Self Insured Plans Can Measure, Manage and Engage

 

New HPM Institute Report Explores how Organizations that Self-Insure can Measure, Manage, Engage and Save to Control Costs

Without access to claims data in traditional third-party payer programs, employers lack information needed to make key plan improvement and cost-cutting decisions.

 

July 27, 2010–Bethesda, MD — A new report from the Healthcare Performance Management Institute (www.HPMInstintute.org) provides a detailed overview of how employers that choose to self-insure their healthcare plans for employees are maximizing their savings while improving outcomes. 

In the report “Measure, Manage, Engage and Save: An Overview of How Healthcare Performance Management Works,” leading experts in the field of employer-managed insurance plans explain how a growing number of employers are moving away from the prevailing model of purchasing insurance through third-party payer systems. The reason: plan purchasers are typically in the dark about key cost components. This approach offers little insight on how the health of their workforce affects skyrocketing healthcare cost. And they have little visibility or control over what can and should be done to address the healthcare needs of their employees.

At the center of this problem is not a fundamental lack of claims data but a lack of will to provide data to stakeholders who can benefit most from the information derived. For myriad reasons, insurance providers (carriers) — who receive comprehensive contracts to cover a workforce pool in a healthcare plan — severely limit how much — if any — information is shared with employers who pay their premiums, often citing privacy laws and other risk management concerns. Thus, while paying third-party insurers to assume total responsibility for managing health claims — and risk — may seem convenient, it comes at a price: Employers sacrifice access to vital, aggregated information about employee health. 

In response, a growing number of corporate buyers of healthcare coverage for their employees are choosing to self-insure, while embracing a new business discipline known as Healthcare Performance Management (HPM). One of the hallmarks of HPM is a data “dashboard” that presents a comprehensive array of information about key trends in the health of the workforce and potential risks. Information like this helps employers answer critical questions, such as:

• What are my company’s health plan medical expense trends?
• What areas show the highest potential for costly, future medical risks?

 

To better understand how HPM works, the editors of BizTechReports.Com interviewed experts at the Healthcare Performance Management Institute. The institute focuses on the use of business technology and management principles that deliver better and more cost-effective healthcare benefits.

Toward that end, this paper explores the four pillars of HPM, which call on executives to effectively:

• Measure the key cost elements of healthcare spending
• Manage key aspects of healthcare spending and important health outcomes
• Engage employees and family members in material health improvement initiatives
• Save money through cost-avoidance, better workforce health and improved productivity

 

To download this report, visit: http://www.hpminstitute.org/node/154

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About the HPM Institute

The Healthcare Performance Management Institute (HPM Institute) is a research and education organization dedicated to promoting the use of business technology and management principles that deliver better and more cost-effective healthcare benefits for employers who cover their employees. The institute’s mission is to introduce and develop a new corporate discipline called healthcare performance management (HPM) — a technology-enabled business strategy that tackles the challenge of controlling healthcare cost and quality in much the same way that enterprises have optimized customer relations, supply chain management and enterprise resource management. HPM provides C-level executives with visibility and control over company healthcare benefits spending trends and risk management postures, while protecting individual employee privacy.

PPACA: SMALL BUSINESS AND SELF-INSURANCE

   

                                   PPACA:  SMALL BUSINESS AND SELF-INSURANCE

                                                            Dispelling Some Myths

                                             By George J. Pantos, Esq.

Small business consistently has said that their No. 1 concern is controlling the escalating cost of health insurance premiums. As health costs continue to climb, smaller employers increasingly are turning to self-insurance as a cost-effective way of managing health plans they offer employees.

However, as many small employers declare independence from health insurance companies, some critics observe that self-insurance (also referred  to as “self-funding”)  is too risky for small firms and  only large firms should be allowed to self-insure.

Now, in two newly released white papers, the Self Insurance Institute of America (SIIA) responds, “While it is generally true that larger employers self-insure at higher proportions, there is no valid reason why smaller employers should be restricted from this often advantageous financing option.”

Smaller firms face higher health premium costs than large employers. Recent surveys confirm that premiums paid by small firms in 2009 alone were 18 percent greater than those paid by large companies. During the 10-year period 1999 to 2009, overall premiums increased 120 percent, or four times faster than prices, according to the Kaiser Family Foundation.

