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Take Two Premiums and Call Me in the Morning...

By: Ron E. Peck, Esq.

A friend and ally in the health benefits industry recently asked me if I had an up to date listing of the most costly health care expenses paid by health plans in 2018.  I didn’t; so on a whim I brought up my handy dandy search engine and typed in: “the most costly health care expenses paid by health plans in 2018.”  You know what the top results were?  “Cost of Employer Health Coverage to Rise in 2019” … “Health Insurance: Premiums and Increases” … “How to Find Affordable Health Insurance in 2018” … and other, similar articles focused on what individuals will pay in premium (and in some instances, even dissecting co-pays, deductibles, and co-insurance).  The common thread?  They are all about participant out-of-pocket expenses.  I didn’t ask how much it costs to obtain insurance.  I asked how much it costs to obtain an appendectomy!

This is just a most recent example of an issue that sticks in my craw like no other, and reminds me of something I wrote years ago.  Check this article out: https://moneyinc.com/affordable-health-insurance-is-not-affordable-health-care/.

“… too many people are confusing the term ‘health care’ with ‘health insurance.’ … Health care – meaning the actual act of caring for someone’s health – is necessary for survival. Health insurance – meaning a method by which we pay for health care – is just that; merely a means to pay for health care. Yet, a few years ago (2009 to be precise), a report posted by the American Journal of Public Health indicated that nearly 45,000 deaths are annually associated with a ‘lack of health insurance’ and that uninsured, working-age Americans have a forty percent higher risk of death than those with private insurance.  The knee-jerk reaction to this news is likely (and likely was) to rush to provide health insurance to as many people as possible. Indeed, according to this report, health insurance saves lives. Furthermore, one could argue, if saving lives is health care, and health insurance saves lives, then health insurance is health care, and your author has proven himself wrong.… As stated before, however, health insurance is a method by which we pay for health care. It stands to reason, therefore, that it is not a lack of health insurance that kills people, but rather, it is a lack of means by which to pay for health care that kills people. This, then, leads us to a logical conclusion; the problem is not that we don’t have insurance … the problem is that we can’t pay for health care without insurance. This, then, leads to the next logical thought: why is health care so expensive?”

Go back and re-read the first paragraph of this blog post.  Sadly, I fear my words published two years ago apply as much today as ever.  Enjoy this blast from the past for Throwback Thursday, and let me know if you think we’ve advanced at all since then.


Patient Assistance Programs: Friend or Foe?

By: Brady Bizarro, Esq.

Prescription drugs are some of the most costly benefits for any health plan, especially for those plans that are self-funded. In 2017, total spending on prescription drugs in the U.S. reached $453 billion. Specialty drugs are particularly culpable, accounting for more than one third of all drug expenditures in 2016 despite making up less than one percent of all written prescriptions. In May, the Trump administration released a forty-four-page blueprint for executive action on prescription drug prices, entitled “American Patients First.” The document contained many strategies for combating rising drug costs; but it also focused in on the use of patient assistance programs (“PAPs”) and considered whether they might be driving up list prices by limiting the transparency of the true cost of drugs to patients.

Plan sponsors originally utilized the typical tools available to them to try to offset the cost of specialty drugs: higher copayments, coinsurance, and deductibles. In an effort to mitigate the impact on patients, several pharmaceutical manufacturers developed PAPs to help offset patients’ out-of-pocket drug costs. Some of these programs are very generous. For example, a PAP run by Enbrel offers up to $660 per month toward the cost of a specialty drug for members who would not otherwise qualify for financial assistance.

Assistance programs are marketed as a kind of altruism for patients, which has great public relations benefits. They can also increase the demand for specialty drugs, even when generic alternatives are available. This results in a huge cost to the patient’s health plan. Consider the following scenario: a specialty drug’s list price is $10,000. A generic alternative is available that has a list price of $2,000. The health plan imposes a $500 copay for specialty drugs when generics are available and a $100 copay for generics. In this case, however, the specialty drug manufacturer offers the patient a $450 copay card. For the patient, the out-of-pocket cost for the specialty drug is $50 cheaper than the copay for the generic alternative. The patient chooses the specialty drug, and the health plan pays $9,500. Had the patient selected the generic alternative, the plan would have only paid $1,900.

