Employers find that offering more health-care benefits saves them money. Here's how you can benefit.

JACK LALLI, 60 years old, suffers from diabetes and chronic heart disease. In 2000, he suffered a heart attack during a knee operation. Two months later, he had needed bypass surgery. His heart didn't recover as robustly as his doctor hoped, and Lalli was forced into early retirement. "It was hard to do anything that put physical strain on the body," he says.

Today, Lalli feels relatively healthy. He has learned how to deal with his chronic conditions ably, thanks to a disease-management program provided by Blue Cross Blue Shield of Minnesota. The company assigned him a nurse who monitors his weight and blood pressure, consults with him after his many doctor appointments and even sends him helpful information about his conditions. Perhaps most important, she has taught him that it's OK to question his physicians and take control of his own care. "I now have no qualms (about) questioning my doctors on anything," Lalli says. "I press them for good answers."

Don't be surprised if your health plan starts offering a similar benefit. By 2005 some 60% of large employers are expected to roll out what the industry calls disease-management programs, according to consulting firm Hewitt Associates. This is up from 39% in 2003.

Why such a high adoption rate? It boils down to simple arithmetic. Ten percent of the work force drives 70% of total health-care costs, while half of all employer costs are incurred by people with chronic conditions, according to Hewitt Associates. If employees and dependents with such conditions were managed appropriately to reduce high-end episodes of care, such as visits to the emergency room, the employer costs would go down significantly, the consulting firm says.

How much might employers save? Leading disease-management provider American Healthways guarantees that its clients will break even on their upfront investment after just 18 months. Companies can then expect to save an annual 2% to 3% in total medical cost spending (Cigna, an American Healthways client, saved 6% last year), and three times as much on indirect costs, such as employee absenteeism and productivity. Disease-management programs can even chip away at the rate of medical inflation by slowing premium increases by as much as 5%. So by spending a little more on the front end, companies are finding they're saving much more on the back end.

"You can only cost-shift, ratchet down benefits and switch health plans so much," says Diana Scofield, a health-care consultant with Towers Perrin. "There have to be other innovative ways to address the rising cost of health care."

More and more employers are starting to believe that a disease-management program isn't a benefit that would be nice to have but something that they must have, says Mary Harrison, director of health and welfare consulting at consulting firm Mellon Financial.

How do they work? Providers use computer algorithms to search through claims data and prescription records for patients who suffer from chronic conditions. Someone who's taking medication for diabetes, for example, would pop up during the screening process. Candidates are then sent a letter with information about the program to their home. A few weeks later, a case manager follows up with a phone call and asks the member if he or she is interested in participating in the program. Disease-management programs are completely voluntary.

Participants often find they receive the Cadillac of health-care service. They're assigned their own personal nurse whose job it is to act as health coach and advocate. Good ones even recommend some patients see costly specialists — something the average health plan certainly doesn't encourage.

Alison Conyea, a disease-management case manager with First Health, recently did just that. She was assigned a five-year-old with asthma who, over a span of a few months, had gone to the emergency room several times. In just one phone call, she was able to diagnose the problem: The little boy wasn't receiving coordinated care. The family had recently moved into the area and hadn't yet chosen a primary-care physician. Whenever there was a problem, the mother rushed her son to the emergency room.

Conyea took control of the situation. She recommended the child see a pediatric pulmonary specialist and helped the mother find one who was in her network. She then found a primary-care doctor for the boy and educated the family on how to manage asthma more effectively. She even taught the mother how to read a peak flow meter to monitor her son's breathing. This turned into a winning situation for everyone: The child is doing better and hasn't been back to the emergency room since. And although seeing a specialist can be expensive, perhaps $200 a visit, it's far cheaper than a trip to the ER.

Since offering its disease-management programs, Cigna has found that its members are requiring fewer costly hospital stays. The health plan has seen an 18.8% reduction in hospital visits for its asthma patients, 14.9% for diabetics and 16.3% for those suffering from heart disease. And 92% of diabetic patients and 90% of cardiac patients surveyed say the program has helped them manage their disease more effectively.

While some patients worry about Big Brother watching over them, experts agree that there's little reason to worry about privacy. Thanks to patient privacy laws, it's illegal for a disease-management provider to pass along any information to one's employer, says Towers Perrin's Scofield.

If better health isn't enough to convince people to participate, here's one more reason: their bottom lines. During the past year, many Americans have seen rising health-care costs minimize or even wipe out expected pay increases. This is one way people can try to stop the hemorrhaging.