Entries in Riddle, Clive (271)


Medicare Prescription Drug Coverage in a Big Box

By Clive Riddle

Retail health care will continue to emerge and develop in new arenas. Retail health care started with prescription drugs decades ago, and now retail, convenient care clinics have been the rage. But there are certainly more retail avenues to develop, starting with health insurance at the individual level. Marrying individual Medicare distribution with prescription drugs at the retail would seem a natural. At least it has to Aetna and Costco.

This week, Aetna and Costco announced an alliance to offer a Medicare Part D Prescription Drug Plan: the Aetna Medicare Rx - Costco Plus Plan, to be available in 17 states, with Costco providing sales distribution to its members, and preferred Rx benefits provided for prescriptions filled at Costco pharmacies.

The plan will be available in Alaska, Arizona, California, Colorado, Florida, Hawaii, Idaho, Illinois, Michigan, Nevada, New Mexico, New York, Ohio, Oregon, Utah, Virginia and Washington. Monthly premiums will range from $50 to $70, depending upon the state. Under the plan generic copays, typically $10 at other pharmacies, will be $5 at Costco, or in some cases, zero copay.

Costco operates 545 “membership warehouses”, including 400 in the United States, and also operates Costco Online, an electronic commerce Web site at costco.com.


Data from the Consumer Driven Healthcare Summit

By Clive Riddle

The Third National Consumer Driven Healthcare Summit was held earlier this week in Washington DC, addressing a wide range of current key health care consumerism issues, with leading thought leaders and industry experts from around the country. Here's some interesting data shared by speakers from four selected Track Sessions during the conference:

Individual Health Insurance

Samuel Gibbs, Senior Vice President of Sales of eHealth, Inc.(parent of eHealthInsurance) gave a presentation on "The Online Individual Insurance Market - Perspectives, Experiences and Trends." EHealth represents over 180 health insurance carriers nationwide, which are available directly to consumer via their eHealthInsurance web site. Sam shared that eHealth's individual plan profile for 2007 was as follows:

* Average Age: 36
* Percent Male: 54%
* Percent Single: 61%
* Average Annual Premium: $1,896
* Range of Average Monthly Premiums: $83 to $388
* Average Annual Deductible: $1,971

Ann Ritter from the Convenient Care Association participated in a session on "The State of Convenient Care for 2009" and shared just released RAND convenient care data including:

* Patients by age breakdown as follows: under age 2 - 0.2%; age 2-5 - 6.3%; age 6-17 - 20.3%; age 18-44 - 43.0%; age 45-64 - 22.6%; age 65+ 7.5%
* 2.3% of patients were triaged to an emergency department or physician's office
* Among patients age 65+, 73.65% of visits were for immunizations
* Ten basic treatments and services accounted for more than 90% of visits

Paul H. Rubin, PhD, Samuel Candler Dobbs Professor of Economics and Law, Department of Economics, Emory University, in a presentation on "The Cost Effectiveness of Direct to Consumer Advertising for Prescription Drugs" discussed findings from a study and paper he co-wrote with Adam Atherly of Emory University, in which they found during patient visits to their physician:

* 4% of patients schedule physician visits to ask about a drug
* 14% of patients discussed a concern because of DTC advertising
* If patients ask for a drug, 39% receive that prescription, 22% are prescribed a different drug, and 18% receive no drug
* 5.5% of physicians prescribed a requested DTC drug, but thought a different drug was better
* 88% of patients requesting a DTC drug had a relevant condition
* 75% who received the requested drug reported subsequently feeling better

Michael Vittoria, Vice President, Human Resources, Sperian Protection, in his presentation on "Integrating Wellness & Preventative Care into a CDHP" told us that Sperian, with 1,300 U.S. employees, adopted a self funded HRA in 2004, introduced HSAs in 2007 and introduced Wellness Incentives in 2008. Sperian currently has 56% of employees enrolled in PPOs, 14% in HMOs and 30% in the self funded HSA options. 34% of their 2008 HSA participants earn < $30k, 21% earn between $30k to $50k, 17% earn between $50k to $75k, 16% earn between $75k and $100k, and 12% earn more than $100k. Sperian conducted various wellness incentive programs during 2008, with their weight loss program yielding a BMI reduction in participating employees from 30.7 to 29.4. Sperian's overall medical cost trend from each previous year has been:

* 2004 - 11.7% increase
* 2005 - 4.5% increase
* 2006 - 3.6% increase
* 2007 - 2.6% increase
* 2008 - 1.8% increase


Getting to the bottom of Counter-Intuitive Data

By Clive Riddle

The KFF/HRET Annual Survey of Employer Sponsored Benefits and Smaller versus Larger Group Premium Costs

Results were recently released from The Kaiser Family Foundation and Health Research & Educational Trust  Annual Survey of Employer Sponsored Benefits. This year’s 214 page document is a must read if you want a statistical photo album, as opposed to a snapshot, of employer health benefits landscape.

