Volume 9, No 2 | March 2011
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EDITOR’S LETTER
US Employee Benefits Industry Players Head to Chicago
I
am very excited at this year’s upcoming Employer Healthcare Congress, October 26-28th, 2011 in Chicago. This will be our 3rd year, and each year we have focused on making improvements. Last year, only in our second year, we became one of the largest employee benefits conferences in the country beating out almost all other benefits conferences, some of which have been around for over 23 years. We have moved to Chicago this year because of it’s central location which will draw a much larger audience. Our attendance this year is already almost at 200% higher than at this same time last year, and I believe this is because of our location and that Chicago is home to a high concentration of mid-size and large employers. This year we have reinvested in the congress significantly to make this the biggest and best year yet. We have two great keynote speakers, Bill Rancic, the winner of Donald Trump’s 1st “Apprentice” TV Show, and Cecil Wilson, the President of the American Medical Association. We have changed the format of the congress to have more cross-overs as to bring our symbiotic conferences closer together, and we will have more advanced educational sessions and workshops. We have also expanded our VIP program and will be including not just employers but agents and consultants also this year. What I am most excited about is our new networking software which has been newly built and is more of a social networking tool on top of meeting scheduler. It will make it easier for attendees to view who is coming to the conference, through photos, bios and allow for attendees to synch to twitter, LinkedIn and Facebook to see who in their network is attending the conference. Tomorrow I am headed to New York City for an interview with FoxNews. See you soon.
Jonathan Edelheit
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EDITORIAL STAFF EDITOR Jonathan Edelheit jon@employerhealth� carecongress.com
ASSISTANT EDITOR Megan Chiarello ADVERTISING SALES info@voluntaryben� efitsmagazine.com
GRAPGHIC DESIGNER Tercy U. Toussaint For any questions regarding advertising, permissions/ reprints, or other general inquiries, please contact:
Megan Chiarello ASSISTANT EDITOR
561.792.4418 PHONE
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Info@voluntarybenefits magazine.com E-MAIL Copyright © 2011 Voluntary Benefits Magazine. All rights reserved. Voluntary Benefits Magazine is published monthly by Global Health Insurance Publications. Material in this publication may not be reproduced in any way without express permission from Voluntary Benefits Magazine. Requests for permission may be directed to info@ voluntarybenefitsmagazine. com. Voluntary Benefits Magazine is in no way responsible for the content of our advertisers or authors.
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CONTENTS Issue 23 • May 2011
FEATURES
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Debit Card Cheaters & How to Choose the Best Third Party Administrator For Your Consumer Driven Health Plan
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Pharmaceutical Importation ~ Logical, Legal, Safe
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How Brokers Can Find Opportunities in the Healthcare Reform Era
INSIDE THIS ISSUE Give Me Drugs!.....................................................................................................26 Connecting Employee Health to Voluntary Discount Dental Plans......................32 Teamwork Is Not “Voluntary”....................................................................... ...... 24 Health Reform and the CLASS Act: Threat or Opportunity?...............................35 The Costs of Doing Business Reducing Administrative Burdens in a State Health Exchange...............................................................................................................41 Meaningful Thoughts Beyond “Meaningful Use”................................................44 Unions Cheat Members Out Of Health and Wealth............................................ .48 What is the Biggest Myth about Electronic Fund Transfers?............................. .52 Workers’ Compensation Cost Escalation..............................................................55
FOLLOW US ON:
Debit Card Cheaters
& How to Choose the Best Third Party Administrator for Your Consumer Driven Health Plan By Isaiah D. Joyner 6
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C
lose your eyes, you’re beginning to become very sleepy, very, very sleepy...Relax your entire body and now imagine you are a human resources professional at XYZ Company, in charge of vendor selection. You’ve been with “PoorFlex Company” for several years for your company’s Flexible Spending Arrangement (FSA) services without much issue, unless you or your employee’s need to call in or get an issue remedied. Over the years you’ve had several reports and personal
into your office complaining of receiving something called a, “Substantiation Notice” from “GreatFlex.” Through some research you discover that these “Substantiation Notices” are required by the IRS for any claims that cannot be identified completely via the debit card. After further research, you discovered that all claims must have the service date, description of the charge, and the amount of the charge in order to be in full compliance with the FSA plan
experience with slow phone answering, or Section 125 Cafeteria Plan. employee’s not being able to understand the call You begin to wonder amongst the complaints center representatives, and poor follow up. received about “PoorFlex” why the substantiation request issue never showed up… This has irritated your boss and your participants enough to warrant searching for a new FSA As you proceed with pressing investigation, you discover several negative reviews online about Administrator or Third Party “PoorFlex” indicating hefty penalties, fines, and Administrator (TPA). fees by the IRS for companies who had been audited for not providing substantiation for their Through your research you discover several participant’s FSA or HRA plan claims. You reputable TPAs that would fit the bill. You begin to wonder, “How long have we been out make your selection with a TPA with better of compliance!?” customer service called, “GreatFlex Company.” Everything has been fantastic with “GreatFlex.” You are now woken up with a snap of the The complaints about poor customer service fingers. “Snap!” Aren’t you glad you aren’t have all but disappeared and you’re finally XYZ Company! able to get back to work! After several months you start seeing those old familiar faces stroll The aforementioned situation is all too common
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in the TPA world and not requiring substantiation Benefits of FSAs: for FSA claims is one of the most common • Employers save 7.65% in FICA taxes audit concerns when dealing with these types of for every dollar employees contribute to plans. In a company’s defense, you don’t know an FSA. what you don’t know. And how could you? Many insurance agents spend much of their • Employees get an “instant raise” in the training on the “bigger ticket” items, such as form of tax-savings. medical insurance and its ins and outs. Why shouldn’t they? That’s how they make their • Employees enjoy the peace of mind that living. Pre-tax benefits are taught and are money for their health needs is there when a required teaching to obtain your broker’s they need it license, however since these products don’t tend -no worrying about paying for unexpected to be dealt with on a daily basis in their industry, (or expected) medical expenses. much of it leaves the brain and is only revisited • Morale Booster when disaster strikes! In the Third Party Administrator (TPA) industry Health Reimbursement Arrangements (HRA) “PoorFlex” would be called a, “##&%& Debit have increased in popularity due to the rising Card Cheater” amongst other things… cost of health care premiums. Because HRAs are flexible, employers can purchase higher What is a debit card cheater you ask? deductible health plans with significant premium savings. They then self-fund a portion of the Well, simply put, a debit card cheater is a Third high deductible (or benefits) with an HRA so Part Administrator (TPA), Agency, or company employees don’t feel the burden of the high who does not substantiate the claims they receive deductible plan. from participants for section 125 cafeteria plans i.e. Flexible Spending Arrangements (FSAs), Employers and Employees win in several ways: Health Reimbursement Arrangements (HRAs), or sometimes they are referred to as MERPS • Flexibility in controlling escalating Medical Expense Reimbursement Plans, this is benefit costs an interchangeable term. If you are unfamiliar with the FSA and HRA, here are some brief • Flexibility in benefit choices explanations; Flexible Spending Arrangements (FSA) is a • Employee retention and attraction great way for both employers and employees to save money. In fact, they are one of the only • FICA Tax savings of 7.65% on every benefits that save both employees and employers dollar that is utilized through the plan. money. These pre-tax plans work by allowing employees to set aside money pre-tax (before taxes are deducted from their paychecks) to Why does it matter if my pay for common everyday medical, travel, and administrator substantiates claims? dependent care expenses. Pre-tax plans save money on Federal, FICA and state taxes. If your administrator chooses not to substantiate claims, they are putting the employer and broker
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in unnecessary risk. The IRS requires that all claims provide non auto-adjudicated i.e. when the debit card is able to substantiate claims at the “point of service.” According to publication 502 printed by the Internal Revenue Service (IRS), only certain qualified health related expenditures are eligible for reimbursement. E.g. co-pays, RX, teeth cleaning, eye glasses, and over twenty six thousand other items. The issue of non-compliance with section 125, has to do with services rendered and paid for that do not classify as eligible as defined in publication 502 by the IRS. (www.irs.gov/pub/ irs-pdf/p502) E.g. Teeth Whitening, Non RX Over the counter medicines, cosmetics, etc. See below clarification dated July 31st, 2006: “All other charges to the card are treated as conditional pending confirmation of the charge by the submission of additional third-party information, such as a receipt. Claims that are identified as not qualifying for reimbursement because of lack of additional information or otherwise, are subject to certain correction procedures. Rev. Rul. 2003-43 concludes that the procedures adopted by the employer in Situation 1 meet the requirements of § 105(b) because all claims for medical expenses are substantiated, either automatically or by the submission of additional information. Card systems that do not meet the requirements of § 105(b) result in all payments provided by the cards being included in the participant’s income.” (Pie, 2006) I’d hate to be that employee!
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What is a Valid Receipt? Store/Pharmacy receipt, including name of product and date of service Co-pay receipt from medical provider, including date of service Itemized bill from medical provider, including date of service Insurance company’s “Explanation of Benefits”, including date(s) of service. Canceled checks and credit card statements are not valid receipts.Documentation from a physician must accompany receipts if they are for medical expenses that seem as if they would not be accepted for reimbursement. For example, cosmetic treatments or massage therapy are not typically reimbursable, but could be if prescribed by a physician.
Eligible Health Care Expenses Pre-tax benefit plans allows for reimbursement of certain health care expenses, which may include medical, dental and/or vision related expenses. Within the parameters of expense types allowed under your plan, Health Care Expenses claimed for reimbursement must be used for the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body. The maximum range of health care expenses that may be allowed under your plan are outlined in IRS Publication 502 -Medical and Dental Expenses (http://www.irs.gov/pub/irs-pdf/p502. pdf), as well as over-the-counter drugs and mileage associated with health-related services (rate is updated periodically by the IRS.) There are several questions you can ask to ensure
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How do I know if my administrator is substantiating properly and providing the needed level of customer service? your administrator or potential administrator is substantiating their claims properly and providing the much sought after quality customer service;
administrative fees should you be involved in litigation at some point. However 6 months of administrative fees is really just a drop in the bucket when you have to pay an attorney and possible penalties for non-compliance. Remember it’s your company’s money and reputation on the line not the TPAs!
• “What’s your substantiation procedure,” you’ll know quickly whether they are or not based on their response.
• “What’s your substantiation rate for the • Customer service is important. It’s essential card?” This question is important, as it that you ask a few key questions to ensure makes them expound on their processes for you are getting your monies worth. substantiation (if they have one.) And allows you to cross check number 1. a.) “How fast do you pay claims or average claims processing time?” Many • “Have you ever been involved in litigation won’t know or will have to ask and get regarding non-compliance for any of back to you. This is a big red flag that you your products?” Trends are an important can expect inconsistent quality. warning sign. If they have trouble staying in compliance with other companies why would b.) “What is your average hold time to you be any different? get a live person?” This is key, you don’t want to speak with an Interactive Voice • “Do you have an Errors and Omissions Response (IVR) system. While helpful in Policy (E&O Insurance) to help cover costs some cases, FSAs and HRAs generally should we be audited?” Watch out for audit require a personal touch and your guarantees!!! Some of these “PoorFlex” participants will be greatful for the live companies offer 6 months or more of person to help them with their questions.