As the scenario above reveals, PAPs can incentivize patients to choose specialty drugs even when cheaper, generic alternatives are available. For most patients, the only price they are aware of is the amount they pay at the register. The cost to their health plan remains hidden to them, although they eventually feel the effects downstream. In other words, PAPs can save patients money on the front end while driving up the cost to patients on the back end through increased premiums and cost-sharing. With PAPs now in the crosshairs of both plan sponsors and the Trump administration, we should expect new regulations on their use in the coming months.


An Addiction to Health Insurance

By Ron E. Peck

From June 4th to June 6th we hosted The Phia Group’s Most Valuable Partners at our annual MVP Forum.  This year, it took place at Gillette Stadium, located at Patriot Place in Foxboro, Massachusetts – home of the New England Patriots.  I personally love the Pats, and have been a huge fan since I was a pre-teen growing up in a suburb of New York; (ask me to explain it someday, and I will do so happily).  Likewise, company co-owner and CFO, Mike Branco, is a huge fan.  The other co-owner and CEO, Adam Russo, however, is not a fan – and by that, I mean he hates the team.  Yet, we can all agree the venue, people, and event were exceptional.  Above all else, however, I think the guests are what made the event such a success.  Speaking of guests, one guest in particular volunteered to act as a presenter; (in fact, he was the only non-Phia Group speaker).  That gentleman is Jeffrey S. Gold, MD, of Gold Direct Care; a direct primary care provider located in Marblehead, MA (http://golddirectcare.com/).  Amongst the many interesting things Doctor Gold presented, one thing he mentioned that really struck home for me is that we – as a nation – have an addiction to health insurance.  Wow. 

I took this to heart, and recently asked a newly hired employee of The Phia Group the following series of questions:  “Do you own a car?  Yes.  Do you get oil changes, and fill the gas tank?  Yes.  Are you going to have a car accident?  Uh… I don’t know.  I hope not.  Maybe?  Do you have auto insurance?  Yes.  Will auto insurance pay for the oil changes?  The gas?  No.  Will they pay for the accident?  Yes – that’s what it’s for.  Ok.  Do you get a flu shot every year?  Yes.  A physical; a regular check up?  Yes.  Do you routinely purchase a prescription drug?  Yeah… Are you going to be diagnosed with cancer?  Oh man.  I hope not!  Me too!  But… answer the question.  I don’t know.  Ok; are you going to break a leg?  Maybe?  I don’t know.  What does health insurance pay for?  Uh… all of it.  If auto insurance only pays for unforeseen, but admittedly costly risk, and lets you pay for the routine, foreseeable stuff… why does health insurance pay for everything?  I don’t know.  Wow.  Good question.  Uh huh.  And if the gas station charged $50 a gallon, would you still fill your tank, or go to the competition?  I’d go elsewhere.  That’s nuts.  Ok… So why do you pay $50 for a tissue box when you go to a hospital?  Uh… I don’t.  Health insurance does.” 

This exchange encapsulates one of the issues driving the cost of healthcare through the roof.  Health insurance isn’t insurance.  It’s a community funded piggy bank that we use to pay for everyone’s healthcare – foreseeable and not.  Because some people’s care is more costly than others, but they can’t afford to pay their pro-rated share, everyone needs to chip in something extra to pay for those people.  Frankly, I morally don’t have an issue with that.  I understand the value of everyone pitching in to lift up society in general.  Furthermore, that person in need could be you, or someone you love, with the snap of a finger.  So I see the need.  My issue is that the concept – collecting funds from everyone to care for a society’s need – is by definition, a tax.  The fact that we’re forcing that square peg through the round hole of private insurance is foolish.  Insurance was invented to shift unforeseen (and unlikely) but extremely costly risk onto an entity willing to gamble that the loss won’t occur, but who can afford the hit in the unlikely scenario that it happens.  Forcing a private entity to pay for foreseeable, absolutely certain events – without adequately funding them – is just passing the buck in its worst form.