With employers absorbing a greater share of the overall health care cost bill, small employers are bearing an increasingly larger share of premium costs, according to the Commonwealth Fund.

Higher premiums are driven by increased medical costs and administrative loads, including insurance carrier profits, according to a 2009 Kaiser/HRET Report.  A 2010 study by the American Medical Association reporting on the dominant market share of large health insurers in nearly two-thirds of U.S. cities states that “when insurers dominate a market, people pay higher health insurance premiums than they should.” So, it is not surprising that smaller employers are exploring alternatives to commercial insurance to help bend the cost curve downward.

Self-Insurance Not For Everyone

Over the 30-plus years since passage of the Employee Retirement Income Security Act (ERISA), financially qualified employers of all sizes have shown they are capable of self-funding, with more than 77 million workers and their dependents covered by self-insured group health plans in 2009.

Clearly, however, self-funding is not a viable option for everyone. While larger firms—up to 90 percent by some estimates— self insure group health benefits, small business owners typically cover employees with fully insured plans. In small firms with 3 to 199 employees, 88 percent were in fully insured plans in 2008, according to the non-profit Employee Benefit Research Institute (EBRI).

However, mid-size and small firms increasingly are turning to self-insurance as a cost-effective  alternative to ever rising commercial health insurance premiums. While only a small fraction of the nation’s some 28 million small firms self-insure, the trend to self-funding has gained momentum.  Between 2008 and 2010, the trend to self-funding by small employers increased by as much as 20 percent, according to Price Waterhouse Coopers.

Though self-insurance  is not widespread in the small group market,  it has  grown steadily, with some 12 percent of small company health plan sponsors ( 3 to 199 employees)   in  self-insured  plans in 2009—up  from 6 percent earlier in the decade. An important contributing factor is employer reliance on professional consultants who are able to objectively evaluate whether an employer is capable of retaining the financial risk of self-insuring.

What constitutes  a “small employer”? Unfortunately, Congress did not use a consistent definition of a “small employer” in the Patient Protection and Affordable Care Act (PPACA) and figures vary widely as to what constitutes a “small employer” depending on the specific provision.   While many changes are mandated without regard to employer size, PPACA provisions specifically applicable to “small employers”  range  from:  fewer than 26 employees for tax credit eligibility to 100 employees or less to qualify for exchanges.

Starting 2014, companies with 50 or more employees must either offer health coverage (employer mandate) or pay a $2,000 annual fee for every employee (after the first 30) if any employee receives a health care tax credit.

.”The conventional wisdom that you need at least 250 employees to self-insure is proving wrong”, says Curtis Donley, president of Indianapolis-based Donley Consulting Inc. and former president of a third-party administrator firm. “My experience shows that self-insurance is a viable alternative for financially qualified small employers.  Over the past quarter century, we’ve routinely set up and administered self-funded health plans for financially qualified groups as low as 25 employees and up.”

As the economy struggles to revive, small employers in greater numbers view the self-insurance option  as a favorable  way to save money without sacrificing health care quality. Self insurance lets companies take control of their plans and offer benefits uniquely suited to their workers’ needs, free of many of the costliest state government mandates.

Nevertheless, critics suggest that small employers are not able to bear the financial risk of self-insurance. This echoes a refrain from the mid-90’s debate when the Clinton Administration unsuccessfully advanced proposals initially to restrict   self-insurance to very large firms with 5,000 employees, then to 1,000 employees and up. Opposed by industry, these attempts and a later drive to limit self-funding to firms with 500 employees and up were defeated on Capitol Hill.

The same issue has surfaced once again in connection with the government operated  insurance  exchanges to be set up under PPACA where small employers will be able to elect coverage  starting January 1, 2014.

A new paper published by the National Health Policy Forum (NHPF) once again advances old, misguided assumptions that small  employers who self-insure are likely to cover healthier workers and then elect coverage in the insurance exchanges. The paper observes this could have an adverse selection impact that will trigger higher premiums in exchange pools and that only larger employers should be allowed to self-fund health benefits.

