Entries in Employers (12)


NBGH Annual Survey: Consumer Driven Plans, Private Exchanges and Seven-Percent

By Clive Riddle, September 6, 2013

The National Business Group on Health recently released findings from their annual benefits survey addressing plan design and cost issues for 2014. What did they conclude after getting results from 108 large employer organizations? The cost of providing health benefits will rise 7% (third consecutive year projected at that  rate); employers continue to further embrace consumer driven plans; and there is potential interest in exchanges – particularly private exchanges.

Regarding consumer driven care:

  • 36% of respondents said consumer driven plans were the most effective tactic to control rising costs
  • 72% offer at least one CDHP
  • 22% planning to implement a total replacement CDHP next year, up from 19% this year

Meanwhile, NBGH President Helen Darling tells us “Private exchanges are another option some employers are considering. In the last year, there has been an increase in the number of private exchanges that are being launched. And while some employers are considering private exchanges for active employees sometime in the future, very few (3%) are considering eliminating health care coverage entirely,” said Darling.

41% responded that COBRA participants might find public exchanges to be the most cost effective option. 26% felt some pre-65 retirees might opt to join exchanges, while 20% believe that some part-time employees will do so.

The survey also covered these topics:

  • 44% currently have an on-site clinic in at least one of their locations, with 9% are expecting to build a clinic next year
  • 66% will cover surgical interventions for the treatment of severe obesity in 2014
  • 36% will cover FDA-approved medications and intensive, multi-component behavioral interventions for participants with a BMI of more than 30
  • 89% offer a tobacco cessation program
  • 77% offer telephonic or on-site health coaching
  • 55% offer on-site weight management programs
  • 88% conduct health assessments
  • 83% do biometric screenings

If Kaiser Is Not the Answer, What Is the Question?

by Kim Bellard, March 28, 2013

The New York Times recently published an interesting article, “The Face of Future Health Care,” that raised questions about whether even a model like Kaiser is delivering what we need to reform our health care system.  It’s the old “be careful what you wish for…” dilemma.

After all, Kaiser could be considered a prototype for what ACA wanted when it created Accountable Care Organizations (ACOs).  It is a fully integrated hospital-physician organization, delivering care and managing risk with salaried physicians and other health care practitioners, and its own hospitals.  Hospitals all over the country are rushing to build their own versions, buying up physician practices at a record pace – one survey indicated that 52% would do so this year, while another predicted 75% of physicians would be so employed by 2014.

Kaiser may not have been the first integrated delivery system, nor are they the only one, but they certainly are the largest and have been around for decades.  With all those decades, though, one would expect they would be dramatically lower in cost, and that is not generally the case.  San Francisco public radio station KQED did a report “Why Isn’t Kaiser Less Expensive?” last spring.  In their report, critics accuse Kaiser of shadow-pricing, while Kaiser’s CEO George Halvorson insists they don’t and are usually at least 10% cheaper.  That’s nothing to brag about: with even 1% lower annual trend, they should have gotten 10% cheaper in these early years of the 21st century alone.

All this is not to pick at Kaiser.  I have long admired models like Kaiser, Geisinger Health System, Group Health Cooperative of Puget Sound, Intermountain Healthcare, or The Mayo Clinic.  It just seems intuitively obvious that like an integrated system, without the same incentives to overtreat that are pervasive elsewhere, should produce better results.  Each of the systems has been fairly successful in their core markets, although less so the further away from home they get, yet none are delivering radically different cost or quality results than other providers.

And, really, why should they?  They only have to be a little better each year than their competition.  The new mantra in health care is “value-based purchasing,” but we’re a long way from there.  The Catalyst for Payment Reform reports that only 11% of payments to doctors and hospitals are based on performance, while the Commonwealth Fund reports that less than 1% of health insurance premiums was spent on quality improvement in 2011.  This is disappointing but hardly surprising.  Most purchasers are buying with essentially house money; that is, someone else’s money. 

The biggest sources of health coverage are Medicaid, Medicare, and employer-sponsored health insurance.  The persons covered under all of these are largely shielded from the true cost of that coverage.  Medicaid is funded entirely by taxes, Medicare is also largely tax-funded, even when considering beneficiaries’ lifetime contributions, and, of course, employer coverage has the tax preference.  The “tax expenditure” for employer health insurance is, by far, the largest such expenditure – more than twice as large as the mortgage deduction, for example.  It’s all just compensation to employers; money “contributed” to employee benefits is simply money not spent on employee wages.  The tax preference helps shield employees from how much is being spent on their behalf, and it creates a huge disparity with people buying individual coverage, who receive no tax break.