Furthermore, by removing the consumer of healthcare from the exchange, the person picking the care has no incentive whatsoever to consider price when assessing providers of the good or service.  It’s unnatural not to balance cost against benefit.  When a young male lion wants to mate with a female, but first he needs to defeat the alpha male of the pride, he has to weigh the cost against the benefit.  If that lion had insurance akin to our health insurance, he’d be chasing every female he sees – after all, his insurance will fight the alpha male for him, right?  Isn’t that what insurance is for? 

For too long insurance has been treated as a shield, blinding people from the cost of their care.  I don’t begrudge providers of healthcare their profits; as someone with my own medical needs, and whose family has had its share of health issues, I value our nation’s providers above all others.  I think, however, that the system – as currently constituted – does no one any favors.  Providers who achieve maximum effectiveness and quality of care should are able to charge less for their services, while those who are routinely wasteful or fixing their mistakes, need to charge more for the same services.  As with the competing gas stations, so too here, we need to reward the provider that can do more for less, and the first step in doing that is to shake our addiction to insurance.  Until people see how the cost of care ultimately trickles down to their own pocket, they won’t care enough to pick the better options.


The Fax Machine and a Lesson in Incentives

By: Brady Bizarro, Esq.

Let’s face it: fax machines are horrible and outdated. From busy signals to unreadable printouts to incorrect destinations, it is no wonder most industries abandoned them last century. In our industry, which deals extensively with providers, it’s the primary way to communicate. Understanding why can give you a glimpse into the broader problems with healthcare policy in this country today; a misalignment of economic incentives.

Almost all providers have digitized their own patient records. This was done largely thanks to the Obama administration. In 2009, as part of the stimulus bill, the government passed the Health Information Technology for Economic and Clinical Health Act (the “HITECH Act”), which included nearly $30 billion to encourage providers to switch to electronic records. Statistics reveal that the number of hospital systems using electronic records went from nine percent in 2008 to eighty-three percent in 2015. So far so good. So, what went wrong? Why is the fax machine still the primary way doctor’s offices communicate?

The issue is not digitizing records: the issue is sharing them. When doctors want to retrieve patient records from another doctor’s office, they turn to the fax machine. They print out records, fax them over to the other provider, and that office scans them into their digital system. Needless to say, this is inefficient, and a misreading of economic incentives is to blame.

The government, at the time, assumed that providers would volunteer to share patient data amongst themselves. This data, however, is considered proprietary and an important business asset to most providers. If other hospital systems could easily access and share your medical record, you could more easily switch providers. Switching providers may be a good thing for a patient who is shopping for better value care, but most providers perceive this ability as a threat to steerage. After all, hospital systems compete with one another for steerage.

As in the case of other healthcare policy problems, chief among them out-of-control spending, doctors, nurses, patients, lawmakers, everyone is frustrated; yet, a solution has thus far been out of reach. The proposed solutions divide policymakers among ideological lines as is often the case with healthcare spending: some feel that more government regulation is needed; others feel that fewer regulations are needed. The Trump administration has so far proposed deregulation in this area and giving patients more control over their own medical records. This is one of the four priorities recently accounted by the Department of Health and Human Services (“HHS”). Time will tell if this approach will finally lead to the demise of one of the most despised pieces of technology in medicine.


Massachusetts on Track to Pass a Significant Cost Containment Bill
By: Brady Bizarro, Esq.

Massachusetts, like Phia, is a cost-containment leader and on the front lines of the battle to contain health care costs. Last month, Massachusetts State Senators proposed a comprehensive reform bill focused on health care cost containment, specifically focusing on prescription drug prices and hospital costs. They, along with the Millbank Memorial Fund, spent the past year looking at what other states have done to try and curb health care costs. This bill was addressed last at the state’s Massachusetts Association of Health Plans (“MAHP”) conference by Senate President Stanley Rosenberg (which I attended). The report’s recommendations reveal that the Commonwealth is moving toward adopting many of the cost-containment strategies we already recommend to our clients, including: increasing the use of alternative payment methodologies, encouraging value-based choice, increasing consumer awareness, and mitigating provider price variation.

Unsurprisingly to our industry, the state identified pharmaceutical drug costs as a significant driver of rising health care costs. The bill empowers state agencies to conduct additional oversight of drug manufacturers and pharmacy benefit managers (“PBMs”). Notably, pharmacists would be required to inform consumers if a prescription’s retail price is less than they would pay through insurance, and to charge them the lower price. Drug manufacturers and PBMs are required to report drug pricing information to the state’s Health Policy Commission (HPC).

