COVID-19 and the Uncertainties for 2021 Health Plan Premiums

By Clive Riddle, June 12, 2020

What will COVID-19 do to next year’s health plan premiums? The American Academy of Actuaries have just released a new issue brief, Drivers of 2021 Heatlh Insurance Premium Changes: The Effects of COVID-19. They tell us one thing for certain, is COVID-19 brings a whole lot of uncertainty to the equation.

Academy Senior Health Fellow Cori Uccello explains that “premium changes are based on how costs of care, enrollment, and other factors are expected to change relative to insurers' assumptions that were used in setting premiums for the current year, and the COVID-19 pandemic has brought new unknowns and opposing trends into the mix. The pandemic has introduced both positive and negative cost pressures within the health care system, and uncertainties to key projections such as claims that could be sensitive to possible subsequent waves of infection and illness.”

Four key points of their nine-page issue brief include:

1. For the first half of this year, increased health spending due to the direct costs of diagnosing and treating COVID-19 has been more than offset by a reduction in non-COVID-19 health services

2. We don’t know how trends will continue through the remainder of this year.

3. COVID-19 has introduced significant uncertainty regarding projecting 2021 claims levels

4. How COVID-19 will impact 2021 premiums depends on assumptions involving:

• The emergence of subsequent COVID-19 waves in 2020 or in 2021
• Whether non-COVID-19 utilization continues to be deferred or eliminated in 2021 or whether treatment deferred in 2020 is provided in 2021
• The pandemic’s economic effects on shifts in insurance coverage and risk pool composition, and
• COVID-19 testing and treatment costs, the availability of new treatments and vaccines, increases in mental health and substance treatment needs, changes to telehealth utilization and costs, and changes to provider reimbursement rates

With such an uncertain immediate future, perhaps the best place to start in considering premium rate impact, is to ask the right questions. Last month, MIlliman released a seven-page white paper on this topic: COVID-19: Considerations for commercial health insurance rates in 2021 and beyond.

Milliman tackled the topic by addressing these issues, and their related questions going forward:

1. Acute treatment and vaccination for COVID-19: How will COVID-19 infections and prevention impact 2021 costs? How will the cost of treatment evolve? When will a vaccine be ready, and what will it cost?

2. Access and demand for healthcare: How will the pandemic and aftermath affect access and types of care received? How long will utilization declines last, and what will patterns look like in the aftermath?

3. Lasting impacts on population health: How will the pandemic affect overall population health? How will carriers adjust rating philosophies to manager COVID-19 risk?

4. Economic impacts on enrollment and utilization: How will collateral economic damage affect enrollment and utilization patterns?

5. Disruptions to provider networks: How will provider systems be disrupted? How might this affect future contract negotiations and reimbursement structures? How will costs swings interact with one-sided and two-sided risk-sharing arrangements?

6. Operational impacts: How will disruptions and cash flow volatility impact reserve estimates used for pricing? How will delivery systems need to adapt, and how will that influence risks and costs? How might general and administrative expenses be impacted?

Affordability and Coverage of Prescription Drugs for Seniors: A Gallup Poll and a KFF Study

by Clive Riddle, November 15, 2019

West Health and Gallup have just released results from a new survey on healthcare costs that found 13.4% of U.S. adults had “a friend or family member [who] passed away after not receiving treatment for their condition due to their inability to pay for it.” That percentage decreases with age: 16.9% under age 45, 12.4% between age 45 and 64 and 6.6% age 65%+  knew someone passing away.

That might seem counter-intuitive, given the greater frailty of seniors, but greater income levels compared to those under age 45, combined with stable coverage (Medicare) factor in. By income the percentages were 18.5% under $40k annually, 11.1% between $40k to $100k, and 9.1% over $100k.

Prescription drugs pricing was a particular focus in the survey, and “89% of U.S. adults report that drug prices are either ‘much higher’ or ‘somewhat higher’ than what consumers should be paying for them.” The survey found “28% of women vs. 18% of men have been unable to pay for prescription drugs;’ and that “medication insecurity skyrockets to 42% among those with annual household incomes of under $40,000.”

Today’s seniors have something the previous generation did not –the availability of  Medicare prescription drug coverage to help insulate from drug costs, and Kaiser Family Foundation has just released a new study: Medicare Part D: A First Look at Prescription Drug Plans in 2020.

Here’s eight things to know from KFF’s study:

1. The average Medicare beneficiary will have a choice of 28 PDPs in 2020, a 29% increase from 2017
2. A total of 948 PDPs will be offered in 2020, an increase of 202 PDPs since 2017.
3. Among the 20 PDPs available nationwide, average premiums will range sixfold from a low of $13 per month for Humana Walmart Value Rx Plan to a high of $83 per month for Express Scripts Medicare Choice.
4. Two-thirds of Part D enrollees without low-income subsidies will have premium increases in 2020 if they stay in their same plan, and one-third will have premium decreases.
5. The estimated national average monthly PDP premium for 2020 is projected to increase by 7% to $42.05
6. In 2020, all PDPs will have a benefit design with five or six tiers for covered generic, brand-name, and specialty drugs, and cost sharing other than the standard 25% coinsurance, similar to 2019.
7. 86% of PDPs will charge a deductible, with most PDPs charging the standard deductible of $435 in 2020.
8. Among all PDPs, median cost sharing is $0 for preferred generics and just $3 for generics, but $42 for preferred brands and 38% coinsurance for non-preferred drugs plus 25% for specialty drugs

Telling Tooth to Power: J.D. Power 2019 Dental Plan Satisfaction Report

by Clive Riddle, November 8, 2019

J.D. Power has just released its 2019 Dental Plan Satisfaction Report, which found that “customer satisfaction with dental plans increased in 2019, driven by year-over-year increases in coverage and communication experience,” with an overall satisfaction score in 2019 of 772 (on a 1,000-point scale) increasing from 768 in 2018.

The study found that DentaQuest (810 score) ranks highest, Blue Cross Dental/Blue Shield Dental (806 score) ranked second and HumanaDental (780 score) ranked third. The study noted “while most dental care providers included in the study typically provide insurance coverage through the customers’ employer, DentaQuest largely provides government plans.” Their report is based on survey responses from 1,400+ dental plan members.

The Kaiser Family Foundation Employer Health Benefits 2019 Annual Survey found that “among firms offering health benefits in 2019, 59% of small firms and 92% of large firms offer a dental insurance program to their workers separate from any plan included in their plan,” and that “sixty­three percent of firms offering a dental program to their workers make a contribution toward the cost of the coverage.”

The recently released 2020 Segal Health Plan Cost Trend Survey found that dental PPO plans were projected at 3.8% premium increases, dental maintenance organization plans at 3.5% increases, dental reference priced plans at 3.0% and dental FFS/indemnity plans at 4.1% increases. The report notes that dental benefits have "remained relatively unchanged for decades."

Here are the detailed results from the J.D. Power Dental Plan Satisfaction Report:

High Deductible Plans, Absentee Employer Contributions and the Burden of Employee Cost Sharing

By Clive Riddle, October 11, 2019

Much is being said about the increasing burden of employee health insurance cost sharing, which continues to far outpace employee wage increases and other cost of living indexes. The prevalence of high deductible plans is often cited as a significant factor adding to this burden. Perhaps not enough is being said about the prevalence of employers that do not make any or adequate account contributions for such high deductible plans, and the role of these absentee employers in adding to the employee burden.

The current issue of MCOL's ThoughtLeaders asks "What are the stakeholder implications going forward arising from employee health plan cost sharing increasing at twice the rate of wages during the past decade?”

Lindsay Resnick, EVP at Wunderman Thompson Health opens his response by telling us the implications "can be summed-up on one word: OOPS…Out Of Pocket Spending. As corporate stakeholders – providers, payers, pharma and employers – joust in a ‘Game of Thrones’ battle over payment schemes, network configurations, price manipulation, and bureaucratic machinations, what about the ultimate stakeholder, America’s healthcare customer. For them, healthcare has become an amalgam of medical, financial and lifestyle transactions where they’re searching for value and grappling with mind-numbing personal decisions."

Natasha Elsner, Research Manager, Deloitte Center for Health Solutions comments that "high-deductible plans—that have become a common benefit option—are blunt instruments: they can discourage utilization of both low-value and high-value services, and such plans can be particularly challenging for people with ongoing health care needs, as well as those with low and even moderate incomes."