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c.) “What is your average call abandonment rate?” i.e. how many people call and hang up the phone because they get frustrated with waiting to speak to someone. If this percentage is high run for the hills! Many won’t even know their average and that’s another big red flag. d.) “Am I assigned an account administrator or manager. If so may I have all of their information i.e. first and last name, direct line, e-mail, fax, etc.” This is important, many of these “PoorFlex” companies don’t assign administrators or say they do, however everytime you call you are transferred to a different representative. This is frustrating and can really cause issues with trust for the employer. Additionally getting issues resolved becomes difficult as you have to start over with a new representative everytime you call. e.) “What is your average for questions resolved on the first call?” This is a great question, you’ll be able to figure out how well the prospective vendor’s training and staff quality is by this number.
service bench marks. While it is not comforting, to say the least, you and your participant’s need an administrator that is going to provide consistent quality across the board. That’s what it’s all about, no matter what the service in any industry. Now more than ever you want to put your dollars to good use and why shouldn’t you? You’ve earned it. The absolute last thing you need are participants calling, knocking, e-mailing, faxing, well you get the idea… to discuss why their FSA or HRA plan isn’t working properly. These plans are complex, but it’s the job of your administrator to make them simple to understand, use, and most importantly to get your money back fast. How does your potential or current administrator stack up against these questions? Do they pass or fail?
Bio Isaiah has worked with eflexgroup.com or “eflex” for more than five years working in various roles such as COBRA compliance and in a sales capacity for CDH benefits. Isaiah is a certified continuing education teacher and provides such CE on a national scale. Please feel free to contact Isaiah for questions on this article or on Consumer Driven Healthcare (CDH.)For a more comprehensive list of questions to ask TPAs, please e-mail Isaiah at ij@eflexgroup.com to get your free one page audit sheet entitled, “Questions to Ask TPAs.”
These questions are a fantastic gauge on whether or not your prospective or current TPA vendor is quality or just “one of those.” As a warning, many will not know the answer to these questions and it will most likely take them quite a lot of time to provide you with the averages for their organization; that is assuming they have the ability or willingness. The simple fact is, if they don’t know or they have to look into it, they probably aren’t paying much attention to these very important customer
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Resources:
Pie, Barbara. Office of Division Counsel/Associate Chief Counsel . Internal Revenue Bulletin: 2006-31 . Washington: Internal Revenue Service, 2006. Web. 15 Apr 2011. http://www.irs.gov/irb/2006-31_IRB/ar10. html.
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Pharmaceutical Importation ~ Logical, Legal, Safe
health plans. Because the FDA stipulates that pharmaceutical importation must be voluntary and for personal consumption only, ASO plans can give employees the option of participating in these plans. The advantages of such an arrangement accrue to both employer and employee: • The employer pays the lowest price available in Tier 1* countries, usually a savings of 35% to 55%.
By J.J Summerell
P
harmaceutical costs, especially those for brand name, maintenance drugs, have been a primary driver of health costs and, in turn, health insurance costs, for well over a decade. Interestingly, the costs for these drugs vary widely around the world and are on average 44% higher in the United States than elsewhere. That’s 44%! Countries with centralized, single-payer health systems are able to negotiate lower prices for drugs than are the myriad of insurance companies in the US. However, the lost revenue from lower prices paid by the single-payer countries is simply shifted to payers in the US. Effectively, the US is subsidizing the research and development ventures of the drug companies more than their single-payer counterparts. Given free markets, this is not a sustainable business model. As pharmaceutical costs have risen, more and more Americans have begun sourcing their brand name, maintenance medications from countries enjoying the lower price structures. As Americans, we have the right to source legitimate prescriptions, for personal use only, from whatever country we choose. Over the past decade a small industry of importation management companies has evolved. One of the more interesting developments in this industry applies to self-funded, ASO
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• The employee no longer is responsible for the co-pay. This can be a significant savings for a family with multiple co-pays on brand name maintenance meds. The remainder of this article will discuss what is involved in implementing one of these plans, including Prospective Accounts, Products and Pricing, PIM Company Analysis, Projected Savings, Future Implications and Legal Substantiation.
Prospective Accounts
Only self-funded, ASO (administrative service only) groups are allowed to participate and employees can only participate on a voluntary basis. Fully insured groups are ineligible. The reason ASO groups are eligible is because they are acting as individuals. That is, with no underlying true insurance on the group and participation only on a voluntary basis participants are legally acting as individuals. This is discussed in more detail within the links under “legal substantiation.” Generally, group size should be 100+ employees. Older employees consume more maintenance drugs, thus increasing
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participation. Ideally, an older employee population is better. Employee communication is paramount to the success of the program. Employees need to be assured that the imported drugs are authentic and will be delivered reliably. Most groups experience about 30% participation initially, growing to 60%+ within a few years.
Products and Pricing
the IPP not give employees access to: • Narcotics. Scripts such as Valium, etc may be prone to theft. • Illegal drugs. • Drugs not specifically approved by the FDA for use in the US. Many drugs are approved for use in other countries but not the US. Such drugs may be available for importation but their availability ‘muddies the water’ for both the FDA and the IPP.
The formulary of the IPP is quite important, both what is provided in the formulary as well • Immediate needs drugs. If a patient needs as what is not provided. It is important for antibiotics, they do not want to wait 5 employees to have the widest possible range days for delivery. These meds should be of drugs available that may be prescribed by a sourced through the traditional PBM. doctor. However, it is equally important that
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Pricing is at the crux of the matter. Consider the top ten medications shipped by a leading IPP:
These are the same products, from the same manufacturers, as those available via the traditional PBM. The only difference is with Nexium, whose US advertising firm had the color changed to purple for promotional reasons. In the rest of the world the ‘purple pill’ is pink! Otherwise, they are the exact same drugs.
Company Analysis There are no long-established players in this market because it is so new. There are a number of firms which have targeted the individual market for over a decade, but the ASO market is just beginning to develop. No doubt, these plans are ‘pushing the envelope’ with the pharmaceutical manufacturers and regulatory bodies, but their objections appear to be negated by various pieces of legislation; points of law and precedent (see ‘Legal Substantiation’). Look for an IPP’s ability to source meds from the top 4 Tier 1 countries: Canada, United Kingdom, New Zealand and Australia. Prices vary from country to country and you need to provide the lowest possible cost. As noted above, it is not advisable to contract with companies who also provide narcotics via overseas sources, even if
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these narcotics are legal and legitimate. They are a target of criminals which you need to avoid. Another critical need is top notch customer service. Although the importation of scripts is legal for personal consumption, occasionally US Customs will intercept a 90 day supply and deem it not for personal consumption since it is for more than 30 days. In this case, the IPP should be willing to overnight a replacement script to the employee. US Customs interceptions occur in less than 1% of shipments but it is a situation which needs to be addressed. Managerial and financial capacities are important but difficult to determine, again because of this being an ‘infant industry.’ IPP’s which have addressed the individual market have the most experience at sourcing and distributing the meds, but very few have long
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term experience list-billing the client company the savings. A utilization report from the current and providing superior customer service in the plan administrator will give the most accurate HR arena. projections. The best bet is to look for an IPP which has been Future Implications in business the longest, has the widest possible formulary of non-narcotic maintenance meds and the administrative resources to make the program simple and successful.
Projecting Savings Savings to an employer will depend upon the number of employees, the use of brand name maintenance medications and participation in the program. For example, Schnectady County (NY) projects an annual savings of $1.3 million + for their 2,300 employees in 2010 after 6 years of offering the program, an average savings of $565 per employee .
This may well be a temporary industry. That is, once a significant amount of meds are purchased overseas, the pharmaceutical manufacturers will adjust prices globally to address the imbalances, rendering IPPs unnecessary. However, for the next several years this is an excellent option to show prospects which other brokers may not even be aware of.
Legal Substantiation
Muncie (IN) is saving $586K per year on their 750 employees, an average of $780 per Is this legal? The regulators and legislators have employee. been intentionally vague on the subject. I am not an attorney and will simply use links to give How much can any individual employer expect readers an overview of legislation, points of law to save? It depends, but contact me and I will and precedents. Seniors living in the United share an Excel spreadsheet which will estimate States along the Canadian border have sourced
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their scripts from Canada for years. Brokers and legality has been questioned, the regulators and human resource managers should consult their legislators have opted not to pursue the matter attorneys regarding their individual situations. and there is a ‘deafening silence’ from the courts on the issue. Until conclusive decisions Joe Morris is the attorney for a leading PIM. are handed down from DC, these programs are Mr. Morris was Assistant Attorney General a terrific way of opening doors to new accounts under President Reagan and a lead negotiator and allowing employer’s immediate savings on for the United States with NAFTA, the their pharmaceutical utilization. North American Free Trade Agreement. His opinion is that pharmaceutical importation, on an individual basis and with a legitimate prescription, is protected by NAFTA. The FDA has not disagreed. Mr. Morris, interestingly, J.J Summerell manages has recently served as Hearing Officer in Rham Worksite Insight, a Emmanuel’s residency hearing regarding his benefits communications eligibility to run for mayor of Chicago. and enrollment firm in Greensboro, NC. An An April 2004 statement by William Hubbard, independent general Associate Commissioner for Policy and agency, Worksite Planning for the FDA is here. These statements Insight markets exclusively through brokers were prepared for the Senate Committee on and agents. Worksite Insight also owns Easy Finance, subcommittee on Health Care and Benefit Statements, LLC, a software product International Trade. sold to benefits brokers and human resource departments. Past President of the Greensboro The Council of State Governments issued a Association of Insurance and Financial Advisors, report, Prescription Drug Importation, in 2004, Summerell currently serves on the Board of in response to inquiries from state and local Directors of the Greensboro Society of Financial governments. Service Professionals. Mr. Summerell earned his Masters in Business Administration from Wake WebMD researched the subject in an article Forest University and has industry awards include The Letter (and Spirit) of Drug Import Laws. the Frederick W. Joyner Distinguished Service Award, the W.H. Andrews Member of the Year Pharmaceutical importation can be a powerful award, qualification for the Leading Producers tool in the effort to reduce health care costs in Round Table and Golden Eagle awards. self-funded, ASO health plans. Though the
Bio
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How Brokers Can Find Opportunities in the Healthcare Reform Era By Lydia Jilek
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he Patient Protection and Affordable Care Act (PPACA) is designed to bring benefits to millions of uninsured Americans by decreasing health care costs and premiums.
billion during the next 10 years —and uncertainty about how it’ll be funded. For the most part, medical insurers, pharmaceutical manufacturers, medical device makers and even affluent Americans are designated to collectively foot the bill. But some predict these new financial burdens may be passed down and produce cost repercussions for Americans. And both employers and their workers believe health care reform will bring higher costs for both employer-sponsored benefit programs and health care services overall.
More than a year since the federal legislation was signed into law, the PPACA has yet to exert downward pressure on these costs and premiums. In fact, the latest reports show an opposite effect. Employers are expected to pay nearly 9 percent more for health care costs for their workers in 2011, the highest level in five years. And employers will more than likely ask their workers to absorb 12 That’s why voluntary benefits present a clear percent of these costs. opportunity for brokers during this time of change. Both real and anticipated medical cost increases The future savings predicted by the government also and the associated shift to less rich medical plans have been questioned because of the sheer cost of will make voluntary benefits very attractive to both the health care reform package—an estimated $940 businesses and employees. 20
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Today’s voluntary benefits are designed to do much more than fill gaps in a medical plan. When people see friends or family financially devastated by an illness or injury—even with solid medical insurance—they understand the need for voluntary benefits. That’s why these coverages such as shortterm disability, accident, cancer and especially critical illness insurance are gaining a stronger foothold.