With regard to reigning in hospital spending, the bill aims to reduce unwarranted price variation among hospitals, out-of-network billing, and hospital readmissions. The state’s idea is to set the benchmark for readmissions at 20% for 2017-2020 and to disincentive out-of-network billing by establishing an upper limit for the non-contracted commercial rate for both emergency and non-emergency out-of-network services.

The Senate is expected to vote on this bill before the holiday recess begins on November 15th. If the bill passes the upper chamber, the debate would move to the Massachusetts House of Representatives, which could make significant changes. We will be monitoring the progress of this legislation.


Natural Disasters (Hurricanes Harvey and Irma) - Don’t Let Them Wreak Havoc on Your Health Plan

By: Kelly Dempsey, Esq.

The last few weeks have been difficult for several states and U.S. territories.  Hurricanes Harvey and Irma have caused significant flooding and damage.  In addition to the loss of power, many people are homeless and corporations/employers are without a place to conduct business.  Depending on the level of damage, it may take a long time for different areas of the country to rebound and rebuild.  Chances are that employee benefits, specifically the health plan, are the last thing on employers’ and employees’ minds, but there are some very important considerations.  So what do Hurricanes Harvey and Irma mean for employers, employer sponsored health plans, TPAs, and employees?  

Self-funded health plans are required to comply with various federal laws that carry different responsibilities including, but not limited to, ERISA, COBRA, FMLA, HIPAA, and the ACA.  These federal laws come with a wide array of notice requirements and time frames for processing claims and appeals and other requests for documents or information.  As such, the Department of Labor and the Department of Health and Human Services (collectively referred to as “the Departments”) have issued press releases and bulletins that provide general guidance and limit exposure to penalties.  These press releases were specifically issued after Hurricane Harvey; however, it’s likely that additional releases will be issued to address Hurricane Irma.  Below are links to important press releases; however, the following is one of the key summary statements:

The guiding principle for plans must be to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time-frames.

Health plans and their supporting vendors will likely need to review situations on a case by case basis to determine what is reasonable for each plan and employer.

If you’ve listened to any recent Phia Group webinars, presentations or podcasts, or read our blog or published articles, you already know we’ve been focusing on leaves of absence and gaps between handbooks and plan documents.  You’re probably thinking, “Yes, I know, so what’s your point?”  With all the damage to homes and job sites, it is possible employees may seek leaves of absence and/or employees will ask questions about existing leaves of absence and how the leave is impacted if an employer ceases operations.  While FMLA is generally not available for employees to use as time off to attend to personal matters such as cleaning up debris, flood damage, home repair, etc., FMLA may come into play if an employee or their family member suffers a serious health condition as a result of the hurricane.  For those employees that were already out on FMLA, if an employer ceases operations, the time operations are stopped would not count towards FMLA leave.  As always, FMLA and other leave situations should also be reviewed on a case by case basis.   

In summary, the Departments have issued guidance specifically related to Hurricane Harvey; however, we anticipate additional guidance associated with Irma as well.  The bottom line is that employers, health plans, and applicable vendors will need to act reasonably when administering the health plans (i.e., processing claims and appeals, issuing notices such as COBRA notices, etc.) and take into consideration the locations and entities that were impacted and allow grace periods or other relief as applicable.

Important Press Releases and Relevant Guidance:
- U.S. Department of Labor Issues Compliance Guidance For Employee Benefit Plans Impacted by Hurricane Harvey
- Secretary Acosta Joins Vice President Pence in Texas
- FAQs for Participants and Beneficiaries Following Hurricane Harvey
- Hurricane Harvey & HIPAA Bulletin: Limited Waiver of HIPAA Sanctions and Penalties During a Declared Emergency


A House Divided
By: Ron E. Peck, Esq.

In the world of self-funding, everyone plays a role.  The broker advises, the employer customizes their plan and funds it, the claims administrator (TPA, ASO, etc.) processes claims, and stop-loss provides financial insurance.  When the lines get blurred or we start asking people to do the jobs of others, we either create new opportunities or destroy the foundation.  It all depends upon whom we’re asking, what we’re asking them to do, and whether they are stepping on any other toes when so doing it.

