Explain the difference between fully-insured and self-insured? Which plan does Pitney Bowes have?
Pitney Bowes
Please read the article for Pitney Bowes Case document below then answer all the 5 questions with detail in the Pitney Bowes Case Question document. Please cite the required textbook which is (Jackson, S., Schuler, R., & Werner, S. (2011). Managing Human Resources. (11th ed.). New York, NY: Cengage Learning. ISBN 13: 978-1-111-58022-3) Or use a reliable resource. Also please write every question before its answer as heading to make it clear where the answer for each question.
PITNEY BOWES CASE QUESTION
1. Explain the difference between fully-insured and self-insured? Which plan does Pitney Bowes have?
2. In Exhibit 6, what do you think is contributing to the lower costs that Pitney Bowes had from 2001 onward?
3. Why do you think they focused on Wellness programs in 1993?
4. What is your opinion about their decision to lower or eliminate copayments for certain prescription drug?
5. How has Pitney Bowes gotten into the health care business? What drove them to?
9-709-458
REV: F EBRUARY 2 4 , 2 0 0 9
________________________________________________________________________________________________________________
Professor Michael E. Porter and Senior Researcher Jennifer F. Baron prepared this case. Siddharth Anand (MBA 2008) conducted substantial
research contributing to the case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as
endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2009 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
MICHAE L E . PORTER
JENNIFER F . BARON
Pitney Bowes: Employer Health Strategy
When our employees become ill, it directly affects our bottom line. We seek a complete alignment of
incentives between the company, the employee, and the providers and plans.”1
—Michael Critelli, Pitney Bowes Executive Chairman
Michael Critelli, Executive Chairman of Pitney Bowes, had taken a strong interest in health care
dating back to his service as Chief Personnel Officer of the Fortune 500 mail and document
management company between 1990 and 1993. Critelli had championed a transformation in Pitney
Bowes, pioneering the firm’s focus on improving employee health while controlling spending. By
2008, annual health care cost increases had dropped into “the low single digits,” below increases at
many other large firms.
Critelli was proud of the recognition that Pitney Bowes’ health care programs had received, and
saw them as works in process. For example, employees based at client sites, rather than corporate
locations, could not always access health and wellness programs. Pitney Bowes also faced challenges
influencing the policies of contracted health plans. Critelli had to chart a course to take employee
health to the next level.
Company Overview
Founded in 1920, Pitney Bowes (NYSE: PBI) was a $6 billion mail and document management
firm headquartered in Stamford, Connecticut. (see Exhibit 1) In 2008, Pitney Bowes served more
than two million corporate and government customers through operations in 130 countries. The
firm’s clients constituted around 80% of the U.S. mail-metering customer base and nearly 65% of the
global customer base.2 The firm had completed more than 80 domestic and international acquisitions
since 2000.3 In 2007, Pitney Bowes recorded 7% revenue growth largely due to acquisitions.
In its early years, Pitney Bowes had pioneered postage meters, which replaced stamps by printing
postage directly onto envelopes at high speeds. By 2000, meter volume had stabilized with the advent
of email and electronic payments. The firm shifted its strategy to products and services that were a
part of the “mailstream,” or the flow of physical and digital mail, packages, and information to and
from organizations and homes.
In 2008, the firm operated in two business segments: mailstream solutions and mailstream
services. The solutions segment included the sale and rental of mail and shipping equipment,
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software, and supplies; payment methodologies for postage sales, services, and supplies; and limited
professional services such as mailing support. The services segment provided mail and document
management functions ranging from operating corporate mailrooms to cataloguing, indexing, and
digitizing legal documents for law firms.
Pitney Bowes had offices in every U.S. state, with major sites including three Connecticut
locations, Maryland, New York, and call centers in Wisconsin and Washington. Major international
sites included the firm’s European headquarters in the U.K., Pitney Bowes Canada, and Pitney Bowes
France. Most other international sites focused on sales and distribution.
Workforce
Pitney Bowes employed more than 36,000 people worldwide, up from 28,500 in 2000. The 26,000
U.S.-based employees could be divided into four distinct populations. The first group worked at
company sites, including the firm’s Stamford headquarters. These 6,000 employees averaged 42 years
of age with 10.6 years of service in managerial, professional, and administrative duties, as well as call
center workers.
The second group included about 4,000 mobile workers, such as sales representatives and on-call
service technicians, and their managers. On average, service technicians were older, longer-service
employees than sales professionals. Turnover was high among young sales professionals.
The third group consisted of about 12,000 “dispersed” employees were based at over 600 client
sites, primarily operating mailrooms and U.S. Postal Service warehouses, each with around 20 Pitney
Bowes workers. These employees averaged 39 years of age with four years of service to the firm.
They tended to earn lower incomes than employees at corporate facilities, were more racially and
ethnically diverse, and were more likely to have histories of unemployment or public assistance.
Dispersed employees often had less access to primary care than corporate staff, resulting in
higher emergency room costs. In New York State, for example, primary care physicians rarely
offered after-hours appointments and there were few walk-in clinics outside of Manhattan. Pitney
Bowes employees based at client sites in New York incurred approximately $4 million in emergency
room costs in 2006. In 2007, dispersed workers accounted for more than 20% fewer physician office
visits than a national Medstat benchmark, while the average Pitney Bowes employee had 7.3% more
visits than average. While dispersed employees visited the emergency room nearly 3% less often
than the benchmark, corporate employee ER visits were 13% below the benchmark.
The final group included about 4,000 mail service employees working in 38 dedicated mail
consolidation sites, with 100-150 Pitney Bowes workers per site. Over 20 languages were spoken by
these lower-income employees, many of whom spoke little English. Pitney Bowes had acquired the
mail service businesses recently, and planned to add these employees to its benefit plans for the first
time in 2009.
By prevalence, the most common chronic condition among Pitney Bowes employees was
hypertension, followed by diabetes, depression, asthma, osteoarthritis, and anxiety disorder. In
terms of absolute costs, coronary artery disease was the most expensive, followed by osteoarthritis,
depression, diabetes, hypertension, and congestive heart failure.
Pitney Bowes believed that up to two-thirds of its health-related costs were indirect. In addition
to absenteeism, “presenteeism,” or reduced productivity at work, frequently accompanied illnesses
affecting employees or their dependents. External estimates suggested that the costs of presenteeism
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linked to chronic disease were two to four times greater than the direct health care costs for those
conditions.4,5
Employee Health Benefits in the U.S.
Employee health benefits were non-wage compensation provided to workers in addition to their
normal salaries. In general, employer benefits were tax-deductible to the employer and non-taxable
to the employee. Historically, health benefits were largely synonymous with health insurance, with
premiums split in varying proportions between employer and employee. Sick leave, long-term care
insurance, and disability coverage often supplemented employer-sponsored health insurance. Other
types of health benefits included on-site health centers, workout facilities, disease management
programs, and various other health and wellness programs.
While health benefits were normally voluntary, states required employers to provide workers
compensation coverage to employees for workplace injuries. Employers paid premiums based on the
type of work performed, associated health risks, and claims history. Injured employees were directed
to providers designated by the workers compensation plan. The providers diagnosed and treated the
injuries, and completed necessary documentation for the employer and state. Employers usually
assigned a case manager to each patient, who worked with the clinicians to develop a treatment plan
that would allow the patient to return to work quickly.
History of Employee Health Benefits
Employee health benefits, and health insurance itself, were virtually unheard of before World War
II. At that time, the major financial loss related to sickness was lost wages, not the cost of care.
Medical expenses were low due to the relatively limited state of medical technology; patients were
provided largely hospitality services at hospitals. Expectations for medical care were limited, and
patients were typically treated at home.6
In the late 1920s and 1930s, amid Depression-era fear of economic crisis and rising health care
costs, Americans began to demand alternatives to out-of-pocket payment. The nonprofit Blue Cross
and Blue Shield plans emerged as the first modern health insurers covering hospital and physician
care. The Blue Cross and Blue Shield plans charged the same amount for all members, known as
“community rating.” For-profit insurers soon followed, appealing to employers by offering
“experience rated” policies with premiums based on the expected health care costs for each member,
which often resulted in lower costs for a healthy employee population.
During World War II, health benefits were excluded from national limits on wage increases,
prompting employers to expand health insurance coverage to attract workers. During the 1940s and
1950s, employer contributions to employee health plans were exempted from taxation, which
reinforced an employer-based insurance system.
In the 1950s, many firms began introducing health screening, personal assistance (e.g. for
alcoholism or personal problems), and health education programs.7 In the 1960s and 1970s,
employers also began to offer some fitness and wellness programs as research demonstrated that
exercise and healthy lifestyle practices could lower cardiac risk factors.
