Entries in Benefits & Premiums (28)


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 programspay-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):

  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%
  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.”