Dudley E. Morris, Senior Advisor, BDC Advisors notes that "compared to the press attention paid to Medicare-For-All, the escalating cost of large employer health plan insurance for working families is something of an elephant in the room in terms of the current political discourse."

A couple of weeks ago Kaiser Family Foundation released its 2019 Employer Health Benefits Survey,  Their comprehensive report found that “"despite the nation’s strong economy and low unemployment, what employers and workers pay toward premiums continues to rise more quickly than workers’ wages and inflation over time. Since 2009, average family premiums have increased 54% and workers’ contribution have increased 71%, several times more quickly than wages (26%) and inflation (20%)."

Section Eight of their 238-page report covers “High-Deductible Health Plans with Savings Option.” They found that 28% of firms offering health benefits offer a HDHP with a HRA (Health Reimbursement Account) or Health Savings Account (HSA). 30% of covered workers are enrolled in an account based HDHP (20% in 20140; with 7% in HRAs and 23% in HSAs. The average general deductibles for HDHP/HRAs was $2,583 for single, and $5,335 for family, and the average firm contribution being $1,713 for singles (67% of the deductible) and $3,255 for family (61% of the deductible.) The HRA employer contribution could certainly be worse (although it should be noted HRAs are not portable after the employee leaves the company.)

The problem is that for HSAs, the contribution is worse, and that’s where most of the enrollees are. The average general deductibles for HDHP/HSAs was $2,476 for single, and $4,673 for family, and the average firm contribution being $572 for singles (23% of the deductible) and $1,062 for family (23% of the deductible.)  It isn’t that all employers are miserly -  the KFF report notes that “there is considerable variation in the amount that employers contribute to savings accounts.”

But the bigger problem beyond employer contributions averaging under one fourth of the deductible requirement, is that 55%pf employers offering qualified HDHP/HSA plans do not make any contribution. Many of these employers are small businesses, meaning the percentage of total employees receiving a contribution is better, but still – 25% of total single employees receive no contribution and 26% of families receive no contribution.

Looking at the contributions on a total dollar basis for all HSAs, the Devinir Midyear HSA Market Statistics & Trends report found that 31% of 2019 HSA contributions come from employers (52% from current employees, 13% from individuals, and 3% from IRA rollovers and Other.)

The problem caused by Absentee Employers and Miserly Employers when it comes to account contributions, is that the true promise and potential of consumer choice and engagement in health care decision making is severely compromised when the consumer doesn’t have the financial resources to make and engage in the options available. It is one thing for a consumer to make selections taking cost into consideration when they have an account that can fund an adequate portion of the cost involved – and their decisions involve allocating those funds and retaining any savings for future healthcare needs. If is quite another to make those decisions when they are burdened by deductibles that have skyrocketed over the past decade without the backing of adequate employer account contributions and don’t have the personal resources to cover that gap.

Eighteen Things to Know from the 2018 KFF Employer Benefits Survey

By Clive Riddle, October 4, 2018

The Kaiser Family Foundation 2018 Employer Benefit Survey, an annual 200+ page definitive report of the state of employer health benefits since 1999, includes these eighteen things to know that KFF highlights:

1.  On average, employees are contributing $5,547 toward the cost of family coverage, with employers paying the rest.
2. Annual premiums for single coverage increased 3 percent to $6,896 this year, with employees contributing an average of $1,186.
3. This year’s premium increases are comparable to the rise in employees’ wages (2.6%) and inflation (2.5%) during the same period. 
4. Since 2008, average family premiums have increased 55 percent, twice as fast as employees’ earnings (26%) and three times as fast as inflation (17%).
5. Currently 85% of covered employees have a deductible in their plan, up from 81% last year and 59% a decade ago. 
6. The average single deductible now stands at $1,573 for those employees who have one, similar to last year’s $1,505 average but up sharply from $735 in 2008. 
7. 26% of covered employees are now in plans with a deductible of at least $2,000, up from 22% last year and 15% five years ago. 
8. Among covered employees at small firms (fewer than 200 employees), 42 percent face a deductible of at least $2,000.
9. 57% of employers offer health benefits, the same as five years ago. 
10. Some employers that offer health benefits provide financial incentives to employees who don’t enroll – either for enrolling in a spouse’s plan (13%) or otherwise opting out (16%).
11. Overall 10% of all offering firms – and 24% of large ones – expect fewer employees and dependents to enroll because of the elimination of the ACA tax penalty.
12. 21% of large firms report they collect some information from employees’ mobile apps or wearable devices as part of their wellness or health promotion programs (14% last year.)
13. Most large offering employers (70%) provide employees with opportunities to complete health risk assessments.
14. 38% of large offering firms provide incentives for employees to participate in wellness programs.
15. 29% of firms that offer health benefits offer a high-deductible health plan with a savings option. 
16. 61% of firms offering HDHPs only this type of plan to at least some of their employees. Overall, 29% of covered employees are enrolled in such plans.
17. 74% of large firms (200+ employees) cover services provided through telemedicine, up from 63% last year and 27% in 2015. 
18. 76% of large firms cover services received in retail clinics.

Medicare Part D Premiums and Enrollment by the Numbers

By Clive Riddle, August 9, 2018

CMS this week announced that Part D premiums are expected to fall from $33.59 this year to $32.50 in 2019. Of course it’s not that simple. First of all, $32.50 is the “basic” premium rate. What Medicare beneficiaries actually pay is income adjusted on a sliding scale. Here are the 2019 “income-related monthly adjustment amounts” just released by CMS:

 

CMS informs us that:

• “the base beneficiary premium is equal to the product of the beneficiary premium percentage and the national average monthly bid amount”
• "the national average monthly bid amount is a weighted average of the standardized bid amounts for each stand-alone prescription drug plan and MA-PD plan.. The weights are based on the number of enrollees in each plan."
• “The national average monthly bid amount for 2019 is $51.28.”
• “The beneficiary premium percentage (“applicable percentage”) is a fraction, with a numerator of 25.5 percent and a denominator equal to 100 percent minus a percentage equal to (i) the total reinsurance payments that CMS estimates will be paid for the coverage year, divided by (ii) that amount plus the total payments that CMS estimates will be paid to Part D plans based on the standardized bid amount during the year, taking into account amounts paid by both CMS and plan enrollees.”
• Using the above calculations “the Part D base beneficiary premium for 2019 is $33.19”
• Then the Income-Related Monthly Adjustment Amounts “are determined by multiplying the standard base beneficiary premium by the following ratios: (35% − 25.5%)/25.5%, (50% − 25.5%)/25.5%, (65% − 25.5%)/25.5%, (80% − 25.5%)/25.5%, or (85 – 25.5%)/25.5%.

Clear as mud?

On the enrollment side of PDP world, here’s a look compiled from July 2018 CMS data:

Here are Medicare national drug plan enrollment totals:

• Total PDP Contracts: 63
• PDP Drug Plan Enrollment: 25,459,900
• MA Drug Plan Enrollment: 18,004,980
• PACE/Cost/Dual Drug Plan Enrollment: 689,113
• Total Drug Plan Enrollment: 44,153,993

The top five states for PDP enrollment penetration are:

• North Dakota – 63.9%
• Vermont – 62.6%
• Delaware – 62.6%
• Iowa – 60.5%
• Wyoming – 58.9%

This compares to a national average of 41.2% penetration. As one might expect, the high PDP penetration states have correspondingly lower Medicare Advantage penetration. For example, North Dakota has 2.7% MA penetration. Conversely, Puerto Rico has only 2.1% PDP penetration, but has the highest MA penetration at 71.1%. (national average MA penetration is 33.8%)

There are 114 counties with PDP penetration rates above 70.0%, mostly concentrated in the above states. Leading the pack is Dubuque County, Iowa at 72.3%. The bottom 77 of the 3,218 counties listed are all in Puerto Rico, as mentioned above. The first mainland county just above them is Clackamas County, Oregon with 17.6% penetration.