Consider, for instance, when a benefit plan asks its stop-loss carrier whether they should or shouldn’t pay a claim.  Stop-loss is not health insurance.  It is a form of financial reinsurance.  Health insurance receives medical bills, processes the claims, and pays medical service providers for care rendered to insured individual patients.  Stop-loss allows others to handle the “health insuring,” and instead provides protection to such health benefit plans against debts – incurred by those benefit plans – when payable claims exceed a deductible.  They despise it when a plan asks them whether the plan should pay or deny a claim.  They don’t want to be the fiduciary, or deemed responsible for wrong payment decisions.  They aren’t paid to make such decisions, or incur such exposure.  As such, most stop-loss carriers have traditionally told the plan that they (the carrier) cannot make the call, and that the plan will have to comply to the best of their ability with the plan document.  That, when the claim is submitted for reimbursement to the carrier, only then will they judge the payability.

The problem?  Some carriers want to have their cake and eat it too.  They won’t tell the plan what to pay and what to deny, but they will happily criticize the plan’s decisions after the fact.  Again – let me stress that I’m talking about a minority of carriers.  These very few can ruin the reputation of an entire industry, however, and that is why it is so important to address this growing problem.

With increasing frequency – a lack of communication or presence of conflicting interpretation is resulting in stop-loss and benefit plans disagreeing regarding what is payable, how much is payable, and thus – what is covered by stop-loss.  Even more tragically, the growing number of disputes between plans and stop-loss carriers is leading to an increased number of claims paid by benefit plan sponsors that are not reimbursed by stop-loss, resulting in employers enduring negative experiences with self-funding, financial ruin, and legislative scrutiny.

For instance, a plan document may define the maximum payable rate as “usual and customary,” and define that as being a number calculated by reviewing what most payers pay.  The plan takes that to mean “private payers,” while stop-loss includes Medicare as a “payer” when calculating the payable rate.  Or, perhaps the plan applies usual and customary only to out of network claims – choosing to pay per a PPO network contract whenever possible, but stop-loss interprets the term “maximum payable” to apply to all claims – in and out of network; arguing further that the plan document controls the plan, and stop-loss only insures the plan.

The number of claims I’ve seen independently audited by the carrier, resulting in the carrier chopping away at the amount paid by the plan – in an effort to define what they feel is the “payable” amount – and the resultant conflicts will not benefit the industry.  When a self-funded employer who sponsors a self-funded plan, also uses a PPO (to avoid balance billing of their members), and that plan pays $100,000 in “discounted claims” … they expect stop-loss to pay everything paid beyond the $60,000 deductible; a refund of $40,000.  It is, after all, why they pay for stop-loss, and is something they depend upon to self-fund.  Imagine, then, when the carrier “reprices” the $100,000 using Medicare,  and decides no more than $10,000 should have been paid… well short of the $60,000 deductible.  They may even go so far as to “advise” the plan to ask the provider to refund $90,000 to the plan.

This employer will point a finger at their broker, their TPA, and stop-loss.  Taking the carrier’s advice to heart, and challenging the outrageous provider bills and/or PPO terms is the last thing they are going to do.  The sooner we realize this form of “tough love” doesn’t work, and ultimately only provides fuel for politician’s anti-self-funding rhetoric, the better.

To address this issue, it behooves both the plan (and its TPA) and stop-loss to examine the plan in its entirety during the underwriting process.  What do I mean by “entirety?”  The plan document is not enough.  A plan is more than an “SPD.”  It is also the network contracts, employee handbooks, and any other document or obligation that dictates how the plan will actually be administered.  Only by laying all of those cards on the table ahead of time and agreeing collectively how the plan will be administered in all such circumstances can disputes like the ones I described be addressed before real money is at stake.


Altogether Now… But Not a Single Payer
By: Ron Peck, Esq.

I have in the past remarked both that a single payer system would be harmful to patients and providers, and that it therefore behooves providers and benefit plan administrators to collaborate on an approach that ensures long term sustainability and viability of private benefit plans.

