Free & Clear banks on healthy savings
As one of the largest for-profit providers of tobacco-addiction treatment, Free & Clear measures its success in both lives and dollars...
Seattle Times business reporter
As one of the largest for-profit providers of tobacco-addiction treatment, Free & Clear measures its success in both lives and dollars.
Flat-screen monitors in the company's new downtown Seattle call center display a real-time count of "lives helped today" — 136 on a recent morning.
But beyond touting health benefits to individuals, Free & Clear plays up the cost savings that businesses can achieve when workers quit.
Big employers are increasingly interested because "tobacco treatment is the low-hanging fruit in health-care cost savings," said President and Chief Executive Tim Kilgallon.
The federal Centers for Disease Control and Prevention says helping workers quit is "the single-most cost-effective health-insurance benefit" an employer can provide.
While it's hard to see those dollars on the bottom line, companies such as Microsoft are convinced they are real.
"We won't see that obviously in year one, but we hope to see that in subsequent years as people quit smoking," said Tom McPherson, senior benefits manager at Microsoft, which began offering Free & Clear's program to employees Jan.1. "We believed in the business case as far as ultimately achieving cost savings."
Free & Clear
The company was spun off from Group Health Cooperative as a for-profit company in November 2003.
What it does: Provides counseling and support, primarily over the phone, for people trying to stop smoking. It operates the state's free quit line.
Employees: 300 total, including 200 tobacco-cessation counselors or "quit coaches."
Revenue: Now at an annualized rate of about $25 million, more than double 2004.
Smokers helped: The company has about 10,000 new enrollees a month. From one-quarter to one-third of those people are smoke-free a year later.
Funding: $10 million from Polaris Venture Partners, Three Arch Partners, and Kaiser Permanente. Group Health Cooperative retains a minority stake.
Source: Free & Clear
Revenue at Free & Clear more than doubled in the past year and is running at an annual rate of about $25 million. Executives say the company has positive cash flow and doesn't plan any capital infusions beyond the $10 million from venture capitalists two years ago.
Free & Clear was spun off from Group Health Cooperative in November 2003. It relocated this summer from Tukwila to two floors in Seattle's Wells Fargo Center.
Early this month, it will open its first branch office, a four-person operation in Hawaii, servicing the $1.2 million contract it landed to run the state's toll-free tobacco quit line.
The company has 15 such contracts with states including Washington and Oregon, representing about half of the company's revenue. The rest comes from more than 60 companies and health-insurance plans that buy Free & Clear's service.
Free & Clear's comprehensive stop-smoking program centers around one-on-one telephone counseling by its 200 "quit coaches." Kilgallon said it would cost an employer roughly $1,000, including both counseling and nicotine-replacement therapies, to put three employees through a typical Free & Clear program.
"On average, one of those three people is going to quit," he said.
The first time a smoker calls the quit line, a coach assesses his readiness to stop smoking and potential barriers to quitting. The coach helps the smoker develop a specific plan to quit, frequently including nicotine gum or other therapies, which the company sells via mail.
For some smokers, quit coaches recommend prescription medications such as bupropion, an antidepressant.
Throughout the 20- to 30-minute intake interview and subsequent calls, smokers get encouragement and motivation to quit. They're also mailed written support materials.
The number of follow-up calls depends on the severity of the smoker's addiction to tobacco and the level of coverage.
The tobacco-cessation program was developed by Group Health and Duke University, and has been studied and refined over 20 years, said Dr. Tim McAfee, Free & Clear's chief medical officer. It was among the first in the country to offer personal telephone counseling, now a widely used tobacco-treatment method.
Timothy Church, a spokesman for the Washington Department of Health, whose quit line has been run by Free & Clear since its launch in 2000, said successful counseling depends on providing accurate information and being available when smokers need help.
"Most of that can be accomplished over the phone," he said.
Washington's adult smoking rate dropped from 22.4 percent in 1999 to 19.7 percent in 2003. The state launched a comprehensive anti-tobacco strategy in 2000.
At least 70 percent of the roughly 45.4 million smokers in the U.S. say they want to quit. Those who do will live an average 10 years longer, with a lower incidence of several types of cancer, heart disease and other illnesses.
According to Free & Clear, getting one smoker to quit will save an employer $5,606 annually. The breakdown:
• $341 in reduced absenteeism (smokers are out sick 2.9 days a year more than nonsmokers and 1.6 days a year more than ex-smokers);
• $1,882 in time spent on smoke breaks (three breaks a day, 13 minutes a break);
• $1,760 in productivity because the worker is less likely to die prematurely;
• $1,623 in medical-cost savings.
But those savings may not be immediate, or permanent.
The CDC cites one study that found employers who help workers quit smoking will see benefits equal to costs after three years; benefits surpass costs after five years.
Also, if a worker quits smoking but later quits the job as well, the company's productivity benefits vanish too.
Kilgallon said that on a regional basis, at least, it could balance out when more employers and health-insurance providers offer smoking-cessation services.
None of the state's three largest health insurers gives an up-front decrease in premiums for large employers with smoking-cessation programs or smoke-free workplaces. Instead, premiums are calculated using an employer's claims history.
So an investment in smoking cessation would show up in employers' premiums over time as more workers stop smoking and their health-care costs drop.
The overwhelming majority of insurers do offer coverage of tobacco-cessation programs, a 2002 national survey found.
At Microsoft, tobacco treatment is one of several wellness programs offered free to employees. It's part of the self-insured company's effort to hold down health-care costs.
McPherson said Microsoft reviewed the market and requested proposals from several tobacco-treatment vendors before choosing Free & Clear. He described it as "head and shoulders above" the competition.
Free & Clear faces competition from a handful of other for-profit tobacco-cessation services, including QuitNet.com, associated with the Boston University School of Public Health, as well as nonprofits such as the National Jewish Medical and Research Center in Denver, which has contracts for four state quit lines.
Kilgallon said that as the company expands with new locations, perhaps in the Midwest or East, the challenge will be to maintain the quality of its service.
Free & Clear intends to accomplish that by adding a Web-based complement to its phone-counseling service, and technology that will allow its quit coaches to work from home.
"Both of those initiatives should help us to continue on the same growth trajectory that we're on today," Kilgallon said.
Benjamin J. Romano: 206-464-2149 or email@example.com
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