Until the 1970s, most employer-based insurance consisted of fee-for-service
“indemnity” health plans that allowed free provider choice and fee-for-service reimbursement. In
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1973, Congress passed the Health Maintenance Organization Act, spurring the growth of HMOs,i
preferred provider organizations (PPOs),ii and other managed care plans. By 1987, about 60% of
Americans with employer-sponsored insurance were enrolled in managed care plans, versus 5% to
10% in 1980.8 Member cost sharing became more common among managed care plans, many of
which included three principal types of cost sharing arrangements in addition to premium payments:
deductibles, coinsurance, and co-payments. Plans with deductibles required beneficiaries to pay a
certain dollar amount out-of-pocket before insurance coverage began. Coinsurance involved
requiring beneficiaries to pay a percentage of the cost of their care, typically 20% of health care
charges. Finally, many plans introduced co-payments, or fixed charges paid by members for each
provider visit.
The Employee Retirement Income Security Act (ERISA) was enacted shortly after the HMO Act.
ERISA exempted “self-insured” employers, or employers that directly assumed employee health care
costs, effectively using their employee base as an insurance pool, from many state regulations. These
included mandatory benefit levels, minimum reserve requirements, and certain state taxes. Selfinsured
plans were subject to federal Department of Labor oversight, while states regulated “fullyinsured”
health plans purchased from commercial carriers.9 ERISA required insurers to provide
information about plan features and funding, established fiduciary responsibility for managers of
plan assets, and instituted member rights to sue for benefits and breaches of fiduciary duty.10
Throughout the 1980s, the prevalence of employee health and wellness programs grew rapidly.
Over 32% of large employers offered formal fitness programs in 1985, up from 2.5% in 1979.11 By the
mid-1980s, offerings ranged from basic educational programs including newsletters, health fairs,
screenings, and classes, to more comprehensive programs focused on achieving and maintaining
healthy lifestyles.
After the failed Clinton Health Plan, legislation sought to address abuses by insurers.12 The
Health Insurance Portability and Accountability Act of 1996 (HIPAA) aimed to improve continuity of
coverage by prohibiting discrimination in enrollment and premiums charged to employees based on
health status or preexisting conditions.13 The restrictions applied to both self- and fully-insured
health plans. The Act also promoted the privacy of personal health information, and mandated
national security standards for electronic health care transactions.14
In spite of the managed care boom’s cost containment efforts, health care costs rose throughout
the 1990s. Initially popular among beneficiaries, HMOs became the target of consumer backlash
amid concerns about onerous approval requirements and other cost-control mechanisms on access to
and quality of care. Enrollment shifted to “lighter” managed care, with PPOs growing from 28% of
covered employees in 1996 to 46% in 2001.15
Annual employer-based premium increases reached double digits in the early 2000s, with a 59%
total increase between 2001 and late 2004. The percentage of workers covered by employer plans fell
from 65% to 61%, while employee cost sharing for family coverage rose 10% between 2003 and 2004.
(see Exhibit 2) The proportion of insured workers whose employers paid their premiums in full fell
from 34% in 2001 to 21% in 2004 for single coverage, and from 14% to 7% for family coverage.
i HMOs were generally the most restrictive managed care plans, requiring members to use providers within a contracted
network. Patients needed primary care physician referrals for specialty care, and non-network care was not reimbursed.
ii PPOs were managed care plans that negotiated with independent provider groups for services at discounted rates. Members
were offered lower co-pays for care from network providers, facing higher charges and/or additional deductibles for nonnetwork
care.
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Most employers that continued to offer coverage did not reduce the scope of benefits beyond cost
sharing, and preventive care coverage remained high and rising. More than 95% of insured workers
had coverage for physicals, prenatal and well-baby care, and gynecological exams.
Facing rapidly rising costs, more than half of employers shopped for new health plans in 2003,
with 31% of employers changing carriers and 34% changing the types of health plans offered.
“Consumer-driven” plans, typically pairing a high-deductible health plan with a health savings
account, began to capture employers’ attention. About 10% of firms reported offering a highdeductible
plan in 2004, compared with 5% the previous year.
By 2007, the percentage of firms offering insurance had stabilized, falling just 1% from the
previous year. Employees’ proportion of premium payments had also changed little over the
previous eight years. Average premium growth in 2007 was 6.1%, the lowest rate of increase since
1999.16 Total premium increases since 2001 amounted to 78%, compared to total inflation of 17% and
wage increases of 19%.
Employer-Based Health Insurance in 2008
In 2008, employers remained the leading source of health insurance in the United States, covering
nearly 160 million non-elderly people, or around 54% of the population.17 Medicare covered 14% of
individuals in the U.S., Medicaid and other public programs covered 12%, private individual (nongroup)
insurance covered 5%, and 16% were uninsured.18 Sixty percent of U.S. employers offered
health benefits. Nearly all firms with more than 200 workers and around 45% of firms with fewer
than 10 employees offered coverage. One-third of large firms also covered health insurance for
retirees. Of firms with retiree coverage, 92% offered benefits to retirees under 65, and 71% covered
Medicare-eligible retirees.
Nearly 80% of active employees at firms offering health insurance were eligible to enroll. Of
eligible workers, 82% took up coverage. Reasons for employee ineligibility included minimum workhour
requirements and wait times for new employees. Eligible workers choosing not to enroll often
did so for financial reasons, or because they could get coverage elsewhere (e.g. through a spouse’s
employer or public program). Access to employer-based insurance was correlated to income. Three
in 10 workers with family incomes below the federal poverty level ($21,200 for a family of four in
2008) were covered by their or a spouse’s employer, versus 92% of employees earning over 400% of
the federal poverty level.19
Employers and employees typically shared responsibility for the cost of health coverage for both
self- and fully-insured plans. Average total annual premium costs were $4,479 for single coverage
and $12,106 for families, though amounts varied significantly across employers and plans. (see
Exhibit 3) Employers usually paid the bulk of premiums, with the average worker contributing 16%
for single coverage and 28% for families.
In addition to employee premium contributions, most beneficiaries faced additional cost sharing
requirements. Annual deductibles were common forms of cost sharing, and some plans included
both overall deductibles and separate deductibles for certain types of care (e.g. hospital care,
pharmacy benefits). Average deductibles for single coverage in 2007 ranged from $401 for HMOs to
$1,729 for high-deductible plans. Many health plans also included modest co-payments for actual
services received. Average copays for in-network office visits in 2007 were $15 to $20 per
appointment, and out of network visits were $20 to $25. Some health plans also involved coinsurance
for a percentage of the cost of care, particularly for out-of-network services. Average 2007 out-of-
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network coinsurance levels were 33% of the cost of care, while in-network rates were 17%. Most
employer-based plans set annual caps on beneficiaries’ total out-of-pocket spending.
Employers offered a number of different types of health plans; large firms were more likely to
allow employees to choose among multiple options, and almost half of covered workers had access to
more than one plan type. Preferred provider organizations (PPOs) were the most common plans, and
high-deductible health plans were the least common. Very few employees remained in traditional
fee-for-service plans.
Preferred Provider Organizations (PPO) PPOs were offered by 79% of firms providing
coverage, and enrolled 57% of covered workers. PPOs were groups of providers that contracted with
health plans or employers to provide services at discounted rates. Plan members paid lower
copayments or coinsurance for care from in-network providers than for non-network care. Unlike
HMOs, PPOs did not normally require members to designate primary care physicians and permitted
patients to access specialty care without referrals. Average annual premiums were $4,638 for single
coverage and $12,443 for families.
Health Maintenance Organizations (HMO) HMOs enrolled 21% of covered workers, and
42% of firms offering coverage provided HMO options. HMOs were the most restrictive plans in
terms of access to services, requiring members to designate primary care physicians and obtain
referrals for non-emergency specialty care. Care from non-network providers was typically not
reimbursed. Average HMO premiums were $4,299 for single coverage and $11,879 for families.
Point of Service (POS) POS plans enrolled 13% of covered workers and were offered by 21%
of firms providing coverage. These plans contained similarities to both PPOs and HMOs, with higher
reimbursement for in-network care along with the option to obtain non-network care. Members were
required to designate primary care physicians and generally needed referrals for non-emergency
specialty care. Average premiums were $4,337 for single coverage and $11,588 for families.
High-Deductible Plans Also known as consumer-driven plans, high-deductible plans
enrolled 5% of covered workers and were offered by 10% of employers providing coverage. These
plans were often paired with savings options like health savings accounts (HSAs), to which
employers and employees could contribute up to an annual cap. Employer contributions were nontaxable
and not counted towards employee income, while employee payments were tax deductible
and in some cases could be made on a pre-tax basis. Average deductibles for plans with HSAs were
$1,923 for single coverage, although amounts varied. Average single premiums were $3,869 and
family premiums were $10,693.
Most small and medium-sized employers and some large firms offered fully-insured health care
coverage purchased from commercial insurance carriers. The carriers reimbursed providers for
covered services, assuming the financial risk for beneficiaries’ actual health care costs in exchange for
fixed premium payments.
