any year. (A Tribune spokesperson said the company does not discuss its benefits publicly.)
Whether daily newspapers have unions or not, they all offer health insurance. In last summer’s annual Newspaper Industry Compensation Study (NICS), all 455 responding daily newspapers said they offered health insurance, and only 1% did not also extend coverage to employee families. The study, conducted by the Inland Press Association and co-sponsored by five other industry associations, provides the fullest picture of health insurance benefits among dailies.
Just 10% of newspapers cover 100% of an employee’s health insurance premiums, the NICS found. On the other extreme, only 11% make the employee pick up as much as 31% to 40% of the premium ? a share that puts the papers on roughly the same level as Wal-Mart, which requires employees to pay one-third of premiums.
The greatest number of newspaper companies pay between 75% and 80% of the cost (36% of the responding papers). Dental insurance, which has not risen nearly as steeply as major-medical, is offered by 94% of newspapers, but employees pay much more of the cost. About a third of newspapers (32%) pick up less than 60% of dental premiums.
The vast majority offer a choice or a combination of HMO plans (40% of newspapers) and PPOs (83%). Just 2% opt for self-insurance in their medical coverage.
But another shift may be on the way. Powell, the Benefit Development Group CEO, says the future of health insurance will be shaped by so-called Consumer Driven Plans (CDPs), such as UnitedHealthcare’s I Plan, a menu of insurance options with co-pays or deductibles ranging from $250 to $500 on the low end to $1,500 or $3,000 on some plans. The maximum employee out-of-pocket costs are capped at $3,000 to $5,000 annually.
Under CDPs, employees set aside pre-tax dollars in “health savings accounts” (HSAs) that differ in a key way from the accounts familiar as an option to many employees now. Traditional plans effectively discourage employees from setting aside large amounts of money in their accounts because unspent money disappears at the end of each year. Unspent money in an HSA can be rolled over year after year.
The idea is to force employees to consider the cost of care. Powell and other HR experts claim the convenience and apparent low cost of plans with $20 co-pays has encouraged physicians and patients to overspend on care. “You go to a doctor and say, I have a tummy ache, and the doctor says, let’s take a CAT scan,” Powell says. With the much higher out-of-pocket employee expense of CDPs, the hope is that some of the same patients will say, “I’ve got a tummy ache, and you know what? I’m gonna take a swig of Pepto.”
Dallas-based Belo Corp. is one newspaper chain that has begun offering a CDP, along with a range of more traditional HMO and PPO plans. The number of employees who have enrolled in the CDP is fairly small but increasing, says Marian Spitzberg, senior vice president, human resources. “The employees that participate in the [CDP] find it useful to find out more about prevention, and they think a lot more about their own health,” she says.
With universal coverage throughout the industry, the whole notion of what health insurance is has changed, some newspaper executives and others say.
“Here’s a lesson I learned: Benefits aren’t meant to take care of everything or every bill,” Scripps HR chief Ebel says. “They are meant to make sure your employees … can focus on their jobs and they don’t have to worry about being wiped out financially, if they have to go to the hospital or [get] a certain course of treatment. It’s not meant to pay for everything.”
As newspapers shift costs to employees, they are also encouraging them to re-think the way they use health insurance. In general that means encouraging visits to physicians and other care providers for wellness practices such as controlling high blood pressure or losing weight, while discouraging non-emergency visits to the ER, expensive diagnostic tests and prescription remedies.
Like Scripps, newspapers are also paying more attention to how they tell employees about plan options. Knight Ridder, for instance, is in the second year of an ambitious plan of educating supervisors and managers ? the people employees come to first with benefits questions ? about the company’s plans through UnitedHealthcare. “We’ve spent more time communicating the thinking behind the plan than ever before,” says Human Resources Senior Vice President Mary Jean Connors. “We go to employees and focus groups to collect their thinking and how different decisions impact them. We’re making sure that our supervisors and managers understand the plans because if they don’t understand it, the employee won’t understand any better.”
Knight Ridder came to that conclusion the hard way. Two years ago the company instituted a change in benefits and sent word through an open-enrollment package sent to employees’ homes. The next day workers stormed to the office, complaining to their supervisors who were just as surprised. “You can imagine the uproar about a significant benefit change that impacted people’s paychecks,” says Shawn Leavitt, director of benefits at Knight Ridder. “It was a bonehead move on our part.”
Now when the company makes changes to benefits, they pore over the details with senior management in a two-hour conference call or on-site meeting. “We never make it an issue of wanting employees to like the change but in getting people to understand why it makes sense,” Leavitt says.
At some papers, the message about controlling health insurance spending is getting through in another way: Employees are audited to ensure that everyone they are claiming on the plan is actually eligible for coverage.
Detroit Newspapers, which manages business operations of Knight Ridder’s Detroit Free Press and Gannett Co.’s Detroit News, introduced in-house auditing about 18 months ago in an effort to control insurance costs that were rising upwards of 20% annually. “You want to make sure that all the right dependents are claimed and that you don’t have a lot of ex-spouses on the plans,” says Randi Austin, Detroit Newspapers’ vice president/human resources & labor relations. During an amnesty period, employees were asked to confirm the names of family members listed on their coverage, and reminded that they could be liable to pay back money spent on ineligible claimants.
“We had a lot of, um, new information provided, let me put it like that,” she says. So far, the agency has been able to drop “a couple of hundred” wrongly claimed dependents from the insurance rolls. Austin says the papers aren’t trying to be hard-nosed with the audit. It’s pursued some back payments in only two cases, she says: “I accept that changing your health insurance form is not the first thing on their mind when someone is going through a divorce.”
A federal bailout?
The health insurance mess has some HR directors thinking aloud about something their editorial pages might find unthinkable: a government health insurance program for workers. Sierra Vista, Ariz.-based Wick Communications publishes dailies in small markets in six states, a geographic nightmare when it comes to finding a health care network. But Director of Human Resources Thomas W. Riebock says the chain has managed to keep its annual increases in health insurance to single digits by turning the job over to Holland Powell’s Benefit Development Group. Long term, though, health insurance may be a job for the feds, Riebock says: “The only way it’ll change is if the federal government comes in.”
Newspaper Guild President Linda Foley says she sees the difference a government program makes at the bargaining table. Health insurance is a contentious issue everywhere “except in Canada, where they bargain over wages because there isn’t this 1,000-pound gorilla in the room,” she says. “It really takes a whole big area of disagreement and tension out of the relationship because you don’t have to deal with it.”