Animal Farm Meets Health Care

By Kim Bellard, March 23, 2018 In George Orwell's classic Animal Farm, the animals revolt against their human masters, and establish a classless society with the inspiring principle, "All animals are equal."  As events play out, their society devolves into a dictatorship with a ruling elite, and the principle becomes "All animals are equal, but some are more equal than others." This, surprisingly, makes me think of health care.   I am old enough to remember when maternity coverage was at best only very limited even in employer group health plans.  It took the Pregnancy Discrimination Act (1978) to require them to treat maternity the same as any "illness," and, even then, individuals plans often did not include it until ACA required it.  Similarly, coverage for mental health was typically skimpy until the Mental Health Parity Act (2008) required parity. Preventive services were usually only available for (the small percentage of) people enrolled in HMOs, until network-based managed care plans grew more widespread in the 1990's.  The same happened with prescription drug coverage, which used to only be available to the minority of people with "major medical" coverage. It took the Affordable Care Act to standardize what "essential benefits" should be included in health plans. For services like dental, vision, or hearing, not so much.   Evidently, some services are more equal than others. We've managed to push our rate of people without health insurance to around 11%, but it's more than double that for dental insurance, and worse yet for vision coverage.  For seniors, the figures are significantly worse.  The real question should be, why do we have separate coverages for services like dental or vision, especially when many lack them? This matters.  According to NCHS, 14% of Americas report hearing trouble, 9% vision trouble -- and 7% have no natural teeth left (25% for those over 75).  There is a well documented link between oral health and our overall health, yet a study found that dental care had the highest financial barriers to care, compared to other health services. If you break a bone, you'll see a doctor; if you break a tooth, you'll see a dentist.  If you have problems with your throat, you'll see a doctor; if you have problems with your gums, you'll see a dentist.  If you want to correct your vision with glasses, you'll see a optometrist; if you want to correct it with Lasik, you'll see a physician. Specialization is understandable, as most physicians end up doing, but I have to wonder why some types of specialization start at the beginning of training, rather than after the basic medical training (see my previous article on balkanized medical education). We accept all this because, well, that's the way it always has been.  That doesn't mean it makes sense, or that it is best for our health. We each only have one body.  Although some health issues are fairly specific, we are increasingly realizing that many are systems issues involving multiple parts of the body.  It's time to stop drawing artificial distinctions between what care we get, who gives it to us, and how those professionals get trained.  Health is not equal to health care.  Health care should not be limited to medical care.  We need to get past "historical accidents" and focus on what is best for our health, and our care. Unless you actually do believe that all health services, and all health care professionals, are equal, but some are more equal than others. This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting

State Employee Benefit Plans Provide Insight Into Overall Group Benefit Trends

By Clive Riddle, July 20, 2017 The Summer 2017 edition of Data, Segal Consulting’s publication providing research findings on public sector employee benefits, presents findings from their 2017 State Employee Health Benefits Study. As states are one of the largest employers, and their benefit decision making is directly impacted by policy makers, monitoring the pulse of state employee benefit plans provides insight into benefit trends for group coverage as a whole. Andrew Sherman, Segal’s National Director of Public Sector Consulting, tells us “health benefits have become more important to state leaders as the cost of coverage outpaces overall inflation, placing budget pressure on health plan funding and underscoring the need for ongoing cost-management efforts. Examining what other states offer can be helpful for these leaders when they make difficult decisions about potential changes in coverage.” The 23-page issue exclusively presents their study which involved a review of the websites for all 50 states and the District of Columbia in the fourth quarter of 2016, capturing medical, prescription drug, vision and dental plan information, as well as wellness and tobacco-cessation programs, including 105 PPOs/POS plans, 83 HDHPs/CDHPs, 149 HMOs/EPOs and five indemnity plans. One insight from the study was “there are stark geographic discrepancies to where it is offered. According to the study, 13 Southern States offer HDHP/CDHPs, compared to just two in the Northeast. They are offered in eight states in the Midwest and seven in the West.” This equates to 22% of the states in the Northeast, 76% in the South, 67% in the Midwest and 54% in the West offering consumer driven plans. Single premium increases averaged 8% for HMO/EPO plans, 10% for PPO/POS plans and 14% for HDHP/CDHP plans. The average single monthly premium was $780 for HMO/EPO plans, $713 for PPO/POS plans and $563 for HDHP/CDHP plans. Single deductibles averaged $194 for HMO/EPO plans, $483 for PPO/POS plans and $1,997 for HDHP/CDHP plans. For the prescription benefit, single copayments averaged $9 for generic, $29 for brand formulary, $53 for brand non-formulary, and $101 for specialty drugs.

Two Employee Benefit Studies Don’t Agree on Everything – But Do Agree on 52% HDHP Adoption

By Clive Riddle, February 19, 2016 

Benefitfocus has just released the “Benefitfocus State of Employee Benefits 2016,” based on benefit selection data from 700,000+ people at 500 large employers, based on actual behavioral versus self-reported data. They cite that 52 percent of large employer clients now offer high-deductible health plans (HDHPs). 

The report notes that “millennials—born between 1980 and 1989—selected HDHPs more than any other age group. However, while approximately 44 percent of employees in this group chose HDHPs, a much smaller number of these employees took full advantage of health savings accounts (HSAs.)”

In addition, the report found that their clients “should be well positioned to navigate the Cadillac tax to be levied on higher-cost health care plans in 2020 under the Affordable Care Act. Total premiums across all 2016 plans averaged $14,974 for family coverage and $6,096 for individual coverage—both well below the tax’s respective target thresholds of $27,500 and $10,200.” 

While voluntary benefits have receiving much publicity as a popular solution and offering in consumer driven plan environments, they report that “only 36 percent of large employers offered such voluntary benefits for 2016, and only 14 percent of employees actually enrolled.” 

Meanwhile, Wells Fargo Insurance  has just released their Employee Benefits Trend Study surveying 650 middle-market companies and large corporations, which painted a somewhat different picture. They found that “fifty eight percent of employers surveyed expect their medical plan costs to exceed the thresholds for the Affordable Care Act (ACA) excise tax, or “Cadillac” tax, which was originally to take effect in 2018, but has been delayed until 2020.” Their findings state that “As more employers offer high deductible health plans, the C-suite is also aware of the financial exposure that employees face with these types of plans. As a result, they are looking to mitigate those costs by offering voluntary benefits solutions (e.g. critical illness and accident insurance).” 

But the Wells Fargo survey did agree to the penny with the Benefitfocus study on one item – HDHP adoption, citing that “half of the employers in the study said they will continue to make changes to their plans either this year or in 2017 by adding a high deductible plan option (52 percent), increasing the employee contribution percentage (56 percent), or increasing co-insurance features (55 percent).

Someone Must Be On Drugs

By Kim Bellard, November 11, 2015

As is probably true for many of you, I'm busy looking at health plan open enrollment options for 2016. The past few years I've been guilty of just sticking with the same plan, so it has been too long since I've had to shop. Plus, I'm helping my mother pick her Medicare options for next year. All in all, I'm awash with health plan options.

I've got different levels of HMO, POS, and PPO options, from multiple carriers. My mother has many choices of Medicare Supplements, with Part D options, as well as Medicare Advantage options (both HMO and PPO), each from multiple health insurers.

It's not that there aren't plenty of options. It's just that, well, the options are so damn confusing.

Austin Frakt recently wrote in The New York Times about this problem. He cited a few studies specifically on point about health insurance, such as:
 

• One study found that 71% of consumers couldn't identify basic cost-sharing features;
• Less than a third of consumers in another study could correctly answer questions about their current coverage;
• Researchers found that consumers tended to choose plans labeled "gold" -- even when the researchers switched the "gold" and "bronze" designations, keeping all other plan details the same.

Many consumers tend to stick with their existing choice even when better options are available, simply because switching or even shopping is perceived as too complicated.

I'm most frustrated with prescription drug coverage. Not that long ago, the only variables were the copays for generic versus brand drugs. Now there are often five or six different tiers of coverage -- such as preferred generic, other generic, preferred brand, other brand, and "specialty" -- with different copays or coinsurance at each tier, each of which can also vary by retail versus mail order, and for "preferred pharmacies." 

Moreover, the health plan's formulary, which determines what tier a drug is in, can change at any time. Plus, as has been illustrated recently, the prices of any specific drug can change without notice, sometimes dramatically. If either of those happens to one of your drugs, say goodbye to your budget.

It's all enough to make your head spin.

The health plans would no doubt argue that their various approaches to prescription drug coverage are necessary in their efforts to control ever-rising costs for prescription drug costs. Well, they aren't working.

Prescription drug prices continue to soar, even for generic drugs. They have become a political issue, with the Senate now launching a bipartisan investigation into prescription drug pricing and the Presidential hopefuls from both parties being forced to take positions on how they would control them. For once, politicians are in sync with their constituents; the latest Kaiser Health Tracking Poll found that affordability of prescription drugs tops their priority list for Congress and the President.