Over half of large firms offered self-insured coverage instead of, or in addition to, fully-insured
plans. More than two-thirds of large firm employees were in self-funded plans, compared to 12% of
small business workers. Unlike fully-insured plans, self-funded plans required employers to assume
the financial risk of employee medical claims. Instead of making fixed premium payments to
commercial carriers, self-insured employers paid for the care its employees received. Self-insured
employers effectively functioned as insurers, using their employees as risk pools. Employers could
purchase stop-loss coverage to minimize the impact of large claims, but did not shift their claims
obligations to other insurers or third parties. An employer could offer one or many self-insured plan
types, and PPOs were the most common.
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Self-insured employers typically contracted with third-party administrators or commercial
insurers to manage their plans. Some employers contracted with health plans for Administrative
Service Only contracts (ASO) for claims processing capabilities, paid for either by a percentage of
claims paid, a flat fee per claim processed, or a flat fee per covered employee.
Many fully- and self-insured employers selected health plans through competitive bidding. Often
with the assistance of benefits consultants, firms solicited bids from competing plans that specified
the type of coverage sought and particular services to be purchased.20 Employers could request
provider access and quality data21 from each plan, and could require accepted carriers to meet
specific quality standards. Many firms set specific customer service standards, while fewer included
clinical quality measures in health plan contracts.22
Employers were increasingly pursuing “value-based benefit design,” in which insurance benefits
sought to align employee incentives with improving personal health and lowering costs. Pharmacy
benefits were a frequent target. In 2007, 84% of large firms offered tiered prescription drug
programs, 45% had implemented or planned mandatory generic substitution policies, and 19%
offered or planned over-the-counter drug coverage.23
Some firms offered health and wellness programs tied to insurance premium reductions. In 2007,
more than 25% of large employers offered premium discounts for wellness program participation,
with 24% providing discounts based on smoking status, 12% based on management of health risk
levels, and 9% for participation in weight management programs.24
In addition to traditional health insurance, many employers offered supplementary plans for
other types of care. Nearly 20% of firms offering health benefits offered long-term care insurance. In
2006, half of employers offering health benefits offered dental plans, and 21% offered vision plans.25
Around 75% of eligible employees participated in dental and vision plans, which normally involved
cost sharing of premiums, co-payments, or coinsurance.26
Many firms offering benefits in 2007 reported they were likely to increase employee cost sharing
in the coming year, though few were likely to drop coverage completely. Over 20% considered
offering a high-deductible plan with a health savings account, and 37% considered raising
deductibles for existing plans. (see Exhibit 4)
Employee Health and Wellness Benefits
Over 25% of firms with health benefits also offered at least one wellness program, and a similar
percentage included at least one disease management programs in their most popular health plan.27
Large employers were more than twice as likely as smaller firms to offer both types of programs. (see
Exhibit 5)
Most large firms outsourced the management of health and wellness programs to health plans or
other third party contractors. A 2007 survey found that 65% of large firms offering wellness
programs used standard programs operated by their contracted health plans.28 Another 17%
primarily used their plans’ programs, but contracted with other vendors for some services.
Exercise and Fitness Many employers, including nearly half of very large firms, offered onsite
fitness facilities. Facilities were often available free of charge or for a nominal fee, and some firms
encouraged staff to exercise during lunch breaks or business hours. Some smaller employers, or
those facing space constraints, subsidized local gym memberships for employees.
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On-Site Clinics In 2007, around 25% of large employers offered on-site clinics, with an
additional 5% to 10% planning to do so within a year. Clinics ranged from a single part-time clinician
offering preventive services (e.g. screenings and immunizations), to facilities with full-time clinical
staff that delivered regular primary care, case management of chronic conditions, health counseling,
and treatment of minor acute medical conditions. Nearly 15% of large employers offered on-site
pharmacies, and 4% had on-site dental services.29
Health Risk Assessments and Risk Reduction Health risk assessments (HRAs) were
surveys designed to identify and measure employee health risks. Offered by up to two-thirds of very
large employers, HRAs ranged from simple tools measuring risks like smoking prevalence and blood
pressure to more comprehensive assessments including quality of life issues and chronic conditions.30
Many HRA programs were combined with health screenings, personalized wellness scores, and
action steps for risk reduction.31 High-risk employees were often called by health coaches to discuss
their scores and were frequently referred to programs like weight loss and smoking cessation
courses.32 Over 33% of large firms also offered injury prevention programs, most common in
industries like agriculture and manufacturing with higher potential for work-related injuries.33
Disease Management Once aimed primarily at common chronic conditions like
cardiovascular disease and diabetes, disease management programs had expanded to include a wider
range of ailments. In many programs, nurse educators offered personalized telephone or in-person
health coaching, and periodically asked patients about their health status.34 Efforts also included
condition-specific or general educational programs on self-management of chronic disease and
interaction with the health care system.
History of Health Benefits at Pitney Bowes
Pitney Bowes offered its first health plans in the years following World War II, which were fullyinsured
plans of large insurers like MetLife and Prudential. The firm paid employee premiums in
full, and did not require employee coinsurance or co-payments for care.
Pitney Bowes introduced its first HMO in the late 1970s, and its first self-insured plans in the
1980s, a decade after ERISA. Most employees continued to choose fully-insured plans until the mid-
1990s, when Pitney Bowes decided to promote enrollment in its self-insured offerings to expand the
risk pool for those products. The proportion of employees in self-insured plans grew from 30% in the
early 1980s to over 90% by 1986.35 Pitney Bowes continued to offer fully-insured options in all
locations due to employee demand. In some locations, workers sought access to a particular fullyinsured
carrier or plan. For example, the Kaiser plans were very popular in California and Health
Alliance was well-liked in Detroit.
Serving as Chief Personnel Officer from 1990 to 1993, Michael Critelli faced pressure to stem the
firm’s annual double-digit growth in health care costs. Pitney Bowes had introduced its first
employee cost-sharing policies in 1989, and cost sharing was increased from 10% to 20% between
1990 and 1993. The proportion of health care costs paid by employees rose from 20% in the mid-
1990s to nearly 30% in 2007. Flexible benefit programs were introduced in 1993, giving participating
employees greater control over how to spend their benefit dollars.
In 1993, Pitney Bowes decided to enroll employees at its headquarters in managed care plans
with efficient physician networks, but could not find any that met its needs. The firm decided to
create its own network, and asked all potential health plan contactors to submit two years of
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ambulatory, outpatient, inpatient, and prescription drug claims data for analysis of treatment
patterns for specific medical conditions. The data showed that a local managed care organization
contracting with solo physicians and small group practices had average episode of care charges that
were 34% below a major competitor plan. Specialist charges per episode were 25% lower.36
Pitney Bowes contracted with the local managed care organization to administer two health
plans: a Point of Service network of 1,000 physicians, and an Exclusive Provider Plan that excluded
100 of the least efficient physicians and did not reimburse out of network care.37 In the first year, per
employee costs dropped over 9%, while average Connecticut premiums rose 10%. The next year,
Pitney Bowes costs rose 5% less than the state average.
New Programs
In 1993, Pitney-Bowes introduced its first wellness programs as pilot initiatives for Connecticut
employees. Offerings included themed brown bag lunches, on-site screenings, and programs aimed
at lowering blood pressure and smoking cessation.
Pitney Bowes also transformed its occupational health centers into four on-site primary care
clinics to promote access and adherence to basic care and prevention. When clinic staff discovered
risk factors for chronic illness during routine visits, they encouraged employees to participate in the
firm’s preventive health and wellness programs. Critelli noted:
We [had] moved rather rapidly from zero cost sharing to 20%, and we wanted to give people
something in return. That’s when we started [on-site] health clinics, preventive screenings, and
active case management, and tried to present a more caring face to employees as [we] were asking
them to spend more on health.38
To determine which wellness programs were most appropriate for its workforce, Pitney Bowes
introduced a voluntary health risk assessment in 1995, with a follow-up in 1997.39 HRA results were
also used to help individual employees identify and prioritize their health risks.
A 1997 analysis of Pitney Bowes employee health care claims found that 20% percent of workers
had not made any claims in the previous year. Concerned that employees were forgoing primary
and preventative care, the firm expanded its wellness initiatives to all U.S. employees. Pitney Bowes
also introduced on-site fitness centers, healthy food choices in the cafeteria, and preventative health
education programs designed to fit employee work schedules.
To better understand its prescription drug costs, and to gain more control over employee drug
benefits, Pitney Bowes decided to “carve out” pharmaceutical benefits from its self-funded health
plans, offering drug reimbursement through a separate plan.
Also in the mid-1990s, Pitney Bowes carved out mental health services for self-insured members
to offer more comprehensive benefits. In particular, Pitney Bowes wanted employees to have
coverage for an Employee Assistance Program (EAP) promoting access to early-stage, outpatient
treatment for mental health conditions before they required acute or institutional care. In 1997, a new
benefit design created incentives for Connecticut employees and their dependents to access eight
behavioral health counseling sessions free of charge before they were referred to the appropriate
mental health service provider. In 1998, the program was made available to all U.S. employees.
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Information and Purchasing Initiatives
Pitney Bowes health care costs soared 13% in 1999, exceeding the Hewitt Health Index
benchmark.iii The firm set out to identify and analyze employee health trends and their causes.