So Far
Brokers who may have previously overlooked these voluntary products are now re-engaging and learning how to use this coverage to increase their revenue stream, while meeting important needs of their customers and employees.
• Annual and Lifetime Maximums – Medical insurers will no longer be permitted to have lifetime maximums or place annual maximums on what are determined to be “essential benefits.”
• No Pre-existing Condition Limitations – Medical insurers will be required to accept all applicants without excluding any pre-existing conditions from coverage. This applies to children up to age 18 now, and will extend to adults in 2014.
• Total Coverage for Preventive Care – Medical insurers will be required to pay for the entire cost of In addition, as employers look for smart benefits preventive services specified by the Department of strategies to deal with health reform changes, Health and Services and cannot ask employees to the role of brokers will continue to be extremely share this cost (exception for grandfathered plans). important. Working directly with employers to structure medical packages to better align with • Child Coverage – Insurers will be required to market reforms means brokers will have front-line offer coverage to eligible children until they turn knowledge of new products that may be needed to 26 years old, unless they have access to benefits at complement redefined health coverage. work.
Pharmaceutical Tax Levy – A multi-billion
•
Health Care Costs and Premiums Will be dollar tax will be levied on branded drug Directly, Indirectly Driven Higher manufacturers. Joint research by Towers Watson and the National Business Group on Health shows nearly threefourths (71 percent) of employers believe health reform will increase the overall cost of health care services in the United States, while 69 percent believe it will increase the cost of their benefits programs. A separate survey of U.S. workers found similar concerns. Two-thirds (67 percent) believe health reform will result in higher benefit costs, while more than one-half (54 percent) believe it would reduce their available benefits and lower the quality of health care (53 percent).
The Future • Comparative Effectiveness Fee – In 2013, this fee—charged to medical insurance providers—will be used to fund a non-profit organization to study patient outcomes. • Medical Device Manufacturer Tax – Manufacturers of medical devices, such as pacemakers and X-ray machines, will be assessed a 2.3 percent tax, starting in 2013.
• Health Insurer Levy – Beginning in 2012, a Let’s look at a few health care reform measures that levy will be imposed on health insurers, with have the potential to directly and indirectly drive up exclusions for insurers that meet certain criteria. employers’ health care costs and premiums:
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• Excise or “Cadillac” Tax – This 2018 provision levies a 40-percent excise tax on health insurers for any plan with a premium that exceeds standards set by the Department of Health and Human Services. These measures have many employers rethinking their entire benefits program in order to maintain some level of cost control while still providing competitive packages that appeal to current and prospective employees.
The Voluntary Benefits Market Is Expected to Grow Due to Health Care Reform
to offer account-based CDHPs by 2012. These plans typically pair a high-deductible medical plan with a Health Savings Account (HSA), Health Reimbursement Account (HRA) or Flexible Spending Account (FSA). Reductions in premium costs mean more employee out-of-pocket costs. To control premium costs, many employers will explore increasing deductibles and co-pays, just to name a few alternatives. As these types of strategies are rolled out, the need for voluntary benefits will grow as employees look to cover the financial gaps these new medical plans create. Since the recession, employers have become increasingly concerned about their employees’ financial welfare. Voluntary benefits are not included in the calculation for the 40-percent excise tax. The anticipated impact of tax, revenue and enforcement provisions will be minimal when it comes to benefits other than medical, such as disability, accident, long-term care and critical illness insurance. Voluntary coverage is accepted from the market reforms such as the elimination of the pre-existing condition exclusion and the guaranteeissue requirements as well as from the excise tax on health plans when premiums are deducted on a post-tax basis.
This cost-neutral coverage fits a diverse As brokers help employers create new benefits workforce.Typical voluntary benefits can be added strategies to deal with these rising costs, voluntary at little or no cost to the company while offering offerings will be key ingredients. Here’s why: workers a variety of options to best protect their finances. Significant moves toward consumer-directed health plans are underway (CDHP). One solution Employees can use these voluntary benefit experiencing resurgence is the consumer-directed payments any way they choose. They can health plan (CDHP). As the name suggests, CDHPs offset expenses for deductibles, co-payments, place consumers in the driver’s seat, assuming they rehabilitation, travel for treatment, home care will make more informed and frugal health care or even daily living expenses while they are decisions if they have a bigger financial stake in the recuperating from an illness or accident. process. Seventy-nine percent of employers expect
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months or years an employee is enrolled in a HSA, the individual may not have accumulated enough contributions to make a dent in these catastrophic medical costs. Critical illness coverage can help by providing employees financial assistance in the event of a serious illness, such as heart attack or stroke. The insurance may also include coverage for cancer and family members. The lump sum benefit from The Stage is Set for Critical Illness critical illness insurance can also supplement a Insurance to Expand Fast disability plan, helping to keep employees “whole” during a time of financial crisis. Industry experts say the fear of a “worst-case scenario” has been a primary roadblock to employee acceptance of CDHPs. Critical illness insurance is one voluntary product that is growing in popularity, thanks in part to new medical advances. These technologies help more people than ever survive serious conditions such as cancer, heart attacks or stroke. For example, federal data reveals that about one in every 20 adults in the United States has survived cancer, including nearly one-fifth of all people over 65. But the cost of this advanced medical treatment is very high, even for those with medical insurance.
Opportunity Abounds for Proactive Brokers
Although some elements of PPACA may be years away, the arrival of health care reform is forcing a long-needed conversation about health care in this country while at the same time increasing the level of awareness and need for voluntary benefits. The voluntary benefits industry as a whole has seen large increases in sales—even during the recession—as individuals look to increase their levels of protection and security.
Even healthy people can be financially strapped There will be plenty of opportunities for brokers to by a serious injury. The cost for treatment and the help employers proactively prepare for the changes potential for lost wages can create a severe financial coming from health care reform. Brokers will be in strain. the best position to help employers take a step back and re-evaluate not only their medical coverage, but Recent economic woes have intensified this issue. also their total benefits offerings, in light of PPACA. With 78 percent of American workers always or It will be more important than ever for employers to usually living paycheck to paycheck, few have any work consultatively with brokers to find solutions safety net of savings to rely on. In a qualified highthat meet their unique needs in this new era of deductible health plan (HDHP)/HSA plan, a family workplace insurance. Developing a voluntary living in these circumstances could be extremely benefits program that includes relevant products hard pressed to reach their annual out-of-pocket to address the gaps in health coverage is a proven maximum. way to build opportunities with both existing and prospective clients. And if a health crisis strikes within the early
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Tips for Navigating Health Care Reform
and education programs to support any product offering, which can boost enrollment participation. Educate yourself. You need to be a sponge for This has strong value for customers, as well. Research information. Take advantage of the non-partisan, shows that when employees understand the value of factual reports available free to the broker community. their benefits, they report higher levels of workplace Companies such as Unum offer free resources that satisfaction, which can lead to greater company loyalty simplify the mandates of health reform (http://unum. and increased productivity. com/HealthCareReform). By understanding fully how health reform will impact your customers and their employees, you can be the expert and consultative resource they need most. Lydia Jilek has been with Develop a voluntary benefits strategy and Unum since 2006 as the business plan. Focus on actively developing a director of product and voluntary benefits program. Treat voluntary benefits market development. She as a genuine revenue stream instead of a nice-to-offer is involved with developing and launching new products service that brings in incremental income. Use it to and platforms offering expanded capabilities. expand existing clients’ benefits packages and open Jilek also is the health insurance and healthcare channels to new ones. reform expert for the company. Evaluate current health plan designs based on She graduated with her bachelor’s degree in health care reform requirements. Although existing English from Bates College and received her plans may be temporarily grandfathered, future plan MBA and master’s degree in Human Resources designs and contract negotiations may become more and Industrial Relations from the University of complex as the new health insurance market evolves. Minnesota. Before coming to Unum, Jilek worked for Medica Health Plans in Minnesota.
Bio
Customize to align with other coverage. One-sizefits-all benefits packages will not work in the new workplace. Use the best combination of traditional and voluntary benefits to help employers offset their employees’ financial risk from health care reform. The right benefits mix can vary according to industry, region and specific workforce demographics. Work with a provider offering strong benefits communication and education. Health care reform will certainly bring a myriad of complexities and questions to the workplace—for both employers and, especially, employees who are increasingly being asked to make more of their own benefits decisions. Partner with insurers that offer strong benefits communications
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1.Frank, Jackie, “Employer Health Costs to Rise in 2011,” Reuters, September 27, 2010. 2. Congressional Budget Office, Letter to Congress, Estimate of Direct Spending and Revenue of Health Care Reform, March 28, 2010. 3.Miller, Stephen, “Double-Digit Health Care Cost Increases Expected to Continue,” Society for Hu man Resource Management, February 3, 2010. 4.Ibid. 5.Towers Watson, “Rethinking Employer Strategies in a Post-Health Care Reform World,” December 1, 2010. 6. Frankel, Steve, “Boost Employees’ CDHP Comfort Zone with Voluntary Benefits,” Voluntary BenefitsMagazine.com, March 2010 7. U.S. Centers for Disease Control and Prevention, “Cancer Survivors,” March 11, 2011. 8. CareerBuilder.com, “More Than Half of Workers Will Use Their Tax Return to Pay Off Bills, Finds New Career Builder Survey: Nearly Eight-in- Ten Workers Report They Live Paycheck to Paycheck,” April 7, 2010. 9. Unum, “Beyond the Usual Benefits; The power of employee education to influence workforce satisfaction,” June 2010.
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Join the Voluntary Benefits Association www.VBAssociation.com
bacK Cover
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Give Me
Drugs! By Mark Roberts
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T
he pharmaceutical industry is big bucks…research, manufacturing, registration with the Feds, marketing, and sales. Billions and billions of dollars every year are spent not only on new medications, but also existing medications, whether they are generic or brand name. Is America the most medicated nation on Earth? Could be, according data released by the Department of Health and Human Services (HHS). At least half of all Americans take at least one prescription drug, with one in six taking three or more medications. Prescription drug use is rising among people of all ages, and use increases with age. Five out of six persons 65 and older are taking at least one medication, and almost half the elderly take three or more. Man, that’s a lot of meds!
Among the report’s findings: •
Use varied by sex, race and ethnicity. Three times as many white adults as black or Mexican adults took antidepressants, and women take more drugs than men;
•
Boys were prescribed drugs to treat attention deficit hyperactivity disorder (ADHD) twice as often as girls, but antidepressants were prescribed to boys and girls at the same rates;
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Private health insurance covered almost half of prescription drug costs, and 30% of people pay out of pocket.
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Those who were without a regular place for health care, health insurance, or prescription drug benefit had less prescription drug use compared with those who had these benefits.
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The most commonly used types of drugs included: asthma medicines for children, central nervous system stimulants for adolescents, antidepressants for middle-aged adults, and cholesterol lowering drugs for older Americans.
