Healthcare Reform Magazine

National Healthcare Reform Magazine

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

1

ONE Location

2011 Employer Healthcare Congress National Healthcare Reform Magazine

Four Leading Healthcare Conferences

One Exhibit Hall, 4x the Traffic Shared Exhibit Hall, Networking Lunches & Networking Receptions

October 26th-28th, 2011

Marriott Renaissance Schaumburg Convention Center Hotel

2

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

22

EDITORIAL

The Challenges for Accountable Health Organizations (“ACO’s)

by Tony Barber

Editor-in-Chief

Jonathan Edelheit

ADVERTISING SALES Info@HealthcarereformMagazine.com

PRODUCTION Graphic Designer

Tercy U. Toussaint

For any questions regarding advertising, permissions/ reprints, or other general inquiries, please contact: Info@HealthcareReformMagazine.com

CONTENTS from the Editor 04 Letter Transparency in Healthcare Reform

26

How obesity and workers comp is crippling companies and Prevention

by Mel Okeefe

29

The Time is Now Ten Steps Organizations can Take to Successfully Comply with ICD-10

by Manish Nachnani

33

HEALTHCARE...WHO CARES?

by Mark Troutman

by Jonathan Edelheit

38

05

HEALTHCARE BENEFITS INNOVATION: EMPLOYERS CREATING THEIR OWN CAPTIVE INSURERS

by Melvin J. Howard

New Avatar of Value Based Benefit Design

by Bhushan Deopujari &Dr. Vandana Rahadwa

is the future of the 10 What Health Insurance

by Jane Ames

Innovation, 13 Technology US Healthcare and

by Apporv Reddy

16 Medical Loss Ratios.. Agent or

No Agent.. ‘Freedom to Choose’

by Larry Steep

19

The MLR Provision: Unraveling the Mystery of Three Little Letters

42

THE BEHAVIOR DRIVEN HEALTH PLAN

by Russ Swallow

by Pamela Mullahy

Copyright © 2011 Healthcare Reform. All rights reserved. Healthcare Reform Magazine is published monthly by. Material in this publication may not be reproduced in any way without express permission from Healthcare Reform Magazine. Requests for permission may be directed to info@HealthcareReformMagazine.com. Healthcare Reform Magazine is in no way responsible for the content of our advertisers or authors.

National Healthcare Reform Magazine

LETTER FROM THE EDITOR

Transparency in Healthcare Reform

ABOUT THE EDITOR

There is something that has been eating

away at me for months.

It is the utter lack of

transparency by government and by both Republicans and Democrats regarding healthcare reform.

It

is almost impossible to find one person in the US Government who can talk about Healthcare Reform.

I don’t know if it’s because no one in DC or up on the hill knows anything about healthcare reform or if there is some kind of unofficial “gag order” in place. No one realizes it because no one even knows what the right questions to ask. But when our magazine goes out to ask questions of people in the Government, whether Republicans or Democrats, we are told they won’t do interviews.

When these same

Jonathan Edelheit is

editor-in-chief of the Healthcare Reform Magazine and has been involved in Health Insurance industry for over ten years. His background includes running a national healthcare administrator that designs insurance products for employers and insurance companies and working with thousands of health insurance agents and consultants around the country.

Mr. Edelheit has

people in government who are involved in the healthcare reform process

been

go and speak at conferences, they put a “gag order” on the conference.

in hundreds of magazines and

No recordings, no pictures, and no stories are allowed to be written about

media over the past few years

their speech? Can you believe this? Where is the freedom of speech and

and is considered an expert in

where is the transparency? Is it because they know people won’t like the

health insurance and healthcare.

answers, or because they don’t know the answers and that will be very embarrassing.

The saddest part is that both sides are so focused on fighting

each other and “one-upping” each other, they have forgotten about the American people. They have forgotten that while they fight for political standing and positioning for 2012, we the people lose out. I feel the recent elections were supposed to be a big wake up call to BOTH parties. To cut it out and to do what’s best for America and to teach them to start working together. Unfortunately both parties missed the message and we may find no progress until two years from now, when Americans correct inaction and political infighting at the next set of elections.

Jonathan Edelheit

4

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

mentioned

or

featured

Mr. Edelheit is also the editor of the Self Funding Magazine, the Corporate Wellness Magazine, the Voluntary Benefits Magazine and the Global Benefits Magazine.

Mr. Edelheit also runs one of the largest healthcare conferences in the country, the Employer Healthcare

Congress,

www.

employerhealthcarecongress.com.

National Healthcare Reform Magazine

New Avatar of Value Based Benefit Design

by Bhushan Deopujari & Dr. Vandana Rahadwa

Patient Protection and Affordable Care Act (PPACA) stresses on increasing the coverage, providing preventive care and value based insurance design, there-by curbing the health care costs in the long run. It has also brought number of regulations which restricts the insurance companies from denying coverage to individuals based on their pre-existing conditions. The insurance companies are now prohibited from charging co-payments or deductibles for preventive care along with

complying with medical loss ratio of 85%. With all these changes, it will be challenging for insurers to retain existing members and to attract new members while remaining compliant with regulations.

PPACA thus puts intense pressure on payers to reduce costs and improve efficiency. At the same time it also provides a big opportunity for insurers to attract new members eligible for coverage. To leverage this opportunity, payers need to develop value based insurance plans supported by strong data analytics and also increase their focus on disease prevention strategies.

Value Based Benefit Design (VBBD) is emerging as an approach to promote services and behaviors proved to be effective in improving health of the members. The central focus of VBBD

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

5

National Healthcare Reform Magazine

is increasing value for patients — the health outcomes achieved per dollar spent VBBD is based on the concept of providing additional incentives to the members with chronic disease conditions to be compliant towards prevention and care management strategies.

The strategies include preventive medications, regular checkups, diagnostics, disease and care management etc. Incentives can be in the form of providing financial benefits, in terms of lower co-pay, coinsurance, lowering tiers of certain branded drugs, starting prevention and wellness programs etc. Thus, for Members VBBD program aims to improve the overall health while for payers, it aims to reduce long term health care costs.

of motivation, perceived health behavior, among others.

VBBD Programs- Suggested implementation considerations:

Insurers will need to think of innovative strategies to reduce healthcare cost, maximize ROI and improve member retention. VBBD programs will also be appealing to employers who will need to focus on increased productivity encouraged by healthy lifestyle choices.

Cost Benefit Ratio

VBBD program is usually implemented by employers, with a large member base, having substantial number of members suffering from VBBD Programs – Today: chronic diseases. The group with high noncompliance will be benefited the most from

Today, a very limited number of employers VBBD programs. The cost benefit analysis and insurers have implemented VBBD programs should be done in the planning phase for deciding for their members. A study done by Centre for the minimum participation number and the target Value Based Insurance Design, University of compliance level, for justifying the ROI. Michigan shows that currently less than 20% of the employers have implemented some type Redesigning the Benefits of VBBD program and approximately 50% are planning to adopt these programs in near future.

Benefits should be designed considering One of the existing VBBD program is designed the non-compliance factors. Carefully designed to offer $20 discount on certain prescription drug benefits are likely to provide rich dividends co-payments for plan participants who refill their towards the success of VBBD program. Benefits medications on a timely basis, while another is can be in the form of financial incentives, designed to offer lowered co-pays for asthma and educational seminars, counseling, prevention diabetes medications. There is also a program programs, disease and care management programs which creates a personal health profile of the etc., Designing benefits should be dependent members and benefits are designed considering on factors such as economic cost, targeted the suitability and effectiveness of the program increase in compliance, presence of prevention, for the particular member. disease and care management programs etc. For

To be effective in the post-reform world, example, in case of economic constraints, the VBBD concepts need to be altered considering incentives requiring low investment but having the other non-compliance reasons which include maximum impact on compliance should be lack of awareness on the VBBD concepts, lack first implemented. Remaining benefits can be

6

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

Active Member Participation

The success of VBBD programs is heavily dependent on active participation of members. The members should be provided with all possible tools such as self-health monitors, dedicated customer service etc. encouraging them to take increased ownership towards their health.

Payer-Provider Collaboration

With increased focus in pay for performance, it is imperative for providers to participate in disease management and quality initiatives. Payerprovider collaboration will further enhance the success of VBBD programs.

The collaboration can be achieved with: •

subsequently extended to members as the program evolves.

• •

Tracking Program Effectiveness

It is also very important to track the effectiveness of program at predetermined intervals to ensure the success of the program. Necessary changes should be made to benefits from time to time depending upon the prevalent non-compliance factor. The non-compliance benchmarks set up for program should be reviewed periodically for continuous improvement.

The success of VBBD program will depend upon end to end analytics starting from VBBD conceptualization stage to tracking the success of VBBD program post-implementation.

•

Insurers providing financial incentives to members for visiting recommended providers.

Insurers providing financial incentives to providers based on quality compliance.

Episode Treatment Group (ETG) /Bundle payment system for providers to promote quality care which will help providers comply with ACO (Accountable Care Organization) mandate.

Tiering: One approach to steering consumers and patients towards the use of high valued health care services and health providers is “tiering.” Broadly defined, tiering refers to the classification of healthcare providers (e.g., hospitals and physicians), pharmaceuticals, or treatments/therapies, based on objective or subjective criteria such as cost, quality and value. The members leveraging high value services from the tiered providers are incentivized by the insurance companies

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

7

National Healthcare Reform Magazine

Insurers adopting VBBD framework are likely to be insurer of choice post health care reform Such insurers will also be better placed to comply with the regulations and contain health care costs in the long run.

Challenge

Description

Suggestions to address the challenge

Cost of implementation

VBBD program implementation requires upfront investment in setting up the IT framework, providing incentives to members while redesigning benefits, starting and maintaining prevention and wellness programs, administrative costs to run the program, provider incentive programs and clinical research.

With accurately predicting the ROI using advanced analytics, necessary investment can be justified for implementing the VBBD program. Also implementation of the program can be done in a phased manner starting from simpler to complex there-by reducing the initial implementation cost.

Quantifying Dollars Saved

ROI realized from the VBBD program is very difficult to measure quantitatively.

Advanced analytical capabilities can prove useful in quantifying the financial impact of VBBD program and can also provide exact ROI realized from the program.

Increased utilization of high value services

VBBD provides incentives such as copay / coinsurance reductions to encourage members to use the high value services.

This will result in increased utilization of high value services, ultimately increasing the healthcare cost.

Value realized from various initiatives of the program can be evident only after few years of implementation.

Long term savings achieved through reduction in high cost claims and member wellbeing will justify the investment made for VBBD programs.

Adverse selection and Continuity in VBBD programs:

If an insurer offers VBBD to small groups, it is likely to attract more people having that disease thus increasing the overall risk of the group. This leads to adverse selection and challenges the basic principle of insurance. Also in order for insurers to realize benefits from VBBD program, it’s necessary that the group / individuals continue to be enrolled with them for long term.

Pre PPACA, small groups and individuals were not the ideal candidates for VBBD programs. The risk of adverse selection is for real while implementing VBBD for small groups or individual market. With PPACA prohibiting insurers from denying coverage to members with pre-existing conditions, insurers need re-think of innovative ways to balance the risk of adverse selection. Even if insurers decide against implementing a full-fledged VBBD program for small groups / individuals, they can implement specific VBBD components to minimize the risk of covering individuals with pre-existing conditions.