In 2002, Pitney Bowes hired a software company to create an algorithm that used claims data to
predict future health care costs by geography. The algorithm predicted an imminent cost increase in
the New York area due to high chronic disease prevalence and poor medication adherence.40 Pitney
Bowes introduced additional health education initiatives in the region, as well as free or low-cost onsite
immunizations and screening. The firm also encouraged staff to seek regular care at nearby
health clinics instead of relying on the ER. It held regular on-site meetings led by Pitney Bowes
managers and communicated with employees via direct mailings sent to employee homes.
Pitney Bowes chose not to renew its contract with a major New York health plan and, according to
then Corporate Medical Director Dr. Jack Mahoney, sought a more proactive carrier that would
“reach out to people, to help engage them before they became high-cost claimants.” Mahoney, whose
extensive prior experience ranged from working with Aetna on employee health benefits programs to
serving as White House physician for President Gerald Ford, explained:
Most employers focus on lowering medical expenses for the 5% of high-cost claimants. We
also look at the 75% or so of employees incurring 25% of costs but who may be at risk for
becoming high-cost, and work to prevent that from happening.
After an initial cost increase, 2003 costs in the New York area fell to just 1% above 2002 levels.
Pitney Bowes engaged a second contractor to help management understand why some employees
had moved from having low health costs to high costs. Evaluation of medical, pharmacy, behavioral
health, and disability claims, along with absenteeism and workers compensation, suggested that
three groups of employees were most likely to become high-cost claimants: those with annual health
care costs over $780, current non-users of health services, and chronically ill employees who did not
adhere to their medications.
To promote treatment adherence, co-payments were reduced or eliminated for drugs treating the
firm’s three most expensive conditions: diabetes, cardiovascular disease, and asthma. Associate
Medical Director Dr. Brent Pawlecki described the decision as “a little scary, because everyone said
our pharmacy costs were going to go through the roof.”41
Also around 2002, a productivity analysis by a third-party contractor estimated that Pitney Bowes
had lost $51.7 million over the past year due to “presenteeism.”42 Productivity losses caused by colds
and flu accounted for nearly $10 million, with other contributors including headaches, back pain,
fatigue, and gastrointestinal illness. The firm began offering flu vaccines at on-site clinics and
required its health plans to cover them. A cold and flu prevention campaign stressed the importance
of hand washing and other ways to avoid infecting co-workers.
Another spurt in costs occurred in 2003, when health claims for self-insured beneficiaries rose
11.5%.43 Over 33% of the increase came from inpatient costs, which rose 9% per visit, though the
number and duration of admissions remained constant. The firm traced much of the change to its
California sites, where powerful hospital groups had increased average per admission charges to
iii The Hewitt Health Index compiled health costs, health status, and utilization data from a cohort of large US employers, and
provided each firm with its own data compared with an aggregate Index benchmark. The Pitney Bowes benchmark included
data from 18 comparable firms.
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$20,500, double the average in other states. The California Public Employees’ Retirement System,
which provided insurance for 415,000 members, began to drop certain hospitals from its provider
network, but Pitney Bowes did not feel the firm was large enough to influence pricing.
Another 35% of the increase was for outpatient hospital charges, driven by expensive lab tests and
radiology services like MRIs and CT scans. The number of employee CT scans rose 7% between 2002
and 2003, while the cost per scan rose 15% to $560. In 2004, the firm introduced 20% coinsurance and
$250 service-specific deductibles for non-preventive (i.e. related to diagnosis or treatment of a
suspected condition) scans and other tests, up from a fixed $75 copay.
Pitney Bowes had joined several regional business coalitions aimed at boosting employers’
negotiating power with health plans. By 2004, many of the groups had begun to use the “eValue8”
tool to assess health plan quality.44 Developed by the National Business Coalition on Health (NCBH),
an umbrella organization of employer health groups, NBCH member employer coalitions jointly
conducted the annual eValue8 survey submitted electronically to health plans. Survey questions
were revised annually based upon employer feedback. The NCBH verified and scored plan
responses, and reported results to members.45
In 2004, Pitney Bowes participated in its first eValue8 survey through the New York Business
Group on Health employer coalition, an NBCH member. Pitney Bowes subsequently added and
dropped health plans based largely on eValue8 results, and estimated that it had saved $12 million in
annual health care costs since joining the quality purchasing initiative.
Health Benefits at Pitney Bowes in 2008
Pitney Bowes spent over $150 million on health care in 2008, more than $140 million of which was
for employee and retiree claims, payments to ASOs and carve-out vendors, and fully-funded plan
premiums. The remaining $10 million was dedicated to on-site clinics, health and wellness
programs, Hewitt Associates services, and benefits staff. Per capita health care costs had increased
more than 70% in absolute terms between 1996 and 2007, a growth rate of around 6%. The rate of
increase for Pitney Bowes’ dispersed population consistently exceeded that of employees at company
sites. Over the same period, Medstat benchmark costs per capita for other large employers more than
doubled, with a CAGR of nearly 8%. (see Exhibit 6 and Exhibit 7)
Health benefits reported to the Executive Vice President and Chief Human Resources Officer,
Johnna Torsone, a senior executive position reporting directly to the CEO. The human resources
department’s health benefit responsibilities included budgeting for new programs, developing
training programs for new and existing employees, and monitoring employee satisfaction.
Day-to-day administration of health benefits was managed jointly by Dr. Brent Pawlecki, who
had succeeded Mahoney as Corporate Medical Director, and Andrew Gold, Executive Director of
Global Benefits Planning. Pawlecki was responsible for designing, implementing, and monitoring
employee health and wellness programs; the disability management program; workers
compensation; and the on-site company clinics. Gold was in charge of contracting for all Pitney
Bowes benefits, including health plans, retirement plans, and other non-health benefits.
Overall, a team of eight employees worked directly on health plan design and wellness
programs. Although consultants often advised Pitney Bowes to “cut overhead” by reducing its
benefits staff or filling positions with less senior employees, the company viewed its team as an
investment, noting that firms with less overhead often had higher total health care costs.
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Health Plans
Pitney Bowes’ self-insured health plans covered 90% of employees receiving health benefits from
the firm. Fully-insured plans enrolled the remaining 10%. All employees working at least 30 hours
per week were eligible for coverage in 2008. Approximately 80% of eligible employees enrolled in
health plans through Pitney Bowes. Many of the 20% who declined coverage obtained insurance
elsewhere, for example through a spouse’s employer or public program.
Pitney Bowes offered a range of PPO plans through five national carriers, and HMOs through 20
local and national carriers. Almost all PPOs were self-funded, while HMOs could be self- or fullyinsured.
Offerings varied by region, but most employees could choose among a comprehensive PPO,
a more restrictive PPO, a high-deductible “saver” plan, and sometimes an HMO.
Self-Insured Plans Pitney Bowes offered self-insured PPO plans, as well as high-deductible
plans and a small number of HMOs. All self-insured plans offered the same scope of covered
services and included certain cost sharing principles. Beyond those common elements, employees
could choose from plans with a range of deductible and coinsurance levels.
Self-funded plans were administered by national insurers under Administrative Services Only
(ASO) contracts that adjudicated and paid employee claims from an account funded by Pitney
Bowes. Pitney Bowes made monthly, fixed payments to each ASO contractor based on the number of
employees covered. In return, the ASO adjudicated all claims, determining how much of the service
to cover according to the beneficiary’s health plan, and paid the approved portion. While ASOs were
responsible for administrative functions, Pitney Bowes controlled scope of coverage, cost sharing
levels, and employee benefit appeals.
Pitney Bowes allowed the ASOs to form provider networks, and did not interfere with individual
provider contracting because the number of employees in each area was insufficient to identify and
contract with providers based on firm-specific criteria. Instead, the firm used health plan responses
to the eValue8 survey to select plans that considered quality metrics and quality improvement
programs when contracting with and managing providers. Health plans were increasingly creating
“high-efficiency” or “high-value” specialist networks that offered incentives for members to seek care
at subsets of physicians within existing provider networks identified as low-cost and high-quality
providers. Mahoney noted:
We’re still waiting for plans to demonstrate the real value of those networks. It used to be that
only the highest-cost outliers were excluded, or those with serious quality concerns. Now the
networks can be restricted to one or two quartiles of providers.
Fully-Insured Plans Pitney Bowes also offered fully-insured coverage in all regions. The firm
purchased pre-packaged, primarily HMO plans from 20 commercial insurers, including Harvard
Pilgrim, Kaiser, Aetna, and Humana. Pitney Bowes had reduced the number of HMO carriers from
46 to 20 in 2008, with additional cuts planned for 2009.
Pitney Bowes had little influence on fully-insured plan design and cost sharing. Fully-insured
cost-sharing levels were similar to self-insured plans, as Pitney Bowes selected plans in part based on
cost sharing requirements. Fully-insured beneficiaries were not enrolled in the pharmacy or mental
health carve out plans, lowering overall premiums, however other cost sharing requirements were
typically higher in commercial plans.