While the KFF/HRET is rightfully one of the most often cited, and leading sources for employer health benefit statistics, the results occasionally contain data that seems counter-intuitive.  Digging through this year’s document, the comparison of  smaller versus larger employer group premium costs raises such a red flag.

Intuition would guide us to believe that larger employer groups would experience lower premium costs and lower premium increases. Historically, a wide number of studies from national benefit consulting firms have borne this out.

But the 2008 KFF/HRET survey tells us that premiums are now cheaper for smaller firms (3-199 workers) compared to larger firms (200+ workers), with the average monthly single premium at $382 for smaller versus $397 for larger firms (3.9% higher), and the average monthly family premium at $1,008 for smaller versus $1,081 for larger firms (7.2% higher.) The report notes that in past years, any differential was not so significant.

What gives? It of course is always tempting in such situations to dismiss the information as a result of skewed data and a faulty survey. But who are we to know that this is case? Instead, the answers may still be in front of us. The report doesn’t specifically respond with answers to this vexing question, but it does supply enough detailed data to offer some explanations, if you dig one level deeper.

And in digging, it would appear that the difference could be due to benefit packages, plan funding, and demographics.

When broken down by plan of benefits, smaller firm premiums are actually more expensive for a number of categories (Family HMO, Single PPO, Single and Family HDHP) and the differential is not as pronounced where larger firms are more expense (3.2% higher for Single HMO and 2.4% higher for Family PPO) except for POS premiums, which don’t have that significant of enrollment.

Thus part of the explanation for less expensive smaller firm premiums could simply be in the mix of benefit packages (HMO vs PPO vs HDHP etc) for smaller firms vs larger firms. On top of that, a good portion of the explanation could be in the level of cost sharing, which impacts premium costs. For example, the average Single PPO deductible for smaller firms was $917, compared to $413 for larger firms.

Another component of the explanation may be in that self-funded plan costs are running higher than fully funded plans. The report indicates that family self-funded premiums average 6.2% higher than fully funded premiums. The report also tells as that only 12% of smaller firms have some level of self-funding compared to 77% of larger firms. Furthermore, more large firms are trending towards self funding. 62% of workers with employers having 5,000+ employees self-funded in 1999, increasing to 89% in 2008, and 62% of workers with employers having 1,000 to 4,999 employees self-funded in 1999 compared to 76% in 2008.

Lastly, demographics can provide some of the explanation. Larger groups tend to have a slightly older population, and the report indicates that firms with less than 35% of workers aged 26 or under had 6.7% higher premium costs than firms with more than 35% of workers aged 56 and under. Larger groups tend to have workers with higher wage levels, and the report indicates that firms with less than 35% of workers earning $22,000 or less had 8.3% higher premium costs than firms with more than 35% of workers earning $22,000 or less. Lastly, larger firms tend to be more unionized, and the report indicates that firms with at least some union employees had 4.3% higher premiums than firms with no union employees.

The point of all this digging is to demonstrate, when considering reports as valuable of the KFF/HRET annual survey, not to just browse through the summary and walk away with a headline that smaller groups now have lower premiums than larger groups, as some news organizations have done, or to dismiss the survey as flawed, as some pundits have done. Digging through the data can yield explanations, which would seem to indicate that on an apples-to-apples basis, small groups aren’t really cheaper. Instead, small groups have higher cost sharing, a different mix of benefit plans, less self funding and demographics that make them “apples” compared to large firm “oranges”, and the apples do cost less than oranges in this case.


Presenteeism Quantified

By Clive Riddle

CIGNA last week released Yankelovich survey results quantifying various aspects of "presenteeism", which they define as "the phenomenon of employees being physically present at work, but not performing their duties at full capacity due to illness and various distractions."