According to the CDC, these patterns reflect the main chronic diseases common at these ages, but may also likely reflect more aggressive treatments for chronic medical conditions such as high cholesterol and high blood pressure as recommended in the updated clinical guidelines. Lack of access to medicines
may impact health and quality of life, as The increase in the price index from the first prescriptiondrugs are essential to treat acute quarter of 2009 through the first quarter of and chronic diseases. 2010--prior to passage of health reform in March 2010--was 5.9 percent, less than the increase for Finally, with older Americans using multiple the 2 years prior but higher than in 2006. The medications, this likely reflects the need to treat study also found that the U&C price index for the the many diseases that commonly occur in this second basket of 55 brand-name drugs increased age group; however, excessive prescribing or at an average annual rate of 8.3 percent during polypharmacy is also an acknowledged safety the time period. In contrast, the U&C price index risk for older Americans, and a continuing for the third basket of 45 generic drugs decreased challenge that may contribute to adverse drug at an average annual rate of 2.6 percent. events, medication compliance issues, and increased health care costs. What do all these numbers mean? Drugs cost money, and in certain cases people are forced to Prescription drug use in the U.S. has been rising choose between medications, and food and rent. steadily in the past decade and the trend shows no Typically, those that are not insured experience signs of slowing, the CDC says. Plus, according the greatest hardship as the price paid at the to WebMD, the CDC also says that: pharmacy is out of pocket and not covered by an insurance plan. That’s one reason that the Wal• People with a regular place for health Mart $4 generics are so popular. Seniors who care were 2.7 times as likely to have used are in the Medicare Part D “doughnut hole”, and prescription drugs in the past month compared to those under 65 who are low income families and those without the benefit. individuals are forced to find alternative ways to pay for their prescription medications. • People with health insurance were about twice as likely to have used at least one According to the Kaiser Foundation, prescription prescription medication in the past month as drugs are vital to preventing and treating illness those without health insurance. and in helping to avoid more costly medical problems. Three main factors drive changes • People with prescription drug benefits in prescription drug spending: changes in the in their health insurance plans were 22% more number of prescriptions dispensed (utilization), likely to use prescription medications than those price changes, and changes in the types of who did not have that benefit. drugs used. The cost of drug-related morbidity, including poor adherence (not taking medication All these statistics boggle the mind, especially when as prescribed by doctors) and suboptimal the cost of prescription medications continues prescribing, drug administration, and diagnosis, is to increase. According to HealthExecMobile. estimated to be as much as $289 billion annually, com, a market basket of 100 commonly used about 13% of total health care expenditures. prescription drugs increased at an average annual The barriers to medication adherence are many: rate of 6.6% from 2006 through the first quarter cost, side effects, the difficulty of managing of 2010, compared with a 3.8% average annual multiple prescriptions, patients’ understanding increase in the consumer price index for medical of their disease, forgetfulness, cultural and belief goods and services (medical CPI). systems, imperfect drug regimens, patients’ ability to navigate the health care system,
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cognitive impairments, and are reduced sense of to a survey by America’s Health Insurance urgency due to asymptomatic conditions. Plans, the vast majority of policies purchased by individuals (rather than employer or other group Prescription drug spending is affected when coverage) had drug benefits. new drugs enter the market and when existing medications lose patent protection. New Department of Health and Human Services data drugs can increase overall drug spending if show that as of February, 2010, approximately they are used in place of older, less expensive 41.8 million (90%) of the 46.5 eligible Medicare medications; if they supplement rather than beneficiaries had drug coverage. The total replace existing drugs treatments; or if they treat number of beneficiaries in a Medicare Part D a condition not previously treated with drug plans was 27.7 million (60%), including 17.7 therapy. New drugs can reduce drug spending if million beneficiaries (38%) in stand-alone they come into the market at a lower price than prescription drug plans and 9.9 million (21%) in existing drug therapies; this can occur when a Medicare Advantage drug plans. Another 14.2 new drug enters a therapeutic category with one million beneficiaries (31%) had coverage from or two dominant brand competitors. New drug either employer or union retiree plans including use is affected by the number of new drugs (new FEHB and TRICARE (8.3 million, or 18%) and molecular entities) approved by the US Food and drug coverage from the VA and other sources (5.9 Drug Administration. million, or 13%). About 4.7 million Medicare beneficiaries (10%) had no drug coverage. Employers are the principal source of health insurance in the United States, providing coverage Medicaid is the joint federal-state program that for 176 million (58%) of Americans in 2008, pays for medical assistance to 60 million lowaccording to Kaiser. Sixty percent of employers income individuals and is the major source of offered health insurance to their employees in outpatient pharmacy services to the nonelderly 2009, and 65% of employees in those firms are low-income population. Although prescription covered by their employer’s health plan. Other drugs is an optional service, all state Medicaid employees may have obtained coverage through programs cover prescription drugs for most a spouse. Nearly all (98%) of covered workers beneficiary groups, although there are important in employer-sponsored plans had a prescription differences in state policies with regard to drug benefit in 2009. For individuals, according copayments, preferred drugs, and the number of
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prescriptions that can be filled. Since January 1, 2006, states have been required to make payments to Medicare (known as the “clawback”) to help finance Medicare drug coverage for those who are dually eligible for both Medicare and Medicaid. According to the Kaiser Foundation, the new PPACA provides for a significant expansion of coverage to the uninsured through a Medicaid expansion, an individual requirement to obtain health insurance, and subsidies to help low and middle income individuals buy coverage through newly established Health Benefit Exchanges. PPACA provides that prescription drugs are one of the “essential health benefits” that must be included in health plans in the Exchanges and in the benchmark benefit package or benchmarkequivalent for newly eligible adults under Medicaid.
the beneficiary coinsurance rate from 100% in 2010 to 25% in 2020, a reduction between 2014 and 2019 in the threshold that qualifies enrollees for catastrophic coverage, and elimination of the tax deduction for employers who receive Medicare Part D retiree drug subsidy payments, starting in 2013.
The HHS projects US prescription drug spending to increase to $457.8 billion in 2019, almost doubling over the next several years. In the coming years, implementation of various provisions of PPACA will affect prescription drug coverage, utilization, prices, and regulation. Coverage and utilization of prescription drugs will be expanded by PPACA’s health insurance mandate and premium and cost-sharing subsidies; the designation of prescription drugs as an essential health benefit to be covered by private health plans through the new health benefit Exchanges and by Medicaid for newly Also, it provides for a $250 rebate to Medicare eligible adults; and Medicare’s prescription drug Part D beneficiaries with out-of-pocket spending rebate, cost-sharing, and catastrophic threshold in the Medicare Part D coverage gap in 2010, changes, according to the Kaiser Foundation. a 50% discount for brand name drugs for beneficiaries in the coverage gap that started Prices charged to government programs will this year, a phasing-in of coverage in the gap for be affected by changes to Medicaid rebate generic and brand name drugs which will reduce requirements and expansions to the Section
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340B program. Prescription drug regulation will be affected by the new process for licensure of bio-similar versions of brand name biological products and by drug labeling requirements. These and other PPACA changes will ultimately impact national spending for prescription drugs in ways yet to be seen.
medications, so the more medications available to sell, the more profit is generated for the manufacturer, the pharmacy, and the sponsor. And, since PBMs have tracked utilization for years with electronic adjudication of claims, you can find out how much has been saved and what drugs are being dispensed. Although HIPAA regulations will not allow personal customer Another option is to include a discount pharmacy information to be disclosed, at least information card for customers. There are many of these is available on the types and amounts of drugs available through various sponsors; including being dispensed. Plus, the customer saves pharmaceutical companies such as AstraZeneca, money. Everybody wins. pharmacy benefit managers (PBMs) like CVS Caremark, plan administrators like Careington So, when someone says “Give me drugs,” let’s International, and other sources. Customers can hope it’s for the right reason. Profitability, patient enroll through websites, over the phone, or at care and advocacy, and prescriptions—a great pharmacy counters based on the business model antidote for what ails you. for the card. Typically, in this arrangement, the customer gets a discount at the point of sale (and via mail order in some cases) and is able to save on both brand name and generic medications without worrying about over using or worrying Mark Roberts’ professional sales background about a maximum utilization of their pharmacy includes almost 30 years of sales and marketing card. Discounts can range from 5% up to 40% in the tax, insurance, and investment markets. depending on the store and the medication. Often, Currently his key focus is developing relationships PBMs will share available some small revenue with clients at Careington International (www. for eligible prescriptions with the sponsor to help careington.com). Mark also is a licensed life, offset the cost of marketing to consumers. health and accident insurance agent in all 50 states and DC. Additionally, Mark has been writing Discount pharmacy cards can be used by anyone a health care blog for the past 3 years, found at at almost any pharmacy nationwide, and the www.yourbesthealthcare.blogspot.com , which savings are immediate. The cards have broad is a topical weblog about various health care application for uninsured and underinsured issues. He has been noted recently as the Medical individuals, and the cards can be used as a standReporter for an online news service with over alone service or embedded as a value added 110,000 subscribers at www.thecypresstimes.com component in a health plan, limited medical , and he has been pleased to regularly contribute benefit plan, or discount medical plan with other articles to magazines for both medical and dental services. However, you cannot use a discount topics both in the US and the UK. You can contact pharmacy card in conjunction with a co-pay; no Mark at markr@careington.com or 800.441.0380. double dipping just to save extra money.
Bio
Pharmacies make money when they dispense
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Connecting Employee Health to Voluntary Discount Dental Plans By Nicole Ropiza
S
tudies and word-of-mouth in recent years Academy of Periodontology.” have brought much needed attention to the connection between dental care and For those who religiously keep up with their a person’s overall health. dental hygiene ; brushing twice daily, flossing daily and scheduling semi-annual dental According to the Academy of General Dentistry, checkups, the preventive care and daily dental more than 90 percent of all systematic diseases hygiene habits can help them avoid some major have oral health symptoms. Poor or lacking out-of-pocket dental expenses tomorrow. dental health may have negative effects on a range of diseases and conditions, including Proper dental care can also help keep employees diabetes, osteoporosis, heart attack, stroke, at work. Considering that lost work due to pregnancy and pre-term birth weights. dental problems equates to 164 million hours of employee productivity each year, according to In addition, a report in Dental Health Magazine the U.S. Department of Labor’s Bureau of Labor from February 2011 goes on to read, “People Statistics. with gum disease are almost twice as likely to suffer from coronary artery disease as those But sometimes, dental health is not as simple as without gum disease, according to the American just brushing, flossing, chewing sugarless gum
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and so on. You might need a cavity filling or root canal and our children might need braces. And, sometimes our mouth is a major investment not covered by employer-sponsored insurance plans. Meanwhile, the cost of dental care procedures is rising faster than you can say “commission.” According to a 2010 report from Pew Center on the States, the total annual spending for dental care is expected to increase 58 percent, from $101.9 billion to $161.4 billion, through 2018. Coincidentally, a 2009 poll by Harris Interactive and Health Day found that 50 percent of uninsured Americans skipped necessary dental care visits due to financial burdens. The fast increase in dental costs and lack of dental coverage has prompted some workers to get creative with their dental care budgets. A few money saving dental care solutions that have hit the newscycle in recent years include: visiting local university dental schools for dental care at a fraction of the cost; heading overseas for a dental vacation and discount dental work in countries like Costa Rica and Tijuana; and negotiating with dentists to find a discount wherever possible.