This rankled the industry which fired back that these conclusions are without foundation. “We are working to head off a DOL report that concludes smaller employers should not self-insure due to solvency concerns and a separate HHS report suggesting that self-insured health plans will negatively impact health insurance exchanges due to adverse selection says Mike Ferguson, Chief Operating Officer of SIIA.

 These conclusions are incorrect for the following reasons:

Dispelling  The  Myths

 

• Myth –Self-insured plans cover healthy employees. Not true. Federal laws prohibit plan sponsors—whether insured or self-insured– from selecting only the most favorable risks among  individuals in plans they sponsor. PPACA bars coverage denial based on pre-existing conditions and prohibits discrimination based on employee health status, including such factors as claims experience, medical history, genetic data, evidence of insurability and disability. Moreover, these practices have been prohibited for over 20 years since passage of HIPAA.
• Myth–Self-insurance will result in adverse selection. Employer sponsored self-insured plan membership includes a broad cross-section of  workforce  risk, covering low, medium and high employee health risks  Since insured and self-insured plans have similar membership  demographics, there is no basis for the highly speculative assumption  that self-insured plans enroll a more favorable selection of health risks. There is no historical basis for the speculation that small employers who self-insure under PPACA will skim healthier and better risk out of exchange pools. This observation is inconsistent with empirical evidence and published research studies.
• Myth—Small employers can’t bear the financial risk of self-insurance. Not true.  Employers must meet sound actuarially determined financial requirements (good cash flow) in order to demonstrate they are capable of self-funding. To protect against year to year variations and the expenses of complex illnesses, small employers purchase medical stop-loss insurance to indemnify them for potential high costs of large or catastrophic claims. Self-insured employers with stop-loss are reimbursed for individual employees’ medical costs above a certain predetermined amount. Following passage of PPACA, most stop-loss carriers amended policies and now cover unlimited annual and lifetime benefit costs.

 

Moreover, as the white papers note, PPACA contains anti-adverse selection reforms that will keep coverage rates in check regardless of pool risk exposure.. The tax credit subsidy available to eligible small employers is only available for employers who purchase insurance in the exchanges. Employers now have a guaranteed right of renewability regardless of plan risk profile changes. Also, the new premium review process will help combat against excessive increases for small groups.

 

The white papers are titled “Why Self-Insured Health Care Plans Will Not Contribute to Adverse Selection Under PPACA” and “Companies of All Sizes Can Operate Viable Self-Insured Group Health Plans” can be accessed via e-mail at mstrickfadden@siia.org, or by calling 202-463-8161.

 

Reports to Congress.

 

PPACA (Section 1253) requires the Secretaries of Labor and of HHS to prepare and submit an annual report to Congress on self-insured plans, with both reports due March 23, 2011.  Based on Form 5500 data, the DOL report will include general information on self-insured group health plans (including plan type, number of participants, benefits offered, funding arrangements and benefit arrangements). Using data from financial filings, the report will also include information on assets, liabilities. contributions, investments and expenses.

The HHS report will cover insured and self-insured employer characteristics (including financial solvency. capital reserve levels, the risks of becoming insolvent, and the extent to which new insurance market reforms are likely to cause adverse selection in the large group market.  

SIIA reported recently on a series of meetings with DOL and HHS officials to discuss PPACA-mandated studies on self insurance.  “Our assumption  is that there at a minimum there is ignorance among regulators, but more likely a negative bias pervades”, said SIIA’s  Ferguson, .”We are hopeful that our meetings with federal officials will help dispel the myths”.

 

The Options Under PPACA

 

Under PPACA, small business owners with fewer than 26 employees and average annual wages of less than $50,000 can now claim a tax credit of up to 35 percent of the premium cost—increasing to 50% in 2014.  If they choose to offer insurance coverage, an estimated 4 million small companies will be eligible for the tax credit on 2010 tax returns, according to a Families USA report.  Though some insurers already saw a dramatic increase in plan enrollments in 2010, millions of small employers in this size range who exceed the average annual wage limit will not be eligible for the tax credit.

