Health Care Pricing ... All Over the Map

Health Care Prices All Over the MapIt's always fun to watch shoppers each holiday season camp out for hours to snap up bargains that pale in comparison to the savings available in the health care marketplace.   If buyers put as much emphasis on shopping for health services throughout the year as we do on enrolling for coverage once a year, we could make greater strides to flatten the cost trajectory of care. If there is one city that knows how to shop it's Big D, so here's a three-step process for any employer hoping to put a little "Black Friday" in their health plan:

1. Offer A High-Deductible Plan:

A 'quiet revolution in health insurance' is taking place as the number of employees enrolled in a plan with an annual deductible of $1,000 or more has risen to nearly 40% in 2013.   Among all plans, the average annual deductible among covered workers is over $1,100 and exceeds $1,700 for small firms (under 200 workers).   (Kaiser/HRET Survey of Employer Sponsored Health Plans).

Milton Friedman wisely quipped "Nobody spends somebody else's money as wisely as he spends his own.   Putting in a high deductible plan enables your employees to be economically rewarded for shopping around and strategically aligns your insurance plan to cover infrequent and high cost medical events.

2. Arbitrage your Network

In the 20th century days of health care consulting, we used to attend to great detail to reprice claims for employers wanting to select the right insurer and network health plan.   This focus on network discount has given way to more sophisticated value equation models.   Once your health plan/network is in place, the employer must then teach employees to exploit hidden value within the network throughout the year.

60% of medical and pharmacy claims come from non-emergent services.   As an example, three facilities within a five-mile radius in Dallas offer the same in-network MRI for prices ranging from $600 to $3,000.   Transparency laws are now enabling big data analytics software to quickly review over a billion national claim records for price and quality comparisons at the push of a button.

3. Shop with a trusted friend

The best health price transparency providers have realized that shopping for care is best delivered when technology is married with an independent consumer advocate.   As an example, there are over thirty types of knee surgery, so having a personal concierge to help me navigate my options enables my family to build trust with an advisor that does not have a financial interest in the outcome.   To revolutionize the system, we need to help our employees act on information, not just provide data.

Many DFW employers are well on their way to creating a shoppers mentality among their health plan enrollees.   Consumer advocacy and pricing transparency programs have already returned annualized savings anywhere from four to twenty-four times the cost of the service.

In a town that continues to reinvent the shopping experience, we anticipate more companies to get on the "Black Friday" bandwagon when it comes to savings in their health plan. The best part is we can all be empowered to score health deals that would make a Walmart clerk gush just by picking up the phone.

Top Ten Healthcare Predictions for 2014

20141. With UT falling to Baylor, another 50/50 season for the Dallas Cowboys and a botched HealthCare.gov rollout in 2013, predictions for 2014 have head coach, Jason Garrett and U.S. Secretary of Health and Human Services, Kathleen Sebelius joining the ranks of Mack Brown and the unemployed ... At least they will have a new health insurance option available to them when they leave their employer. 2. Consumer health devices, mobile and telehealth initiatives will continue to bring about market-based reforms that enable better tracking, monitoring, and care coordination for patients with chronic conditions, who lack access to primary and specialty care or for those payers and providers willing to experiment with technology enabling solutions.

3. Watch for continued M&A activity with health systems similar to Baylor Scott & White or Tenet (Vanguard Health) in other areas of the country. Health care delivery systems will continue to survive and thrive through specialization, mergers, or partnerships that lead to even bigger systems of care.

4. After the elections in November 2014, more carriers will exit the exchange system or become even more selective with their markets and propose double digit premium rate increases as the demographic underpinnings of the exchange fail to capture the 18-34 age group needed for the law to succeed.

5. With less than predicted young people signing up for HealthCare.gov, watch for legislative push to increase penalties for those who did not adhere to the requirements in the law in 2014. There will also be a healthy amount of debate over whether the penalties should be waived in 2014 due to the botched website rollout of healthcare.gov. [The penalty for 2014 is the greater of $95 a year or 1% of adjusted gross income].

6. The political rhetoric of "repeal and replace" will eventually give way to the demands of the American people searching for bipartisan amendments and solutions that target the real enemy in this country ... a broken fee for service environment that pays for the reimbursement of treating disease. The government will not shut down in 2014.

7. Employers will continue to adopt tax-efficient plans (such as high deductible health plans with health savings accounts) as new taxes (associated with ACA's funding) become more transparent to higher wage earners. Private health exchanges will grab the attention of employers interested in defined contribution approaches to funding their benefits.

8. Companies will abandon large incentives associated with traditional first generation wellness offerings (HRA's, Biometrics, and Wellness Content) in favor of programs that actually show promise of changing behavior to combat the effects of smoking, obesity, metabolic syndrome and diabetes — Pharmacotherapy and surgical options will gain more traction for those who qualify.