workers have access to employer-offered dental plans, compared to the 74 percent of workers with access to similar medical coverage. As many companies do not offer dental coverage and are considering insurance cuts in response to a questionable economy and newfound financial strategies, dental benefits are beginning to play a major role in employers attracting and retaining workers. Dental is the third most requested benefit after major medical insurance and retirement benefits, according to a report by LIMRA. And nearly 80 percent of workers participate in benefit programs if dental care is part of the program. Giving employees an option and resources for dental plans is an investment for companies. Employees with dental benefits are more likely to take part in preventive dental care, contributing to their overall health and wellbeing. According to a recent survey by The Long Group, 83 percent of employees with an employer contributory dental plan visited the dentist twice or more a year. Brush Up On Voluntary Discount Dental Plans
Employees More Conscious of Employer Dental Benefits Some companies find employer-paid dental programs too expensive and not necessary to Other media reports in recent years, including their employees overall health and well-being. the New York Times, “How to manage dental costs, with or without insurance” and BankRate. And while employers discuss how best to com, “Dental insurance or discount plan,” have respond to cost challenges and the anticipated brought attention to the struggle against high effects of health care reform, voluntary dental dental expenses and the growing gap between plans are becoming an alternative for companies employers and dental benefits. to share with their employees and save on health care costs. These days, the reality is that many employer- But, let’s say for instance “Company A” offers offered health care plans do not include dental a mom of three a full-time job with a healthy coverage or offer it as a supplementary benefit. base salary, halfway decent medical insurance, According to the U.S. Department of Labor’s a 401k program to participate in and no dental Bureau of Labor Statistics, only 48 percent of insurance. The mom considers the offer and
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reviews another opportunity with “Company B,” which will provide everything that “Company A” will, as well as voluntary discount dental plans. The mom weighs her options while considering one of her sons is going to need braces soon and she’s anticipating a cavity filling or two this year. She decides to go with “Company B,” knowing that she will take advantage of the voluntary discount dental plans for her family and save money in the long-run versus paying out more of her salary. She also knows that she’ll be more productive at work without having to worry about how she is going to afford her son’s orthodontist bill, which can cost up to $7,000 without any benefits. With voluntary discount dental plans, employees and families typically pay an annual membership fee that gives them access to discount dental dentists have agreed to offer at dental care services at discounted rates. Major providers, such as Aetna and Cigna, offer plans where savings can range from 10 to 60 percent on routine exams, x-rays and costly dental procedures.
drugs. As a solution for employees and employers, voluntary discount dental plans can help companies cut costs while providing workers with an option to manage necessary dental expenses. It also gives brokers an alternative to provide clients who want to cut dental benefits as a whole. And the next time the sensitive topic of no help with employee dental care comes up for your client, they could say, “We do not provide employer-paid dental plans, however, you can join a voluntary discount dental plan with access to significant savings on dental care procedures for you and your family. And you have the flexibility of choosing an affordable plan without annual limits.”
Bio Nicole Ropiza is the broker/affiliate and group manager at DentalPlans.com. The leading online source for discount dental plans, DentalPlans. com connects individual, family and group members to significant savings on dental care procedures such as cleanings, braces, root canals and crowns. The company offers more than 30 of the leading regional and national discount dental plans with more than 100,000 participating dentist listings in combined networks across the country. For more information and to find a discount dental plan that fits your family’s needs, visit www.DentalPlans.com.
Voluntary discount dental plans are not dental insurance. Employees and families typically pay an annual membership fee starting at $79.95 per year for individual employee and $129.95 per year for families. Plans also activate within three business days, without paperwork hassles or health restrictions. Plans do not have annual limits and can be used as often as needed, which offers employees a choice and affordable alternative to dental insurance while they choose the plan that best fits their needs. Some plans can also be used for procedures such as cosmetic dentistry, and may include discounts on vision and prescription
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For more information about a turnkey sales solution for insurance brokers to fill the growing need for affordable dental care, visit www. DentalPlans.com or call 1-888-632-5353 choose option 5 for brokers and 6 for groups or email DPBrokers@DentalPlans.com.
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Health Reform and the CLASS Act: Threat or Opportunity? By Todd Grove March 23, 2011 was the one year anniversary following buckets: of President Obama signing into law the health • Reduction in income. Most health care reform bill, which includes the Community brokers believe that their income will be Living Assistance Services and Supports adversely affected. (CLASS) provisions. Many of the details of the • Client Relationships may be threatened. CLASS provisions are not yet defined and will Loyalty is becoming a very rare trait be developed through regulation, but as with all amongst even our most well entrenched other aspects of this industry altering legislation, clients and that could be shaken even further nothing will ever be the same – both for the by an upheaval in policy design/pricing. consumers of health care and the brokers who service them. • Value proposition could be diminished. As a consolidation of plans occurs, Most brokers I speak with are very concerned understanding the differences between about most of the health care reform in its one broker and another may become more present form. Some of the major concerns I hear difficult. fall into the
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or $175,200 annually. All of these are the perceived threats of health care reform which will roll out over the course of the next As a result of these alarming statistics, Senator two years. Ted Kennedy made it his mission to include some benefit, albeit small and controversial, in the final Another school of thought lies around the health reform legislation. opportunities the reform act presents, and we will focus here on the CLASS Act as a particularly The CLASS provisions create a voluntary effective way for health brokers to combat all three government program under which participants of the concerns mentioned above. will pay a monthly premium, will be covered on a guaranteed-issue basis, and will be eligible for A Bit of Background modest benefits for their long-term care needs after five years of paying premiums. While it has Why does health care reform include any provisions been characterized as a long-term care program, for long-term care? After all, no major medical plan; it is primarily designed as a program to provide not even Medicare, presently cover LTC costs at all. Let’s look at why long-term care cost are so alarming and need to be addressed now with all employers and their staff: • According to the Technical Report 1-01, Scripps Gerontology Center, February 2001, of every 100 people over 65 years of age, 43% will need long term care • 40% of those receiving long term care are assistance to the working disabled. It’s important to working adults between the ages of 18 and 64. note that benefits will be paid by premiums collected (GAO/HEHS-95-109 long term Care Issues, p. from voluntary participants and not by the taxpayers. 7).
What are the details of the coverage that • Reported by the U.S Department of Health would be provided?
and Human Services, when you reach age 65, you have a 40% lifetime chance of entering a Most of the terms of the new CLASS program nursing home, and a 10% risk that you will stay that passed as part of the Patient Protection and there at least five years Affordable Care Act will be developed by the Department of Health and Human Services over “The average length of stay in a nursing home the next few years. Certain terms are set in statute, (current resident) is 892 days” (The National Nursing including the following: Home Survey).
Enrollees will:
In some parts of the country it can cost over $100,000 a year. If we assume that nursing home costs will continue to reflect recent trends, by the year 2021, the average rate will have risen to about $480 a day, 36
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• Pay a monthly premium, through payroll deduction, that has yet to be determined, but most recentestimates indicate that the average |
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premium will be $180-$240/month; that cost of the legislation.” premium could be increased yearly to ensure that the CLASS fund is actuarially sound. “Removing the unrealistic annual Medicare savings ($463 billion) and the stolen annual • Be covered on a guaranteed-issue basis; revenues from Social Security and long-term • Be eligible for benefits for their long- care insurance ($123 billion), and adding in term care needs after paying premiums the annual spending that so far is not accounted for the first 60 months of coverage (i.e., a for ($114 billion) quickly generates additional 5-year waiting period) and have worked at deficits of $562 billion in the first 10 years. And least three of those five years; the nation would be on the hook for two more • Receive a lifetime cash benefit after entitlement programs rapidly expanding as far meeting benefit eligibility criteria, based on as the eye can see.” the degree of impairment, which is expected to average about $75/day or more than $27,000 per year and is payable as long as the claimant remains disabled.
Why should Benefit Brokers Care?
Enrollees will be offered coverage through their employers and will be automatically covered unless they opt out. They can opt back in at a later time. Self-employed people or those whose employers do not offer the benefit will also be able to join the CLASS program through a government payment mechanism.
Bad math This part of health care reform is one of the most controversial – in large part because it creates so many unanswered questions. What are the premiums, how are they set and where do they go once collected are but a few of the more pressing queries. . Douglas Holtz-Eakin, who was the director of the Congressional Budget Office from 2003 to 2005, wrote concerning this issue; “Consider, the fate of the $70 billion in premiums expected to be raised in the first 10 years for the legislation’s new long-term health care insurance program. This money is counted as deficit reduction, but the benefits it is intended to finance are assumed not to materialize in the first 10 years, so they appear nowhere in the
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To begin, they have to starting caring now. CLASS is not “voluntary.” Every worker is involuntarily and automatically opted into the program. Each employee or self-employed person must willfully opt out to avoid the program’s large “premiums” that will otherwise accrue by default. Secondly CLASS is not “insurance” by its true definition. Insurance is for healthy people who want to prepare responsibly for the relatively small possibility they may become disabled or chronically ill. CLASS is in essence a “prepayment” of care subsidized by the insurable
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for the benefit of the uninsurable. CLASS will suffer significant adverse selection. People most likely to use the benefits will be far more likely to participate than people who are privately insurable otherwise. As a result of all these problems and concerns, why would an employer offer CLASS when a voluntary offering of true long-term care insurance would make so much more sense for the vast majority of his/her employees? The answer: not many. Unfortunately, most benefit brokers are woefully uneducated on both CLASS and the multi-life offerings in the market. Therefore, they will not be able to position private sector options well when the employers start calling. But with education comes opportunity. Employers need guidance. Brokers need clients. LTC insurance specialists bridge the gap and can accomplish the goals each party has throughout this turbulent period.
So, how can the important subject of long-term care planning be addressed professionally and The best defense… ethically with the millions of at-risk, actively The average broker in America today still working baby boomers? The only sensible sells—and will continue to sell—one or two and effective approach is through what I call LTC policies a year. Why? That can be explained strategic partnering. in one word: focus. As the importance of LTC insurance has grown, so has the complexity Most agents who have been successful at of the policies. In addition, most brokers who providing LTC insurance have focused solely provide financial products are having enough of on this complex product and the emotionally a challenge keeping up with the changes in state charged sales process that accompanies it. They health insurance regulations, rate increases, are never a threat or a competitor to benefit health reform related to major medical plans brokers because LTCi is all they provide. updates and so on to concentrate on the complex and emotional sale of LTC insurance. The client Years ago, direct mail and seminars were an doesn’t want to talk about it, the advisor doesn’t effective way to generate significant LTC know enough about the coverage and the insurance leads. 15 years ago, the average age underwriting guidelines change as frequently as of a LTCi purchaser was 68. Today: 58. Today, virtually no one buys LTCi through the mail. the policies they are associated with. Now, carriers – with the help of government
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incentives(non-ERISA classification, tax breaks, care insurance specialist. exec carve out options) – have repositioned LTCi and sales at the worksite are sharply on The best method for finding a specialist to work the rise. with is obviously word of mouth/professional networking. However, locating them can As a result, how we reach and market to the also start with a Google search in your area. future owners of policies must change to mirror One organization that is national with trained buying patterns of our prospects. worksite specialist is LTCFP. Another, ACSIA, can also be identified on the web. The CLASS Act is exactly what has been needed to crystallize attention by employers, When searching, designations can be helpful LTCi specialists and benefit brokers on this as well. The two most common are CLTC and voluntary benefit. LTCP. Of the two, CLTC is commonly accepted as the industry standard. The LTC insurance specialist needs access to boomers where they work. The advisors need Attend NAIFA and NAHU meetings. Many of to fulfill fiduciary responsibility and inform the leading LTC specialists are involved on a their corporate clients of the severe limitations local level in these organizations. of CLASS. These are two great disciplines that perfectly support one another. The key is Questions to ask when interviewing bringing them together in a way that benefits all specialists parties involved. • How long have you been in the field? The importance of LTC insurance will continue Look for at least 5 years. If they were to grow, as will the options on how to design previously affiliated with a captive or and underwrite coverage. Therefore, it is in the career shop, that is a benefit because they best interests of all parties—benefit brokers, received significant training and support. LTC insurance specialists and their clients— to develop trusting and mutually beneficial • What businesses/organizations have you partnerships. This model will in large part worked with? Experience at the worksite transform the marketing of LTC insurance using simplified underwriting and a 60 day throughout the years ahead. enrollment period are important.