Small employers (up to 100 employees) looking ahead to 2014 when the well-publicized exchanges will be in place need to decide whether to continue health insurance coverage or scrap their  plans and pay the $2000-per-employeer penalty. They will need to weigh not only the impact on their bottom line, but also “what is the right thing to do for employees.”There is no clear answer,this will be a business-by business decision

Employers in this size range who decide to continue health plan coverage, will need to choose the funding method—insurance or self-insurance—that does the most to lower health costs and improve employee healthcare quality.  The other option, coverage in state health insurance exchanges, is expected to benefit from negotiated prices with insurers, but will be subject to new HHS-regulated “essential benefits” mandates and other requirements.

Some insurers have announced they will not participate in the exchanges but will offer their products only outside the exchanges. Many employers not eligible for coverage in exchanges (mainly due to size) can be expected to continue funding health benefits outside the exchanges through commercially insured plans .However, these plans will be subject to the same mandated state benefits, premium taxes, rating restrictions and other costly requirements that have resulted in soaring premiums.

The Self-Insurance Advantage

 

“Increasing medical costs and willingness to assume more risk are driving many employers, even small employers, to shift to self-insured health plans”, according to Sheri Sellmeyer, vice president of analysis for Health Leader InterStudy, a leading provider of health care market intelligence.  From January to July 2008, self-insured health plan enrollment grew by 1.6 million lives, or 2.2% nation-wide, according to a 2009  HealthLeaders study.

Self-funded plans are appealing to small employers because of the greater flexibility that comes with freedom under ERISA to tailor plans to specific workforce needs (including medical, dental, vision and Rx drug benefits) without being impacted by costly state mandated benefits and premium taxes. .”We’ve just finished our first year on a self-funded plan backed by stop-loss insurance and we’ve saved over $600,000 in the first year by being self-funded”, said Tad Roane, CFO, Crescent Directional Drilling, a small employer in Houston, Texas.

Unlike employers who purchase insurance from a commercial  insurance carrier licensed by a state, employers who self-fund health benefits can offer the same uniform health plan in multiple states, as permitted by the federal  ERISA provisions. This is a significant advantage for the many small employers that do business across state lines and operate  in multiple states.

 PPACA sets forth new federal standards and mandates applicable to fully insured as well as self-insured plans. However, self- insured plans are exempted from some PPACA reforms that apply specifically to insurers such as medical loss ratio (MLR) standards, rating restriction rules, and insurer fees.

Starting July 1,2011, any  planned rate hike of 10% or more  in the small-group  insurance market  must undergo extensive review by the state involved or by the Department of  Health & Human Services, according to new PPACA rules issued by HHS—another reason to consider the self-funding alternative.

Taking Control.  Under PPACA, a small employer that self-funds is able to gain more control quickly over costs associated with employee health benefits.  Working with their TPA, employers who don’t know much about the health of their workforce—and what is driving costs– now can utilize innovative technology (analytics, metrics, predictive modeling)  to help employees  improve  healthy lifestyle choices and  reduce healthcare costs.

Insurers have worked hard to keep employers—the payors—in the dark about what’s going on in their health plans. Lacking detailed plan data, employers have been forced to swallow premium increases year after year. But self-funded plan sponsors have direct access to historical plan claims data and can use new technology to see where their benefit dollars are going.

Self-funded employers can access their own plan clinical and Rx prescription claims data, without an insurance company standing in the way. Working with their TPA, employers can utilize innovative technology to leverage HIPAA-compliant claims data that unveils a real-time snapshot of plan health risk.  They are able to gain insight into potential costly catastrophic  conditions in the workforce before high cost claims are filed. With this information, employers can adopt actionable plan design and employee outreach prevention campaigns to mitigate risk.

Proactive employers can launch educational activities that engage employees in programs such as care management, disease management and nurse coaching. . By offering employee incentives, some self- funded employers report better than 50 percent voluntary employee   participation rates in targeted outreach programs—far in excess of the 30% national benchmark on voluntary participation. Implementing this strategy has already saved many companies money. For example, a self-insured South Carolina-based long term care company used innovative software programs to reduce its health care costs by 19 percent.  An Atlanta-based self-insured radio station company employed technology and saw a four-fold increase in employee enrollment in wellness programs.