9. Watch for the continued proliferation of programs that provide price transparency and consumer advocacy. Consumers and large payers will become more educated around the disparity in pricing among health care facilities and providers. Congress will try and respond with everything from price controls to transparency bills.

10. Congress will not be able to agree to the Medicare cuts that are the underpinnings of the Affordable Care Act. The Office of Management and Budget (OMB) will run new actuarial calculations that increase the size of the federal deficit beyond what our children can bear.

The One Thing Needed for Exchanges to Succeed

Young people are the most coveted of all participants to have enrolled in a health insurance plan.   It is the concept that underlies group underwriting to have those with fewer health risks to help offset the cost of those who are older and have greater medical needs.   Dallas ranks as one of the largest communities of uninsureds in Texas at 31% compared to a 26% state average. Many of these uninsureds are young people (ages 18-35) who have relied on our public health system to be there if things do not go as planned.

The very success of the Affordable Care Act (ACA) will depend upon convincing these "young invincibles" that health protection is worth purchasing.   If only the public exchanges could be as inviting as an Abercrombie & Fitch, Hollister or a Juicy Couture. The federal government is projecting enrollment in the exchange system to be around 7-8 million by the end of 2014.   As the law intends, the cost of insuring the most expensive users of the system must be offset by around 2.7 million of young invincibles between the ages of 18-35 for it to work. In the first month of enrollment, 26,794 people selected a health plan on the federal exchange website. The makeup of these enrollees has not been released by the federal government, but a demographic match to the patronage of a cafeteria restaurant is to be expected.

As exchange enrollment begins to materialize in 2014, public officials may wish to revisit the following if they hope to enroll the most coveted young adults:

1. A Retail Experience That Works - When the standard young people are used to is designing their own Nike shoes online or ordering Uber's transportation service at the push of a button, HealthCare.gov will find itself quickly falling off the browser's  "favorites" list.   In a November survey by USA Today, many young people will not try again until December and cannot even comprehend calling a 1-800 number for service.   We all like using intuitive technology that works ... but young people demand it even more ... a problem plaguing HealthCare.gov for the foreseeable future.

2. Changes to Employer Plan Dependent Definition  - Many employer plans used to only cover dependent children up to age 19 or 26 (if a full-time student).   On January 1, 2014, all employers (grandfathered and non-grandfathered) will be required to extend coverage to dependents up to age 26.   The chief actuary at CMS is likely regretting the legislature's decision to extend dependent coverage to age 26 for employers.   With 60% of American's covered by employer-based plans, this leaves a smaller group of of younger adults to enroll under the public exchanges.

  3. Affordable Coverage -  Older Americans will pay a higher rate than younger Americans, but the community rating is tiered using only three different age group bands. AARP lobbied strongly for this and it is an absolute boon to the baby boomers and a real shaft to Generation X, Y, and millennials who will bear the brunt of the top third-oldest risk tier by age. Age rating bands of 3:1 will prevent insurers from charging an adult age 64 more than three times the premium they charge a 21-year-old for the same coverage. As a result, young Americans will see higher premiums under the Exchanges than when they could have purchased coverage (Pre-ACA) in the private market when they used age rating bands of 5 to 1.

The Obama administration's federal study found that if all 50 states had expanded their Medicaid coverage the way they were supposed to when the law was passed, almost 90 percent of single Americans under 35 years could get coverage that cost less than $100 a month. They did not count on a Supreme Court ruling that enabled 25 states to opt out of expanding Medicaid coverage. This created unexpected "cracks" in the system when many young people who were to have qualified for Medicaid coverage will find they do not earn enough for subsidies under the Exchange.

In an astute political move, the Obama administration pushed back the requirements to release projected increases in health premiums for 2015 until after the November 2014 elections. In 2014 our young adults will eventually have to make a decision to pay the federal penalty (the greater of greater of $95 or 1% of AGI annually) or buy health coverage. Here's betting their XBox One they pay for neither.

A Debit Card for Dependent Care Savings Accounts?

Most employers will use a debit card to pay a service provider under our Flexible Spending Account (FSA).   We were curious if it is common to offer debit card functionality for dependent care savings accounts as well.   So we set out on a mission to survey the marketplace.   Here are our results ... Are debit cards available for dependent care accounts?

Select vendors that administer FSAs were surveyed and it was found that many do offer debit cards with the dependent care accounts.   When the debit card it swiped, the merchant category code (mcc) is used to determine if the charge is an eligible dependent care charge.

Is it common to offer a debit card with the dependent care account?

The majority of the vendors surveyed said it is not common to offer a debit card with the dependent care account.   This is mainly because there can be swipe issues with it through the automated mcc codes that get transcribed through the system.