ACA doesn’t equalize the tax preference, but it does introduce a vast set of new subsidies for individual coverage.  The Society of Actuaries has recently reported that individual premiums may be 32% higher due to ACA, joining the chorus of warnings about what may start happening in 2014.  Even HHS Secretary Sebelius now acknowledges they may be higher, but notes that the new subsidies will offset much of these.  While I think it is good public policy for more people to be covered and for economically disadvantaged people to get assistance in making coverage affordable, I worry greatly about creating a large new class of people sheltered from the true cost of health insurance.  It’s making a bad situation much, much worse.

Steve Brill has gotten much deserved attention for his lengthy and insight Time article “Why Medical Bills Are Killing Us.”  Brill painstaking walks through the crazy world of health care prices, especially their inconsistency between payors.  Some have used his work to call for single payor or other rate-setting, while I would argue that the system is a symptom of what happens when no one is paying enough attention to prices.

Frankly, I question whether the ACO/integrated delivery system is going to be the solution to our health care mess.  Hospitals are like factories: full of capital-intensive equipment and expensive to operate unless run at capacity.  Yet they aren’t really run like modern factories in terms of management practices, as a recent study in JAMA pointed out.  Similarly, physicians and other health care providers have some definite income expectations and fixed overhead obligations. 

All too often, combining hospitals and other providers in integrated delivery systems may be more about consolidating market power or assuring current revenue levels than about improving the cost and quality of the care for patients.  One AEI scholar recently pointed to the “humongous monopoly problem in health care,” and that’s with ACOs still in an early stage.  AEI is not the first to cite this issue, as I’ve written about previously, but I still don’t think enough attention is being paid.

We’re moving quickly to a health care system that features geographic provider monopolies or cartels, consumers too shielded from costs, and a regulatory environment that creates larger barriers to entry for new competitors in either delivery or financing of care.  That’s the perfect storm for a disaster. 

For radically different results, we’ll need radically different approaches.  Clayton Christian wrote about disruptive innovation in health care over ten years ago, and yet we’re still waiting to see it.  It may mean breaking the health/medical connection that HMOs led us to try to integrate in health coverage, giving consumers more fiscal accountability for the former while still protecting them from catastrophic expenses that can result from intensive medical interventions.  It should mean putting more of the data and technology – like mobile apps -- in the consumers’ hands, as advocated by people like Eric Topl (The Creative Destruction of Medicine) or Joe Flowers, and using that data to measure performance and help prescribe treatment. 

We’ve had a very paternalistic health care system, with health care experts telling us what care we need and other experts choosing coverage for us.  Let’s hope we can change that.  We need consumers engaged, taking responsibility, and demanding accountability from providers.  We need new types of competitors, using 21st century technology and science, to help consumers manage and finance their health needs.

We have to make sure that legislation and regulations focus on what’s best for the patient, not necessarily for existing health system entities, in order to help ensure we don’t stifle innovation (e.g., FDA regulation of mHealth).  The facts that traditional Medicare benefit design is still largely based on 1960’s Blue Cross Blue Shield designs, or that, generally speaking, you can’t use telemedicine to consult with an expert physician in a different state due to licensing or coverage restrictions, amply illustrate the problem. 

Whatever the future health system looks like, it won’t look like what we have today.  Dinosaurs were remarkable effective for hundreds of millions of years, but the environment dramatically changed and they became extinct.  A lot of the dinosaurs that have historically been the basis for our health care system will become extinct in the new health care environment, or evolve beyond recognition.  As with evolution, it will be messy, proceed with many false starts, and produce unexpected winners.

Personally, I can’t wait to see what the future looks like.


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.”


Attention, Walmart Shoppers!

By Kim Bellard, August 20, 2012

I’ve been thinking about something a very smart friend of mine wrote me in response to one of my previous posts: “…I can see where technology and information-driven consumerism might work for some highly motivated and educated people ... but not the masses I see at Walmart.”  I’m sure he meant no disrespect to either Walmart or its shoppers, nor do I, but one can go to pretty much any shopping venue and understand his point. 

The grim statistics are well known -- e.g., we’re too fat, we rely too heavily on medications, incidence of lifestyle conditions like diabetes is soaring, and, of course, we spend way more on health care than any other country.  Despite all that, though, Americans remain pretty cocky about their health, with the vast majority claiming to be in “good” or “very good” health, higher than in other industrialized countries. 