I've long thought that the pharmaceutical industry was ahead of the rest of the health care industry. They were doing electronic submission of claims over forty years ago. They pushed for direct-to-consumer advertising in the late 1980's, and quickly jumped on that bandwagon. While providers only grudgingly adopted EHRs, they quickly moved to e-prescribing.  Other health providers had to move away from discounted charges twenty years ago, whereas drug companies still mostly use that approach and are only starting to tip-toe into more "value-based" approaches, as with the recent Harvard Pilgrim-Amgen deal.

And the backroom rebate deals between drug manufacturers and payors put a lie to any claim that at least drug pricing is transparent.

It's not only prescription drug coverage that is increasingly complicated, what with narrow networks, gatekeepers, different copays for different types of medical services, bundled pricing, or numerous other gimmicks used in health plan designs.  The collateral damage in the ongoing payor-provider arms race is consumer understanding. 

Making things more complicated for consumers is not the answer.

In typical fashion, the health care industry has tried to address the confusion by creating a new industry that doesn't actually solve the problem but does manage to introduce new costs. Many enrollment sites --the Medicare plan finder, public exchanges, private exchanges, broker sites like ehealth, or health insurer sites -- offer tools that purport to estimate your costs under your various health plan options. Yet consumers still don't understand their options.

We keep treating health care as a multi-party arrangement between providers/health plans/employers/government/consumers, which is why everything ends up so complicated. Drug company rebates or medical device manufacturers' payments to providers are prime examples of the kind of insider trading that goes on. It's usually the consumers that come last. And that's the problem.

I think back to 1990's cell phone plans. Consumers never knew what their next bill would bring, between peak/non-peak minutes and the infamous roaming charges. No one liked it, no one understood it, and for several years no one did anything about it. Then AT&T came out with a flat rate plan that essentially said, "we'll worry about all those for you," and soon all carriers had to adopt a version of it.

I keep hoping for that kind of breakthrough with health insurance.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting

Independent Pharmacy Accountable Care Organizations

By William DeMarco, August 26, 2015

The competition for Pharmacy Services has become brutal as large chain stores such as Walgreens and CVS, as well as big box stores like Target and Walmart, attempt to develop exclusive service contracts with large insurance carriers and Pharmacy Management Companies (PBMs). At the same time, employers are faced with rapid increases in specialty drug costs for diseases such as Hepatitis and similar chronic illness drugs that may cost as much as $50,000 to $75,000 per year.

For example on July 24th the FDA approved a new class of cholesterol lowering drugs known as PCSK9. Many health plans were anticipating a price point of $10,000 per year, but the approval came with a recommended $14,600 annual price target. This would translate to a $6.71 per-member, per-month (PMPM) for Commercial and a $15.16 PMPM for Medicare, depending on the patients other conditions according to a Prime Therapeutics public analysis released in June.

While the clinical side of this evaluation proves these targeted drugs do work, the cost to public and private payers is changing the landscape of how employers deal with these services.

PBMs initially established a very good solution for a very complex problem by integrating costs, necessity and quality with outcomes. However, the mark up on PBM services and ability for PBMs to buy wholesale and resell retail has made some employers believe there may be better options they should consider.

In addition, the generic substitution strategy that saved employers millions in the early 1970s has worn away and generic prices are climbing - making the spending for both specialty and routine pharmacy a very large concern.

One solutions being attempted in several areas around the country is the development of an Accountable Care Organizations (ACO) like network of independent pharmacists.

In this segment of the delivery system, most pharmacies are owned by one or more families and are often one man drug stores, or represent small chains covering one or more counties. These pharmacies offer personalized service and a tradition of being a patient advocate - often providing answers to their customer's questions regarding medications, looking out for adverse reactions and communicating with the physician when a question of dosage or reaction occurs.

Organizing these smaller entities into a network with contractual obligations to a central agency that acts as a Management Services Organization (MSO), which in turn, contracts with purchasers, has employers intrigued and supportive because many of these hometown stores can also be an advocate for the employer - a resource needed more and more as value based payment emerges.

These independents not only offer dispensing, but also agree to offer Medication Therapy Management (MTM) to help the patient reconcile drugs, vitamins and even nutrition that may be playing a part in their drug therapy. Many of these stores can also offer medical appliance and durable medical equipment at less than the hospital outpatient cost. In addition, as a local provider, they are predisposed to working closely with PCPs to help introduce alternative drug therapies that may be less costly to the patient and the employer, but are just as effective as standard therapies.

Even if this connectivity is missing electronically, one can still work with purchasers to make sure the patient is adherent and getting their 30 day supply refilled on time. This can be a mutual responsibility between payer and pharmacists. The savings of substitution, the ability to control use of specialty drugs as necessary, and the coordination of care to assure adherence are all part of this new model.

Where does the PBM fit? The PBM can still process drug claims for the employer and share this with the pharmacy MSO, but it relinquishes control of the network to the employer. The employer may decide to run two networks—one of independents (the high performance network) and one of the big box and chains (the general network). If the employer really wants to test the effectiveness of the networks, they could also pay 100% of the high performance network prescription and MTM fees and 80% of the non-high performance network. This gives employees the choice but also incents new business to those who have little preference, but want to save money. It secures the patients for the local pharmacy, which creates competition for the chain stores.

Drug stores as care outlets versus retail vendors can make a very big difference in areas of managing drug costs and adherence. The leading cause of readmission to a hospital is non-adherence to drug therapy - which puts people in the ER. This is a classic example of a Preventable and Avoidable Cost (PAC) that could be better managed on an outpatient basis by having care coordinated by the pharmacists and the PCP.

While the cost of pharmacy will continue to rise as medical research promotes more effective drugs, we know employers and health plans can better manage utilization and patient experience at the delivery point of care, and that is, for many, the local home town pharmacist.

Put Your Money Where Your Scalpel Is

By Kim Bellard, September 22, 2014

I propose taking value-based purchasing from the payor-provider contractual backroom and putting it in the health plan benefit design, where consumers directly see and are impacted by it.

One of the most troubling things about our health care system is the lack of accountability. Providers get paid pretty much regardless of how patients actually fare under their care, and often even if demonstrable errors are committed.

Patients don't get a pass when it comes to blame either.  They don't often take good care of themselves, they don't always follow instructions, and they sometimes opt for high risk and/or unproven procedures with limited chance of success.

The mantra to combat all this is "value-based purchasing," a phrase whose meaning, like beauty, is largely in the eye of the beholder.  In theory, it involves adding performance-based financial incentives to payment arrangements, and may also include bundled payments, shared savings programs, pay-for-performance, or even penalties.

Frankly, I think none of these go far enough, nor do they adequately involve the patients.

I want to accomplish a few things with my proposed plan design approach.  One, I want to more directly relate provider payment to patient outcome -- not in the aggregate, as many incentive programs try to do, but at individual patient level.  Second, I want to reduce how much other health plan subscribers have to subsidize care that is of little benefit.  And third, I want to stop rewarding providers for care that has little or no positive impact.<

The following chart outlines how these might be accomplished (assume the "base" plan design was 80/20):

					Estimated Prevalence
	Percent of Allowable Charges:
	Insurer	Patient	Provider
Condition much improved	100	25	0		50%
Condition a little better	80	20	0		25%
Condition no better	60	15	0		10%
Condition a little worse	40	10	0		10%
Condition much worse			-100		5%
					100%
	Total Weighted Costs
	80	20	-5

In other words, a surgical procedure whose allowable charges were $10,000 would pay the provider $12,500 (125%) if things went really well for the patient, only $7,500 (75%) if the patient was no better after it -- and the provider would actually owe the patient $10,000 if he/she ended up much worse after the surgery.  Providers would not be able to balance bill patients for any of the reductions.

If I've done my math right, with the assumed prevalence rates shown above, the payouts are revenue neutral for payors (weighted cost of 80) and patients (weighted cost of 20), prior to the provider payback. 

Health plans and providers who want to test this approach would probably want to do at least a year of data collection so they can fine-tune the final payment levels for the different stages, based on the measured prevalences.  I think we might be surprised by what we'd learn.

There is good evidence that direct engagement by physicians can boost patient use of portals, and I can't

think of anything that would give physicians more incentive to do so than directly tying their payments to such use. 