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Each month, Pitney Bowes paid fixed premiums to fully-insured carriers based on the number of
covered employees. The plans did not share utilization, claims, or health status information with the
Pitney Bowes, considering the information proprietary.
Eligibility Pitney Bowes employees eligible for health insurance had to opt out of coverage;
otherwise, workers who did not select plans were automatically enrolled in the high-deductible saver
plan, the lowest-premium option. The saver plan offered first-dollar coverage for prevention and
chronic care drugs, with primary care subject to a deductible. Once the deductible was met, all
services included in the plan were covered in full.
All retirees who had worked at Pitney Bowes for at least 10 or 15 years, depending on the
business unit, were offered health benefits, including those who were Medicare-eligible. Plan designs
carried over between active employees and retirees so that retirees did not have to switch plans.
Around 1,500 workers who had retired before 1993 received the same benefits they had as active
employees, even if those benefits did not include any employee cost sharing. Employees retiring
after 1993 were eligible for health benefits similar to those offered to active staff in 2008.
Plan Selection and Design Pitney Bowes began the health plan selection and benefit design
process by surveying fully- and self-insured plans through eValue8. The 2008 survey covered health
plan management of providers, provision of physician quality information to members, and ability to
help members navigate the health care system. A new section on “total population health
management” asked about programs encompassing “the full range of at risk chronic and acute
conditions with a focus on prevention, risk-reduction, and self-care.”46 Additional topics included IT
support, disease management, medical homes, patient safety, member communication, and financial
stability. Of particular interest to the firm were a health plan’s scope of benefits for chronic
conditions and the cost of care for certain diseases. (see Exhibit 8) Pitney Bowes also shared
modified eValue8 results with employees to facilitate their health plan choices.
All plans offered by Pitney Bowes covered three core components: preventive care and screening,
mental health benefits, and catastrophic coverage for serious and expensive illnesses. Most
preventive services were offered at low or no cost to the employee, and most routine services were
eligible for first-dollar coverage. Deductibles and out-of-pocket maximums for non-routine services
varied substantially across plans.
The benefits management team examined the prevalence of illness, service utilization patterns,
and cost information for its workforce. Health plans were evaluated with these areas in mind. For
example, as diabetes was both common and costly among its workforce, Pitney Bowes paid particular
attention to the type of care delivered to diabetics. (see Exhibit 9)
Pitney Bowes believed a cultural fit was important, and met with new and existing health plans
individually before contracting with them. Mahoney explained:
You can look at great statistics for a member call center, but when you walk through it, you
know if beneficiaries can pick up the phone and reach someone who can relate to them, who
understands their situation.
Once plans were chosen, employee premiums were set such that the lowest-premium plan
would be affordable to staff earning $20,000 to $25,000. Employees were given cash equivalent flex
credits for use towards their premiums, with lower-income workers receiving the most credits.
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Pharmacy and Mental Health
Pharmacy and mental health benefits for Pitney Bowes employees enrolled in self-insured plans
were managed by specialist vendors rather than their regular health plans. Employees made a single
payment for pharmacy and mental health benefits together with their health plan premiums.
Beneficiaries could choose between a standard drug benefit and an upgraded plan involving higher
premiums. Employees with fully-insured plans received pharmacy and behavioral health benefits
through their health plans.
The pharmacy plan managed by Caremark had a three-tier formulary with tier-specific levels of
coinsurance up to annual out-of-pocket limits. There were no mandatory generic substitution
programs. Each medication was placed in one of the tiers, with coinsurance levels of 10%, 30%, or
50%. Pitney Bowes used predictive modeling software to identify drugs for which non-compliance
was likely to raise costs, placing those in the least expensive tier. All diabetes drugs and devices, for
example, were placed in the 10% tier, along with osteoporosis treatment, antiseizure medications, and
prenatal supplements. Claims data had also shown that 60% of the firm’s beneficiaries with diabetes
and 52% of those with previous cardiac events were on cholesterol-lowering statins in 2006. By 2008,
diabetics and beneficiaries with histories of heart attack, angioplasty, or stents could receive statins
for free.47
Mental health benefits were managed by ValueOptions, a national behavioral health managed
care company that received capitated payments from Pitney Bowes for each covered employee.
Benefits included the Employee Assistance Program (EAP), which covered six to eight counseling
sessions for non-diagnosable and less severe issues (e.g. bereavement, child behavior problems), as
well as services for more serious conditions.
On-Site Medical Services
In 2008, around 20% of Pitney Bowes employees had access to one of the firm’s seven on-site
clinics in Connecticut, Maryland, Wisconsin, Washington, and New York. An eighth clinic was
planned for Washington, D.C. The clinics had evolved from “bare bones” programs treating minor
illnesses and injuries to comprehensive units offering a full suite of health care treatments, including
primary care, screening and diagnostics, disability management, health counseling, patient advocacy,
and referral services to community medical services.
The clinics offered limited and varying levels of specialty services relative to the size of the clinic,
including allergy and asthma care, sports medicine, gynecology, gastroenterology, travel medicine,
counseling, physical therapy, chiropractic care, and massage. Centers also monitored compliance
with pre-employment physicals and required fitness-for-duty testing following disability claims for
certain positions. Clinics also supported Pitney Bowes health and wellness initiatives, for example by
distributing pedometers to promote a program challenging employees to take at least 10,000 steps per
day.
The clinics could distribute an entire course of medication for common conditions through a
limited formulary of mostly generic medications. Clinic prescriptions were integrated with the
Caremark database, and drugs prescribed by on-site clinicians were not subject to co-pays. Stamford
employees could collect their medications at an on-site pharmacy, launched in 2006, or have the
prescription delivered to their offices.
While their scope of services had expanded, the clinics were treated as an extension of primary
and specialty services for employees rather than the principal or sole care provider.
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Clinics were staffed by full- and part-time primary care physicians, nurse practitioners, physician
assistants, certified occupational health nurses, health educators, and counselors. The Stamford clinic
employed five physicians with rotating hours as well as nurses and nurse practitioners. Some
facilities also provided space to local physicians and specialists with large numbers of Pitney Bowes
patients to hold weekly on-site office hours.
Services were free to employees and offered during work hours. Clinic licenses from the
Department of Labor covered only the care of employees, not dependents. Dependents and retirees,
however, were eligible to use the Stamford pharmacy.
Some smaller sites provided varying levels of on-site health services primarily due to space
constraints. For example, the 200-employee Bridgeport, Connecticut facility offered on-site flu shots
and screenings. Pitney Bowes operated call centers for health questions in Wisconsin and
Washington, with a third planned in Maryland.
Health and Wellness
In 2008, Pitney Bowes offered health risk assessments, disease management, disability
management, and Health Care University (HCU) programs. These programs were offered to all
corporate employees, with some adaptations for dispersed workers. Most programs were offered
only in the U.S. at corporate locations, although some major international sites had adopted certain
health and wellness initiatives, such as disease management and disability management in Canada
and the U.K.
Health Risk Assessment Pitney Bowes offered voluntary online HRA questionnaires to all
employees. Surveys assessed individual health risks and flagged areas for improvement. Pitney
Bowes required each health plan to post the HRA survey on its own website, where it could be
completed electronically. Low employee participation in the HRA in 2007 was attributed to difficulty
navigating the various health plan websites. Pitney Bowes decided to create a single, user-friendly
HRA website, and its development was in process in 2008.
Disease Management Pitney Bowes offered a number of disease management programs for
common chronic conditions to employees, dependents, and retirees. Most disease management
programs were managed by health plans or ASOs, who had access to employee claims data and
could target high-risk workers. The firm required all plans to have programs for asthma,
cardiovascular disease, and diabetes, and many plans also offered additional options. Two
programs, cancer care and prenatal care, were managed by separate, national vendors, both of which
involved access to a 24-hour hotline staffed by nurses. Pitney Bowes believed that beneficiaries did
not want their employer to have information about their chronic disease status.
Eligible employee participation in disease management programs ranged from a high of 47% for
diabetes to a low of 16% for back pain management. Participation varied by medical condition and
the enrollment criteria used by the health plans. For example, diabetes program eligibility was based
on prescription and medical claims information. The firm did not seek to enroll all employees with a
target condition, as some were already under good management.
Participants with access to on-site clinics often received some disease management services at the
workplace. For example, the diabetes program included regular monitoring of Hemoglobin A1c
levelsto assess blood sugar control, cholesterol testing, lifestyle coaching and education about
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diabetes control, and access to a diabetes nurse educator. These services were provided at on-site
clinics when possible. Other employees received these services from outside providers.
Disability Management Pitney Bowes offered disability management programs to help
employees return to work safely and efficiently following absences due to a range of conditions,
including injuries, cardiovascular disease, maternity, and behavioral health issues. Employees and
their treating physicians had access to a 24-hour phone line staffed by representatives who triaged
disability claims according to diagnosis, and made referrals to nurse case managers when
appropriate. Case managers followed each employee until he or she could safely resume work.