Conclusion

 

In the post-PPACA world, escalating costs will represent one of the most predictable outcomes of health reform for employers. As employers face higher costs and expanded requirements, many will turn to alternative risk transfer funding methods such as self-insurance to better manage their health plans and control costs. While embraced by larger firms for years, self-insurance is becoming an increasingly popular option for mid-size and small employers as well. In the new healthcare marketplace, self-insurance is a viable solution to rising health care costs—whether for financially qualified employers considering self-funding as an alternative to fully insured coverage, or for employers with self-funded plans already in place.

 

George J. Pantos, Esq. is a member of  Thompson’s Editorial  Advisory Board and  Senior Advisor, Wellnet Healthcare, Bethesda, Md. (gpantos@wellnet.com)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Do It Yourself Health Plans Work to Cut Health Costs

I wrote an Op Ed in the Providence Journal that highlights the advantages of self-insured  plans in controlling health costs. With over 100,000 readers, the Providence Journal is one of Rhode Island’s most widely read daily newspapers.  The article highlights the importance of plan claims data in more effectively managing health plans. aWith direct access to their own plan claims data, self-insured plans have a significant advantage in reining in their workforce health costs.

Click here to read the entire article.

New White Paper on Controlling Costs Thru Self Insurance

 

Implementing a corporate Health Performance Management (HPM) program  to control costs requires a serious  commitment to managing healthcare in a unique non-traditional way. Since health management isn’t a core competency for most organizations, it’s typically an overlooked area of potential cost containment. Organizations that under-take HPM technology embrace three key goals: improving employee health; optimizing health risk management; and targeting significant cost savings.

 

 For many companies, more effective plan management will start by addressing the costs associated with full-service insurance providers who are fundamentally un-incented about making significant progress in healthcare cost reductions. But those cost reductions can only be realized if companies that self-insure access plan claims data that is  key to analysis and predictive modeling  that helps to identify and measure potential workforce health risk.With direct access to plan clsims data,  self-insured companies are  well positioned to engage their at-risk workforce in effective wellness programs designed to avoid the high costs of potentially catastrophic conditions. 

In a new white paper,” Measure Manage Engage&Save” the Health Performance Management Institute describes how self insured plans can use HPM principles to improve health outcomes and reducd costs. (www.hpminstitute.org) 

Self-Insured Plans Use Technology to Control Costs

I have a better idea, Mr. President

By George Pantos , Esq.

At tomorrow’s White House health reform summit, President Obama hopes to re-invigorate the health care debate and prompt Congress to act on the issue this year. He’s invited members of both parties to meet, challenging Republicans and Democrats alike to offer alternative reform ideas.

Here’s one for would-be reformers—why not use technology to empower companies and their employees with the information they need to take control of their health care expenses?

In recent years, data-driven strategies have revolutionized the way companies handle their customer relations and manage their supply chains. It’s high time they did the same for health benefits.

Click here to read George Pantos’ in-depth analysis, which appeared in the Orange County Register.

Businesses generally lack access to—or ignore—data about their health plans, even though health care represents one of their biggest expenses. That’s a mistake.

A technology fueled “Health care Performance Management” strategy can capitalize on the mountains of health data out there and help firms measure and manage their health costs.

For instance, on an aggregate basis, businesses could use HPM data to find out how many times their employees had visited the doctor and correlate it with treatment data to ensure that their employees were following their doctors’ orders. That’s just one way to use technology to save money.

President Obama has leveraged the power of technology better than virtually any other public official. Yet his health care plan ignores many of the money-saving technologies we use in other aspects of our lives. That should change.

 