Ideally, I'd like to see this approach applied not just to the surgeon's fees, but to bundled payments including the hospital/facility and any ancillary providers.  The more providers who have a direct financial stake in the actual outcome, the better.

What we need is a surgical practice and/or health system that has enough confidence in its outcomes to bet on it, and a health plan (or self-funded employer plan) who are willing to take not just the financial risk but also the risk of how to communicate the approach to members.

The question is -- is anyone bold enough to try?

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting

That's Not the Way I Always Heard It Should Be

by Kim Bellard, March 11, 2014

Now that the initial open enrollment period under ACA is drawing to a close, we’re starting to hear more about how the enrollment is going, and the news is not encouraging.

The Administration has touted that 4 million have gotten coverage through the exchanges – still several million short of their goals – but they claim to not know much about whether ACA’s impact on the uninsured rate.  Fortunately, outside organizations are helping to fill in some of the gaps. 

The McKinsey Center for U.S. Health System Reform released the results of their individual market enrollment survey, with results from February 2014.  Only 27% of those who had obtained new coverage in 2014 reported having been previously uninsured.  Even more discouraging, only 10% percent of all previously uninsured now reported having coverage.  The faint sign of hope in the numbers is that both numbers are up sharply from previous surveys – 11% and 3%, respectively – but I doubt anyone who supported ACA’s passage thought they were signing up for only helping 10% of the uninsured.

Adding insult to injury, only three-quarters of those with new coverage reported actually having paid their premium, confirming reports that health insurers had warned about.  And that percentage was only 53% among the previously uninsured, which does not inspire much confidence that they will remain insured for very long.

Perceived affordability remains the key barrier to buying coverage, even though 80% of those citing it were actually eligible for subsides, a crucial fact that two-thirds were unaware of.

One glimmer of good news is that Gallup reports that the uninsured rate has, in fact, dropped, down to 15.9% (versus 17.1% in 4Q 2013).  To be fair, though, their results showed spikes in late 2013, and the 1Q 2014 results are on par with 1Q 2013 and 1Q 2011.  Coverage through an employer dropped two percentage points from 4Q 2013, while both individual coverage and coverage through Medicaid were up by slightly under 1%.  

The Urban Institute released their own survey results on ACA enrollment, conducted in December 2013.  Among all adults 18-64, 12% reported having looked for information on health plans in the marketplace (Orwellian for “exchanges”), with another 17% planning to do so.  More significantly, among the uninsured still only 19% had looked, another 33% thought they would look – and 23% had not heard about the marketplaces.  The comparable numbers for those below 138% of the federal poverty level were 13%, 25%, and 27%, respectively, highlighting that the most vulnerable groups are not getting the message.

The picture isn’t really rosy anywhere.  The people who were already in the individual market continue to be buffeted by changes in the rules of the road.  For example, there is Administration’s executive decision to allow subsidies for policies purchased outside the marketplaces, in recognition that some consumers may have been too frustrated by the marketplace websites to buy from them. 

Then there is the “bare bones plans” mess.  After the uproar last fall about people having to lose their health plans because they didn’t meet ACA minimum standards, the Administration belated announced a one year delay in the enforcement of those standards, and has just extended that delay for yet another year, potentially meaning they won’t apply until 2016.   

It’s anyone’s guess about what has happened with premiums in the individual market.  A recent analysis by the Robert Wood Johnson Foundation in selected states found (with the exception of Alabama) more competitive markets and premiums, while a report from the Manhattan Institute last fall found an average increase of 41% (much due to benefit changes), and a study by the presumably objective Society of Actuaries last spring also expected significant increases, especially for younger consumers.

Any employer with a health plan or 401k plan – or any state Medicaid director – could have warned us that voluntary enrollment typically leaves lots of eligible people not taking action..  We should have taken the approach many 401k plans have adopted – “automatic enrollment.” Driven by disappointing participation in 401k plans, the federal law was changed to allow employers to automatically enroll employees in their 401k plan, with a default contribution rate.  Employees could still opt-out, or change the default contribution level, but employers have found that participation rates are higher and average contribution rates are higher under this approach.  What’s not to like?

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting

It Depends on the Outcome: Payments for Providers – Benefits for Consumers

By Clive Riddle, May 10, 2013

Two separate studies released this week took the pulse of the outcomes-based financial landscape in healthcare at different ends of the spectrum: Availity released a sixteen-page white paper: Health Plan Readiness to Operationalize New Payment Models for providers, while the Midwest Business Group on Health released a twenty-page report: Employer Survey on Incentives, Disincentives & Outcomes-Based Incentives for employees.

The Availity study was conducted by Porter Research in the fourth quarter of 2012, involving interviews of 39 health plans. 82% of the plans consider payment reform a ‘major priority. 90% expect value-based payment models to impact their top three business objectives ( 46% expect a ‘major’ impact, while 44% anticipate ‘some’ impact.)

That doesn’t mean value based payments are mainstream today.  Just 20% say value-based models

support more than half of their businesses today.  But 40% predict that in three years, value-based models will support more than half of their businesses; and nearly 60% forecast that more than half of their business will be supported by value-based payment models in the next five years. And, of those, 60% are at least mid-way through implementation.

While the ACA uses Medicare as a primary tool to promote provider payment reform, the marketplace seems to be focusing health plans even more on the commercial side. More than 75% say they are focusing value-based payment efforts on their Employer Group plans, compared to 54%  for Medicare plans  and 46% and 44% citing Medicaid plans and Individual plans..

Availity noted that “transitioning to payment models that base compensation on outcomes requires physicians and health plans to exchange new kinds of information – different than what is required under today’s predominant fee-for-service arrangements. 90% of health plans agree that automating the exchange of ‘new’ information required under value-based payments is critical to success, with 85% saying the highest value will come from real-time exchange, though less than half have real-time capabilities.”

Meanwhile, the Midwest Business Group on Health employee incentive study was conducted during April 2013, with responses from 94 self-funded employers that represented multiple industries and locations around the US.  They found that “80% of responding employers are utilizing some form of incentives, with 41% using or planning to use outcomes-based incentives to increase engagement and participation as well as motivate healthy behaviors in employer-sponsored programs.”

Here MBGH findings from the study regarding outcomes-based Incentives:

• Employers responded that 13% are already offering outcomes-based incentives and 28% are planning to launch programs over the next one to two years, while 40% indicated interest, but need more information.
• Of those currently offering outcomes-based programs, 54% tie incentives to both outcomes-based measures (i.e. meeting specific targets such as BMI of 25) and improvements in outcomes (i.e. percentage decrease in BMI), versus one or the other.
• Onsite clinical screening programs are used by 94% of employers as the way to capture biometrics with the top measurements being: 86% blood pressure, 81% BMI, 73% cholesterol, 68% glucose, and A1c and waist circumference tied at 59% each.
• Employers said that 18% are experiencing participation levels of over 90% for outcomes-based programs; while the majority (60%) is experiencing participating levels of 40 to 80 percent.
• Employers indicate that 98% of employee feedback is “somewhat positive” to “very positive.”
• Degree of difficulty is notable with 95% of employers finding some level of difficulty in implementing an outcomes-based program.

Also, MBGH shared this data regarding the overall offering of incentives/disincentives:

• Of the 18% of employers who reported not offering incentives or disincentives, 53% indicated the reason was that it was not part of their corporate culture and 47% are not sure it works.
• For those employers offering incentives, 62% reduce premiums, 38% use gift cards and 35% offer merchandise.
• Of those employers that use disincentives, 43% increase employee share of premiums for non-compliance and 14% have higher plan deductibles or out of pocket fees.
• Activities that most employers’ incented included biometric screenings (70%) and health risk assessments (78%), with the greatest disincentive (78%) being used for tobacco use.
• The monetary value of incentives programs varies widely, with $250-500 for 27% of those offering programs, $100-250 for 22% of employers and $500-1,000 for another 22% of companies.
• Employers indicated that 71% found their incentive strategy was “very successful” or “successful” and 45% viewed their disincentive strategy as “very successful” or “successful.”
• With the Affordable Care Act (ACA) in 2014 allowing employers to increase their incentives from 20 to 30 percent of total coverage, almost 67% said they are “very likely” or “likely” to do so and almost 36% are “not very likely” or “not likely.” For tobacco users, the ACA allows employers to increase the value from 20 to 50 percent, with employers indicating 48% “very likely” to “likely” and 52% “not very likely” to “likely.”