Learning from disability programs was integrated into workplace safety and health program
design, with input from the Corporate Medical Director, on-site physicians, safety engineers, and
ergonomists. For example, after realizing that maternity-related disability was a significant
contributor to lost work time and health care costs, Pitney Bowes began to include maternity
management in its disability management program. The program fit better within the disability
management program rather than disease management because it was not run by health plans or
ASOs, and because many women took disability leave for normal delivery or complications.
The maternity program was designed to prevent or reduce poor birth outcomes such as low birth
weight, neonatal intensive care hospitalization, and maternal disabilities. The program also managed
postpartum return to work, and included health risk assessments during pregnancy, a 24-hour
information line continuing six weeks postpartum, and educational materials.
Until 2007, short- and long-term disability management was managed internally and separately
from the workers compensation program which was run by a third-party administrator. Employees
contacted the workers compensation vendor for on-site injuries and disease management staff for
conditions unrelated to work. In 2007, the two programs were joined under the management of the
Disability Assistance Department, led by Corporate Medical Director Pawlecki. Under the new
structure, employees injured on-site were simultaneously offered entry into both programs.
Health Care University Health Care University (HCU) was the Pitney Bowes umbrella
program to encourage health and wellness through education. Health education programs
emphasized personal responsibility and self-care through ongoing sessions and printed materials
promoting healthy diet, exercise, and behaviors associated with improved health outcomes. For
example, the “Count Your Way to Health” program used brochures, signs, and emails to inspire
employees to comply with health guidelines. Program targets included zero tobacco use, flossing
once daily, eating five fruits and vegetables daily, maintaining a body mass index below 25,
exercising 30 minutes per day, and 100% seatbelt and bicycle helmet use.
Offerings were adapted in response to HRA data and employee feedback. For example, after HRA
results revealed the prevalence of actual and potential cardiovascular disease, Pitney Bowes launched
the Healthy Heart School program at its headquarters. The program included four teaching sessions,
follow-up visits from a Health Coach, and an educational guidebook. The firm also expanded its diet
and exercise efforts. A nutritionist managed cafeteria menus and oversaw portion control. Healthy
items were placed at the checkout counter, and unhealthy snacks were farther away. Nutrition data
on the food being served was clearly visible. Food service was eliminated for meetings other than
lunch, and vending machines offered healthier snacks.
Although HCU programs were primarily held at Pitney Bowes facilities, some were available to
dispersed employees. For example, the smoking cessation program adapted from the “Mayo Clinic
Quit Line” was available at all work sites. In lieu of in-person consultations, dispersed employees
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could call a dedicated phone line staffed by smoking cessation counselors. Wellness messages were
communicated through brochures and postcards sent to employee homes.
Pitney Bowes offered financial incentives for completion of HCU programs. Employees earned
credits and received financial awards applicable toward health benefit payments. Nearly 25% of
employees completed HCU educational, screening, or behavior change programs in 2005.
Health Results
Pitney Bowes monitored and evaluated the collective impact of its health benefits. While program
evaluations were conducted, the firm did not try to calculate return on investment for individual
initiatives. Dr. Mahoney, in a new part-time role as Director of Strategic Health Initiatives, said that
while the firm had invested “millions” in its clinics and to promote drug adherence, it had saved
“tens of millions” from lower medical costs and increased productivity.
The firm estimated that in aggregate, its health benefits programs had saved $39.8 million in
2007.48 Estimates suggested that one-third of the savings was due to plan design efforts such as
tiered drug benefits and reduced cost sharing requirements for primary and preventive care. The
remaining savings was attributed to health and wellness programs, disease management, on-site
clinics, and employee “consumerism” by factoring cost into their drug choices.
Health Plan Performance
Pitney Bowes used two databases to measure health plan cost and quality. One, managed by
Hewitt Associates, tracked health plan enrollment and total claims for both self-funded and fullyfunded
plans. The database also included administrative costs for self-funded plans. Utilization of
services was recorded and the firm could access blinded employee data. Pitney Bowes could not
access individual health information (e.g. test results, diagnoses) for privacy reasons.
Claims information was then combined with a second database managed by Medstat, a
subsidiary of the Thomson information management corporation. The database tracked common
chronic disease prevalence and corresponding hospital admissions, average length of inpatient stay,
outpatient visits, and ER visits for each condition. Data could be sorted by factors including time
period, health plan, Pitney Bowes business unit, state, metro area, and employment status. Pitney
Bowes’ data was benchmarked to Medstat’s U.S. client base, mainly other large employers.
Medstat submitted annual summaries to Pitney Bowes, and the firm could request inclusion of
particular metrics or trends, as well as mid-cycle reports. The core benefits team also had real-time
access to the database, and frequently reviewed the information on its own. Pitney Bowes preferred
the Medstat database to information provided directly by health plans because it could customize the
data fields, access information at any time, and retain data upon switching plans.
In 2007, Pitney Bowes total active employee medical claims and administrative costs, including
employer and employee contributions, surpassed $100 million, of which the firm paid nearly $85
million. Total annual per employee costs averaged over $7,000.
Pharmacy Performance
Reducing employee cost sharing for chronic care drugs and supplies had improved compliance
with treatment. (see Exhibit 10) In 2007, one year after eliminating cost sharing for statins prescribed
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to high-risk beneficiaries, Pitney Bowes observed a 7% increase in adherence among targeted
members.
Between 2001 and 2006, asthma treatment adherence rose from 33% to 62%. The percentage of
asthmatic beneficiaries on albuterol only treatment, used for acute airway spasms, dropped from 51%
to 33% over the same time period, with a corresponding 28% rise in non-acute, long-acting asthma
controllers. In 2003, average service utilization and cost of care decreased 15% for asthma and 6% for
diabetes. Between 2001 and 2003, drug costs fell 19% for asthma and 7% for diabetes due to a drop in
complications. Improved adherence was also partly responsible for a 26% decline in ER use for
diabetes and a 19% decline in hospital admissions between 2001 and 2003.49
Annual per capita drug costs for all Pitney Bowes employees rose slightly between 2001 and 2003.
The drug benefit plan incurred average annual charges of $675 per employee, 10% to 15% above
comparable firms. Pitney Bowes received regular inquiries from benefits consultants offering to help
manage drug costs, but chose to maintain the revised structure. Per employee costs for the Pitney
Bowes mental health benefit carve out were also above average.
Health and Wellness Performance
On-Site Medical Services In 2007, Pitney Bowes recorded 35,000 employee encounters in its
on-site clinics. Nearly 75% of employees with access to clinics utilized their services during the year,
and 96% of people who had visited the clinics rated their experiences as good or excellent.
In Connecticut, many employees reported that the clinics were their only source of primary care.
These employees registered 33% lower health care costs than workers using only outside health
services. Claims data showed that clinics used fewer and less costly tests and prescription drugs,
which drove much of the savings. Employees using only on-site clinics had fewer absences and
disability episodes, controlling for demographics (the on-site clinic only workers were mostly young
males). The firm estimated that for every dollar spent on the clinics, it saved $1 in health costs plus
an additional $1 in productivity costs.50
Health Care University On average, Pitney Bowes estimated that health care costs for HCU
program participants were 10% lower than non-participants.51 Based on a 2005 evaluation, the
Stamford-based Healthy Heart School cardiovascular screening and education program led to
average participant cost decreases of 24.1% and risk score declines of 25.6% (excluding three outliers)
between 2002 and 2004. Average participant cholesterol and body mass levels also fell slightly.52 In
comparison, nonparticipant health costs rose 56.7%, and risk scores increased 28.1%.
Over a decade earlier, Pitney Bowes had conducted a four-year longitudinal study comparing
HCU program participants and non-participants. In 1995, non-participants’ average per capita health
care costs were 7% higher than participants. Participant costs decreased 5% from 1993 to 1996, while
non-participant costs increased by 2%.53
Future Challenges
In 2008, Critelli was concerned about the firm’s ability to improve the health of its 12,000
dispersed employees who could not access many Pitney Bowes on-site programs. He explained:
This is a very diverse group of people, many of whom, such as repair people, work out of their
homes and cars. They represent some of the people who need our help the most. They can’t be
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left out of this. It is critical to our bottom line that we find a way to bring them into our culture of
wellness.54
Federal regulations introduced in late 2006 limited health plans’ use of member incentives based
on “health status-related factors” like medical conditions, claims history, genetic information, and
disability, restricting the amount by which Pitney Bowes could differentiate employee premiums
through, for example, limiting the magnitude of non-smoker discounts and credits for participation
in some HCU programs.55 Pitney Bowes had already reached the per employee limit for allowable
credits, and Critelli considered these incentives to be a key part of the firm’s value-based insurance
design.
Critelli was also considering how employers could exert more influence on care delivery. For
example, health plans had been unwilling to strengthen and improve access to primary care. In spite
of the attention generated by new primary care models like medical homes, health plans resisted
these types of arrangements because they believed reimbursement levels would not cover the costs of
additional services and staff. While employer coalitions had negotiated for expanded behavioral
health benefits, they had been unable to do so for primary care.