Health Reform and ERISA Preemption

Questions have been asked about what effect the health reform bills would have on ERISA and preemption. At the outset, not very much. But under both bills, employer health plan sponsors will have to comply with myriad costly new federal requirements including state-based exchanges, mandated and expanded plan coverages, as well as numerous taxes fines and fees. This will be required under the new federal health reform structure that would be superimposed over current laws because ERISA does nor preempt other federal laws (it preempts state laws). In other words, many new federal standards in the health reform bills designed to reform insurance practices would also apply to self-insured plans as well. thus eroding the important distinction between insurance and self-insurance as health plan funding methods. With respect to ERISA and preemption, both the Senate and House health reform bills generally provide that ERISA law and preemption shall be preserved for employer sponsored health plans. But, the House bill (HR 3962) provides that for insured plans offered thru the exchanges, ERISA preemption is rolled back and state tort law and remedies would apply even if the plan is employer sponsored. Additionally, it should be noted, that after a five- year grace period, DOL and the new “Health Choices Commissioner” will set federal standards for all health plans, including self-insured plans. Let’s take a closer look at the House bill, particularly as it relates to state tort law and ERISA preemption. ERISA tort liability preemption currently is based primarily on section 502 of ERISA. While Section 502 does not explicitly preempt state tort law, the Supreme Court in Pilot Life and again in Davila concluded that Congress intended to preempt state law by enacting section 502’s comprehensive remedial scheme. Section 502(a)(1) applies to claims for benefits or to clarify rights against a “plan,” which is defined by ERISA Section 3 to include an “employee welfare benefits plan,” i.e. an ERISA health plan. As you know, ERISA section 514 preempts state laws that “relate to” employee benefit plans, except for state laws regulating insurance, which are saved from preemption, except state laws are not saved from preemption that regulate self-insured plans. Nowhere in HR 3962 is ERISA section 502(a)(1) explicitly repealed or amended, so if 502 preemption is changed by HR 3962, it must be indirectly. Section 251 of HR 3962, “Relationship to Other Requirements,” requires the creation of internal and external grievance and appeal procedures for qualified health benefit plans. Section 251 has two sections, the first dealing with coverage not offered through exchanges and the second dealing with coverage offered through the exchanges. Section 251(a)(1) provides that in the case of health insurance not offered through the Exchange ,” the requirements of Title II of HR 3962 (dealing with protections and standards for qualified health plans), do not supersede ERISA or State law, except insofar as those provisions conflict with the requirements of the insurance reform provisions of HR 3962, as determined by the Health Choices Commissioner. Note, however, that Section 251(a)(2) further provides that “Nothing in paragraphs (1) or (2) shall be construed as affecting the application of section ERISA section 514 (the preemption provision). Employment-based plans (which HR 3962 defines to include ERISA plans, government plans, and church plans) remain subject to existing law, including state law insofar as ERISA section 514 saves the state law from preemption, unless the existing law conflicts with HR 3962. Section 251(b) applies to “Coverage Offered through Exchange.” This provision states that “in the case of coverage offered through the Health Insurance Exchange,” the requirements of Title II do not supersede any requirements of title XXVII of the Public Health Services Act (basically the HIPAA provisions) or of state law, except insofar as those requirements prevent the application of the insurance reforms as determined by the Health Choices Commissioner. The first sentence of section 251(b)(2), states again that in the case of health insurance offered through the exchange, State law rights and remedies apply to health insurance issuers. The second sentence, however, states “The previous sentence shall not be construed as providing for the applicability of rights and remedies under State laws with respect to requirements applicable to employers or other plan sponsors in connection with arrangements that are treated as group health plans under section 802(a)(1)” of ERISA. Section 802(a)(1) is a new section in the House bill added to ERISA under the employer mandate provisions of HR 3962. It provides that if an employer makes an election to offer health benefits under section 801, that election shall be treated as the establishment and maintenance of a group health plan under section 733(a) of ERISA. Section 801 refers to an election by an employer “to be subject to the health coverage participation requirements,” which are defined by section 803 to be the requirements of the employer mandate. Sections 411 and 412 allow an employer to 1) offer a group health plan; 2) offer coverage through an Exchange-participating health benefits plan, if the employer is Exchange-eligible; or 3) to make a contribution in lieu of coverage. Thus, under new section 802(a)(1), coverage offered by an employer, either directly or through an exchange, is group health plan coverage. But, the language of 251(b)(2) says that state law rights and remedies apply against health insurance issuers, but not against “employers or other plan sponsors” who offer a group health plan under 802(a)(1). ERISA defines “plan sponsors” to mean the employer or employee organization that establishes a plan. Section 251(b), therefore, says quite plainly that state law remedies (including tort remedies) apply against health insurers who participate in the exchange, the employer if the employer provides coverage through the exchange. In other words, under the House bill, ERISA Section 502 would no longer preempt state tort remedies against insurers that offer coverage through an exchange. To recap, Section 251(a) preserves ERISA section 514. But section 251(b), on its face, applies to all coverage offered through the exchange, including coverage funded by an employer, and expressly applies state law remedies against health insurance issuers. Thus, ERISA section 514 would continue to preempt state insurance law with respect to self-insured plans, at least for the time being. In sum, the most likely interpretation of section 251 is that it applies state tort liability against insurers marketing policies through the exchange. Subject to any changes by the conference committee, this would seem to create at least a temporary distinction favorable to self-insured employment based plans not sold thru the exchanges. Allowing state tort suits and remedies against insurers when coverage is sold through the exchanges is likely to make policies sold through the exchanges more expensive. I hasten to add, however, that pressures to roll back ERISA preemption for self insured plans not sold thru the exchanges can be expected to develop and mount over time. Closing thoughts: The federal proposal for pay or play call for employers with certain minimum payrolls ($400,00 in the House bill) to offer qualifying coverage or pay an 8% payroll tax.This new federal provision is likely to trump ERISA preemption arguments not offered by self-insured employers in pay or play lawsuits. Also, eventually, all employers would be allowed to transition into the government-supervised exchanges (employees of existing plans can migrate at any time thus heralding a potential longer term decline in self-insurance (There is some hope, however, that a future Congress could repeal some of the more onerous provisions)