Getting Healthy

By Cyndy Nayer, April 1, 2013

In January 2013, US News published a report on why Americans aren’t healthier and gave us the concept of a health lag.  In fact, the gap between America’s health status and that of other industrialized nations is a 30-year trajectory of lower outcomes.

Last week, Modern Healthcare published a review of Kaiser Family Foundation findings in which the highest hospital readmissions were directly correlated to the unhealthiest counties in the US.

On the same day as the MH-KFF release, I was privileged to receive a tweet on patient engagement that highlighted the blog of Gilles Frydman  on PatientDriven.org, which highlights the real engagement and outcomes of patients who seek to understand their conditions and treatment by conversing with others.  The point here is in the definition of engagement, per the blog, “An engaged patient is someone deeply involved in the scientific understanding of their disease, fully aware at all times of the entire spectrum of available therapeutic options. It requires a set of learning, cognitive and psycho-social tools that can only be acquired by conversing often with a real network of peers who are similarly involved in this complex endeavor.“ 

This, says the author, is exactly opposite of the current definition of patient engagement as used by HIT, care professionals, benefits personnel, and service providers:  “the engagement flows from the various professional stakeholders of the health care system to the patients. It is a direct extension of the concept of consumer engagement.”

It’s exactly the discussion I am most involved in, most of the time, in which the (choose one) doctor/ IT developer/ hospital administrator/ national thought leader talks about patient engagement as the patient behaving according to the “guidance” he/she is provided.  But what if the guidance reaches the patient at the same time she is dealing with her teenager who had a car accident, or her husband who may lose his job? What if the “guidance” is a follow-up visit or test, but the office isn’t open late when she is off work? What if the “guidance” is the purchase of a pharmaceutical that she either can’t afford or that may cause side effects for her?  What if she simply didn’t understand the instructions or, three months later, is feeling better and stops the medication or falls off her nutrition plan?

Unfortunately, the problem here is that the engagement and persistence (which, by definition is part of engagement) did not occur because people have other parts to their lives than the body parts with issues.  They have financial needs, emotional needs, social needs, even transportation needs that interfere with engagement. While the most-influential people in the patient’s life, according to surveys, is the clinical “face” (doctors, pharmacists, nurses, etc.), these people do not follow the patient everywhere, and others in her sphere of influence take precedence.

Emergency department visits drop when medical practices extend hours. There are examples of patient engagement strategies that work and that translate directly to saved dollars.  In surveying more than 9,500 people with steady sources of care, the Center for Studying Health System Change focused its results on 1,470 individuals who had tried to contact their primary care practices after normal business hours in the past year. The study, published online in Health Affairs on Dec. 12, found that nearly 21% had difficulties reaching their physicians after hours, and those who reported more difficulty accessing after hours had higher rates of emergency department use (37.7%  and higher rates of unmet medical needs (13.7%).

As I’m on my relentless pursuit of solutions that deliver better health outcomes, I have to  emphasize this, re-emphasize it, and then state it many times more.  Those who doubted the power of value-based benefit design or outcomes-based clauses did not fully understand the suite of services and, what I call surround-sound messaging, that is necessary for patient engagement in health.

We cannot be paternalistic, nor maternalistic, in making health the end goal.  We have to meet people where they are and stop treating body parts separately (you know, hypertension over there and depression over here and diabetes…).  We have not only organize in patient-centric efforts but, perhaps more importantly, in patient-driven circles.  This is the success of the senior-citizen breakfasts that promote Medicare health plans, of the breast-health discussions that occur in churches and hair salons, and of the Dr. Oz and Dr. Phils of the world who reach through social media (including TV) to their audiences.

Transparency will only matter if the patient is seeking healthcare.  If, instead, she is seeking a carpool for her kids or the money for rent, then transparency of treatments may not be as meaningful, if it’s on the radar at all.  ”Entitlement programs,” as Medicare and Medicaid are increasing called, cause splits in peer groups and often in the same family, pitting seniors against young working adults in the “subsidy” allotment.

These are not directly related to the delivery of treatment from the health system, but they are distractions to the patient decisions.  If the incentives to the prescriber are different than the incentives to the patient, the patient will more often seek the treatment recommended by the doctor, as this is the trusted relationship.  In survey after survey for many years, the clinician advice trumps the insurance benefit advice, yes, but it also relieves the patient of asking price or quality or convenience questions of the physician.  To this point, in my March 15 2013 I sent out the Health Affairs link to the Kaiser study showing that consumers do not want to be responsible for their healthcare costs, and they don’t want their doctors to be responsible, either.  

If we want to close the health valley that we are in, if we want to use the amazing healthcare resources in our country wisely and widely for all of us, then we have to stop this narrow focus of hospital v doctor v benefit plan v pharmaceutical manager v insurance and get back to the basics:  making healthcare understandable, actionable, and most of all, relevant WITH the patient not TO the patient.  Patient engagement IS the holy grail for healthcare and health improvement.  But it can’t be done around the patient, it must be done with the patient fully present and asking questions and envisioning the future of his or her health.  If he or she can’t see it, he or she can’t achieve it.

High Deductible PPO Plans Versus CDHPs

By Clive Riddle, March 8, 2013

United Benefit Advisors has just released results of their annual health plan survey, with responses from 11,711 employers sponsoring 17,905 health plans nationwide, with results applicable for small to midsize companies. The survey includes a focus on Consumer Driven Health Plan (CDHP) vs. PPO comparisons of premiums, deductibles and enrollment. Their study found that “Consumer-driven health plans (CDHPs) -- high-deductible health plans (HDHPs) often paired with health savings accounts (HSAs) or health reimbursement accounts (HRAs) -- are not achieving long-term savings greater than what would be reached by raising the deductible on traditional PPOs.”

Unlike most national large employer benefit consulting firms, UBA – whose survey concentrated on smaller firms – is not bullish on account based plans, and would rather place their bets on straight PPO plans with a higher deductible. Although one could argue, it might be easy to make a stripped down high deductible PPO health plan yield immediate lower costs than a CDHP that has account administration costs, up-front wellness benefits and other bells and whistles. That doesn’t necessarily mean the PPO HDHP would be the best long term solution for an employer’s and employee’s objectives, unless immediate premium costs is the only concern.

UBA CEI Thom Mangan tells us “Employers are turning to CDHPs as a cost-cutting solution against the relentless upward spiral of health care costs. However, our research shows that small-to midsize businesses in particular, who may be considering these plans may first want to consider increasing the deductible on the plans they already have to achieve the same initial savings. Or, prior to implementing a CDHP plan, employers should build a culture of health and wellness in their workplace that drives employee behavior towards quality, low cost medical care and prescription drugs.”

Here’s some of the data UBA has shared from their findings:

• Nearly 60 percent of the 11,711 employers surveyed said they plan to offer a CDHP in the next five years
• PPOs remain the dominant plan type with 61.7 percent of U.S. employee enrollment
• The greatest savings of a PPO over a CDHP was achieved with a deductible of $2,000-$2,999, where PPO cost per employee was $7,811 and CDHP was $8,859, a savings of $1,000 per employee.
• Savings created by CDHPs over the plans they were replacing or HSA, averaged 1.75 percent in 2012, a significant reduction from prior years.
• Enrollment also decreased to 15.6 percent (a 1.8 percent decrease from 2011), and nationwide enrollment among employers with 1,000 or more employees dropped substantially from 15.9 percent in 2011 to 11.3 percent in 2012.
• The area of the country that has seen the biggest increase in CDHP growth is Minnesota, which saw the percent of employees enrolled in CDHPs increase from 15.5 percent in 2010 to 37.1 percent in 2012, a rate 18.4 percent higher than the national average in those same years.
• Other areas with rapid CDHP growth include Indiana, Virginia and the Northeast region. The only western state to see CDHP popularity increase was Oregon, where percent of employees enrolled in CDHPs increased from 12 percent in 2010 to 20.3 percent in 2012.
• Overall, CDHP enrollment in the west is the lowest in the country with only 7.7 percent of employees covered, a slight increase from 7 percent in 2011 and 4.6 percent in 2010. HMOs account for 31.3 percent of the market in the west.