8

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

One way to address these challenges is to implement the VBBD program on pilot basis.

based on visits to high value providers, payment and delivery system reform etc.

• •

About the Arthor

• •

Target a single chronic disease Implement VBBD program for a small plan sponsor Redesign few benefits to start with Implement the program from simpler to complex

The learning can then be used for implementing it to a larger population. Apart from this, there also needs to be a trade-off between the cost and the return on investment. Higher the complexity of VBBD, higher the returns it is likely to provide in the long run. Hence, the success of VBBD also depends on long term goals of payers and their investment capabilities.

Bhushan Deopujari is a Consultant with Healthcare Consulting Practice of Infosys Technologies Limited.

Bhushan has more than 6 years of Healthcare industry experience. He has primarily worked in Payer industry. He has extensive experience in Healthcare Data Warehousing, Claims, Rebates invoicing and Allocation (sub components of PBM).

He is a certified AHIP. Bhushan is currently working on conceptualizing and designing IT solutions for Payer industry

Conclusion:

Dr. Vandana Rahadwa is a Senior Associate

With PPACA there is a renewed importance Consultant in Healthcare Consulting Practice of for VBBD programs, which provides a structured Infosys Technologies Limited. way to help healthcare stakeholders comply with the mandates as well as to contain healthcare Dr. Vandana comes with extensive experience costs in the long term. Considering the challenges over 7 years in healthcare sector. She has worked while implementing VBBD programs, it must be in Provider and Payer industries. She specializes well understood that the benefits realized over a in Hospital Planning, Designing, Operations long term will help justify the investments in this Management, Healthcare Quality management, program. Payers / Employers will have to decide Disease Management and Healthcare IT solutions.

Currently Dr. Vandana is focused on conceptualizing upon the strategy that suits best for them.

Use of analytical capabilities by payers, right from and designing IT solutions for addressing business identifying the target population to tracking the challenges posed by healthcare reform. program post implementation is one of the most important factors contributing to the success of References: • www.healthcare.gov these programs. VBBD program is also incomplete • VBBD Purchaser guide by National Business Coalition on Health without active member participation as well as January 2009 involvement of provider in terms of financial • http://www.sph.umich.edu/vbidcenter/ • VALUE IN HEALTH CARE Accounting for Cost, Quality, Safety, incentives, bundle payments, ETGs etc. Thus, Outcomes and Innovation AN IOM LEARNING HEALTHCARE benefit design strategies are likely to be most SYSTEM WORKSHOP, March 2009 effective when they are paired with other policies, • http://www.lifeclinic.com/fullpage.aspx?prid=530220&type=1 • http://www.uhc.com/news_room/2010_news_release_archive/ such as provider incentives, incentives to members refill_and_save_program_for_prescription_drugs.htm

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

9

National Healthcare Reform Magazine

What is the future of the Health Insurance

by Jane Ames

You have probably planned a vacation in the past five years. During that time you had the choice to use a Travel Agent or not. Most of us did not. ...Health Insurance Agents across the country who work in the Individual and Small Group markets are concerned that consumers will bypass them in a similar way after 2014. Is that likely? This article explores this question using analogies from other industries that have had to undergo similar changes.

for individuals and small groups to purchase health insurance with or without Federal subsidies. There are 5 products that must be offered and each insurer must describe their products in a similar format. No medical information can be used to decline or rate up an individual or group. If a person needs help with their transaction they can call a person hired by the government called a “Navigator�. There is the option of allowing private insurance to be available outside the Exchange with different benefits, but rates are pooled Background: Starting in 2014, Health Care so there will be no price advantage for consumers to Reform requires that each state make available an select plans inside our outside the Exchange. (Note: Exchange, which is an (primarily) on-line portal This is highly summarized for purposes of this article.)

10

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

Reasons why Health Agents will still be will consider personal references more important than any data on the internet to make their selection. This is needed after 2014 People will do their own shopping online only if they consider it a good use of their time.

In the case of travel, there are 3 reasons people shop online: (1) There are far more options available to people via the internet than through a travel agent (2) There is more information about the options (pictures, personal unbiased testimonials, prices, etc.) (3) Many consider it an enjoyable activity.

The same will not be the case with health insurance in 2014 once the Exchange is functioning.

By law, the Exchange will only include the insurers and products that it offers, consumers will have to go elsewhere to learn about other options. The objective for the Exchange is to provide data to help individuals make informed decisions on the most cost-effective, high quality providers and insurers.

a cultural and trust issue (think about how you selected your mechanic, accountant, and dentist.) In addition, if you have a health insurance agent before 2014 and you trust them, and it doesn’t cost you extra or reduce your options, you are likely to want to keep using them for advice and service. Finally, shopping online for health insurance is not likely to be considered enjoyable, although it is likely that a consumer would explore the Internet and then contact their existing agent.

Service and trust are important considerations

There will be a new level of complexity post 2014 as people become eligible for Medicaid or other Federal and State subsidies and want to know what options they have to maximize their health insurance benefits and minimize their penalties. Here you might consider as an analogy the individuals and business owners who do their own taxes online (like TurboTax) vs. those that go to a CPA or lower-priced firms like H&R Block. People make these selections based on cost, time, expertise, and trust. In the future world of Health Care Exchanges– all of these are considerations when you decide whether to go on your own or use a Health Insurance agent. If there is a cost to using an agent or if there are less options, that will be a large deterrent*, but some people may consider it worthwhile if they feel they will benefit most with the service of an expert who can explain all their options and provide unbiased recommendations.

In addition, if an individual considers the service of the Exchange call center (staffed by Navigators) to be inadequate they will be less likely to shop without assistance. What this means is that Agents who are expert on the new law and all the options within and outside the Exchange will be in demand. Classes offering CE credits will be important, or perhaps new certifications will be required or a new type of Agent Even if done well, it is still likely that most people designation will be created.

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

11

National Healthcare Reform Magazine

Agents must add value to Financial Products

their situation • compliance and penalties: the new law creates

CPAs and Real Estate agents are perceived numerous penalties and fines for non-compliance to add value to a financial transaction. They do this • Tax implications: businesses in particular have through saving money or time, as mentioned before, many tax implications to consider that will likely and also by reducing risk and acting as an advocate be outside the area of expertise of a government if issues arise. Do Health Insurance Agents do this?

Navigator.

Now- definitely. Health Insurance is a very complex industry. Different carriers offer different products, Based on these points, it is apparent there is still have different rules and often use the same terminology a need for Health Insurance Agents, but it will look a in different ways. Not all information is available on lot different in 2014 than today. We, as agents, will how things work, and people aren’t always sure that need to carve out the more clerical tasks to Navigators what they see is what they will get. Facts change faster and stay educated on the changes in law and continue than even websites can keep track of. Consumers trust to service and advocate for our clients. In addition, that agents will help them avoid pitfalls and hidden we should use any influence we have to make sure “gotchas.” the Exchanges are designed in a way that allows for competition, keeps private health care options available and doesn’t become a government bureaucracy. One way to influence this is to join NAHU and contributed to their PACs. Things are moving fast, so do it today! *NAHU and its subsidiary organizations are working hard to avoid the following scenarios that would markedly impact the future of agents: (a) people who are eligible for subsidies can only get them through the Exchange (b) there are no commissions for Agents when placing business through the Exchange.

About the author

In the future, however, many of these risks will be mitigated through PPACA regulations. What risks will remain? A few come to mind: • Frequent changes: a new Exchange is bound to hit bumps and make changes frequently in the beginning.

• Extreme complexity: assuming that competition continues, there will be changes in carriers, providers and plan options both inside and outside the Exchange likely involving items we haven’t even thought of yet. When individuals and businesses only look at their health insurance once a year it is very helpful for them to go to a single source for the most current advice preferably one who knows

12

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

Jane Ames worked for a leading national Health Insurance company for 18 years where she was an underwriter, trainer and key participant in pricing system development and implementation in 11 states.

In 2010, Jane started her own business, Jane Ames Consulting which provides health care consulting, education and broker services to individuals and small businesses in Georgia. She is also on the Board of the Atlanta Association of Health Underwriters. In addition to an undergraduate honors degree in Mathematics from Clemson University, she has both an MBA and MHA (Masters in Health Administration) from Georgia State University.

This article was edited by Erica LaSalle, graduate of Georgia Southern University with a Bachelor of Arts in Writing and Linguistics and English.

National Healthcare Reform Magazine

Technology Innovation, US Healthcare and Health Reforms

by Apporv Reddy

Over past couple of decades, banking industry witnessed technology innovation in the form of credit cards, ATMs and online banking which substantially reduced administrative costs and made banking simpler for end user. The innovation in chip technologies enabled hardware industry to bring down cost of computers which lead to higher demand and reduced cost for the industry.

Bookstores went online and companies like amazon brought down the cost of books by cutting down entities involved in the supply chain. There are numerous such examples across various industries where technology has played key role.

with other industries; it is one of the reasons why America spends 17.2% of GDP or about $2.5 trillion on healthcare. The healthcare expenses have been growing at significantly higher rate than inflation. U.S. healthcare system stands last for its performance among seven industrialized nations, despite spending the most, according to a new Commonwealth Fund report 2010.

Technology innovation has not succeeded in improving US healthcare the way it did in other industries and the actions being taken by federal government to promote Healthcare IT.

1. Slower Adoption of technology: Implementation of innovations that could bring down costs has been

However, Technology innovation has not slow in US healthcare industry. Implementation of worked as well with US healthcare industry as it did Electronic Health records is one such example. Partial

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

13

National Healthcare Reform Magazine

to full penetration of EHRs in European nations such as Norway, Sweden is about 90 % whereas it stands at meager 23% in USA, according to a report.

Administrative efficiencies could be achieved with innovations such as Real time claims adjudication and ICD 10 implementation. CMS report suggests that hospital productivity gains have been “small or negligible� over the past quarter century. The usage of basic communication medium like E-mails also is not widespread between patients and doctors. Usage of smartphones in healthcare is catching up, however it still has long way to go.

surgical and clinical advances. An article in The Journal of the American Medical Association points out that simple surgery that eases pressure on the nerves has been replaced by complex fusion surgery to relieve lower back pain. Surgeons were paid 10 times as much for the complex surgery, hospitals were paid three and a half times as much, and manufacturers made $50,000 worth of implants for the complex surgery compared with little or no profit from the simpler fusion surgery.

5. Overutilization of technology: Overutilization of technology, increases spending with limited additional benefits. At the same time, market-based competition among provider organizations to use the latest equipment increases the utilization of expensive technology at the expense of older, less expensive alternatives. This clearly seems to be the case with US healthcare where returns in terms of improved healthcare are not in proportion to investments on technology.

2. Higher Costs of Technology: Due to patent protection laws, manufacturers need not worry about price competition when they launch new medical equipment/drug; emphasis is on recovering the costs before patent expires. Insurers do not have enough bargaining power to negotiate lower prices on these costly treatments. Because of this, technology drives up the healthcare costs.