Jodi Prohofsky, CIGNA Health Solutions Unit SVP of Operations tells us "The survey demonstrates very clearly what every employee knows – that life impacts work and work impacts life. The challenge for employers is to find ways to reduce that impact by offering workplace programs focused on employee health and well-being, and then encourage their employees to use these programs. It’s important for employers to create a culture of wellness in the workplace so that every employee has the opportunity to achieve his or her full health and productivity.”

Here's selected results from their study:

  • On average, people admitted to spending between 2 ½ and five hours per week resolving personal issues while at work, spiking during particularly stressful or eventful weeks.
  • 61% of employees reported for duty while they were sick or coping with family and personal matters, with an average number of  6.9 "presenteeism" days per employee for the past six months, compared to 3.0 actual absence days per employee for the past six months.
  • Employees average 2.4 hours per week dealing with personal issues in a typical week, and 4.7 hours during a stressful week
  • 62% of employees admitted to being  less productive on those days they were sick or had to deal with personal issues, 
  • 38% of employees reported to work sick or with a significant person issue out of a sense of duty, and 25 % reported because they needed the income. 
  • 66% of employees admitted they don’t get enough sleep, and 45% said that their lack of sleep hurt their work performance. 
  • Of those saying that a lack of sleep affected them at work, 50% were less productive, 43% were irritable, 42 % were unable to focus, 40% delayed projects,  28%  admitted to making errors, and 12% fell asleep on the job (multiple answers allowed.)
  • Employee strategies to stay alert bode well for Starbucks. the top strategy was to drink caffeinated beverages (57%). 20% said they take a nap to stay refreshed.

The lines continue to blur between human resource issues and benefits issues, and employers, health plans, providers, and solutions companies are all building on a trend to address workplace issue like presenteeism through delivery and management of health care benefit. Expect to see health plans, wellness companies, care management companies, pharmaceutical programs, and various vendors to continue to step up involvement is this area.


The Venus and Mars of Actuaries and Underwriters

By Clive Riddle

For many of us, what goes on behind the closed doors of actuarial and underwriting offices, if not the stuff of Tom Clancy novels, is still a bit mysterious. Many of us in fact confuse the two functions, thinking that they are interchangeable terms to be applied within an organization, when in fact, they are not. In this month's Predictive Modeling News, editor Russell Jackson interviews actuary Joseph N. Romano ASA MAAA, and underwriter James A. Minnich, discussing what Russell refers to as " the Martian and Venusian aspects of each side.”’

Russell cited a recent predictive modeling conference presentation the two, representing Ingenix, had given where they addressed the “stereotypical extremes of actuaries and underwriters. Here are characteristics of the stereotypical actuary: conservative, analytically accurate and precision-seeking, medium- to long-term focus, action-oriented, but with limited urgency, financially results-oriented and biased, program-oriented, a shy, quiet numbers person with some people skills. Here, on the other hand, are characteristics of a stereotypical underwriter: moderate to conservative, analytically accurate but flexible, short- to medium-term focus, responsive and oriented to fast-paced action, balances financials with growth, customer-oriented, an approachable “people person” with good conversation skills. The best actuaries and the best underwriters, the two said, understand those extremes and have a little bit of both in their approach.”   
Russell asked the two point blank,  what is the difference between what actuaries do and what underwriters do?. Joe Romano the actuary responded "There are a lot of different ways to describe the roles, of course, especially around pricing. That’s where the two disciplines -- actuary and underwriting -- intersect, interact and overlap. Actuary also does reserving and other peripheral activities, but the primary interaction is on pricing. I would argue that an easy definition is that actuary tends to look at macro activity, at issues in the aggregate. Underwriting, on the other hand, while staying aware of that aggregate, works more with the specifics, with a particular group, for example." Jim Minnich the underwriter added "I’d also use that 'micro' and 'macro' distinction. Also, I’d add that actuary is responsible for coming up with the revenue you need on a per-member-per-month basis, on average, for a set of benefits. The underwriter does the analysis on a group-by-group basis, to do a risk assessment to determine if the group is average, healthy or sick. Underwriting starts with the average revenue needed, then the underwriter adjusts it to the particulars of the group. There’s another dynamic at play, too. None of this happens in a vacuum, so the 'best practice' is where they’re linked together -- actuary, underwriting and sales. What if the PMPM rate is consistently too high to be supported by the market? We need to make sure we get enough revenue, but we have to strike a balance between profit and growth. Sales is focused on growth, while underwriting and actuary focus more on the profit piece."