Mercer Weighs in on Employer Health Benefit Cost Projections

By Clive Riddle, November 16, 2012

Here’s what Mercer has to say about the rise in  health benefit costs:  “growth in the average total health benefit cost per employee slowed from 6.1% last year to just 4.1% in 2012. Cost averaged $10,558 per employee in 2012. Large employers – those with 500 or more employees – experienced both a higher increase (5.4%) and higher average cost…. Employers expect another relatively low increase of 5.0% for 2013. However, this increase reflects changes they plan to make to reduce cost; if they made no changes, cost would rise by an average of 7.4%.”

This is based on results from Mercer’s annual National Survey of Employer-Sponsored Health Plans, which includes public and private organizations with 10 or more employees; with 2,809 employers responding in 2012. The full survey results will be released in April 2013.

 How does this compare to what other major human resources/benefits consulting firms are estimating? Here's what we reported in our Tidbits column in the October 6th edition of MCOL weekend:

Aon Hewitt reports that "the average health care premium rate increase for large employers in 2012 was 4.9 percent, down from 8.5 percent in 2011 and 6.2 percent in 2010. In 2013, however, average health care premium increases are projected to jump up to 6.3 percent."  Towers Watson's survey "projects a 5.3% net increase in total health benefit plan costs after any plan changes are taken into account, increasing the average cost per active employee from $10,925 in 2012 to $11,507 in 2013. Of the 2013 total, employees will pay an average of $2,596, or 22.6%, up from $2,436 in 2012." The Segal Company  projects 8.8% increases in 2013 for open access PPOs (10.0% in 2012; 8.2% increases in 2013 for HMOs (9.6% for 2012) and 9.1% increases in 2013 for HDHPs (10.4% in 2012.)

Mercer makes particular note of the impact of CDHPs in the employer benefit arena. They state that “with a growing number of employers now positioning a high-deductible, account-based consumer-directed health plan as their primary plan – or even their only plan – employee enrollment jumped from 13% to 16% of all covered employees in 2012. Many employers see these plans as central to their response to health care reform provisions that will raise enrollment. Over the past two years, offerings of CDHPs have risen from 17% to 22% of all employers, and from 23% to 36% of employers with 500 or more employees. Well over half (59%) of very large organizations (20,000 or more employees), which typically offer employees a choice of medical plans, now offer a CDHP. With the cost of coverage in a CDHP with a health savings account is about 20% lower, on average, than the cost of PPO coverage – $7,833 per employee compared to $10,007 -- employers are increasing willing to make the CDHP their primary or even their only plan. Among large employers that offer an HSA-based CDHP, average enrollment rose from 25% to 32% in 2012. And, when asked if they expect to offer a CDHP five years from now, 18% of large employers say they expect to offer it as the only plan, up from 11% in 2011.”

Guest Blog from Sander Domaszewicz on Decline in Utilization Metrics

By Clive Riddle, April 30, 2012

Sander Domaszewicz is a Principal with Mercer well-versed in employer and employee health benefit issues, and is a noted national speaker on topics related to this arena. Recently, MCOL’s ThoughtLeaders publication asked it’s panel about the recently observed trends regarding a dip in various utilization metrics. We didn’t connect with Sander in time to ask him this question for the current issue of ThoughtLeaders, but I asked him if he wouldn’t mind doing a short guest blog with his thoughts on the issue.

Question: A number of recent studies have indicated a modest decline in several key patient utilization metrics since the onset of the great recession. Will a long-term change result, or will utilization increase as the economy improves – and what are the implications?

Sander Domaszewicz, Principal, Mercer:

Many of the plan sponsors we work with are busy moving forward with strategies that will right-size utilization now and in the future, making sure that their workforce gets the care they need at a good value, and no more.  Some of the most powerful efforts in this area started to blossom during the great recession, and our expectation is that long-term change will result. 

Employers' focus has shifted to almost equal attention now being given to both the Demand-side and the Supply-side of the care consumption equation.  On the Demand-side, employers are investing in keeping healthy folks healthy and keeping illnesses well-managed for those that have chronic conditions.  This Demand-side aligns with "wellness" or "health management" initiatives and is trying to reduce the demand for health care services in the first place.  If the Demand-side of the intervention breaks down, employers are also addressing the Supply-side of the care utilization equation.  So if people do need to seek health care services, let's make sure we get them the right care, at the right time, from the right provider, for the right price, with the right outcome.  In other words, how can we get the most total value for the health dollar spent.  Consumer-directed health plans, centers of excellence, narrow networks, patient-centered medical homes, ACOs, medical travel, telemedicine, retail/onsite clinics, and other interventions all have Supply-side impact.

Both the private and the public sector purchasers of health services are working diligently to optimize necessary utilization and prevent unnecessary utilization, so better control over time may be more achievable now than at any time in the past.

The Price Is (Not) Right

By Kim Bellard, April 25, 2012

I noticed several recent articles and studies about some of the problems caused by the crazy ways we price care in our health system.  If they made a reality show about it, it’d be less The Price Is Right than it would be Survivor. 

Let’s start with a study published in the Archives of Internal Medicine, titled “Health Care as a Market Good?  Appendicitis as a Case Study.”  The authors studied costs for treatment of acute appendicitis, looking at data in California hospitals.  One might assume a fairly small range of cost for this, given that the treatment options are not wide.  They found that costs varied from $1,500 to $183,000; the patient who cost $183,000 admittedly had cancer, but received no treatment for cancer for the stay in question.  Dr. Renee Hsia, the lead researcher, told The New York Times, “There’s no rhyme or reason for how patients are charged or how hospitals come up with charges.  There’s no other industry where you get charged 100 times the same amount, or 121 times, for the same product.”

Indeed. 

Of course, when patients have insurance and go in-network, they usually don’t get exposed to most of the impact of this variation, although increased cost-sharing even for in-network services still makes this an issue.  For uninsured patients, or patients who go out-of-network, it can be much worse.  The Minnesota Department of Health recently alleged consumer protection abuses of a company – Accretive Health -- hired by hospitals to ensure patient bill collection.  According to the report, the company used “boiler-room-style sales atmospheres'' at Fairview's seven hospitals using collection quotas, cash inducements and in-house competitions to squeeze cash from patients before they were treated.”   The practices addressed deductible, coinsurance or other patient responsibilities, either from the current services (yet to be rendered) or from prior unpaid bills.  I wonder if they at least were specific about how much the patients would owe.  I also wonder if they add treatment for the high blood pressure or twisted arms caused by the strong-arming to the list of services. 

Not surprisingly, this problem isn’t limited to Minnesota or to Accretive Health.  For example, the Charlotte Observer and the News and Observer of Raleigh investigated how area hospitals were suing patients to collect debts.  The newspapers found North Carolina hospitals filed such suits over 40,000 times for the five years ending in 2010.  The majority of lawsuits came from two systems, both of which are non-profit.  The investigation notes that some of the hospitals in question made sizeable earnings over the same period, despite their non-profit status, and found numerous instances where the hospitals did a poor job of determining if the patients qualified for programs that would assist with their bills.  It’s tough to get sick, especially when your health care provider slaps a lien on your house for charges that you had no way of predicting in advance.

Then there is what has happened with Fair Health.  This is the database that was set up to settle New York’s 2009 dispute with Ingenix about how that company established “usual and customary” charges, as used by many health insurers around the country to set payment limits on out-of-network services.  It seems that many insurers have decided to adopt a different methodology to calculate out-of-network liabilities, based on a percentage above the Medicare payment levels.  New York regulators believe that many New Yorkers are ending up owing more under the new methodology, even though insurers pay anywhere from 140 to 285 percent of Medicare rates.  It’s not entirely surprising that insurers have adopted the new approach, given that Fair Health wasn’t actually up and running until last year and the Medicare rates are much more predictable than the approach based on “usual and customary.”   I suppose it is possible that Medicare payment levels truly are that low, or that some providers truly deserve payment levels several multiples over what Medicare would pay, but both seem doubtful.  One would think that, say, 200 percent of Medicare payment rates would be sufficient as a payment level, but maybe the patient is getting an appendectomy in California. 

It boils down to some usual culprits:

• Provider charges aren’t subject to competition.  They can calculate them in virtually any way they want, at whatever level they choose, because their payor customers negotiate more realistic levels and their retail customers usually aren’t told charges in advance.  Virtually no one is shopping services based on price.  It’s crazy that the most vulnerable patients are the ones most likely to be subject to these entirely arbitrary and often unrealistic prices.
  