6. Lack of innovation in chronic disease prevention: Prevention is the key to both better health and lower 3. Consumer price insensitivity: Once members pay healthcare costs. One third of American population the premium, there is decreased motivation to opt is overweight (about 97 million people) and America for drugs, treatments that cost less as members tend spends whopping 75% on chronic diseases which can to believe that costlier treatment is better. Costlier be prevented to large extent by closely working with treatments and equipment are demanded by patients consumers. However the focus is more on disease care and physicians on the grounds of quality. Cost of new rather than on preventive care. According to a recent technology consistently accounted for 20 percent to New England Journal of Medicine article, over 2 million 40 percent of the rise in health expenditures over the Americans die due to preventable reasons like smoking, past forty years. Perverse incentives like this push the high blood pressure, obesity, diabetes etc. UnitedHealth healthcare costs up despite innovations happening in Group estimates that Diabetes may cost America the system. approximately $3.4 Trillion in the next 10 years. Improper eating habits and unhealthy lifestyle are prime reasons 4. Limited incentives for doctors / hospitals for cost behind these problems. Innovative ways to promote reduction: Many of the technology innovations have prevention may go long way to bring down healthcare not lead system efficiency or reduced healthcare costs. costs. Solutions need to be introduced and implemented On the contrary, Congressional Budget Office estimates to involve all stakeholders and push consumers to lead that an astonishing half or more of the increased spending healthier lifestyle. Health 2.0 technologies could go long on health care in past decade is due to technological, way to promote healthier lifestyle.

14

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

which would enable Healthcare IT to usher into new era where technology would simplify healthcare with big ticket implementations such as HIPAA 5010 changes, ICD 10 implementation, Grants of $19.2 Billion to address the meaningful use of health records and privacy / security concerns associated with the electronic transmission of health information as part of ARRA act of 2009.

PPACA act of 2010 has outlined various changes with regards to healthcare IT. The proposed changes include implementation of health benefit exchanges, promoting administrative simplification with enhanced interoperability, promoting new models such as Accountable care organizations which would need various technology innovations ( Remote health monitoring, telemedicine) to be successful, creating Innovation Center within the Centers for Medicare and Medicaid Services and performance bonuses for organizations that demonstrate successful implementation of HIT initiatives among other steps.

7. Defensive Medicine costs: In many cases, physicians opt for comprehensive treatment that include extra tests and scans to make sure that they don’t have to face litigation for medical malpractice.

This practice of defensive medicine costs $55.5 billion to US healthcare every year according to a study.

Doctors also pay hundreds of thousands of dollars a year in malpractice insurance. These expenses can be limited to an extent with Electronic Health records implementation.

The change that all these reforms are set to bring in would not be easy on stakeholders involved in US 8. Failure in reining the inefficiencies: Significant healthcare, however if Healthcare industry has to be innovations are required to rein in the key areas of transformed into an efficient one, this change is a bitter system inefficiency such as administrative inefficiency, pill that the stakeholders would have to swallow !!

Provider errors, lack of care coordination, unnecessary care, fraud and abuse etc.

$40 billion of costs could be saved in About the author the U.S. health system in terms of inefficiencies reduction with implementation of EHRs, according to Apoorv Surkunte works as Lead Business Analyst Mckinsey report. Fraud and abuse are prevalent, more in Healthcare IT area with one of leading Health prominently in Medicare. Healthcare costs would insurance companies in USA with experience of 7 years. be significantly lower (A Thomson Reuters report His areas of interest include healthcare innovations, claims that almost $700 billion are spent in wasteful health reforms, Electronic Health records and ICD 10 spending and significant chunk here can be saved) implementation, health 2.0. Apoorv is certified project with innovations in this area which has not happened management professional (PMP) and possesses so far. various international healthcare certifications from AHIP.

Federal government is pushing the changes Apoorv can be reached at apoorv.reddy@gmail.com

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

15

National Healthcare Reform Magazine

Medical Loss Ratios..

Agent or No Agent.. ‘Freedom to Choose’

by Larry Steep

Unknown to most consumers, a couple of days before Thanksgiving, coincidentally a historically slow news holiday, HHS and the NAIC decided to force Insurance Carriers to include Insurance Agents commissions in the mandatory Medical Loss Ratio (MLR) requirements. The aforementioned, immediately opened the door for Insurance Carriers to dramatically reduce Insurance Agent commissions.

To everyone who understands the dynamics of the debate, the future is clear; the MLR requirements will eventually remove the Insurance Agent from the consumer transaction of purchasing Health Care. To fully understand the devastating Market Disruption this will create; it is necessary to examine the basic function of a Health Insurance Agent; specifically, as it relates to the President’s ‘Stated’ Goal in passing Obama Care (PPACA).

So what’s the harm? Why should the consumer The ‘Stated’ goal of Obama Care is, to provide be concerned about an overpaid Insurance Agent ‘AFFORDABLE’ Health Care to the consumer; both receiving less money. the currently insured as well as the current uninsured population.

Answer: The concern should not be for the Insurance The goal of Health Insurance Agents, is to Agent, but what soon could be, the defenseless provide their clients, whether they are Individual or consumer.

Employer Group Health Plans, the most competitively priced ‘AFFORDABLE’ quality Healthcare in the

Let’s examine the most critical points in framing, prevailing market. the virtually ignored, debate, concerning Medical Loss Ratios (MLR)...Obama Care and the future role of The reason the relationship exist between an Health Insurance Agents’s.

Health Insurance Agent and a Healthcare Consumer,

16

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

is to provide an ‘Uninformed Buyer/Consumer’ (Individual or Employer) with representation against an ‘Informed Seller’ (Insurance Carrier).

Competition between Insurance Carriers is created by the Annual or Semi -Annual ‘Insurance Carrier’ Renewal Marketing process that is conducted on behalf of the ‘Uninformed Buyer/Consumer’, by their Health Insurance Agent. The aforementioned process, is the sole reason Insurance Carrier premiums stay competitive. Additionally, this annual marketing of Insurance Carriers motivates/forces the Carriers to continue to provide ‘state of art’ innovated products.

Now to the MLR situation/debate.

If Insurance Carriers are only allowed to retain 15% to 20% of the Premiums they receive; lets call that the Pie and if this 15% to 20% of the Pie is not sufficient for their book of business; What will they do?

How? Answer: Without Health Insurance Agents holding Insurance Carriers accountable, the Carriers will continually raise their premiums. At which time, the consumer will say ‘No Mas’ and welcome any financial relief.

Answer: Simple, they will increase the size of the Pie. With the Consumers representation IE. their Health Who will be the financial savior?

Insurance Agent having been removed from the Answer: A new, even more robust form of Government transaction. run Health Plan..Obama Care on Steroids..HealthCare Security for everyone.

Who will stop them.

Most consumers, who are provided Healthcare thru their employers are unaware that annually, How? If Insurance Carrier premiums rise in unison; Insurance carriers request millions of dollars in rate the increased premiums become the new accepted increases; that are never fully realized.

Cost Basis.

Why not?

Answer: I would proffer that, The Government won’t make any real attempt to curb the rising Premium. The Answer: The Annual Health Insurance Agent / Renewal Government will allow the Insurance Carriers unbridled marketing process. On behalf of their clients, during this marketing/comparative process, Health Insurance greed for profit destroy their own future.

Agents force Insurance Carriers to compete against each Answer: The Goverment.

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

17

National Healthcare Reform Magazine

other, prompting them to be remain both Competitive and Creative.

In summary it is impossible to provide Consumers with AFFORDABLE Health Care if their informed representatives are taken away.

If the rate increases Insurance Carriers requested How can the consumer remain protected and the were realized, the money to pay these increases, would country miss the financial disaster created by HHS flow out of the local business/consumers hands and into forcing Insurance Carriers to adhere to MLR’s? the pockets of Insurance Carriers.

Answer: Give consumers ‘Freedom to Choose’ give

Let’s consider the financial impact of just one them a ‘BOX’. A “BOX” that allows the consumer the regional firm. Our firm, The Benefit Planning Group is a right to have a knowledgeable representative (Health regional firm representing clients primarily in Georgia. Insurance Agent).

Currently TBPG clients spend over $300,000,000 in annual Health Insurance premiums.

How?

Conservatively, in 2010, we reduced the average ‘requested’ rate increase from our clients various Insurance Carriers by 10% or $30,000,000.

The $30,000,000 that our clients did not have to pay, remained in their own respective corporate economy.

Consider this:

If our average client yields a profit of 10% off Gross Revenue, they would have had to increase products / services sold by $300,000,000; just to pay for the Insurance Carrier Increases negated, by their ‘Informed Advocate/Representative IE their Health Insurance agent.

Answer: This can be accomplished by the State Insurance Exchanges providing a BOX on the exchange’s enrollment system; that the consumer can check For example...Agent ___ or NO Agent___.

In conclusion, one last question; Why wouldn’t HHS or the State Health Exchanges want consumer’s to have the ‘Freedom to Choose’?

About the author

Upon graduating in 1978, from University of Georgia, Mr. Stepp entered the Healthcare arena with Sun Life of Canada as a Risk Management Analyst and Underwriter. Based on his interaction with his assigned

The debate over MLR’s brings to the forefront Broker /Agent contacts he believed Employers were the financial importance of an Health Insurance Agent. ‘under represented’ in the area of Healthcare expertise.

The Financial Impact of taking away the Consumers As a result of this conclusion, Mr.Stepp began his Informed Advocate/ Representative..IE their Health pathway to becoming a Healthcare Consultant.

Insurance Agent, will eventually cause irrefutable The Benefit Planning Group (TBPG)is a mutlti faceted damage and disruption to the Health Care System and Healthcare Consulting firm which represents a wide the Consumer. diversity of Employers. TBPG’s diversity of discipline in the Healthcare field creates opportunities from both By the way what did it cost those clients to save the sides of the Healthcare aisle. Services range from $30,000,000 in rate increases? Just how much did traditional Employer representation to working on the Health Insurance agent receive? behalf of Providers in providing representation for Physicians and Hospitals in the field of Managed Care; Answer: Less than 10% of their total savings or less Medicare; Health Continuam Management; Healthcare than 1% of their total premium.

Insurance Carrier market.etc 18

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

The MLR Provision: Unraveling the Mystery of Three Little Letters

by Pamela Mullahy

The Patient Protection and Affordable Care Act (the “PPACA”) provides that insurance carriers are required to satisfy certain medical loss ratio (“MLR”) thresholds; otherwise they are required to provide rebates to enrollees. Beginning in 2011, carriers will be required to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement. On November 22, 2010, the Department of Health and Human Services issued an interim final regulation on the MLR provision of the PPACA.

The intent behind the regulation is to hold insurance companies accountable and increase value for consumers. While these rules apply to insurance carriers, and not employers, it is important for plan sponsors to understand their impact.

Reporting Requirements

Insurance carriers will be required to publicly report on how they spend premium dollars. The reported information will clearly demonstrate how

much money goes towards actual medical care and activities to improve health care quality versus how much money is spent on administrative expenses like marketing, advertising, underwriting, executive salaries and bonuses.

Carriers are required to submit their MLR reporting by June 1 of 2012 for the 2011 year.

How is the MLR Calculated?