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Exhibit 1 Selected Financial Results, 1998 – 2007
1998* 1999* 2000* 2001* 2002 2003 2004 2005 2006 2007
Revenue $ 3,499,483 $ 3,811,576 $ 3,880,868 $ 4,122,474 $ 4,244,124 $ 4,440,312 $ 4,832,304 $ 5,366,936 $ 5,730,018 $ 6,129,795
Income from
continuing
operations $ 443,149 $ 562,990 $ 562,125 $ 514,320 $ 464,870 $ 404,068 $ 405,439 $ 473,243 $ 565,659 $ 361,247
Return on
Sales 13% 15% 14% 12% 11% 9% 8% 9% 10% 6%
Total assets $ 7,661,039 $ 8,222,672 $ 7,901,266 $ 8,318,471 $ 8,732,314 $ 8,891,388 $ 10,211,626 $ 10,621,382 $ 8,608,944 $ 9,549,943
Return on
assets 6% 7% 7% 6% 5% 5% 4% 4% 7% 4%
Stock-
holders’
equity $ 1,648,002 $ 1,625,610 $ 1,284,975 $ 891,355 $ 904,392 $ 1,145,416 $ 1,349,152 $ 1,364,249 $ 699,189 $ 643,303
Return on
Equity 27% 35% 44% 58% 51% 35% 30% 35% 81% 56%
Total
employees 27,700 27,267 28,542 32,724 33,130 32,474 35,183 34,165 34,454 36,165
Dollars in $000s
* The figures for 1998 to 2001 are not restated for discontinued operations
Years Ended December 31
Source: Company documents.
Exhibit 2 Employee Cost Sharing in Premiums and Deductibles
1988 1993 1996 2000 2001 2002 2003 2004
Monthly worker contribution
Single $ 8 $ 34 $ 37 $ 28* $ 30 $ 39* $ 42 $ 47
Family $ 5 2 $ 124 $ 122 $ 135 $ 149 $ 178* $ 201* $ 222*
% of premiums paid by worker
Single 11% 20% 20% 14%* 14% 16% 16% 16%
Family 29% 32% 27% 26% 26% 28% 27% 28%
Deductibles
Conventional, individual $ 1 63 $ 222 $ 264 $ 248 $ 239 $ 295 $ 384 $ 414
Conventional, family $ 3 75 $ 495 $ 594 $ 580 $ 598 $ 700 $ 785 $ 861
HMO, individual $ 30 $ 44
HMO, family $ 65 $ 80
PPO, in network $ 1 06 $ 170 $ 180 $ 175 $ 204* $ 251* $ 275 $ 287
PPO, out of network $ 1 77 $ 289 $ 313 $ 340 $ 409* $ 4 66 $ 561* $ 558
POS, in network $ 71 $ 70 $ 92 $ 54* $ 113* $ 210
POS, out of network $ 324 $ 352 $ 407 $ 409 $ 442 $ 575
*p<.05
Source: Gabel, Jon, et al, “Health Benefits in 2004: Four Years of Double-Digit Premium Increases Take Their Toll on
Coverage,” Health Affairs, Vol. 23, No. 5, September/October 2004.
Average Monthly Contribution, Percentage of Premiums Paid by Covered Workers for Single
and Family Coverage, and Average Deductible by Plan Type, Selected Years 1988-2004
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Pitney Bowes: Employer Health Strategy 709-458
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Exhibit 3 Average Employer and Employee Premium Contributions by Plan Type, 2007
Source: “Employer Health Benefits 2007 Annual Survey”, (#7672) The Henry J. Kaiser Family Foundation and HRET,
September 2007
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Exhibit 4 Planned Changes to Employee Benefits, 2008
Very Likely Somewhat Likely Not Too Likely Not At All Likely Don’t Know
Increase the Amount Employees Pay for Health Insurance*
All Small Firms (3-199 Workers) 21% 24% 21% 34% <1%
All Large Firms (200 or more Workers) 39% 34% 17% 10% <1%
All Firms 21% 24% 21% 33% <1%
Increase the Amount Employees Pay for Prescription Drugs
All Small Firms (3-199 Workers) 11% 30% 30% 26% 2%
All Large Firms (200 or more Workers) 9% 29% 41% 20% 1%
All Firms 11% 30% 31% 26% 2%
Increase the Amount Employees Pay for Deductibles*
All Small Firms (3-199 Workers) 12% 25% 27% 35% 1%
All Large Firms (200 or more Workers) 9% 29% 40% 20% 1%
All Firms 12% 25% 28% 34% 1%
Increase the Amount Employees Pay for Office Visit Copays or Coinsurance*
All Small Firms (3-199 Workers) 13% 29% 27% 29% 2%
All Large Firms (200 or more Workers) 7% 29% 43% 20% 1%
All Firms 13% 29% 28% 28% 2%
Introduce Tiered Cost Sharing for Doctor Visits or Hospital Stays
All Small Firms (3-199 Workers) 7% 16% 39% 35% 3%
All Large Firms (200 or more Workers) 3% 16% 41% 39% 1%
All Firms 7% 16% 39% 35% 3%
Restrict Employees’ Eligibility for Coverage
All Small Firms (3-199 Workers) <1% 4% 29% 64% 3%
All Large Firms (200 or more Workers) 1% 6% 28% 64% <1%
All Firms <1% 4% 29% 64% 3%
Drop Coverage Entirely*
All Small Firms (3-199 Workers) 1% 2% 16% 81% <1%
All Large Firms (200 or more Workers) <1% 1% 5% 93% <1%
All Firms 1% 2% 15% 82% <1%
Offer High Deductible Health Plan/Health Reimbursement Account (among firms not currently offering)
All Small Firms (3-199 Workers) 3% 21% 30% 46% <1%
All Large Firms (200 or more Workers) 4% 21% 30% 45% 1%
All Firms 3% 21% 30% 46% <1%
*Distributions are statistically different between All Small Firms and All Large Firms within category (p<.05)
Among firms offering health benefits, distribution of firms reporting the likelihood of making the following changes
in the next year, by firm size, 2007
Source: “Employer Health Benefits 2007 Annual Survey”, (#7672) The Henry J. Kaiser Family Foundation and HRET,
September 2007
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Pitney Bowes: Employer Health Strategy 709-458
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Exhibit 5 Large Employer Health and Wellness Offerings, 2007
From a survey of 466 employers with a mean of 12,500 employees.
Source: Butcher, Lola, “Wellness Programs: No Longer Just an Add-On,” Managed Care, February 2008.
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709-458 Pitney Bowes: Employer Health Strategy
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Exhibit 6 Annual Per Employee Health Care Costs: Pitney Bowes vs. Benchmark
Source: Company documents.
Exhibit 7 Change in Employee Health Costs from Previous Year: Pitney Bowes vs. Benchmark
Source: Company documents.
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Pitney Bowes: Employer Health Strategy 709-458
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Exhibit 8 Sample eValue8 Health Plan Scoring: Chronic Disease Management, 2005
14
21
30
16
9
21
25
16
8 5
17
6
19
21
43
16
21
32
15
24
14
13
15
20
25
0
15
23
14
11
14
13
29
32
15
24
0
10
20
30
40
50
60
70
80
90
100
HMO B HMO C HMO D HMO
Benchmark
PPO V PPO W PPO X PPO Y PPO
Benchmark
Member Support Provider Support Outcomes Organization & Other
Benchmark refers to the plan with the highest eValue8 score, by plan type (e.g. HMO, PPO). All plans are eValue8
respondents.
Source: Company documents, slides prepared by Mary Bradley of Pitney Bowes and Laurel Pickering of the New York
Business Group on Health.
eValue8
score
out of 100
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Exhibit 9 Pitney Bowes Employee Diabetes Care, by Health Plan
Opthalmology Visits Cholesterol Screening Rates
Primary Care Visits
HbA1c Testing
Source: Company documents, analysis from Thomson Reuters.
Plan A
Plan B
Plan C
Plan D
Plan E
Plan A
Plan B
Plan C
Plan D
Plan E
Plan A
Plan B
Plan C
Plan D
Plan E
Plan A
Plan B
Plan C
Plan D
Plan E
% of the population
whose care met
recommended clinical
guidelines
% of the population
who received some services,
but did not meet
recommended clinical
guidelines
% of the population
who received no services
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Pitney Bowes: Employer Health Strategy 709-458
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Exhibit 10 Change in Chronic Disease Medication Adherence for Pitney Bowes Employees
Source: Company documents.
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Endnotes
1 Spikoff, Martin, “Employers’ Stock in Wellness Rises With No End in Sight,” Managed Care, July 2006.
2 Martin, Neil A., “Putting a New Stamp on Pitney Bowes,” Smart Money, January 3, 2006
http://www.smartmoney.com/barrons/index.cfm?story=20060103&split=0, accessed June 24, 2008.
3 “Pitney Bowes Fast Facts,” Pitney Bowes website, https://media.corporate-ir.net/media_files/irol/83/
83377/FastFacts.pdf, accessed August 6, 2008.