In response, I have been asked why a single payer system is bad for providers and patients, as well as why the current benefit model is not sustainable or viable long term.  While fully responding to both of these inquiries requires way more real estate than I have here, I hope in this blog entry to briefly explain.

WHY THE STATUS QUO CANNOT CONTINUE

I was recently asked to speak about our healthcare system.  I’d planned to talk about how PPACA (aka the ACA or Obamacare) only targets one-third of the healthcare system – that being payers (insurance), while mostly ignoring the other two-thirds: payees (providers) and patients.  

When I performed a web search to find pictures of the three for my slide deck, (insurance, providers, and patients), almost all of the available stock photo images associated with each were as follows: Provider; a wise, grey haired, caring doctor gently comforting a sick child – someone we could trust.  Patient; a desperate looking otherwise average person, clearly in pain and needing help – someone we could relate to.  Insurance; a sleazy looking businessman in a fancy suit, with a slick grin and pockets full of cash – someone we could hate.

Call it a scapegoat, or something else, but of the three players in healthcare, insurance is the villain.  Small wonder, when you consider that they are the ones that employers blame when rates go up; they are the ones siphoning salary from your paycheck; and they don’t provide anything useful.  I mean – providers save lives.  Insurance ruins them, right?  Insurance profits off of others’ suffering, right?  Insurance can charge whatever they want because the alternative is death, right?  Wrong.

Health insurance is routinely ranked beneath the pharmaceutical industry, medical products and equipment, and even some hospital systems, when it comes to profitability; (https://www.forbes.com/sites/liyanchen/2015/12/21/the-most-profitable-industries-in-2016/#12b660035716).  Now – I understand that “profit” means your revenue to cost ratio is great… and that it’s absolutely possible that insurers are taking in way too much revenue, and simply fail to address costs (resulting in poorer profits), but regardless of the reason – the national belief that insurance is printing money, is misplaced.

As I’ve said many times before, insurance isn’t healthcare – it’s a means to pay for healthcare.  This idea that insurance can strong-arm people into paying whatever they want, because people can’t say no – because not having insurance means certain death – assumes that without insurance there is no healthcare.  Yet, the truth is that healthcare would exist with or without insurance; we’d just need to find a different way to pay for it.  People “need” insurance – not for its own sake – but to pay for healthcare, because healthcare itself is too expensive.  

Imagine the following scenario:  Oil changes for your car jump to $1,000 per oil change.  Rather than be outraged with the price, we turn around and demand that auto insurance start paying for it.  We then get outraged when auto insurance rates increase.

Insurance isn’t without blame.  Indeed, I believe strongly that some forms of benefit plan are the only types that should be allowed to exist; that others are too profit driven, and/or force insureds to pay the cost when they make mistakes or act inefficiently.  Yet, with that said, blaming those actors (even the bad ones) for all the problems facing healthcare is a huge mistake.

Health insurance is not a behemoth, stomping around, forcing its will on insureds and providers.  In fact, the opposite is true.  Problems with the status quo arise not from the strength of the insurance market, but rather, their weakness.  This weakness, which we’ll next dissect, would be abolished by a single payer system – at the expense of medical service providers.

Presently, insurers (try to) negotiate with hospitals and drug companies on their own.  To do this, many rely upon preferred provider organization (PPO) networks or other such programs, whereby someone (the insurer itself or a network acting on a plan’s behalf) negotiate deals with providers, which then allows the provider to be deemed “in network.”  

In exchange for agreeing to the network terms, providers are promised prompt payment, and reductions in (or elimination of) audits and other activities payers otherwise engage in when dealing with medical bills submitted by out of network providers.  Indeed, benefit plans unilaterally calculate what the covered amount is when paying an out of network provider (usually resulting in the “balance” being “billed” to the patient).  When paying an in-network provider, however, benefit plans are required to pay the network rate (the billed charge minus an agreed upon discount), regardless of what pricing parameters they’d usually apply to out of network bills.  This is agreeable to the payer, meanwhile, because it means they get a discount (albeit off of inflated rates), and – more importantly – the payment is payment in full… meaning patients aren’t balance billed.

Due to the payer’s size (or lack of size) and number of payers present, competition between payers and networks, and other elements present in our market, payers cannot “strong arm” providers.   Compare this to markets where there is a single payer; when providers must agree to terms controlled by the payer, since it’s their way or no way.  