For larger employers (51 or more employees in most states), the amount an insurance carrier spends on medical care and quality improvement activities must be at least 85% of the premiums received; for small employers (1-50 employees), the amount must be at least 80%. States are also permitted to provide for higher ratios. A carrier’s MLR must be calculated separately for each market in each state as well as each different license under which the carrier conducts business. The rebate must be provided to enrollees when less than the target premium is attributed to claim costs. It is important to note that workforce salaries and benefits, agent w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

19

National Healthcare Reform Magazine

and broker fees and commissions, and general and administrative expenses are not included in a carrier’s incurred claims plus expenditures. A carrier, however, is not required to provide a rebate to an enrollee if the total rebate owed to the policyholder and the subscribers is less than $5 per subscriber covered by the policy for a given MLR reporting year.

Example

ABC insurance company collects $20,000,000 in premiums from its small employer pool in a particular state.

It spent $15,000,000 in qualifying medical expenses. The remaining $5,000,000 covers non-claim expenses, including operating expenses, administrative costs and profit. The MLR for this pool of ABC insurance company would be 75%, and the company would be required to rebate 5% (i.e., $1,000,000) of the premium paid by or on behalf of the enrollee on a pro-rated basis to the enrollees, after subtracting federal and state taxes and licensing and regulatory fees. If an enrollee paid $2,000 in premiums for the MLR reporting year and the federal and state taxes and licensing and regulatory fees are $150 for a $2,000 premium, ABC insurance company would premium on behalf of employees, the rebate may go to subtract $150 from the premium revenue for a base of the employer. $1,850 in premium. The enrollee would be entitled to a rebate of 5% of $1,850, or $92.50.

In any event, regardless of whether a carrier provides rebates to enrollees directly or indirectly Employer Involvement through the employer, the carrier must ensure each enrollee receives a rebate that is proportional to the

Carriers are required to make the first rebates to premium amount paid by that enrollee (the employer consumers in 2012 (based upon their 2011 MLR) and may not retain more of the rebate than is proportional rebates must be paid to enrollees by August 1 each year. to the amount of premium it paid). When a rebate is There are three ways for enrollees to receive rebates: provided by a carrier, the carrier must provide each (1) by having their premiums reduced, (2) by receiving enrollee receiving a rebate an explanatory notice. a rebate check or (3 if premiums were paid by credit or debit card, by receiving a lump-sum reimbursement to Carriers may request that employers administer that account. Rebates made to former employees must rebates on their behalf to plan participants; however, be made in lump-sum by check or by using the same employers are not required to do so. At first glance, method for payment of the premium, such as credit or employers may not want to be burdened with this debit card. In some instances, where employers paid responsibility, but in order to ensure receipt of their

20

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

Must Employers Take Action?

Employers are not required to take any action to comply with the MLR rules. Employers may, however, be asked to enter into written agreements to administer the rebates on behalf of the insurance carriers. Employers should also be aware that carriers may soon decide to bill employers a service fee, rather than automatically deduct commissions and remit them to brokers. Although this interim rule is effective on January 1, 2011, HHS is seeking comments and will issue further guidance, as well as a final rule later this year.

About the Author

share of the rebate, it may be necessary for them to take on this function. In such a case, the carrier and employer should enter into a contract regarding this administration. One thing to note is that, while the carrier is permitted to delegate its rebate distribution functions to the employer, the carrier remains liable for complying with all of its obligations under the statute.

Penalties

If an insurance carrier violates the reporting and/or rebate requirements, it may face a civil monetary penalty for each violation that may not exceed $100 for each day for each individual affected by the violation, in addition to any other penalties prescribed or allowed by law.

Pamela R. Mullahy is Vice President and Benefits Counsel for Emerson, Reid & Co., a wholesale general agent. At Emerson, she helps to fulfill the mission of keeping brokers ahead of their competition by providing insights into the effects of the ever changing health care legislative environment. Ms. Mullahy has been an attorney in the employee benefits arena for more than thirteen years, specializing in ERISA, COBRA, HIPAA, health & welfare arrangements and federal health care reform, among other employee benefit areas.

Ms. Mullahy began her career in employee benefits law at the U.S. Department of Labor, Employee Benefit Security Administration, where she conducted complex civil investigations of employers to ensure compliance with ERISA and other federal and state statutes relating to health care plans. Prior to joining Emerson, Reid, she was the Chief Compliance Officer for the Employee Benefits Division at a large national insurance broker. She also worked for several years in private practice as counsel to a national third-party administrator.

Ms. Mullahy received a Bachelor of Business Administration and graduated magna cum laude from James Madison University. She received her Juris Doctor from Hofstra University School of Law.

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

21

National Healthcare Reform Magazine

The Challenges for Accountable Health Organizations (“ACO’s)

by Tony Barber

Both models establish a measurable formula of accountability for providers relative to the health and wellness of a given population of patients that they serve.

In a June report to Congress, the Medicare Payment Advisory Commission (MedPAC) cited ACOs as a possible method of bringing about changes in the Recognizing that the current fee-for-service Medicare delivery system. In that report MedPAC system drives an increasing level of utilization without examined two variations of ACO’s: regard to overall wellness and without benchmarks upon which to base achievement, MedPAC has suggested • Mandatory Model: In this model, providers receive that a typical ACO would need to have at least 5,000 a shared bonus payment for meeting both cost “beneficiaries”. and quality targets and receive a lower Medicare reimbursement if they fail to reach either target.

MedPAC isn’t the only one group interested in creating an ACO program. The American Affordable • Voluntary Model: In this model, providers receive Health Choices Act of 2009 (H.R. 3200) includes bonuses for achieving targets and would not be a provision to implement an ACO pilot program to penalized for missing them….as the entire payment be conducted by the Secretary of Health and Human method is performance-based.

Services. If the bill is passed, the program will begin no

22

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

of their primary residence. This means that any reimbursement methodology would have to have a method of accounting for and managing this phenomenon so as to appropriately reimburse providers for the right population of patients. The information systems used by providers are so inconsistent and disconnected that accomplishing this would be virtually impossible. Of course the government could move forward, but if the providers are not properly compensated, access/ quality/costs could all be negatively impacted.

later than January 1, 2012 and would run between 3 and 5 years.

A separate House bill introduced by Representative Peter Welch (D-VT) also calls for the establishment of an ACO pilot program as an amendment to the Social Security Act.

There are some clear challenges to the creation and expansion of ACO’s however and they will not be easily overcome: 1. Population shifts: The United States is the most mobile societies on the planet. The U.S. Census Bureau has reported that approximately 16% of the population relocates each year.

This means that every 6.2 years, that the entire population would have a meaningful relocation

2. Common Incentives: ACO’s focus, as has been the case in the past, in a strong primary care network that connects with specialists that have a common vision for the population being served. Additionally, hospitals and outpatient centers (Ambulatory Surgery Centers, Diagnostic Centers, and more) must also be included in the performance measurement program. There has been no significant demonstration of success in any market in achieving this lofty goal. The mindset of medical providers as well as the infrastructure that supports them is so focused on fee-for-service methodologies and there exist so many different platform organizations that bringing them together in any way that will yield a positive result is impossible without first identifying for each and all the projected impact on their businesses and bringing them together into a common incentive program.

3. Lacking infrastructure: There is a serious lack of infrastructure to support an expansive and meaningful ACO strategy. Information systems on the provider side are fragmented and do not facilitate the type of exchange needed to drive performance up and cost down. As each year passes, the information management process becomes more complicated and further fragmented‌leaving providers and patients alike to fend for themselves to move data and communicate as a network of providers.

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

23

National Healthcare Reform Magazine

Information systems providers have failed to outcomes; it behooves them to first establish a create a functional system of sharing medical mechanism that will accomplish the following: information sufficient to assure that patients get 1. Create a simplified and standard method the appropriate care without duplication‌in a of managing and sharing medical information common manner. between and within ACO’s.

2. Create an understandable, measurable payment program that joins the mission of specialists, primary care physicians, hospitals and outpatient centers alike.

3. Broaden the scope of the accountable population base so as to mitigate the impact of transient and disproportionate populations.

Healthcare reform should include some form of ACO program but there is a lot of groundwork to be done ahead of any such initiative‌even on a trial basis.

About the Arthor Mr. Barber is the founder and CEO of Urgent Care America, which provides management services to urgent care centers across the United States. Prior to that he served as the Senior Vice President for Health Management Associates, Inc., (NYSE: HMA). HMA is a leader in hospital management and operates 55 hospitals in 16 states. Mr. Barber has served as a hospital CEO in four different hospitals and has experience in both academic and proprietary ownership structures.

Mr. Barber has been a featured speaker for several organizations and has a vast amount of experience

The special interests of all have taken center in physician practice management, urgent care stage so as to assure that, regardless of the acronym, management and hospital management. Mr. Barber is changing the reimbursement in a manner so as to pay well connected to physicians in many markets around providers based upon performance and to hold them the United States. Other experience includes, the accountable for the outcomes is clearly just a thought creation of a Risk Retention Group, development of a and not an initiative. corporate-wide medical staff credentials program and the creation of a comprehensive CME and physician

If the Fed wants to have a functional ACO relations program designed to better connect hospitals program that can be spread widely with positive with staff physicians and building physician networks.

24

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

25

National Healthcare Reform Magazine

How obesity

and workers comp

is crippling companies

by Mel Okeefe

If you haven’t had the opportunity to read ‘How Obesity Increases the Risk of Disabling Workplace Injuries’ by Harry Shuford and Tanya Restrepro of NCCI Holdings, Inc. I suggest you grab some pain killers and give it a once-over. It sheds a different light on the dilemma we are facing when it comes to our obesity epidemic. Most importantly it offers up the actual cost in dollars of an obese employee compared to a healthy one. I would imagine that the ears of any CEO or CFO would perk up if they heard that the cost of an obese employee, from a Worker’s Comp perspective, can be 50 to 60 times greater over a 5 year period than an identical injury to a healthy employee. 50 to 60 times more!

And although it sounds incredibly inflated, all you have to do is imagine a serious accident on the shop floor of a small manufacturing company to Joe the Jock compared to Wally the Weekend Warrior.

26

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

One is healthy the other obese. They both break a leg.

Joe hobbles in on crutches and does what has to be productive until he’s recovered. He works out his upper body and figures out how to get his heart rate up in the gym. Wally, on the other hand is in some serious rehab.

After a very complicated surgery to repair the broken bone – the same broken bone that was relatively easy to set for Jock because there wasn’t such a concern over his weight or BP, or medications. Not so for Wally!

Then there’s the rehab. Jock heals himself.

Wally gets progressively worse before he gets better.

Whether its aches and pains from trying to get around on crutches to medications and complications because of his physiology. And of course there’s no chance Wally is going to be productive in his condition. A condition that could last months and months. Long enough so the company has to replace him to get his work done.

It’s an ongoing and very expensive nightmare. That is avoidable.

National Healthcare Reform Magazine

Wellness programs are trendy and cool.

And for the most part completely ineffective. “Heresy”, I hear in the background. Before you condemn me let me quote Thomas Paine – “a long habit of not thinking something wrong gives it a superficial appearance of being right.” So, introducing a wellness program that pays for the gym membership of Joe the Jock and the other fit and healthy employees is not a success. It’s a failure. It’s Wally the Weekend Warrior and all of his cohorts who have nothing to do with the wellness program whatsoever who should be the judge and jury of a wellness program. Their verdict? Thanks, but no thanks.