This led Russell to ask them, is there a difference between medical and financial underwriting? Romano replied "There is, indeed. A medical underwriter traditionally is someone who reviews individual health insurance applications, which typically include health questionnaires. So medical underwriting looks at the presence or absence of diabetes, cancer and other chronic conditions to determine the medical health status of the applicant. The financial underwriter, by comparison, works on smaller groups with the other underwriters, but is much more similar in actual function to an actuary, using algebraic calculations to determine the rate needs for a particular group."

Russell Jackson comments that "It doesn’t sound exactly like one is from Mars and the other from Venus, to borrow from the book title, but it sounds like personality types could contribute to a disconnect between actuaries and underwriters." He then asks if  there any way to account for that in staffing, or in setting up communications processes between them?  

Romano tells Russell that "part of what attracts people to the different professions, absolutely, is differences in personality traits. Both disciplines are math-oriented, of course, but while the typical actuary is a math major, an underwriter may be a math major, but we also find folks with a lot broader backgrounds in underwriting because those professionals need a math bent but other skill sets as well. It gets into the different scopes of training the two disciplines undergo; for example, the actuarial profession has a formal examination schedule. The point is, if you have the wrong kinds of interactions between the stereotypes of actuaries and underwriters, you can have problems. But when you get the right kinds, when you get the interactions of people who recognize the stereotypes but who really understand each other’s disciplines, you have the best possible scenario -- the underwriter who understands the actuary’s introversion or the sales agent who understands math. That’s the ideal interaction of the disciplines, and that starts with the interaction of the individual actuaries and underwriters themselves."

Minnich weighed in as well. "I was trained in the early 1980’s at an insurer, and I was surprised that, in that office, we had 50 underwriters, but only five or so of them had math backgrounds. Mine, in fact, is in theology, and I once taught religion to high school students. In other words, you find a wide variety of backgrounds in underwriting, but it’s rare to find an actuary who doesn’t have a math background. Of course, there are stereotypes, too. Are all actuaries very analytical and introverted? Are all underwriters a little less extroverted than sales agents and a little less technically adept than actuaries? Are all sales agents very extroverted with very limited math aptitude?"

Russell also asked how valuable is a formal education program to train each discipline about the other and about respecting the differences between them?  Romano responded that "The Society of Actuaries’ educational processes continually evolve, and we’re trying to get more than math major personalities in terms of thought processes, more of a business orientation; in fact, we talk about the same issues for actuarial and for predictive modeling audiences. There’s great interest in people understanding how they work together. A challenge for better integration of actuary and underwriting, though, is the fact that, while underwriters attend educational forums as well, I don’t know that we have a formal approach to learning each other’s discipline. We have opportunities for that kind of education, but I don’t know that you’ll see it formalized. Rather, that integration is really going to result from the dynamics of people working together and sharing information."

Minnich tells Russell that "My background is in underwriting, so I’m aware of something of an unspoken dynamic; unspoken but worth knowing about. In a traditional insurance company 25 years ago, the actuary held a role that was higher than the underwriter’s. In many cases, the actuary was responsible for coming up with what was needed as far as averages, but also for the formulas the underwriters would be expected to use to go from the average to a community rate for a particular group. It was very clear that, stature-wise, the actuary was much higher. In fact, there are still actuaries working with clients who don’t like to turn the case over to underwriting because everyone knows that “an actuary can underwrite, but an underwriter can’t actuary.” That dynamic is certainly changing, but there’s still some underlying tension out there. What’s changing it? With the advent of HMOs, you see smaller, regional plans that, because of their size, couldn’t afford to hire an actuary. So they’d look to the underwriter on staff to do the traditional actuarial duties and hire an outside firm for consulting actuarial functions. Now, at the huge insurance companies, which have huge actuarial staffs, some of the more stereotypical actuaries still exist. If that person is one of, say 30, actuaries, he or she may not ever have to interact directly with underwriting or sales. But in the smaller plans that have cropped up, if you’re the only actuary, you don’t have that luxury. The good news for all of us is it’s the actuaries who have personalities closer to underwriters and sales agents who will advance. Likewise, it’s the underwriters who are analytical who will succeed."

For More Information:

Predictive Modeling News