In other words, in a pure single-payer system, there is only one payer available – and you play by their rules, or you don’t play at all. Currently, in the United States, Medicare and Medicaid are the two “biggest” payers, and thus, it should come as no surprise that they routinely secure the best rates.

So – when you ask why the current system can’t survive, look at the prices.  Yes – instead of focusing on getting everyone enrolled in an insurance plan, and hoping that will somehow make things less expensive, instead look at what we’re actually paying.  As with the $1,000 oil change, sometimes the simplest answer is the right answer.  Healthcare is too expensive because healthcare is too expensive.

A 2011 study (http://content.healthaffairs.org/content/30/9/1647) found that reimbursements to some US providers from public payers, such as Medicare and Medicaid, were 27% higher than in countries with universal coverage, and their reimbursements from private payers were 70% higher.  This tells you two things – private plans pay way more than Medicare, and Medicare pays way more than “single payer systems.”

What does this mean?  If providers fail to offer private payers better rates soon, they will bankrupt the system.  If that happens, Medicare will go from being the “biggest” payer to the “only” payer… and the rates they pay will drop accordingly.  This then, brings us to the next chapter…

THE ISSUES WITH A SINGLE PAYER

Businesses need to stay profitable to stay afloat, and medical providers are no different.  In a single payer system, usage increases (because – from the “consumer” perspective [aka patients] it’s free), and reimbursement to providers decreases (for reasons discussed above).  That means providers are expected to do more with less.  Naturally, this results in decreases in quality, and longer waiting times (assuming access is available at all).  

To counter this natural shift, many nations with single payer systems also implement strict central planning.  This moves many healthcare choices from individual patients and providers, and instead allows the government to set the rules.

Months to have a lump examined?  Hours upon hours sitting in a waiting room?  Death panels?  The “horror” stories we hear from other nations with single payer systems are not shocking – they are expected.  Yet, those who support a single payer system do so because the current system is too expensive.  Thus, to avoid a single payer system, we need to make healthcare less expensive.  How do we do that?  Reduce the cost of healthcare, and reduce the cost of health insurance accordingly.

IDEAS FOR THE FUTURE

First, many have argued (and I tend to agree) that health insurance pays for too many medical services.  Routine, foreseeable services should not be “insured” events.  Insurance is meant to shift risk, associated with unforeseen catastrophic events.  A flu shot doesn’t fall into that category.  If people paid for such costs out of their own pocket, hopefully the cost of insurance would decrease (adding cash to the individual’s assets with which they can pay for said expenses).  Likewise, hopefully providers would recognize that people are paying for these services out of their own pockets, and reduce their fees accordingly.  If an insurance carrier wanted to reimburse insureds for these expenses (promoting a healthy lifestyle and avoiding some catastrophic costs insurance would otherwise pay) or employers want to cover these costs as a separate and independent benefit of employment (distinct from health insurance) so be it; (cough*self-funding*cough).

Next, we need to refocus on primary care as the gatekeeper.  I’ve seen a movement towards “physician only” networks, direct primary care, and other innovative methods by which benefit plans and employers promote the use of primary care physicians, and I applaud the effort.  They provide low cost services, identify potential high cost issues before they multiply, and steer patients to the highest quality yet lowest cost facilities and specialists when needed.

Lastly, I’ve seen benefit plans attempt to remove themselves from traditional “binding” network arrangements and instead contract directly with one or two facilities in a given geographic area.  By engaging with the facility directly, they can find common ground, and identify valuable consideration not previously considered.  Between increased steerage, true exclusivity, electronic payment, prompt payment, dedicated concierge, and other services payers can offer hospitals – above and beyond dollars and cents – some facilities are able to reduce their asking price to a rate that will allow the plan to survive… and thrive.

From ACOs to value based pricing… from direct primary care to carving out the highest cost (yet rarest) types of care – to be negotiated case by case – many innovative payers are trying to cut costs and ensure their survival.  The next step is getting providers to agree that such survival is good for the provider as well.  Compared to the alternative, I hope they will not cut off their noses to spite their faces.

Behind Closed Doors
By: Brady C. Bizarro, Esq.