The How-to’s of Partnering with LTCi Specialists
• What carriers do you work with? Pick an agent who has appointments with many large, reputable carriers like Prudential, Mutual of Omaha and Transamerica. Captive agents are not effective in the worksite due to the fact that “one size does NOT fit all” in this marketplace. Ask if the specialist is compensated identically carrier to carrier. This obviously avoids conflict of interest.
Broker partnering is a challenging process – much more art than science. It must start with the realization by the broker that they need to work collaboratively to support their clients in the brave new world of health care reform. Once that fact has been accepted, the first step is to locate a professional and ethical long-term
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• What other benefit brokers do you partner with? You might as well find out about what your competition is up to. • Maximizing the relationship: Keeping it Productive – and Profitable Here are a few tips to help set appropriate expectations and develop long-term, mutually beneficial relationships that proactively address the issue of LTC planning with your client base: • Commit to addressing LTC – with all clients. The most common reason why benefit broker/ltc specialist partnerships fail is lack of focus. Both parties get excited and a few introductions are made, then things fade to black. This is avoided by creating a marketing plan that both the benefit broker and the specialist document and sign off on. The most important element is consistency. Speaking with clients every week about LTC and a voluntary offering or carve out is essential. This proactive approach repositions the broker in the mind of the employer and he/she is seen as a valuable resource on health care reform – and the welfare of the employees. • Don’t get greedy. Any specialist worth his/her salt will provide all of the following on each worksite enrollment: vet carriers, implementation calls with carrier, worksite case preparation, proposal development and presentation, enrollment presentation, application processing, bill preparation and reconciliation, policy delivery and ongoing customer service on active cases. As a result, the broker will earn a small percentage of the commission, but generate significantly more income off of LTCi than at any time in the past. The adage “A small
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percentage of a lot beats 100% of nothing” truly applies in this scenario. Re-Brand your image in community. The brokers who truly leverage their relationship with LTCi specialists take a proactive approach to addressing this benefit – and the concerns most employees have surrounding it. That is completely different from the majority of benefit brokers and as a result, provides real opportunity to differentiate their services in a highly competitive market. Incorporate CLASS into many discussions, include some aspect of it in advertising/marketing pieces. LTC Education at the worksite will cut stress, improve productivity – and solidify your relationship with clients who are confused about this issue. CLASS Act forces an acceptance of long-term care planning. Those brokers who view this as an opportunity by partnering with LTCi specialists will “ride the wave” of government mandated health reform and be viewed as a resource rather than a “bearer of bad news”.
Bio Todd Grove, LTCP, CLTC is a founding partner of LTC Financial Partners and has specialized in this field for 20 years. Some of the publications he has contributed to are the New York Times, Senior Market advisor, National Underwriter Magazine, and the Portland Press Herald. He is a member of the Estate Planning Council of Maine and Past President of the Maine Employee Benefits Council. He can be reached in Portland at 207-772-5793 or todd. grove@ltcfp.net
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The Costs of Doing Business Reducing Administrative Burdens in a State Health Exchange
By Bob Barry
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he health insurance industry is loaded with back-office costs from marketing to plan and rate maintenance to enrollment paperwork. The introduction of exchanges will soon add administrative burdens of its own to both state governments and health insurance carriers. Exchanges will not only need to be integrated into the operations of health plans but they will also need to be managed. Determining the best way to integrate the capabilities and processes of insurance providers within the operations of the exchanges will determine the most efficient way to fulfil customers’ needs.
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Carriers want to automate the transfer of information to and from the exchange. They do not want to compile and send a spreadsheet to the exchange for plan and rate information. Carriers also do not want to manage their plans and rates on their own systems and then a second time on the state health insurance exchange. Carriers already have systems that maintain products and rates, store membership information and handle financial services. The more that state health insurance exchanges can interface directly with carrier systems, the less administrative functions and duplication of effort will need to occur. States would also benefit from streamlining and / or the state administrator to maintain products, the communication process with carriers. rates, and rating algorithms easily and directly on the web-based health insurance exchange site. One of the key purposes behind the exchange is These tools provide two key benefits to states. to centralize and lessen the administrative costs First, the product and administration tool will allow associated with distributing individual and small carriers that may not have the ability to integrate group health insurance. Plan and rate maintenance, directly with the exchange to maintain their enrollment, and financial services are three areas products and rates on the web portal. Having such where the state health insurance exchange runs a tool would simplify the process of maintaining the risks of adding to carriers’ administrative products and rates for both the carrier and the state. burden. To streamline this process and reduce administrative costs for both the state and the Secondly, states need a way to review carrier carrier, states should make every effort to allow for products and rates prior to their release on the the automated transfer of information to and from health insurance exchange. In addition, states the exchange. would be able to perform modeling, allowing them to better understand the impact of new rates. States should focus on providing a health insurance exchange solution that is sustainable and affordable Application Administration Tools over time. In order to achieve sustainability, administration costs need to be minimized by Another function that can further assist the states eliminating duplication of efforts. One critical in building a sustainable and affordable health way to minimize administration costs is by using insurance exchange is to utilize an application technology to automate and streamline time- administration tool. The tool allows a state intensive processes. business user to modify the application rather than a technical developer. Business users could make Plan and Rate Administration Tools changes to the style, branding, and images used on the application. In addition, the business user can Plan and rate administration tools allow carriers 42
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need to consider during the planning process, including the coordination of premium subsidies in the individual benefit exchange and the multicarrier list bill in the small group (SHOP) health insurance exchange. Most likely, much of the financial services will fall on the exchange with the financial information being passed to the carrier once subsidies, individual, and group payment has been collected.
add/remove fields, add business rules, and adjust error messages. This functionality allows the health insurance exchange administrator to quickly create and modify any application that is a part of the exchange. It is likely that state health insurance exchanges will include separate enrollment applications for individuals, employers, and employees. The exchange will also likely require a navigator to complete an application to become qualified to assist the consumer in the plan selection process. By enabling a business user to make application changes directly in the web-based exchange versus involving a developer, states will incur less administrative costs related to maintaining the multiple applications.
eBilling and Premium Collection Offering consumers and employers the convenience of online bill presentment and payment will improve customer satisfaction, while minimizing paperwork and processing time. eBilling and premium collection functionality exists today and can be leveraged in state health insurance exchanges. However, there are complexities unique to state exchanges that states
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Technology can reduce administrative efforts and therefore reduce costs. By integrating technology into every aspect of the exchange, insurance carriers can manage rates and plans in one solution and automatically push the updates to all channels. Self-service tools and straight-through connectivity are key sales tools that aid in reducing administrative costs while engaging potential and current enrollees. Giving more control to customers not only improves their satisfaction, but when paired with full integration to back-end systems, it also reduces a health plans’ administrative burden. Virtually instantaneous case installation, fewer errors, and reduced resource requirements are just some of the benefits that an integrated sales technology solution offers.
Bio Bob Barry’s 28 years of experience in the health and life insurance industry give him great insight into the challenges of the industry. At Connecture, Bob is responsible for identifying market needs that InsureAdvantage solutions can serve. His ongoing client interaction, industry experience and expertise ensures that current and future health plan business needs are met in the InsureAdvantage suite.
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Meaningful Thoughts Beyond “Meaningful Use” By Kevin Shrake
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ealthcare reform issues have frequently dominated the headlines over the past year. There are many new changes yet to roll out depending on the final regulations of the bill still being debated by our legislators. One major change has been in full swing and has captured the attention of healthcare organizations across the country. The need for an electronic health record (EHR) is obvious and ties to issues of privacy, efficiency, medical errors
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and duplication of tests to name a few. The healthcare industry has clearly lagged behind when you acknowledge the fact that we have had ATM cards for several decades that allow us to perform banking transactions all over the world. Although the federal government is not always the leading edge innovator of change, in the case of the electronic health record, they have actually led the pack as evidenced by the system that has existed in their Veteran’s Administration (VA) network for many years. Recognizing the value of such a system, the government developed an incentive program as
part of the American Recovery and Reinvestment Act (ARRA) of 2009. Under this act, provisions were developed for a program known as the Health Information Technology for Economic and Clinical Health (HITECH) Act. The final rules of this program were released in July of 2010 and offers financial incentives under Medicare and Medicaid to hospitals and eligible professionals who demonstrate “meaningful use” certified EHR technology. Although clearly an important step, health care leaders must look beyond meaningful use to implement a solution that will fit seamlessly into the process of patient care and provide value rather than turmoil.
objectives. There are 14 core objectives that are required and a remaining 5 that may be chosen from the list of 10 menu set objectives. Facilities that are on the leading edge of this change process may become eligible for the financial incentives beginning in mid 2011.
The Real Objectives Although the government is providing financial objectives to incentivize providers to develop an EHR solution, the real objectives of the program are as follows:
“Meaningful Use”
• To improve the quality, safety and efficiency of care while reducing disparities;
There has been an enormous amount of attention placed on these two words and information is available from a variety of sources. A prudent approach is to go right to the source and gain information regarding rules and regulations from the Centers for Medicare and Medicaid Services (CMS). www.cms.gov Demonstrating meaningful use is the key to receiving the incentive payments but it is not the driver of the key objectives of the program which relate to achieving health and efficiency goals. The recovery act specifies three main components of meaningful use: • The use of a certified EHR in a meaningful manner (e.g.: e-Prescribing); • The use of certified EHR technology for electronic exchange of health information to improve quality of care; and
• To engage patients and families in their care; • To promote public and population health; • To improve care coordination; and • To promote the privacy and security of EHR’s In practical terms those goals relate to such things as reducing medication errors due to the inability to read a physician’s handwriting, or eliminating duplication of tests because the results of previous tests do not easily follow the patient as they seek care in multiple locations. Health care leaders must meet the criteria to qualify for the incentive payments but then clearly focus on how an EHR can improve quality and lower costs in their organizations.
The Change Process
• The use of certified EHR technology to submit clinical quality and other measures.
Health care executives must realize that implementing an EHR requires understanding of the change process as well as a commitment to a “total solution” and not Once established, providers must demonstrate just software implementation. The acceptance of this meaningful use of their installed system for 3 months major change by the end users; physicians, nurses and prior to becoming eligible for any financial incentives. other clinical professionals is critical to the process. For hospitals there are a total of 24 meaningful use Physicians want to know, how easy will it be for me
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to locate information, make rounds on my patients, order medications and establish routine order sets, etc. Nurses have their own issues related to availability of computer terminals, ease of documenting nurse’s notes and accessing test results. Intimate involvement of the key stake holders in the evaluation and implementation process is a major factor in success or frustration.