We claim to exercise, with over half claiming to exercise at least 1-3 times per week, but we may be kidding ourselves, as only about 5% report exercising on any given day.  Similarly, Americans are in denial about their burgeoning weight, reporting they have actually lost weight when, in fact, they gained.  The bottom line is that most of us are not really in shape, and it is impacting our health.

One of the most telling responses to this problem appeared recently: Dr. Michael Joyner of the Mayo Clinic suggested that our lack of exercise should be considered a medical condition.  I understand his point, since we’re obviously not doing a great job of staying healthy on our own.  Certainly getting more regular exercise would help many people – and, most likely, they know it – but medicalizing lack of exercise seems to me as more of what got us into this mess.

It’s not that various parties aren’t trying to encourage us to live healthier lifestyles.  In a recent post, Clive Riddle reported on the recent Aon Hewitt 2012 Health Survey of employers, citing in particular the widespread use of financial incentives towards lifestyle changes.  That’s encouraging, and a recent survey by the National Business Group on Health echoed employers’ adoption of wellness efforts, but also reported that over twice as many employers – 43% compared to 19% -- see increase use of consumer-directed health plans (CDHPs) as their most effective strategy for controlling costs.  In other words, employers are happy to try dangling the carrot, but they still plan to use the stick.

Employers aren’t the only ones trying to lead us to improve our health; the government is trying as well.  For example, a recent study found that state laws restricting the sale of snacks and sugary drinks in schools did result in children gaining less weight.  That’s notable for at least two reasons: first, that there are a number of states already legislating such choices, and, second, that such efforts may actually work.  No wonder Mayor Bloomberg wants to ban large sizes of sugary drinks in New York City. 

In a country where, apparently, the government can require you to buy broccoli (as long as they call it a tax, not a penalty!), the prospect of it telling us how to live is a little scary.   Then, again, this is a government that can’t even ensure that its retirement payments, whether Social Security or federal employee pensions – meet their one main test, i.e., that the recipient is actually still alive.  So maybe I shouldn’t start worrying about them monitoring my ice cream consumption just yet.

How did it come to this, that we’ve delegated the responsibility of keeping ourselves healthy to third parties, including physicians, employers, or the government?  Some of the problem may come from the fact that parties in the health care system are, in fact, treating us like consumers.  Not in the respect of competing on price or quality, mind you, but in using advertising to drive consumer decisions based on image.   The saga of the impact of direct-to-consumer advertising for pharmaceuticals is widely known, with such advertising spending exploding to close to $5 billion annually after such ads were allowed in 1997.  Some are calling for an end to DTC pharmaceutical ads, as the CBO studied last year.  The hospitals are also getting into the act, pouring money into advertising, as the New York Times reported last year.  Throw in spending by various diet and alternative medicine alternatives, and it becomes clear that we face a lot of forces telling us that some other person and/or product is the key to our health.  When we don’t directly pay for some large portion of those, as health insurance can allow us to believe, the temptation to not shop prudently is almost irresistible.   We may shop for flat screen TVs at Walmart, but when it comes to health care, we think we deserve to be Neiman Marcus shoppers.

There are certainly many situations were medical advice and treatment is not only appropriate but also necessary, and thank goodness that our clinicians are always finding more ways to combat our various maladies.  We have more and better options all the time, even though often those options are more expensive and sometimes not as clearly beneficial as we should expect.  But the responsibility for our health does not lie in those clinicians’ hands, much less in the hands of our employers or government officials.  I don’t have any reason to expect that Americans will be better at managing their health than they are at managing other aspects of their lives, but we shouldn’t be worse either. 

There is a lot efforts around “patient centered medical homes,” which include many good ideas, especially better coordination among health care providers.  As long as the focus is “medical,” though, the “patient centered” part of it is going to lack important components necessary for improved health.  Health is the result of a complicated interaction of genetics, environment, lifestyle, social influences, and medical interventions, to name a few.  We need to break out of the medical model to truly get at health.

We talk about the health care system, but in truth it is still the medical care system.  If we’re serious about improving health, and impacting the quality and cost of medical care, maybe we need to step back and think about a health care system really should look like. 

I’m sure that some Walmart shoppers are spending beyond their means, buying things they don’t need and can’t afford.  Some are perhaps even in bankruptcy.  But I like to think that most of them live within their means, and have learned how to manage their financial health.  We should be thinking about what in our current system leads us to not expect them to do the same with their actual health.