4 Partnership for Prevention, Leading by Example, 2005.
5 Working Toward Wellness Initiative, in cooperation with PricewaterhouseCoopers, “Working Toward
Wellness: The Business Rationale,” World Economic Forum, 2008.
6 The following three paragraphs use information from: Thomasson, Melissa A., “From Sickness to Health:
The Twentieth-Century Development of U.S. Health Insurance,” Explorations in Economic History, 39, 2002, pp.
233-253.
7 This paragraph uses information from: Gebhardt, Deborah L. and Carolyn E. Crump, “Employee Fitness
and Wellness Programs in the Workplace,” American Psychologist, February 1990.
8 Kramon, Glenn, “Business and Health; ‘Managed Care’ is Top Plan Now,” The New York Times, June 14,
1988.
9 This paragraph uses information from: Acs, Gregory, et al, “Self-Insured Employer Health Plans:
Prevalence, Profile, Provisions, and Premiums,” Health Affairs, Vol. 15, No. 2, Summer 1996.
10 US Department of Labor website, “ERISA,” https://www.dol.gov/dol/topic/health-plans/erisa.htm,
accessed June 25, 2008.
11 This paragraph uses information from: Gebhardt, Deborah L. and Carolyn E. Crump, “Employee Fitness
and Wellness Programs in the Workplace,” American Psychologist, February 1990.
12 Phoenix Health Systems, “A History and Overview of HIPAA,” https://www.hipaadvisory.com/regs/
hipaahistorybyzon.htm, accessed July 17, 2008.
13 US Department of Labor Fact Sheet, “The Health Insurance Portability and Accountability Act (HIPAA),
December 2004, https://www.dol.gov/ebsa/newsroom/fshipaa.html, accessed June 26, 2008.
14 CMS website, “HIPAA – General Information,” https://www.cms.hhs.gov/HIPAAGenInfo/, accessed
June 25, 2008.
15 The following four paragraphs use information from: Gabel, Jon, et al, “Health Benefits in 2004: Four Years
of Double-Digit Premium Increases Take Their Toll on Coverage,” Health Affairs, Vol. 23, No. 5,
September/October 2004.
16 The following paragraph uses information from: Claxton, Gary, et al, “Health Benefits in 2007: Premium
Increases Fall to an Eight-Year Low, While Offer Rates and Enrollment Remain Stable,” Health Affairs, Vol. 26,
No. 5, September/October 2007.
17 We utilize Employer Health Benefits: 2007 Annual Survey, The Kaiser Family Foundation and Health
Research & Educational Trust as the source of most information in this section.
18 Health Insurance Coverage in the U.S. 2006, Slides, Kaiser Family Foundation website,
http://facts.kff.org/chart.aspx?ch=477, accessed June 27, 2008.
Purchased by Gwendolyn Whitfield (gwen.whitfield@gmail.com) on March 19, 2013
Pitney Bowes: Employer Health Strategy 709-458
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19 Rowland, Diane, “Health Care Affordability and the Uninsured,” Testimony U.S. House of
Representatives, Committee on Ways and Means, Health Subcommittee, April 15, 2008.
20 Maxwell, James, Peter Temin, and Corey Watts, “Corporate Health Care Purchasing Among Fortune 500
Firms,” Health Affairs, May/June 2001.
21 Health Plan Employer Data and Information Set (HEDIS) measures, a set of measures developed by the
National Committee for Quality Assurance (NCQA), were commonly used health plan quality indicators. The
71 measures included mainly process metrics (e.g. whether a patient received Beta blocker treatment following a
heart attack), along with the results of four patient surveys, and three patient health indicators (e,g. patient blood
pressure levels).
22 Galvin, Robert S. and Suzanne Delbanco, “Why Employers Need to Rethink How They Buy Health Care,”
Health Affairs, Vol. 24, No. 6, November/December 2005.
23 12th Annual National Business Group on Health/Watson Wyatt Survey Report, 2007.
24 12th Annual National Business Group on Health/Watson Wyatt Survey Report, 2007.
25 Employer Health Benefits: 2006 Annual Survey, The Kaiser Family Foundation and Health Research &
Educational Trust.
26 Employee Benefit Research Institute, “Typical Health Benefit Package in Private Industry,” April 2006.
27 Employer Health Benefits: 2006 Annual Survey, The Kaiser Family Foundation and Health Research &
Educational Trust.
28 The following paragraph uses information from: Butcher, Lola, “Wellness Programs: No Longer Just an
Add-On,” Managed Care, February 2008.
29 12th Annual National Business Group on Health/Watson Wyatt Survey Report, 2007.
30 The following paragraph uses information from: Schultz, Alyssa B. and Dee W. Edington, “Employee
Health and Presenteeism: A Systematic Review,” Journal of Occupational Rehabilitation, Vol. 17, 2007.
31 Partnership for Prevention, Leading by Example, 2005.
32 Employer Health Benefits: 2006 Annual Survey, The Kaiser Family Foundation and Health Research &
Educational Trust.
33 Employer Health Benefits: 2006 Annual Survey, The Kaiser Family Foundation and Health Research &
Educational Trust.
34 Kritz F. “Talk about follow-up healthcare: employers and insurance firms are providing ‘health coaches’ to
help workers manage and prevent illnesses” Los Angeles Times, November 20, 2006.
35 Hall, Ken, “Pitney Bowes Offers 3 HMO Plans,” Intercorp, Vol. 5, No.3, February 7, 1986.
36 Covington, Sally, “Examples of Successful Purchaser Strategies to Improve Health Care Value,” memo
from the California Works Foundation, April 26, 2005.
37 This paragraph uses information from: Covington, Sally, “Examples of Successful Purchaser Strategies to
Improve Health Care Value,” memo from the California Works Foundation, April 26, 2005.
38 Miller, Julie, “Beware of barriers to care: Pitney Bowes increases access to care through on-site clinics and
low-cost drug benefits,” Managed Healthcare Executive, April 1, 2008.
39 The Health Project, C. Everett Koop National Health Award Winners, Pitney Bowes: Evaluation
Documentation, https://healthproject.stanford.edu/koop/PitneyBowes1/documentation.html, accessed August
5, 2008.
Purchased by Gwendolyn Whitfield (gwen.whitfield@gmail.com) on March 19, 2013
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40 The following three paragraphs use information from: Dragoon, Alice, “An Ounce of Prediction,” CIO,
July 1, 2004.
41 Miller, Julie, “Beware of barriers to care: Pitney Bowes increases access to care through on-site clinics and
low-cost drug benefits,” Managed Healthcare Executive, April 1, 2008.
42 Blassingame, Kelley M., “Firms Press to Quantify, Control Presenteeism,” Employee Benefit News, December
1, 2002.
43 The following two paragraphs use information from: Fuhrmans, Vanessa, “Pressure Points: Attacking Rise
in Health Costs, Big Company Meets Resistance,” Wall Street Journal, July 13, 2004.
44 The National Business Coalition on Health (NBCH) was a national, non-profit, membership organization
of nearly 60 U.S. employer-based health care coalitions. Coalition members represented over 10,000 primarily
large and medium-sized firms across the public and private sectors. (https://www.nbch.org/)
45 Managed Care Week, “Employers’ eValue8 Project Shines Spotlight on Health Insurers’ Performance,” Vol.
13, Issue 40, November 10, 2003.
46 “National Business Coalition on Health Releases 2008 eValue8 RFI,” NCBH news release, December 12,
2007 https://www.nbch.org/news/news121207.cfm, accessed July 16, 2008.
47 Miller, Julie, “Beware of barriers to care: Pitney Bowes increases access to care through on-site clinics and
low-cost drug benefits,” Managed Healthcare Executive, April 1, 2008.
48 Mahoney, Jack, “Employers and DM Services What Matters,” presentation.
49 Mahoney, Jack, “Reducing Patient Drug Acquisition Costs Can Lower Diabetes Health Claims,” The
American Journal of Managed Care, Vol. 11, No. 5 Supplement, August 2005.
50 Miller, Julie, “Beware of barriers to care: Pitney Bowes increases access to care through on-site clinics and
low-cost drug benefits,” Managed Healthcare Executive, April 1, 2008.
51 Spikoff, Martin, “Employers’ Stock in Wellness Rises With No End in Sight,” Managed Care, July 2006.
52 Cholesterol and BMI changes were not statistically significant.
53 C. Everett Koop Awards website, 1996 National Health Award Winners,
http://healthproject.stanford.edu/koop/pitneybowes/evaluation.html, accessed July 17, 2008.
54 Spikoff, Martin, “Employers’ Stock in Wellness Rises With No End in Sight,” Managed Care, July 2006.
55 The following three paragraphs use information from: https://www.laborlawyers.com/showarticle.aspx?
Ref=list&Type=1119&Cat=3389&Show=9468, accessed August 23, 2007.
Purchased by Gwendolyn Whitfield (gwen.whitfield@gmail.com) on March 19, 2013
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