Choosing the Best Option There are a number of qualified companies with viable EHR solutions to pick from. When choosing a vendor it is important to consider these meaningful thoughts beyond meaningful use. • The software must be certified;
One Size Does not Fit All
• The vendor must have an efficient process of meeting meaningful use criteria;
Clearly there are differences in capabilities and resources in a 25 bed critical access hospital and a 700 bed medical center. The former often has very little on site information technology (IT) personnel and support unless they are part of a larger health system. Larger institutions often have a full complement of IT support and have different needs when it comes to EHR implementation. For this reason, when evaluating vendors, health care executives should look for a total solution which has a menu of options to choose from that can be customized to the specific needs of the client. This could range from a total outsourced solution for smaller hospitals to working in a support capacity utilizing existing resources in a larger facility.
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• System costs should be structured to minimize total costs while taking advantage of positive adjustments in Medicare Cost Reports (for critical access hospitals) or enhancing payments to larger facilities; • Total costs of the implementation should be calculated. Is this an all inclusive package deal for a defined period of time, or will there be ongoing maintenance and upgrade costs? Beware of a low acquisition cost followed by expensive upgrades; • Are financing options available that meet your needs? and;
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• How will your system be supported and maintained and how will it interface with existing systems?
Avoiding the “CEO Nightmare” As we enter the age of EHR we are moving into a scenario of dependence on technology that we have not experienced to this point. The typical issues that a CEO worries about have historically related to things such as patient safety, quality measures, financial performance, medical staff relations and employee satisfaction. The CEO did not have to be concerned about how orders would be processed or patient documentation achieved because it was accomplished via people and paper. This might be a good system based on “up time” but as described earlier it does not offer the safety, efficiencies and portability of data advantages that an EHR provides. The most critical issue that CEOs should ask is, “how will our EHR system be maintained and supported and by who?” Making sure that you have a clear, professional, cost effective answer to that question will avoid the CEO nightmare of frustrated physicians and staff complaining about not being able to care for their patients.
healthcare industry as it relates to implementation of EHR. It is important to meet meaningful use criteria and qualify for financial incentives offered by the federal government as soon as possible. It is equally important however to engage in a process that takes in account the change process with the users as well as the need for a total solution that that is cost effective and meets your ongoing system support needs. Healthcare leaders that recognize these key elements will provide the best environment for serving their patients while enhancing the satisfaction of their clinicians.
Bio Kevin Shrake is an experienced Health Care CEO . He is a Fellow in the American College of Healthcare Executives as well as an accomplished author and public speaker. He currently serves as the Executive Vice President and Chief Operating Officer of M*D Resources, Inc. based in Fresno, California.
We are entering a major era of change in the
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UNIONS CHEAT MEMBERS
OUT OF HEALTH AND
WEALTH By Lisa Holland
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L
et’s start by saying that we are pro-member, prohealth and pro-wealth! Now that we’ve gone on record stating that we are not bias towards Unions, let’s talk about the health of America. It’s not good. It’s getting worse and union members aren’t any healthier than the general population, yet they have some of the best health benefits in the nation! So, what’s wrong with this picture? Just look at the recent CDC stats on obesity…it’s appalling. America spends more on healthcare and is one of the sickest nations in the world. You can draw your own conclusion on that fact but it’s now obvious that the amount of money in terms of benefits that are available to an individual or union member makes no difference in their health status. It’s the member that makes the difference in their personal health. If we accept these facts as correct then union members are paying huge amounts of cash to doctors, hospitals and administrators. Why not pay union members to be healthy? Yes, that’s right. It’s the concept inherent in a Consumer Directed Health Plan with an HSA. But Unions have been loath to listen to the facts. We say it’s time for the Unions to stop cheating their members out of health and wealth. Here’s how: The facts speak for themselves that CDHP changes an individual’s healthcare behavior. McKinsey’s research and recent findings continue to show that 25% or more of members in a CDHP change their actual health behavior for the better. They stop smoking and lose weight. First year medical trend reduction is in the range of 14-17%. Health spend continues to decline as members maintain their better health status year after year. This demonstrates how improved health behaviors and lifestyle changes can impact healthcare affordability. Where does the saved money go? In a CDHP model it goes to the member’s HSA account. Cash, tax free… accumulating tax free for the use of members and their families for future medical care and retirement. Who can argue with a plan that makes members healthier and wealthier? The transfer of wealth to union members might possibly be the largest transfer in history and will eclipse any rate of pay increase that most Americans may see in the next 20 years.
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Union leaders continue to perceive CDHP as a “take away” rather then a benefit and continue to ignore the hard facts that members on a CDHP are not only getting healthier but wealthier.
dollar “shifted” from a member’s paycheck to their own HSA account they will save about 42 cents in taxes while management saves about 8 cents in taxes. For example, a contribution from management of $2,000 a year saves enough taxes Unions have special leverage with their ($840) to pay for 80% of all workers’ healthcare management and are in a position to seek this in any one year. Re-routing tax dollars for the wealth transfer to their members. This is not a benefit of union members seems to be a good wealth transfer from management but from the idea too. medical establishment as a reward for just being healthy. We think it’s a no-brainer for Unions to New point-of-service adjudication and payment go to management and seek a CDHP/HSA plan technology now makes the implemention of a that pay first dollar for preventive care, then ask CDHP with HSA a hassle free experience for management to fund the first two year deductibles members, since members no longer get reams essentially giving members a “ZERO” deductible of bills at home nor have to deal with a debit plan. Stay healthy and get wealthy! It’s a win/ card. Just walk in, get treated and walk out. win/win situation for members, union leaders It’s Simple. Imagine a system that enriches and management. the union member with tax savings, tax free dollars, a “zero” deductible plan, paid preventive Here are the facts: 80% of members in any health healthcare, additional money for retirement, no plan never spend on average more than $800 a more bills at home and that actually can make year on healthcare and that includes families. the member more healthy while at the same time Most members will have their deductible saving management money that makes the Union accumulated within a year or two. For every leaders look like heroes. The time has come for
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Unions to take a real close look into the world of CDHP.
About Simplicity Health Plans Cleveland, Ohio - Simplicity Health Plans is the best implementation of a CDHP/HSA. It aligns the interests of the Employer, Employee and the Provider to provide a turn-key, fully integrated Consumer Directed Health Plan. It also delivers a low cost, scalable solution to control claim costs. The Plan fuses unparalleled technology, point of service adjudication, real-time data, and first of its kind anti-fraud controls. Services include an ERISA compliant health plan, HSA administration and banking, medical claims administration, TPA functions, pharmacy, dental & vision, COBRA, stop loss reinsurance, realtime Utilization Review and Case Management, Health Coaching, Comparison Shopper, Health & Wellness programs, and a host of on-line tools for Providers, Employers and Members.
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Bio Lisa M. Holland, RN, MBA has been in the healthcare care industry for over 18 years and held senior level positions within major healthcare organization in the US. Lisa is an accomplished business development professional. Lisa’s professional objective is to promote appropriate utilization of healthcare services/solutions that empower healthcare consumerism. Gregory J. Hummer, M.D., has spent the last 18 years developing and perfecting Simplicity Health Plans to solve the vexing complexities, out-of-control costs, burdens and inefficiencies that are associated with healthcare coverage in America today. Dr. Hummer is chairman and CEO of Simplicity Health Plans.
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What is the Biggest Myth about Electronic Fund Transfers? By Bill Davis
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t is a common belief today, that if a claims administrator begins to send electronic payments (EFT) to healthcare providers it will lower their fulfillment costs. When, in fact, this is not the case. The problem is that, unless a claims administrator produces an 835 that providers will accept, the administrator must still print an EOB, so the provider can reconcile to their EFT payments. Since EFTs use trace numbers and printed provider EOBs generally using check numbers marked “void”, it creates difficulties for providers to reconcile the EFT deposit to the paper EOB. This in turn can cause an increase in either the number of customer service calls or the provider resubmitting the claims. Additionally, because the cost of an EFT is only pennies less than the cost of clearing a check, there is little savings to be gained by the administrator!
this rarely represents more than five to ten percent of EOBs produced for providers. This is due to the fact that only the larger provider organizations can accept both an EFT & 835 making them the administrator’s largest payees. This means that the administrator must still bear the additional expense of producing provider payments over 90% of the time. The truth is that EFTs help providers increase their cash flow, but save very few dollars for the claims administers. The most effective way for administers to truly save on fulfillment costs (e.g. print, postage, and banking fees) is to dramatically reduce the number of provider EOBs processed while migrating toward electronic delivery options that can reliably deliver reimbursements to a broad base of providers.
The first step in this process is to begin consolidating Moreover, if an administrator is moderately successful all payments electronically across all self-funded in obtaining 50% of its benefit dollars transmitted employer groups weekly for each individual provider via EFT with provider adoption in accepting 835s, in a “non-comingling and ERISA-compliant” 52
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manner. The savings in this consolidation process is dramatic, because the typical claims administrator approves different employer group’s payments on different days, and each of these groups generally pays the same providers with one check/per claim. On average, an administrator can achieve a consolidation rate of four or more claims on one provider EOB with one check, rather than generating four different checks being mailed out on four different days. By adopting this strategy with other treasury processes it will dramatically reduce the reconciliation costs and bank fees for the administrator, or its clients, as well the number of pages to print and postage if a provider is unwilling to accept electronic delivery. This innovative process alone will reduce an administrator’s EOB print and postage expenses by over 60%, plus saving over 75% on banking fees on provider payments!
Alternative delivery options include:
Once the administrator has incorporated this consolidation process, which is under their control to implement, providers may be contacted aggressively to begin accepting alternative payment methods of delivery.
EOB and creates a PDF image of the document with the EFT trace number on the document. Once the EFT has been created, an e-mail to the provider directs the provider to the location of the EOB
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Stored Value Virtual Card: The fastest payment delivery option for the provider is the stored value virtual card. Under this payment option a provider receives a fax image of the provider’s consolidated EOB for posting and a virtual card number for instant payment by entering this number in its card processing terminal. This is the easiest and safest delivery method because the providers do not have to give the administrator their bank account information, and they have the paper EOB to back up the payment. The administrator is charged nothing in this case, thereby completely eliminating its print and postage costs. Provider Direct: Many claims administrators have relationships with local providers who do not have the 835 capabilities to support EFT transactions. Provider Direct takes the consolidated provider
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PDF. In this way, the provider receives its EOB and can reconcile it to the EFT payment by comparing the trace number from its bank to the trace number on the document. Generally, a fee per transaction is charged to the administrator, but the fee is far less than the administrator’s consolidated print and postage costs. Provider Direct does require the provider to give the administrator its bank account information. Vendor Direct: Although many providers have clearinghouses and lockboxes, most of these vendors have been unwilling to support individual 835s and individual EFT payments from the administrators due to their or their client’s inability to reconcile these individual EFT transactions to individual 835s. With weekly consolidated EOBs, however, these vendors are now more willing to take these transactions and process them on their client’s behalf. The fees paid by the administrators range from free to a per claim fee. However, all fees are again far less than what the administrator would incur paying their print vendor.
Summary In summary, EFTs alone do not lower the administrator’s fulfillment costs unless coupled with an 835, and only the largest providers process both. Therefore, the administrator is forced to produce 90% to 95% paper EOBs thus incurring additional costs. The only solution for administrators to reduce fulfillment costs is by consolidating payments more efficiently while utilizing alternative electronic delivery methods that are more acceptable to a broader base of providers.