Well of course they’re going to say that. Who in their right mind would opt to eat healthy foods and exercise when it’s so much easier to lounge around and watch television and eat junk? “So,” some energetic and healthy individuals (consultants or employees) say “let’s incentivize people to exercise and eat healthy. And make it fun and exciting. How about we let the employees get involved with the planning and implementation. Won’t that build teamwork and camaraderie?”

Hmmmm…..sounds like a great plan. Coming from a person who, for want of a better description, has seen the light! Joe the Jock that is. But you have to get into the mindset of Wally the Weekend Warrior to appreciate how futile that approach is going to be. He/ she/they don’t like exercise. They don’t want to eat healthy. Yes, they would like to be fit and healthy. But it’s too much effort. So asking them to participate in the wellness program and help design it would be akin to saying “okay Wally, we’ve decided to run a third shift. Nights. And you’re in charge. Now I know you hate coming in at 10. And we’re aware of the fact that you’re going to spend most of the shift figuring out how to pass the time and get back at us for making you work such horrible hours and be away from your warm bed and family. But, we thought that if you’d help in the design and implementation of this torture you’d be a lot happier about it.”

“Pessimist” I hear being screamed in the background.

To which I reply, pragmatist. It’s no secret that 70% of people claim that they don’t like their job – there are lots of polls to validate that observation. Work, to a huge section of the population, is something they do because they have to make money to pay bills and lead

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

27

National Healthcare Reform Magazine

the life they want to lead. And based on the obesity rates it’s not much of a challenge figuring out what people want to do with their free time.

So, how long would a company be in business if the policies and procedures were created by those required to produce a product or commodity? What would happen if we removed time clocks or quotas or benchmarks or anything that forces employees to do what’s got to be done so a profit can be generated?

That’s exactly the same way we need to look at our wellness programs. Paying for a gym membership for Joe the Jock is nothing more than giving him a bonus for being fit – he would be in the gym irrelevant of the program. Paying for a gym membership for Wally the Weekend Warrior is an absolute waste of money!

He’ll figure out a way to circumvent the system and make it appear as if he’s going in. He’ll get as creative as necessary to make sure he can continue to live the lifestyle he does. In fact he might be able to get a couple of cash bonuses here and there if he spends some time on the computer looking at the company wellness site!

What a concept. What a shame.

they hope and pray that overweight or obese people will see the errors of their ways and do something to reverse the trend. Which is akin to the lunatics in charge of the asylum.

If you think I’m completely off base, how about we do a simple test to validate or repudiate my observations. The CDC just came out with data that says from 2008 to 2010 the number of people with diabetes went from 23.6 million to 26 million – a 10% increase. Pre-diabetics went from 57 million to 79 million. How have you, your family, friends, coworkers and neighbors fared in the last 2 years? Are you in better shape? Are they in better shape? How many of us are doing what we have to do to lead a fit and healthy life?

About the Arthor

Mel O’Keefe is the CEO (Chief Exercise Officer) of Virtual Fitness Coach, an online wellness company.

Mel has an insight into the obesity epidemic because he’s been there. He doesn’t try to hide the reasons for his obesity either. “I ate too much, I drank too much and I didn’t exercise.” At the age of 38 he had an epiphany,

At some stage employers are going to realize changed his ways and is now an accomplished Ironman that we can no longer wish and hope that this obesity triathlete and certified personal trainer/coach epidemic is going to go away. Or the government will help. Or it isn’t going to affect their company. It’s Virtual Fitness Coach has taken the experience of not a matter of if, it’s a matter of when. But, as I say, working with a professional coach and nutritionist and it’s avoidable. Is it easily implemented? Heck no. In have ‘virtualized’ it. Employees are guided exercise by fact it may be as challenging to an employer to create a exercise, meal by meal, day by day until they reach their healthy workforce as it is to create a viable product or health and fitness goals. Virtual Fitness Coach assists service. Mainly because it’s not their field of expertise. in design and implementation of wellness programs for Companies build things, produce things or provide a companies of all sizes. Mel can be contacted at mel@ service. They don’t get people fit and healthy. For now virtualfitnesscoach.com

28

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

The Time is Now

Ten Steps Organizations can Take to Successfully Comply with ICD-10

By Tori Sullivan

requirements, planning considerations and operational challenges associated with a successful ICD-10

On October 1, 2013, the U.S. will switchover. join many countries in the international community by mandating the switchover While each organization’s implementation in code sets for healthcare diagnoses and is its own unique case, the shear specificity and procedures from ICD-9 to ICD-10. These code sets are complexity of the new code set is a technological and used to report and code diseases, injuries, impairments, operational challenge for any organization, no matter and other health problems, in addition to the procedures how prepared they may be ICD-9 contains around used to treat them.

18,000 codes and ICD-10 contains more than 141,000 codes. Remediation of ICD-10 will require extensive

Developed by the World Health Organization, technology modifications to software systems, ICD-10 provides a more accurate definition of services databases, reports, computing logic, data imports and and diagnosis than its predecessor ICD-9 and ultimately extracts, and workflow procedures. leads to more precise payments, fewer rejected claims, and overall improved disease management Extensive training and education will be required worldwide. While the benefits are clear, many U.S. across many departments, and many providers fear that healthcare organizations today are overtaxed with veteran coders near retirement will not stick around for competing initiatives and are not realizing the resource the education and retraining, which could potentially be

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

29

National Healthcare Reform Magazine

a huge loss in human capital. This challenge, combined with overall staffing shortages—particularly in the IT department—could lead to operational productivity loss across the organization. Additionally, the transition to ICD-10 is a significant financial burden to healthcare organizations, many of which are already budget strapped.

While the challenges prevail for organizations going through the switchover, the healthcare industry should not lose sight of the ramifications should they not meet the deadline or have enough time for testing before the official go-live. Claims backlogs, payment delays and denials due to coding and reimbursement discrepancies and a potential increase in fraud and abuse are just a few of the consequences should healthcare organizations not be fully prepared for the October 1, 2013 deadline.

ICD-10 is being compared to massive implementations in the past such as Y2K and HIPAA, yet many healthcare organizations have not initiated their path towards migration. While 2013 may seem far away, in reality it is right around the corner based on the magnitude of the transition. Taking the following steps to ensure proper planning and forecasting will help healthcare organizations transform a government regulation into a competitive advantage: 1.

Executive Leadership: Develop an appropriate Steering Committee, representing leadership from the various impact areas within the organization. The Committee will play a key role in guiding project scope, allocating the appropriate resources as well as maintaining the organizational focus necessary to complete the project. The Steering Committee is also responsible for setting the organizational Strategy for the implementation. This process includes indentifying the “Team” or project resources, which should include leadership, staff and potentially external vendors. The

30

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

“Approach” should also be determined, including goals, scope and objectives. Finally, “Execution” should be clearly planned in terms of change management around people, process and technologies.

Training, Operations Re-engineering, Pilot Testing and Go-Live Preparation. During the GAP analysis and contract negotiations, vendor and contractor budget and timeline requirements are also determined.

As there is not enough staff to make all modifications to test and integrate solutions simultaneously, each organization needs to schedule each modification per vendor so they are in line with the other changes occurring. A schedule of software testing should view like a waterfall to maintain a constant level of resource commitment as well as continue to progress toward the end goal.

2.

Impact Assessment: Complete an assessment of every department within the organization to identify where there will be an impact with the ICD10 implementation. Some areas will not be impacted, while other areas will vary in their levels of impact. It is important to identify the range of impact levels so the organization can focus its resource efforts at the most severely impacted areas first and the least impact areas last.

6. Risk Assessment: A comprehensive risk assessment should be implemented to identify the 3.

GAP Analysis: A GAP analysis is conducted level of risk the organization will experience while on the areas of impact once an Impact Assessment has implementing ICD-10. Risk is related to outcomes been completed. This step will help hospitals determine not proceeding as expected and the result of such the difference between where they are currently and occurrences. A Risk Assessment will prepare for issues where they want to be at go-live through their strategic related to technology modifications, the revenue cycle, organizational strategy. as well as coding and reimbursement discrepancies.

Healthcare organizations should look to define and 4.

Contracting Guidelines: Contractual changes rank risks based on the probability and impact if each typically take the longest to complete because even occurred. Event ‘triggers’ and related responses they involve multiple resources, organizations and such as contingency plans should be associated with personalities, resulting in lengthy negotiations. It each risk. Finally, resources should be assigned to is important to review contracts early in the project manage the identified risks based on the trigger events timeline to determine if modifications are necessary and contingency plans throughout the implementation. to include terminology requiring compliance with the 5010 and ICD-10 regulations. Vendors may also include 7. Budget: The budget should include four additional fees to cover software implementation or dedicated areas – Process Improvement, System maintenance expenses, therefore identifying early on Modification, Testing and Training/Change required modifications to contracts as well as budgetary Management and Revenue Cycle Impacts. Contractor expenses. fees and other supportive services should be considered and included in the overall budget. Revenue Cycle 5.

Implementation Timeline: The project timeline impacts may include a reduction in coding productivity, should work back from the deadline date of October 1, increase in claims submission, and increase in claims 2013 and include completing the Impact Assessment, rejections as well as variances in payment levels for Gap Analysis, Vendor Contract Updates, Hardware ICD-10 codes compared to ICD-9 codes.

Modifications, Software Modifications, End-User

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

31

National Healthcare Reform Magazine

8.

Testing: Working closely with vendors, develop a detailed testing plan that includes expected results and outcomes, resources, specific testing for software, and hardware and support services. The testing should be closely tracked according to expected results and monitored to determine whether each function passes or fails each step of the way. Testing activities should be scheduled with both internal and external resources and locations. The last thing the organization wants is an end-user that is scheduled for a day of testing only to get a software error within the first hour and give up losing hours of productivity. Having vendor technicians on-call to support such events and track progress daily will ensure the organization stays on track with testing schedules.

9.

Prepare for Go-Live: Go-live is not a one-day occurrence, but rather a series of events to help hospitals prepare for the many people and systems that need to be functioning at a specific level by October 1, 2013. The Go-live plan should identify all participants, and define roles and responsibilities, tools/resources, activity milestones and timelines, contingency/back-out plan, support contact information and a reporting process for any issues. Pilot Go-Lives have proved to be beneficial to other countries that have implemented ICD-10.

Using this method in the healthcare organization’s rollout plan will identify and resolve issues early on and maintain a manageable schedule.

10.

Post Go-Live: Following Go-live, organizations will be busier than they were to prepare for the organization. However, now is not the time to forget how much work was accomplished and what was learned along the way. Each organization should summarize project results, evaluate success against established criteria, identify the key lessons learned and assess the project for future improvement.

While all these steps are critically important, organizations can not lose sight of the importance of testing before go-live. Depending on the size and

32

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

scope of the project, organizations should begin testing anywhere from 2 years – 6 months before the deadline.

Virtually every system that touches an ICD-10 code has to be modified, and the longer organizations take to get started on the implementation, the less time they have to test.

The implementation of ICD-10 seems overwhelming and expensive; however, the benefits of implementing this modern code-set far exceed the costs.