Anyone paying attention to national politics in the past six months knows that Washington has a problem with leaks; leaks from the White House, leaks from the intelligence community, and unsurprisingly, leaks from Capitol Hill. While many of these leaks come from “anonymous” sources and some are later debunked, they can be extremely damaging to both administration officials and lawmakers. Leaks, however, are not typically an issue in the legislative process. This is because, although legislation is not usually made public until it reaches a congressional committee, Congress routinely holds public hearings, meetings, and roundtable discussions after introducing legislation that could have a significant impact on domestic policy. This time around, however, Republican leaders have chosen to write their health care bill behind closed doors, and that decision should worry employers, insurers, and providers alike.

Back in March, the Washington Post reported that the House bill to repeal and replace Obamacare was being kept secret in an undisclosed room in the U.S. Capitol. This led Republican Senator Rand Paul (R-Ky) on a rather public quest to find the bill and to demand that his House colleagues show him the secret draft. Eventually, a draft leaked to the press, causing Republicans significant grief and making the task of passing the legislation that much more difficult. The Senate has also chosen secrecy, opting not to hold any public meetings on their version of a repeal and replace bill. The strategy seems to be to wait until the Senate has enough votes to pass the bill before unveiling it. Unsurprisingly, an outline of that bill emerged last week and is now causing Senate Majority Leader Mitch McConnell (R-Ky) many headaches.

According to the leaked outline, the Senate bill requires insurance companies to offer coverage to people with preexisting conditions and, unlike the House bill, it prohibits them from charging sick people higher premiums. The outline still permits states to seek waivers that would permit insurers to decide not to cover essential health benefits. This effectively means that insurers can reinstate lifetime and annual limits on coverage since the ban on limits applies only to essential health benefits. Finally, the outline reveals that heavy cuts to Medicaid are still planned, but are pushed out a few more years. In short, these changes represent a compromise between hardline conservatives who want a full repeal of Obamacare and moderate Republicans who are concerned about the impact on low-income Americans and those with pre-existing conditions.

Since we do not know for sure what the final bill will look like, it is futile to try to assess its impact on the health care industry as a whole and on the self-insurance industry in particular. Still, one conclusion we can draw is that the legislative strategy at play is creating substantial uncertainty for our industry. When the Affordable Care Act was being passed, Democrats held public hearings involving industry experts, advocacy groups, and other key stakeholders. While the bill was far from perfect, at least interest groups got the chance to give their input and to discuss their concerns in an open forum. By writing their health care reform bill behind closed doors, Republicans are making themselves susceptible to leaks and to charges that they shut key stakeholders out of the process. It remains to be seen if this strategy is more or less likely to produce a bill that works for the health insurance industry and the American people.

It's Never Too Soon
By: Jen McCormick, Esq.

Although the regulations may change, it's important to begin thinking about plan changes for the upcoming plan year.  The specifics for compliance requirements may still be unclear, employers should already be in process of contemplating cost containment updates.

There are many ways to add value to an employee health benefit plan. An employer should perform an annual review of their plan to confirm that the plan takes advantage of as many cost containment opportunities as possible. For example, does the plan have strong third party recovery language? Overpayments language? Clearly defined terms? Appropriate definitions? Vendor program with corresponding language? If not, the plan should be cognizant of what's missing or not working, so updates can be made.

In addition to cost containment, and while some rules are in flux, there are many regulatory requirements a plan must be aware of and having corresponding language. For example, is the employer subject to ACA Section 1557? Employer Mandate? Does the plan comply with the MHPAEA? Did the plan pick a benchmark for defining essential health benefits? With all the regulatory changes, plans should stay alert and ready to make renewal modifications.

Last, but definitely not least, employers should ask their employees to weigh in on the plan. Remember it's an employee benefit to offer coverage - so employers should be offering beneficial coverage.  For example, is there a specific service that many employees wish was covered? Could that be added to the plan? Is there a trend in services for employees for which you may want to offer an incentive?  Being self funded allows you to be creative - take advantage!

Plans have freedom to design benefits to suit their needs. With this privilege comes the need to plan ahead and be creative.  Employers should be proactive and ensure this opportunity to annually update the plan design is taken seriously!