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Bio Mr. Davis is the founder and CEO of ECHO Health, Inc. located in Cleveland, OH. With over 30 years of industry experience, he is recognized as a visionary and a pioneer in the application of technology in the medical payment space. Prior to creating ECHO Health, Mr. Davis was the CEO of Secure Solutions, where he developed anti-counterfeit processes for MasterCard International. Mr. Davis holds five U.S Patents and is a graduate from Ohio University.
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Worker’s Compensation Cost Escalation: Technology to Roundup the Usual Suspects By Ritza Vaughn
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elf-funded workers’ compensation programs across the country are struggling to roundup the usual suspects that contribute to high program costs— namely medical and indemnity expenses, claims administration costs, litigation, and compliance with reporting requirements. Whether selfinsured workers’ compensation programs perform these functions in-house or utilize a third-party service provider, they must control and oversee these processes in order to impact costs and outcomes.
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Traditionally, self-funded workers’ compensation programs have been hampered by legacy systems that lacked contemporary automation capabilities and resulted in inefficient operations. These systems were highly resistant to change, inter-connection with other systems and access by external third parties, such as claims specialists, loss-control experts, and attorneys. Recognizing that today’s claims process must be flexible and extend beyond an organization’s
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four walls, program managers are beginning to leverage modern infrastructure to better support proven best practices. In fact, browser-based technology has become a means to automate operations, accelerate transactions, tightly manage quality and performance, and mine business intelligence to continually improve program results.
Advanced Claims Automation Since claims cost the property and casualty industry approximately $40 billion just to administer, it is a core insurance process that would significantly benefit from technological automation. In fact, it’s estimated that claim organizations spend as much as $11 – 14 billion in overpayment, waste, and inefficiency—or what the industry generally refers to as “claims leakage.” This leakage is primarily due to manual, paper-based operations and disparate information systems that result in less than optimal claims outcomes and poor customer service. Browser-based claims technology helps organizations to achieve process transformation— moving from inefficient and disjointed operations to a more automated and integrated workflow. The following claims functions are now incorporated into a browser-based platform that exponentially increases the speed, efficiency and cost effectiveness with which claims are processed:
addition, the development of “intelligent” online forms has made the reporting process easier. These smart forms use drop-down lists, auto-population of fields, and threads of logic to navigate users quickly through the electronic claims submission process. Due to its intuitive, user-friendly design, online reporting is often faster—not to mention less expensive—than a typical phone transaction. • A paperless paradigm. Today, the vision of paperless claims processing is finally being realized. In its rudimentary stage, self-funded programs may have scanned documents but continued to use paper to exchange information via fax and mail. To engage in a truly paperless paradigm, however, organizations are now avoiding the generation of paper documents, relying on electronic submission and exchange of information. In this data-driven environment, information is input once and made available to all parties via the browser-based infrastructure, which spans the entire enterprise and beyond, so third-party partners can also participate in a paperless claims process.
• Consistent, quality claims handling. In the past, consistent claims handling was problematic; similar claims were often handled with widely divergent approaches and results. For example, with some complex injuries, the same case given to two different adjusters could produce a 100 percent variance in results. With business rules and • Online reporting of injuries. Prompt and workflow management, self-funded programs can accurate reporting of injuries is critical to achieving consistently apply policies, procedures, and best best-possible outcomes. With the Internet, injuries practices throughout their organization to ensure are now reported at anytime—24 hours a day, 7 quality results. Business rules also help to guide days a week. Supervisors and managers who need junior adjusters through an organization’s unique to be notified of injuries can receive automated, claims-handling process, essentially allowing them immediate alerts on the same 24/7 basis. In to receive training and handholding as they go.
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• Business rules enable straight-through processing. Ideally, claims organizations want to apply adjuster resources where they are needed most. By leveraging a sophisticated business rules engine, self-funded programs can increase their rate of straight-through processing. This means relatively simple and straightforward claims are settled with little or no human intervention. Claims adjusters are then free to focus their time and attention on more complex injury claims that require their expertise and personalized service. • The adjusters’ automation toolkit. Adjusters can utilize automation tools—such as automated forms, diary systems, scheduling tools, electronic communication, and prioritization of tasks—to help facilitate routine administrative functions, saving as much as 20 percent in adjuster time and resources. With these capabilities, adjusters
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can focus on tasks that directly impact costs and outcomes. For example, letter-writing and formgeneration templates automatically produce documents with fields auto-populated from the claims database. Adjusters review, edit and send the documents, which saves time and automatically creates documentation within the claim. • Quality control through online audits. Claim departments have traditionally audited operations to ensure best practices are regularly performed. Since audits are time-consuming, they’re typically performed on a retrospective sampling of 10 - 20 percent of claims. With browser-based technology, online auditing enables greater transparency. Many organizations now perform real-time, concurrent reviews of 100 percent of their claims, enabling them to ensure a higher level of claims-handling performance. Audit findings then allow claim
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managers to fine-tune operations, achieve a tighter lifecycle and ensure cost-containment at key junctures of the claims process. Some entities have extended this function to also audit external service providers, such as medical providers and attorneys.
Technology to Manage Medical Costs Double-digit medical inflation has affected workers’ compensation programs nationwide. In fact, medical expenses now account for approximately 60 percent of the costs of an average claim. To control these costs, self-funded programs are returning to tried-and-true medical management, but with a slightly new twist – leveraging a browserbased infrastructure to streamline and automate operations, as well as to provide the data analysis capabilities to improve outcomes: • Quality providers. The most critical component to effective medical management is utilizing an appropriate network of physicians who understand workers’ compensation requirements, returnto-work (RTW) objectives, and the importance of leveraging modified duty. Today’s latest data analysis tools can help organizations profile physicians to pinpoint providers who have the lowest overall claims costs and best outcomes. As employees are injured at work, technology helps direct these patients to quality providers in preestablished networks, ensuring the best delivery of care and the greatest level of provider discounts. • Nurse case management. Nurse case managers should immediately be notified of urgent claims, so they can accompany injured employees to an initial medical visit; begin communication about RTW expectations and transitional work assignments; and help direct care to the extent allowed in the jurisdiction. Many of today’s nurse case managers are mobile or work from home. The latest browser-
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based technology allows them to access claims and medical information securely, at anytime from anywhere—as well as to communicate and collaborate with claims management staff to enable optimal outcomes. • Medical bill review. Medical bills must be reviewed to ensure costs are billed in accordance with fee schedules, as well as provider discounts for additional savings. Bill review technology can update fees and discounts in real-time, ensuring the highest level of savings. In the past, medical bills and reports were housed separately from claims, creating silos of information that hampered efficiency. Today, medical bills and reports can be scanned and stored in one location, and linked at the claims level to ensure the most complete claims and medical cost picture.
Litigation Management Today, not only is the number of litigated cases growing, but average settlements are also rising. Generally, lawyer involvement drives up the cost of claims, but it does not increase the actual benefits paid to injured workers. As a result, it is in the interest of all parties to reduce litigation and lawyer involvement.
May 2011
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counsel is targeting their employees, or certain defense firms may have a higher win rate.
Analysis for Safety & Injury Prevention Safety and injury prevention is another critical component to optimizing workers’ compensation program performance. The key to success is identifying where losses are occurring and why, and to formulate a strategy to reduce and mitigate these incidents. To do this effectively, organizations require a 360-degree view of their risks and exposures. • Rules to alert litigation specialists. The best defense to claims litigation is to enable highly qualified and experienced claims professionals to get involved early in a case to minimize the likelihood of litigation through up-front management. Business rules and alerts enable claims litigation specialists to ensure proper procedures are followed to evaluate claims and identify problems early on, so preventive measures can be taken.
In the past, there was no way to effectively collect and analyze loss information at an enterprise level; instead risks were reported and monitored by department. Many organizations utilized paperbased spreadsheets with data manually entered. These reports were time-consuming and laborintensive to generate. They often relied on poor data, and since reports were not dynamic, if information changed, someone had to update the corresponding • Hyperlinks to share data with attorneys. When files. In many cases, reports were delivered too late litigation must occur, communication and sharing to effectively affect change. of information with attorneys must be seamless. A browser-based platform provides hyperlink Today, browser-based technology compiles all technology. A link can be sent via email, allowing claims and loss information in one location and attorneys to directly access claims information. shares it with appropriate stakeholders. The resulting These hyperlinks are secure and access rights are real-time business intelligence provides self-funded defined by the sender. For instance, a claims adjuster programs with the data to monitor claims activity can email a hyperlink to the defense attorney. By and to recommend effective loss-control initiatives clicking on the link, the attorney can connect to for high-cost and high-risk areas: claim notes and can add information as well. By regularly receiving and distributing reports, • Analysis of litigation results. A browser- program managers systematically build awareness based platform also enables program managers of program performance against defined goals and to document and track judgments for plaintiff objectives. Business units and frontline managers and defense counsels in order to identify trends can view departmental losses and compel respective and enable healthy competition among firms. For divisions to follow policies and procedures to help example, program managers may realize plaintiff reduce injuries. In this way, people at every level of
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an organization contribute to program success. Supervisors use reports to identify departments with significant losses, and work with these departments to reduce frequency and severity of injuries. If a department has a high number of backrelated claims, the department can respond with injury-prevention training or by providing safety equipment. According to many industry experts, organizations that utilize advanced data analysis capabilities gain a greater awareness of risks and can save as much as three to 10 percent on their “total cost of risk” or TCOR – the costs to monitor the effectiveness of their risk management programs.
Continued Compliance Reporting Requirements
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Finally, self-funded programs must ensure continued adherence with mandatory reporting requirements. Starting January 1, 2011, many selfinsured entities started to report claims involving Medicare beneficiaries to the Centers for Medicare and Medicaid Services (CMS). Section 111 of the Medicare, Medicaid and SCHIP Extension Action of 2007 (MMSEA) has added these new reporting requirements, and meeting these requirements will be a huge undertaking. If claims are not reported appropriately, organizations may be fined $1,000 a day per claim. Self-funded entities must invest time, money and resources to understand the CMS guidelines, which are more than 200 pages in length. Many self-funded programs do not have prior experience with mandatory reporting procedures. Some lack the right data management and IT capabilities. Others do not want to rely on a reporting vendor to perform reporting on their behalf.
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Whatever the situation, self-funded programs can utilize browser-based claims technology to selfreport and thereby comply with MMSEA reporting requirements.
Rounding up the Usual Suspects Workers’ compensation has been in a state of flux, but the usual suspects in terms of cost escalation remain the same. The critical new piece is utilizing technology to tightly manage and even improve program performance. Browser-based claims and risk management technology manages timely reporting of injuries, optimizes medical cost containment, and ensures best practices are consistently applied. Program managers should realize that a modern browser-based architecture has the ability to boost claims-handling efficiency and staff productivity. With a sophisticated IT infrastructure in place, selffunded program managers will be better equipped to put the usual suspects under lock and key. Many early adopters have already reaped the benefits: browser-based technology makes it easier for them to automate increasingly complex claims transactions, which involve multiple parties, multiple systems and various regulatory requirements.
Bio Ritza Vaughn is the global product director of claims. In this role, she leads the strategic direction of Aon eSolutions claims product. She also leads product planning and oversees the execution of the development lifecycle. She can be reached at ritza.vaughn@aon.com.
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