Currently the U.S. is the last industrialized country to implement the ICD-10 codes, limiting the collaboration and data details that can be exchanged worldwide related to healthcare issues. The more complex code set also allows for specification in reporting healthcare data that will result in newer and more advanced disease identification and treatment methodologies. In addition, ICD-10 enables an increase in detection of fraud and abuse as a result of the data contained within each claim transaction. These benefits will be the foundation for health transformation as we move more aggressively toward technology implementations throughout the U.S. About the Arthor Ms. Sullivan has over 10 years experience leading strategic healthcare projects, including an ICD10 Impact Assessment for Centers for Medicare & Medicaid Services and EHR Implementation projects for clients throughout the US. Ms. Sullivan chairs the HIMSS ICD-10 Task Force and leads business development and delivery projects within Capgemini’s Healthcare sector based in Atlanta, Georgia.

National Healthcare Reform Magazine

Healthcare...Who Cares?

By J. Dennis Wolfe

Over the years, rules have changed dramatically and soon, despite the new federal law mandating

The next time you’re at the grocery insurance coverage for everyone, finding insurance at an store, buy $100 worth of groceries. Tell them you will affordable premium will be difficult if not impossible. pay them $25 and for them to send the receipt to your This is the hidden agenda of “ObamaCare” aka The bank for the remaining $75. How many of you think Patient Protection and Affordable Care Act (PPACA). there is any chance of getting out of that store without being arrested for shoplifting?

Marketed as universal access, the key problem is that limited capacity leads to rationing of care.

Now, consider this scenario. Call a doctor’s Ultimately, the government will decide who gets care office to schedule a visit and tell them you have no health and who does not. Welcome to President Obama’s insurance. You might not even get an appointment. “Signature Legislation”!

There was a time when this was how we all received health care service… we paid for it! For the few patients The new Patient Protection and Affordable who had insurance, it was their responsibility for filing Care Act is worse than a solution. No matter how claim forms to receive reimbursement. The provider well-marketed, this legislation has geometrically was paid by the patient. compounded the problem of delivering affordable

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

33

National Healthcare Reform Magazine

health care to all. If not immediately defunded and Dissonance” (PPCD) means that after a purchase, the ultimately repealed, it will irreparably harm the health buyer may get the feeling that something is not right. In of our nation. some cases it results in cancellation of the sale; the item is returned or other action taken. Once the transaction is

This legislation was never about health care, reversed, the buyer feels better. rather it was about taking control of every American citizen’s personal life. The path that led to its passage What we citizens have been demanding is is directly tied to many years of apathy by Americans. reform to the economic relationship between healthcare When it came to Healthcare...Who Cares? providers and cost protection mechanisms.

Now, with eyes and minds open, it is time to Candidate, now President, Obama won election examine a better solution. Make no mistake about it - to The White House with that promise. Senator Harry we desperately need healthcare cost-delivery reform.

Reid abused long-standing rules of the Senate to pass PPACA; in the House, Speaker Pelosi used an

Readers would do well to review the potential emotional appeal laced with arrogance, urging passage damage almost caused by a “reform” called “Section so the country could find out what was in the bill. In 89” over 20 years ago. I said almost because it was early 2009 in a video I posted on YouTube, I warned immediately repealed. What’s the big deal about then that Congress would use “Reconciliation” to pass Section 89? It was a lighter version of the PPACA this because it could not stand up to public scrutiny and mandate component, recently - and fortunately - ruled that is exactly what happened. unconstitutional by a federal appeals judge (this dispute will now go to the U.S. Supreme Court). Section 89 What we have now discovered is that we was repealed because it was so laden with red tape and do not like its contents. What we got was rationing discrimination-testing requirements for employers that and, as people understood what was done to them, a it would have made doing business impossible. groundswell of anger grew. The result was visible last November. Now we want our money back!

So, how bad is the PPACA? As of the date of this article, The Department of Health and Human Unfortunately, the health care industry has Services (HHS) has already granted 222 known waivers become part of everyday life for Americans. Worse, it exempting some very large national companies and is too complex for the majority of people to understand. unions from new mandates that are far worse than the The natural tendency, therefore, is to become frustrated, old Section 89 compliance rules. If small businesses are angry, then walk away - muttering about blaming the backbone of America and large employers receive someone else for this mess. waivers for compliance mandates on the grounds it would destroy their ability to do business, what will The only question now is whether or not the The PPACA do to America’s backbone? This is why American people will stay focused and continue to I believe that the current healthcare legislation is the hold Congress’ feet to the fire. By their actions in the most malicious and malevolent act ever passed by the lame duck session, it is obvious that Democrats don’t United States Congress. think so. The Republicans also fear any potential public resolve because they would have to actually develop a

A sales phrase called “Post-Purchase Cognitive backbone of constitutional principles.

34

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

However, there is hope to fix this looming manmade disaster. It starts with every single American each learning about this subject. There is currently ample motivation because this is a different situation than the early 1990’s health care cost-delivery crisis. This time the problem is compounded because of the longevity of the parents of baby boomers who need more care and the baby boomers themselves simultaneously now drawing down on the system for care.

accept Medicare or payment from any governmental agency for that matter.

There are providers in America not contracted with major insurance companies and government agencies, who reimburse for health care services. They still accept cash. They are also a small minority. When the majority of local providers want more money for their services, they do not go on strike. They simply “renegotiate” their contract by quietly raising their fees above the existing contractual allowances in their

Our education continues by understanding that insurance reimbursement contracts. This ultimately our healthcare delivery system is a monopoly. You and leads to an increase of contractual allowances in various I cannot hang a shingle outside our office and say we geographical areas as new reimbursement contracts are practicing medicine. From one perspective this is a for providers are written. That in turn leads to higher good thing. It protects the quality of care. It also means premiums and a perfect monopoly… except for one a healthcare provider (private physician/hospital, etc.) small problem. can charge any amount that the market will bear. The provider does not have to contract with any insurer nor There is no additional money to continue

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

35

National Healthcare Reform Magazine

this inverse supply and demand equation. In simple language we have addicted our healthcare providers to a steady stream of external revenue sources and that stream is drying up at the most inopportune time, at the highest demand.

the situation as a jigsaw puzzle. This means ridding America of The PPACA and crafting a new federal law that addresses true cost-delivery reform. Let’s call it The FEDERAL HEALTH Act. It will not ration care and there will be no federal mandates.

The worse solution we could implement is to ration the money because that, in turn, will lead to rationing of healthcare. Yet that is exactly what PPACA did. We wanted healthcare cost-delivery reform and we not only got rationing of money, we got rationing of healthcare.

This unpredictability can now be factored into the solution. We all function differently - earning power and lifestyles. Each community across the country has its own identity because we are human beings who individually decide where we live, what we do, etc.

Everything about each of us is unique.

Another crucial component to the problem is the current cost-protection system. The insurance industry is one significant source of cost-protection and government, at all levels is another one. Of course it is understood that consumers are paying more and more as well.

Therefore, we are the key to true healthcare costdelivery reform, not the politicians and bureaucrats in Washington! It is essential to weave our individuality into a system that allows people to freely move throughout the country and access care wherever they are.

Insurance companies raise premiums to cover increasing costs; the public screams about the evil insurers. What about the outcry when government is forced to raise taxes to pay for the healthcare cost protection that its many programs provide?

This innovative solution is based on capitalism.

It injects competition into the present monopolistic system of how health care services are currently delivered.

To develop this comprehensive approach,

The only difference is that consumers generally which will lead to a better, affordable delivery system, dislike the concept of insurance and there are no we do not need to reinvent the wheel. This is going to regional or national spokespersons extolling its value. absolutely shock everyone reading this when I say what On the other hand, we elect politicians who promise to a crucial role the IRS needs to play. help us get affordable health care. I say to Congress no more help, please!

However, that role is not as an enforcer. The reality is that although we fear and dislike the IRS,

A better solution involves factoring in the like every governmental agency, it is not going away. predictability of human random actions This simple Therefore, we need to use the IRS to ensure that each but complex-sounding component is the reason why local community/region gets its share of funds needed the new law was mortally wounded on arrival. It to provide care. I see this as a far better use of the IRS seeks to control everyone by uniformly rationing care instead of how The PPACA creates and funds 16,000 and federally mandating citizens to buy a product - new agents, then charges them with the task of seizing insurance! our money to fund an unaccountable, bloated federal

To craft a workable solution we must view government that offers false promises of free health

36

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

care.

I have an even deeper question. Why would our federal government mandate the purchase of something we generally dislike -insurance? I unequivocally believe it was NOT done to force you to buy insurance. Instead, President Obama did this to eventually eliminate the insurance industry from the equation. The result is a single payor system. However, what few seem to know is how powerful the insurance industry really is; buildings named after carriers, etc., Like them or not, they move money through our society. Intentionally creating legislation designed to destroy the biggest mover of money through our economy is malicious and speaks to a hidden agenda in The PPACA.

Wouldn’t it more sense to design a system that uses the insurers instead of economically strangling them and by extension, America? It is true that insurers pad every cost factor that goes in a rate under the global umbrella of actuarial science; you either pay the premium or go without coverage.

However, The PPACA creates more and more bureaucracies with more and more tax dollars and give us things like the new agency, The PCORI. It is under the direct control of The President. The Patient-Centered Outcome Research Institute ultimately will decide who lives or dies by regulating the care received. How is this better healthcare? Where is the reform?

True reform should NOT be implemented by passing a law allowing a group of unaccountable people in The White House under direct control of one person The President- to implement rules that control your life.

In other parts of the world we call this a dictatorship.

About to arthor Dennis began his insurance career in 1976 after graduating from San Jose State. Immediately Dennis began to specialize in group health insurance. His clients range from small companies to Fortune 500.

One of his favorite achievements involves a huge multinational law firm who in 1997 contacted him out of the clear blue. He walked in and they told him before he sat down that he was their new broker and they needed him to fix their benefit problem. His ground breaking work on this matter set precedent for how the national individually-franchised network of Blue Cross and Blue Shield companies today work across state lines.

In 1977 he won a national award for his work in creating what we all know today as Community Health Fairs. In 1986 he began a book (published in 1991) that forewarned of the coming health care cost-delivery crisis, while also offering an innovative solution that is now - almost twenty years later - gaining traction, especially now.

His community life is all about doing charitable work.

He has served on his county’s grand jury - twice!.

He was Chair of his county’s state-mandated Mental Health Board and implemented a program in 1999 to give greater awareness of the issues those with mental health problems face. It became the model for greater national public awareness used today.

Two of his proudest legal achievements are his 1998 CA unanimously-passed legislation empowering parents to be more involved in their children’s classroom education, and in 2007 his CA Supreme Court precedent-setting

Having been a guest on radio shows all across decision regarding how laws are enacted and regulated our country and a newspaper columnist on healthcare I by state agencies. consistently state one request of all Americans. “Stay Dennis can be reached at Dennis.Wolfe@comcast.net. healthy. Stay tuned. Get involved. Learn what is being done. Your life now does indeed depend upon it.”