Health Reform Should Require Claim Data Transparency

The Senate health reform bill  sponsored by Senator Max Baucus contains provisions harmful to  claims data transparency and self-insurance. Currently self-insured health plans have access to  their own health plan RX and medical claims data –transparency that provides valuable insight for employers into what is happening inside their plan. With few exceptions, generally employers whose health plans  are insured do not have access to their own plan claims data.

Using available soft ware tools, self-insured employers who have access to their plan claims data today  can employ powerful data and predictive modeling analytics and metrics  to measure, manage and drive down health costs. This technology is already saving self-insured employers millons of dollars

Self-insured employers who opt to purchase coverage through the proposed health insurance exchanges  in the reform legislation would lose access to this claims data and would not be able to  underake actionable  corporate strategies  to curb rising health plan costs.  The claims data which is now transparent to self-insured employers would be controlled by insurance cariers , who have been reluctant to hand over the data to employers, except in Texas where a state law mandates the transparency of claims data by insurance carriers.

Health reform legislation truly designed to achieve significant cost-savings should include a provision requiring the transparency of all claims data so that employers can utilize available technology to analyze plan trends and adopt actionable strategies to contain health costs.

Why Employers Sponsor Health Plans

 There is a compelling business imperative for employers to provide health benefits to employees and their families. Surveys document that employees rate employment-based health benefits as their most important benefit, and find significant value for employers in terms of employee retention, motivation and satisfaction.

 

Companies with huge financial investments in human capital–their workforce–understand the value of their health benefit programs. I subscribe to the view that  employers can improve the ROI in human capital by helping improve the overall health of employees.

 

While I agree that more regulations–I fought ill-conceived, costly employee  benefit regulations over a 25-year career as an ERISA attorney– are counterproductive, the answer is not to throw the baby out with the bath water.

 

 Unfortunately, pending health reform bills create new incentives for employers to discontinue their health plans and just pay a fee to the federal government. I don’t believe government-backed insurance exchanges with essential benefit packages, state mandated benefits and new federal rules  are going to mean less regulation and lower costs, Getting the employer out of health care, in my view, means getting the government (taxpayer) into healthcare.  While this brand of health reform may be  a favorable outcome  for about  25 million  Americans without coverage  (there may be better ways), it could  come at the expense of nearly 165 people covered under the current system.

Is this  a reasonable reply to those who favor quitting employer plans and just paying a fee to the government.

 

 

Health Reform Supersedes ERISA

By superseding ERISA, H.R. 3200 poses a real threat to the current flexibility of employer sponsored health plans to provide uniform benefit plans across state lines as well as to tailor  plans that meet specific needs of the  employer’s workforce.

Because ERISA preempts state insurance laws but does not preempt other federal laws, the new health reform provisions would apply to self-insured as well as insured group mhealth plans.