• The data are hard to find and often not very useful.  Many health plans have versions of price or quality data, and there are a variety of state and federal requirements for providers’ posting of some prices.  Be that as it may, consumers usually don’t have a good idea about what set of services they’ll receive, much less how much they will cost.  And it’s not just consumers who are ignorant; physicians are often in the dark about how much things cost as well (see, for example, Sehgal and Gorman).  Many providers probably have some idea of their costs for the services they most frequently provide, but I’m willing to bet that few have any accurate idea about the costs in the rest of the health care supply chain their patients will go through.  Think Apple doesn’t know the prices throughout their supply chain?
  
• Consumers don’t care enough.  The vast majority of consumers – even those in consumer-directed plans – still don’t seek out cost or quality information, even when it is available (see, for example, EBRI’s Consumer Engagement Survey).  Consumers also don’t necessarily make great decisions even when they get data – for example, Hibbard, et al. found that when just shown costs, consumers still thought higher cost would translate into higher quality.  The researchers found that the cost data needed to be paired with easier to understand quality of data for consumers to make better choices.
  

Perhaps they should make a health care version of The Price Is Right after all.  It might be amusing to watch various participants in the health care system try to guess how much things cost.  Then, again, it might just prove boring, because I doubt anyone would “win.”

DME: A Modest Proposal

By Laurie Gelb, April 18, 2012

What's a "convenience item?"

For most plans, it's anything from the elevation feature of a wheelchair seat to a motorized patient lift to a track to move a shower chair into a traditional stall. In other words, it's features, equipment or supplies that you don't want to reimburse.

The rationale for non-reimbursable DME is most often that in and of itself, the "convenient" add-on or gadget doesn't treat a disorder or isn't essential for ADLs. A power wheelchair's tilt and recline functions, for example, are reimbursed because without them a chair-bound patient is more likely to acquire pressure ulcers, which are costly to treat. But vertical elevation -- that's just patients trying to belly up to bars and kitchen counters, right?

Not only.

Often, the elevation feature is used to prolong the time until a passive lift is necessary for transfers. The same is true of hi/lo beds.

So what?

Watch an assisted standing transfer with a confident patient and assistant. Then watch a lift transfer as the patient dangles from a sling, often scraping body parts against a metal frame and risking already-fragile joints and skin. Which one do you prefer from a cost standpoint?

Taking the whole wheelchair higher may also enable use of a urinal or bedpan (supplies that you don’t pay for, whereas you do pay for catheters + the infections they cause), to make it easier for tall helpers to place a lift sling (or to do pivot transfers with more agile patients), for dressing, feeding and many other purposes. If you think about those specific activities, it’s evident that neither tilt (angled seat) nor recline (angled back) can substitute for elevation in those situations.

Now back to reimbursement. Not only is elevation per se often considered a “convenience, but often it’s not even submitted for reimbursement. Many patients don't even ask for it, even if they are aware it exists, because their DMEs tell them not to bother. Sit-to-stand lifts and chairs are another example of usually-unreimbursable items that yield huge health outcomes for appropriate patients, from avoiding hospital stays for impaction to improved respiratory function.

Much very pricey DME, from mobility to respiratory aids, is never submitted for reimbursement because of time pressure (quicker to buy from the Internet or as self-pay); complexity of the reimbursement process; pressure from a DME to file the easy part; a required preauth wasn't filed in time; DME annual limits and/or specific exclusions.

Is all the DME being bought and sold via the Internet (whether Craigslist or DOTmed) or donated by others good or bad for MCOs? To the extent that it's not reimbursed, you might think that it's just fine. But then turn full circle for the sequelae of obsolete, inappropriate and/or flat-out dangerous equipment and you'll see plenty of potential costs.

Ill-considered Internet purchases and donations aren't the only threat to DME safety; wheelchair-bound/NIV patients who "give up" on or wait forever for unresponsive DME firms who avoid service visits (in part because reimbursement is so uncertain) are practically a cliché.

Visit the homes of the chronically ill, even those comparatively well off and with private coverage, and you'll see fraying slings holding patients whose fall would mean a final hospital stay; rusty equipment with unpredictable steering; BiPAP and even vents being used improperly because no one in the household knows how to titrate them and can't get anyone to help; family members (likely in your network as well) risking severe back injuries because the right equipment for transfers/showering/toileting isn't available.

Some paras and quads "eat like dogs" (often choking in the process) out of bowls because they don't have access to a helper to feed them, and of course wheelchair trays and special utensils aren't covered. Nonetheless, your budget will take a hit at some point, and nutritional status compromised by illness comes under the heading of medical need in most textbooks.

Undeniably, your DME charges for lease months and sales for what you do cover, are way more than patients can pay on the Internet or elsewhere. And this goes back to inflated manufacturer pricing, often in expectation of contracted discounts but also in some cases, simple greed.

The root cause: contracted prices and often suboptimal product quality/selection deplete your DME budget to the point that you can't see a business case for the simple items that would pay for themselves and support your case for "caring" as well. Moreover, DME caps basically tell patients to go anywhere but the traditional system to access equipment. How predictable are the outcomes of back alley DME acquisition?

To put it another way, how much do you know about Helen Jones' fall because the eight-year-old walker passed on from her great-aunt wasn't gripping the sidewalk any longer? You paid for her hospital stay and rehab for a broken hip, and she may need home health on discharge. She didn't know that her walker needed new feet (nor would she have known where to get them), because she has low vision and no one she knows has any familiarity with checking walker feet.

No one teaches us about DME; the provider/plan Web sites so thick with rich media ignore it, so the major sources of information on DME are patient forums and YouTube videos, neither of which Mrs. Jones, 82, is likely to access.

The reciprocal of DME providers’ natural desire to remain profitable, is patients who don't know the system, who don't know when/how to use network benefits and when/how not to; how to access help with equipment that they need to have, or that doesn't work how they need it to; and a system that seems massively disinterested in the change that everyone "agrees" is needed. We obsess about medication errors that leveraging IT and FMEA can fix, but don't touch a larger, increasingly relevant (checked the age trend of your membership lately?) issue.

Beyond medical costs, MCOs incur the cost of fraud. I’ve seen recent drastically upcoded invoices to MCOs from DMEs that patients and family members, exhausted from the calls needed to obtain a facsimile of necessary equipment, not to mention the burden of care, didn't even perceive, or when they did perceive them, didn't blink. Why should they care if the MCO pays more than its contract stipulates, for something they never received, when they perceive that the MCO is depriving them of needed equipment and help?

From the other side, I've seen invoices with incorrect patient names, provider names, equipment codes and diagnosis mismatches sail through (as with home health, but that's another story). The DME claims processing burden is great on the payor side as well. The complexity of regulations for the sake of cost control are only getting worse.

The US managed care maze has also kept many highly-rated European manufacturers out of the US market entirely, except for authorized facility-only distributors, who don’t want the hassle of selling to home care.

Does US access to European products matter? Well, only if you’d like your members to have access to options like wool and fleece lining for slings to protect delicate skin; smaller patient electric lifts and tracks to use in apartments, as opposed to relatives’ [insured by you?] backs; freestanding track systems to reduce mobile lift risk, better repositioning aids, etc. Oh, but wait --none of these are usually covered items, anyway. Well, therein lies part of the problem.

Now imagine that DME was reimbursed like an office visit or injection. Provider in network? Check. Correct coding? Check. Eligible patient? Check. No duplication within six months (just as we don't reimburse two fills for the same med if dose is available or two right leg amputations)? Check. Not experimental? Check. Medical/ADL use (like, not a scooter flag or strobe light)? Check. Then you process the claim.

• How much would you lose?
• How much would you and patients gain?
• How much admin cost would you save?

Sure, you'd cap coverage at one power chair per interval, and other obvious constraints. But a track to get quads into a shower, yes, you'd pay (paid for any skin infections or UTIs lately?). Or an elevator on a power chair. Or a new sling to replace the one that’s frayed past safety.

And on this planet, reputable Internet suppliers could be in-network, too. Yes, certain manufacturers would be upset by this. But, down the road, how long can you continue the game? We’re not in Kansas any more.

Could you pilot a low-complexity DME program for certain dx? Patients at risk and/or high utilizers? Maybe in conjunction with existing disease management? Of course you could. Medicare, Medicaid or private plan, everyone’s feeling the pain (quite literally).

And why would you make the effort? Because the next patient held hostage to inadequate equipment and support may be someone you know.