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

37

National Healthcare Reform Magazine

HEALTHCARE

BENEFITS INNOVATION: EMPLOYERS CREATING THEIR OWN CAPTIVE INSURERS

by Edmond M. Ianni

In today’s crippled economic and changing healthcare environment, businesses (both publicly-held and privately-owned) face critical challenges. They must preserve, manage and grow their precious capital and, at the same time, effectively manage their business risks, including, for example, the risks associated with their employer-provided health insurance plan and other benefits. These needs conventionally have been handled separately: capital planning and management typically have been conducted as a financial function separate from the risk management and human resources (“RM/ HR”) functions. In other words, capital solutions and RM/HR solutions typically have enjoyed a “siloed” existence. Moreover, RM/HR solutions traditionally have involved a combination of purchased insurance in the marketplace and retained risk or self-insurance

38

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

(for example, the deductible liability on an employerprovided health insurance plan).

Some businesses, though, have taken a nontraditional, innovative approach to meeting these critical capital and RM/HR needs, especially in the current environment.

This innovative approach is interdisciplinary. It taps the unique synergy of developing a captive risk management strategy in the healthcare and employee benefits space – a strategy which utilizes many of the exportable captive insurance, governance, business entity, asset protection, tax, trust, capital management, regulatory, financial and risk management benefits that the State of Delaware offers (and which are collectively called “the Delaware advantages”). It is a customizable strategy which helps to preserve, manage and grow financial capital and to manage effectively business risks in a cost-effective

National Healthcare Reform Magazine

and often tax-advantaged manner. Businesses across under the plan, thereby having the plan’s coverage the country are increasingly turning to this innovative attach at a higher level and lowering the employer’s approach to develop their capital and RM/HR solutions. cost of the plan. By doing so, and having the new captive insurance company cover the risks of the higher

Let’s examine how this innovative best practice deductible, the employer will save substantial costs – works. Assume an employer is interested in pursuing a and preserve significant capital – as demonstrated by less expensive strategy for its employer-provided health the independent feasibility study as part of the due insurance plan and its errors and omissions liability. diligence analysis.

The employer and its consultant carefully analyze the available options, testing the metrics and feasibility of The other leg of this strategy involves the different alternatives, and finally determine what would employer’s replacing its commercially purchased be an optimal solution. That optimal solution involves errors and omissions (“E&O”) insurance with coverage the employer’s establishment of its own captive by its new captive insurance company. This similarly insurance company which will cover (a) the employer’s will result in substantial cost savings for the business, deductible liability on its employer-provided health preserving (rather than permanently expending to a insurance plan and (b) the employer’s errors and third-party insurer) additional capital. The feasibility omissions liability. The captive insurance company study, which recognized the employer’s excellent will be organized and licensed in Delaware and will record of no claim having been made under its existing be “serialized” (which will be explained below) for the E&O insurance policy, demonstrated that the employer two types of transferred risk. can expect to achieve substantial savings in both the short-term and long-term by implementing this captive

In this strategy, the employer and consultant risk management solution. decide to increase the level of the employer’s deductible

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

39

National Healthcare Reform Magazine

What is this captive insurance company? And how does it benefit this employer?

Nature of a Captive Insurance Company.

Captive insurance is a form of private risk transfer and coverage. Captive insurance essentially involves the transfer of specified business risks from an enterprise (here, the employer) to a separate, typically private, legal entity, the captive insurance company (the “captive” or “captive insurer”). The captive economically assumes those risks and is financially responsible for any losses resulting from the realization of those risks. The captive insurer, not the captively insured enterprise, therefore is responsible for payment of claims on those losses.

Customizability for the Employer. In our hypothetical, the employer transfers its high deductible liability risks and its E&O liability risks to its newly established Delaware captive insurance company. Just as most Fortune 500 companies are incorporated in Delaware but conduct their business operations in other states, so too can an employer organize and license its captive in Delaware to cover the selected risks of its business conducted outside Delaware.

The employer organizes its captive insurance company as a Delaware limited liability company (“LLC”) and places its selected health plan deductible liability and E&O risks, respectively, in Series A and Series B of its new Delaware LLC. Series A and B are segregated divisions (called “series business units” or “SBUs”) within the Delaware LLC captive. They are not separately incorporated subsidiaries of the LLC. This structural flexibility allows the employer to establish one or more series within its new Delaware LLC captive insurer without the need or expense of creating multiple standalone entities or subsidiaries. (Note that while this employer chose a serializable Delaware LLC for its new captive, the same serializability is available through Delaware statutory trusts and limited

40

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

partnerships. In fact, Delaware is the only state which offers serializability for all three structures – the LLC, statutory trust and limited partnership.)

By utilizing this simple Delaware-advantaged structure for its new captive, the employer can establish simply one centralized governance (management) for the captive – which will be more cost-effective and efficient than having to establish two separate governance structures for two incorporated subsidiaries.

The employer has the further option to engage an outside manager(s) to perform some or all of the administrative responsibilities for the captive, such as, for example, accounting, asset management, claims processing, regulatory reporting and reinsurance procurement and coordination.

Business Flexibility. The serialized Delaware LLC captive also gives the employer business expansion flexibility. If the employer wishes to captively insure additional types of enterprise risk (for example, risks for which it traditionally has purchased commercial insurance, such as property and casualty risk, or selected risks associated with a newly launched business line), it will have the option of using its Delaware LLC captive. In that case, the employer simply could create an additional series business unit within its existing Delaware LLC captive. That SBU would captively insure those additional risks.

Tax Advantages. The serialized Delaware LLC captive also provides state and potential federal tax advantages. As a licensed Delaware captive, the employer’s new captive will be exempt from Delaware business income tax. As a serialized Delaware LLC captive, the employer’s new captive will enjoy favorable state premium tax treatment. For Delaware premium tax purposes, this serialized captive (including all its distinct series) will be treated as one enterprise and, therefore, will be subject to only one $5,000 minimum

National Healthcare Reform Magazine

annual premium tax requirement (rather than subjecting each series to a separate $5,000 annual minimum).

Furthermore, Delaware caps the amount of payable annual premium tax for a Delaware-licensed captive, regardless of premium income growth.

Delaware also provides other state tax benefits to Delaware-domiciled captives. These include, for example, a cap on a captive’s annual premium tax where the captive (which is not otherwise required to do so) employs a certain number of workers in Delaware.

The world’s largest captive, which is operationally headquartered and licensed in Delaware, enjoys this tax benefit.

The employer’s serialized Delaware LLC captive also has the opportunity to benefit from various federal income tax advantages. Although the serialized Delaware LLC is a single legal entity, for federal income tax purposes each series (in our employer hypothetical, Series A and Series B) can be treated as a separate federal taxpayer, allowing each SBU to possibly qualify for favorable federal income tax treatment. For example, if Series A in our example (covering the employer’s health plan deductible liability) is expected to receive not more than $1.2 million in annual captive insurance premium, that SBU possibly may qualify for favorable federal income tax treatment under section 831(b) of the Internal Revenue Code. If it does, that Series A’s premium income would be exempt from federal income taxation, thereby potentially saving that Series A up to $420,000 in federal income tax (assuming an otherwise applicable 35% federal rate) – a preservation of substantial business capital.

Finally, the employer paying the premium to its captive receives an income tax deduction for those paid premiums.

Capital Benefits.

strategy allows the employer to cost-effectively access, preserve and grow its financial capital, while providing a desired RM/HR solution. Rather than permanently expend its capital to a third-party commercial insurer, the employer in effect recycles that capital to itself (and its owners) by utilizing its own, and less costly, captive insurer. If that captive’s capital is managed well, and if the transferred risks and claims are managed well, that capital in effect can be returned to the employer over time in the forms of dividend distributions and claims payments. In addition, the employer’s captive can directly access the reinsurance market, should it decide to reinsure any of its risks, at lower rates – another means of saving additional capital.

Conclusion. In short, a properly organized and well-managed serialized Delaware captive typically is more cost-effective, less expensive and potentially more tax-advantageous than purchased third-party commercial insurance and bare self-insurance. Through a customized captive, an employer can design a strategy which addresses both its capital and risk management objectives, including its RM/HR targets.

About the Author Edmond M. Ianni is a multi-disciplinary business counselor, strategist and manager. He has provided strategic, business development, regulatory, governance and management counsel in various spaces, including financial services, energy and international business.

He currently serves as director of strategic development for the State of Delaware Department of Insurance and formerly was chief strategy officer for Millennium Wealth Management. Mr. Ianni led the regulatory team which worked on the world’s first licensed serialized captive insurance company.

This captive risk management

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

41

The Behavior Driven

National Healthcare Reform Magazine

Health Plan

by Russ Swallow

70% of all deaths • • • • • •

1/3 of the years of potential life lost before age 65 $1½ trillion associated with potentially preventable conditions 133 million people have at least one chronic condition Annual direct cost of heart disease and stroke is $448 billion Annual direct and indirect costs for smoking exceed $193 billion Annual direct and indirect costs of diabetes is $174 billion a year Centers for Disease Control and Prevention Costs of Chronic Disease

42

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

Controlling Health Insurance Costs

Ca

nce

r

rs orde s i D tal Men

Diabetes

If you want healthier employees, you will need to understand …

Heart Disease Hy pe rte ns ion

y Pulmonarns io it Cond

According to the Centers for Disease Control & Prevention (CDC), more than 75% of our $2 trillion healthcare costs are associated with potentially preventable chronic diseases.

To control your health insurance costs, you’ll need to focuson chronic disease because that’s where the costs are.

Str oke

This focus is because the Centers for Disease Control & Prevention (CDC), report that more than 75% of our total health care spending is on people with chronic diseases and these are both preventable and manageable.

Willie Sutton, the famous bank robber, was alleged to have said, “I robbed banks because that’s where the money was.”

1. The impact of chronic disease. Since chronic diseases are responsible for over 75% of all health care costs, companies having a plan that “attacks” the causes will be ahead of the curve. Chronic diseases are treatable and manageable.

National Healthcare Reform Magazine

2. How to influence 4 key health activities A. Identify 4 key activities that “attack” chronic disease B. Understand the combined “attack” on chronic disease C. Design a plan to influence the 4 key health \ activities

In the financial model (shown later in this report), we designed a plan with $$$ incentives that will lower the employee cost when he/she completes the 4 key health activities. In this case, the employer helps those who are willing to help themselves. Employees who complete the activities pay less than those who don’t. Whether they do or don’t, employer costs go down.

3. How wellness “attacks” chronic disease A. You CANNOT control supply costs (healthcare services) B. You CAN influence demand (healthier employees)

Nearly 24 million Americans have diabetes. Of the people living with diabetes, about 18 million have been diagnosed,

Healthy employees cost less. Corporate and about 6 million don’t know they have it. wellness programs help employees get healthy and stay thatway. You’ll save money through reduced If current trends continue, 1 of 3 people born health insurance costs, workers’ compensation in the United States in 2000 will develop diabetes expenses, absenteeism and presenters. during their lifetime. In 2007, about 1.6 million adults The Impact of Chronic Disease Diabetes is Common, Disabling, Deadly and On The Rise.

were newly diagnosed with diabetes, and at least 57 million adults were at risk of developing diabetes.

Diabetes is the seventh leading cause of death.

It is also a leading cause for such complications as blindness, kidney failure, and lower extremity amputations A Stroke Involves Loss of Brain Functions.