Under a new federal framework, proposed federal standards designed primarily to  curb certain undesirable practices and provisions in insured plans would apply to self-insured plans as well.  This will erode the current  important distinction between insurance a nd self-insurance as funding methods for health benefits — a distinction long recognized by the courts..

Among insurance reforms under discussion are pre-existing  condition  coverage limitatons, prompt pay, claims external review procedures and subrogation.

By superseding ERISA preemption, H.R. 3200 opens the door to costly federal mandates that will impact negatively on self-insurance.

Response to Washington Post

George Pantos: Charles Krauthammer’s article on The Great ‘Prevention’ Myth
Does Not Tell the Whole Story
MyHealthGuide Source:

*    Charles Krauthammer, Washington Post – 8/14/09 Washington Post
*    George Pantos, Esq., Former Washington General Counsel to
Self-Insurance Institute of America (SIIA), 8/16/09

The Great ‘Prevention’ Myth Article
Charles Krauthammer wrote the article, The Great ‘Prevention’ Myth, that was
published on August 14, 2009 in the Washington Post.  The article states
that “President Obama has lost the health-care debate… Accordingly,
Democrats have trotted out various tax proposals to close the gap” such as
prevention as saving heath care costs.

    “This inconvenient truth comes, once again, from the CBO. In an Aug.
7 letter to Rep. Nathan Deal, CBO Director Doug Elmendorf writes:
‘Researchers who have examined the effects of preventive care generally find
that the added costs of widespread use of preventive services tend to exceed
the savings from averted illness.'”
    “The fallacy here is confusing the individual with society. For the
individual, catching something early generally reduces later spending for t
hat condition. But, explains Elmendorf, we don’t know in advance which
patients are going to develop costly illnesses. To avert one case, “it is
usually necessary to provide preventive care to many patients, most of whom
would not have suffered that illness anyway.” And this costs society money
that would not have been spent otherwise.
    “…a rigorous study in the journal Circulation found that for
cardiovascular diseases and diabetes, ‘if all the recommended prevention
activities were applied with 100% success,’ the prevention would cost almost
10 times as much as the savings, increasing the country’s total medical bill
by 162%. That’s because prevention applied to large populations is very
expensive, as shown by another report Elmendorf cites, a definitive review
in the New England Journal of Medicine of hundreds of studies that found
that more than 80% of preventive measures added to medical costs.
    “… prevention is not, as so widely advertised, healing on the
cheap. It is not the magic bullet for health-care costs. You will hear some
variation of that claim a hundred times in the coming health-care debate.
Whenever you do, remember: It’s nonsense — empirically demonstrable and
CBO-certified.”

George Pantos Responds
Mr. Krauthammer’s premise is that preventive health care increases medical
cost. He concludes that the added costs of preventive services such as
clinical screenings exceed the savings from averted illnesses. However, his
analysis is incomplete because he fails to note that prevention also can
occur thru inexpensive (often free) individual risk profiles such as Health
Risk Assessments (HSAs) that can detect a propensity for future problems
before illness occurs. Based on completion of simple yet in-depth
questionnaires , such non-laboratory related screenings can serve as a
harbinger of problems related to cost drivers such as obesity and smoking
which add nearly 80 billion dollars in cost to the nation’s health bill.

Employer sponsored wellness programs are successful market-based examples of
prevention (intervention) that is working without adding to medical costs.
Predictive modeling and data analytics also show early promise in preventing
illness and reducing health costs–without the expenditure of a single dime
in government spending. Predictive technology ( the ACG System) developed by
Johns Hopkins University, one of the world’s most respected academic and
medical research institutions, permits early identification of health risk
based on analysis of already available claims data.

While clinical screening is valuable in detecting disease and can be costly,
prevention that detects disease before it occurs is a “priceless” way to
avoid expensive treatment while lowering costs and improving individual
health .A 2009 Report from the Health Research Center refers to a Miliken
Institute Report noting that savings from modest improvements in risk
factors such as unhealthy behaviors could bring about 40 million fewer cases
of chronic disease and reduce economic costs by $1.1 trillion annually in
treatment costs and productivity by 2023. So much for the “myth”.
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