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

43

National Healthcare Reform Magazine

A Stroke Involves Loss of Brain Functions.

Strokes are caused by a loss of blood circulation to areas of the brain. Blockage usually occurs when a clot or piece of athero-sclerotic plaque breaks away from another area of the body and lodges within the vasculature of the brain. Within a few minutes, brain cells begin to die.

Cancer Men

Stroke is a medical emergency. Prompt treatment of a stroke is crucial. Early treatment can minimize damage to your brain and potential complications. Improvement in the control of major risk factors for stroke — high blood pressure, smoking and high cholesterol — is crucial.

Women

44

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

Heart Attack

A heart attack or acute myocardial infarction (MI) occurs when one of the arteries that supply the heart muscle becomes blocked.

Blockage may be caused by spasm of the artery or by atherosclerosis with acute clot formation. The blockage results in damaged tissue and a permanent loss of contrac-tion of this portion of the heart muscle.

Hypertension or High Blood Pressure Health Impact of High Blood Pressure • Major risk factor for heart disease, stroke, congestive heart failure, and kidney disease.

• Primary or contributing cause of death for 326,000 Americans in 2006.

• Nearly 45 million people visited their doctor for high blood pressure in 2006.

Who Has High Blood Pressure?

• Almost 90% of adults aged 45–64 years will develop high blood pressure during the remainder of their lifetime.

• About 25% of American adults aged 20 years or older have prehypertension.

• One of every three U.S. adults aged 20 years or older has hypertension. Nearly one of five people has hypertension and is not aware that they have it.

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

45

National Healthcare Reform Magazine

High blood pressure can damage your health in many ways.

For instance, it can harden the arteries, decreasing the flow of blood and oxygen to the heart.

This reduced flow can cause— • Chest pain, also called angina.

Cianbro, an employee-owned construction company implemented its Healthy Lifestyle Program in 2003.

The program provided for employees at all worksites to complete health risk assessments. Over two years • 16% of participants decreased their risk for obesity • 20% improved their blood cholesterol profile

• Heart failure, which occurs when the heart can’t • 49% reported improving their level of physical pump enough blood and oxygen to your other organs. activity • Heart attack, which occurs when the blood supply to your heart is blocked and heart muscle cells die from a lack of oxygen. The longer the blood flow is blocked, the greater the damage to the heart.

High blood pressure can burst or block arteries that supply blood and oxygen to the brain, causing a stroke.

How to influence 4 key health activities A. Identify the 4 key activities that “attack” chronic disease.

Health Risk Assessment

Chronic Diseases ties Cancer

• 68% participation rate by its third year Source: http://www.cdc.gov/leanworks/why/casestudies.html

Annual Primary Care Physician Visit Chronic Diseases Cancer

1) Assessment

Mental Disorders

2) PCP Visit

Heart Disease Hypertension Pulmonary Conditions Stroke

Annual Screenings Chronic Diseases

Mental Disorders

Cancer

Diabetes

Mental Disorders

Heart Disease

Diabetes

Hypertension

Heart Disease

Pulmonary Conditions

Hypertension

Stroke

Pulmonary Conditions Stroke

46

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

Dia-

betes

Health Activi1) Assessment

Health Activities

Health Activities 1) Assessment 2) PCP Visit 3) Screenings

National Healthcare Reform Magazine

Employees who have a relationship with a primary care physician (PCP) will cost you about one-third less than employees that don’t.

• Reduces ambulatory care-sensitive hospital admissions, emergency department visits, and inappropriate specialty consultations • Those with PCP have better management of chronic conditions • Better outcomes: reduced absenteeism and presenteeism Sepulveda M.J., Bodenheimer T., Grundy P. Primary Care: Can It Solve Employers’ Health Care Dilemma? Health Affairs. 2008;27:151-158

Why Are Check-Ups Important?

Regular health exams and tests can help find problems before they start when your chances for treatment and cure are better.

By getting the right health services, Understand the combined “attack” on chronic screenings, and treatments, you are taking steps that disease help your chances for living a longer, healthier life.

Your age, health and family history, lifestyle choices Don’t Smoke (i.e. what you eat, how active you are, whether you smoke), and other important factors impact what and how often you need services.

Chronic Diseases Health Activities Source: http://www.cdc.gov/family/checkup/index.htm

Don’t Smoke Chronic Diseases

Health Activities

Cancer

1) Assessment

Mental Disorders

2) PCP Visit

Diabetes

3) Screenings

Heart Disease

4) Don’t Smoke-

Cancer

1) Assessment

Mental Disorders

2) PCP Visit

Hypertension

Diabetes

3) Screenings

Pulmonary Conditions

Heart Disease Hypertension

4) Don’t Smoke-

Stroke

Pulmonary Conditions Stroke

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

47

National Healthcare Reform Magazine

Now that we can see how the combination of these 4 key health activities put a “full court press” on chronic disease, we next need to design a health plan that will influence those activities (see next page).

What about obesity?

The health activities in this section are “activitybased” so that one may qualify for employer reimbursements today. While one can see the physician today or quit smoking today, one cannot lose 35 pounds today.

Obesity and what to do about it is in the Living Fit and Living Lean interventions which are included as part of the Wellness Program.

In the example shown above, the employer’s previous insurance was a $15 office copay/$250 hospital copay HMO with 60 employees on the health plan. Premiums were roughly $400 individual, $800 two-person and $1200 full family; split 75/25 between employer and employee.

Our behavioral consultants have identified other key health activities that we need to target, but these By moving to the $2,000 deductible plan, the four are the first. The fifth is presently available on a premiums dropped by 25% or about $144,000 annually. case-by-case basis.

The employer was willing to help his employees with the bulk of that deductible (when/if expenses occur) Design a health plan to influence the 4 key activities provided the employees were willing to engage in the targeted health activities.

Deductible costs

$ 600

Non-Smoker or in a Quit Smoking program

$ 300

Screenings (when advised)

$ 300

Primary Care Physician Visit

the employer agrees to pay WHEN the employee completes the

activities in the right column.

$ 300

Health Risk Assessment

Employee pays 1st $500

48

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

Here’s how it worked. Employees pay the 1st $500 of the deductible with the employer paying part or all of the remaining $1500 based on which health activities they engaged in. If the employee completes the Health Risk Assessment, the employer pays $300 of the $1500. If, in addition, the employee completes the Primary Care Physician Visit, the employer is obligated for another $300 and so on up to the limit.

The more health activities completed, the less the likelihood employer and employees will be obligated for deductibles AND the employees become healthier which benefits everyone. This is win-win all around.

The extra cost to the employer? $3600 or 2½% of the annual savings.

National Healthcare Reform Magazine

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

49

National Healthcare Reform Magazine

Here’s what mine looked like (not so good) in April 2010

Let’s see … in my 60’s … coronary artery disease (very mild heart attack in 1992) … didn’t move much from October 2009 until April 2010 … wasn’t watching what I was eating (love ice cream) … two weeks in Aruba (great food) … ballooned up to 224 pounds (5’10” medium frame) … blood pressure and cholesterol went up …low energy level … does this sound familiar? … do you know anyone like this?

I then actually read every page of my report …

… and discovered I could start improving my score immediately.

Under the category “Improvement opportunities to consider:” was the topic of car safety. I had scored just 1 out of a possible 5 points for seat belt usage. The first thing when I get into the car now, is to strap on my seat belt. Not rocket science, but I was now up to 63

I had to do something quickly. On April 6th, I points out of 100. And that’s when I began to feel better took an online Health Risk Assessment a n d about myself because there was something, one little flunked, scoring 59 points out of a possible 100. My step, I could do immediately.

Body Mass Index (BMI) was 31.3 which means I am That overview also stated my “health age” was obese. Now this is crazy. I know I’m carrying some 4 years older than my actual age. Now if that wasn’t extra weight, but obese? Not me. Oh yeah? motivation to for me to get moving today, then I don’t

My bottom line conclusion? My health ain’t so know what is. good. So what do I do? Where do I start? Let me When I look at my bar chart and see the high think. There’s so many things I need to be doing so I need to find a way to attack everything at once. But I risks associated with my heart, diabetes, fitness and can’t start today because we’re going out to dinner with weight, the pieces of my puzzle start to fall into place. some friends on Saturday, so I’ll wait until Monday to By starting to work on the fitness aspect, I’ll begin to lose weight which will lower both my blood pressure start. and cholesterol which will also lower my heart risk.

OK, been there, done that, time and time again.

and, there are more lifestyle intervention Does this sound at all familiar?

50

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

National Healthcare Reform Magazine

programs … Evidence-based cognitive behavioral training helps people change the way they think about themselves, their life and their lifestyle. The programs teach simple, personal, motivating principles that are practical and enlightening.

By influencing health behaviors, we’ve already learned we can begin to reduce the demand for healthcare services. We next need to take the results of that Health Risk Assessment and create a complete Wellness Program to help us…

Healthy Employees Cost Less

• Reduce healthcare costs by decreasing the number of medical claims for preventable injuries and illness

Corporate wellness programs help employees get healthy and stay that way. You’ll save money through • Increase productivity by combatting presenteeism reduced healthcare costs, workers’ compensation and absenteeism expenses, absenteeism and presenteeism • Identify current health risks within your organization, Healthcare costs will always rise, just as the so you can offer tailored and effective interventions cost for most products and services do.

• Attract top talent and retain key employees by You CANNOT control supply costs fostering a healthy corporate culture (healthcare services) BUT If costs keep rising, what are your options?

You CAN influence demand (healthier employees) To maintain some semblance of control, you’ll keep raising deductibles and copays. Assuming you’re already moving in this direction …

The importance of the Health Risk Assessment

We know the enemy is chronic disease and the assessment prioritizes your personal attack on these

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m

51

National Healthcare Reform Magazine

conditions. Go back and review the sample where you can see how you measures up with regard to:

•

BEI Network of Exit Planning Advisors

•

National Care Planning Council

• American Association for Long Term Care Insurance • Broker Advisory Council for Medicare (Fallon Community Health Plan) • Worcester Regional Chamber of Commerce • Here’s the bottom line

Corridor Nine Chamber of Commerce.

and a Member and Director of The Massachusetts Care Planning Council.

On a personal note, Russ was sole caregiver for his mother during the last eight years of her life. She Healthy employees cost less. Corporate wellness passed away in August 2006 at the age of 94 years and programs will help employees get healthy and stay 12 days. He has hands-on experience in dealing with that way. You’ll save money through reduced health the ongoing myriad of health challenges that are facing insurance costs, workers’ compensation expenses, and the elderly in their declining years and can bring this experience to help others facing similar challenges. absenteeism and presenteeism.

About the Arthor Russ Swallow is a Professional Employee Benefit Consultant and Broker. He is President of BenefitsLab Insurance Agency, Inc., a Massachusetts based company, and has been helping his clients with their health insurance and benefits planning needs, both business and personal, since 1970.

He is a member of …

•

Association of Health Insurance Advisors

•

Massachusetts Association of Health Underwriters

•

Northeast Human Resources Association

•

Society for Human Resource Management

•

Employers Association of the Northeast

52

w w w. H e a l t h c a r e R e f o r m M a g a z i n e . c o m