Following are some of the issues with a dependent care account debit card:

  • * Dependent care provider does not accept debit cards
  • * Dependent care provide doesn't have mcc code, or has an incorrect mcc code
  • * Dependent care accounts must be funded before money can be taken out of the account (This causes the most noise because the card will be denied, even if the charge is only a penny over the funds available in the account.)

In summary, there is nothing wrong with allowing the aded convenience of a swipe when using your tax-efficient savings account vehicle for health or dependent care.   A company would be wise, however, not to tout the debit card features of DCSA given the low success rate of a successful transaction.

Uncle Sam Says Audit Dependents

This post is a must read for any plan sponsor who does client work with the federal government and submits employee benefit related expenses associated with contractors on the job.   I want to thank Dependent Audit Eligbility veteran, Brennan Clipp, for sharing with me an internal memorandum obtained  from the Federal Government's Deparment of Defense ("DOD").   Even if an employer  might not contract directly with DOD, we can be certain other government agencies issuing awarding contracts on large public works projects will follow similar protocol.   In fairness to our U.S. government, they are simply saying that reimbursement for the cost of fringe benefits are allowable from contractors and dependents of those contractors, as long as the dependent adheres to the eligibility under the plan.   Further, "contractor's that fail to implement sufficient procedures to identify and exclude health benefit costs associated with ineligible dependents are in noncompliance with FAR 31.201-6 and CAS 405.   They are recommending that contractors put in audit and process procedures to protect against ineligible dependents.  

As is a common practice for plan sponsors who do a lot of design and build  work for  the Federal Government, reimbursement is often a part of contract reimbursement sought for employee benefit expenses related to contractors and their dependents covered under an employee benefit plan.   The irony here is that the left hand of government recently gave us expensive health insurance legislation and the right hand of government is warning against seeking reimbursement of those expenses for [ineligible] contractor benefits.      

The Memo we obtained here  esentially warns a plan sponsor against submitting any healthcare related expenses associated with ineligible employees or dependents who do not strictly adhere to the eligibility guidelines under the ERISA plan.   Ms. Clipp's firm warns against an employer taking on this project themselves or leaving it to a service provider that does not follow evidence based guidelines for verification.   When done correctly, ineligible dependents can average between 12-18% disenrollment.   This does not come as a surprise with unemployment hovering near 10% and escalating healthcare costs.   Finally, an ongoing audit process can ensure ineligible insured's do not creep back onto the plan when the guard goes down.    Another reason for doing a dependent audit stems from the ERISA fiduciary obligation implicit to other eligible enrollees under the plan.  

There are a number of high-quality speciality firms and important cultural and senior management issues to address internally before human resources should launch.   The notion of eligibilty management as a cost saving tool is not new, but the federal government's validation of a dependent audit as a cost savings mechanism was strong enough to provoke this notice out to field auditors of the Federal Governement.  

  If you're not sure of the Top DOD contractos ... here's the list of the top 100:


Insurers Use New Technologies to Predict Life Expectancy & Lifestyle

It's called Perspective Modeling and it represents a new form of calibrating risk.   This new technology is being used by insurers to predict life expectancy and lifestyle. As we move towards an era in 2014 where individuals will have a choice between  public or private risk pools, look for more splitting of hairs from large payors to use the latest techniques to find the healthy and avoid those with higher risks.

Let BenefitU know how you feel about this video blog.

Pre-Existing Conditions on Endangered Species List

Dear Health Plan Sponsor: "My name is Pre-Existing Condition and soon I will become extinct.   We will look back in the annals of employee benefit text books and find I was used to deny coverage for those that needed it under health insurance plans."

Yes, it is true.   Our dear friend Mr. Pre-Existing Condition will soon become as extinct as the Do Do bird.   While I understand arguments against nasty insurance companies and employer-sponsored health plans denying coverage for someone who needs it, the pre-existing condition exclusion was purposefully used to help protect a risk pool from individuals jumping on and off an insurance plan in favor of using the   benefit only when the individual was sick.

Employers who self-fund their health plans have two paths they can elect to take.   The first path is to amend your health plan as the regulations require.   You must start by eliminating pre-ex for those under age 19, then open things up for those under age 26, subject to grandfather provisions.   By the first day of the 2014 plan year, you will be required to remove them entirely.   I have attached our health reform advisory practice guidance on how to repeal for enrollees under age 19 if you follow this first approach.

The second approach (which many progressive employers have already done) amends your health plan to remove pre-existing conditions entirely.   If you are in the camp that is afraid of the cost impact to your health plan, you can have your benefits consultant or health plan run the numbers to find out how many claims you are denying due to pre-existing conditions.   When you eliminate enrollees under HMO plans, those who send in HIPAA credible coverage notices without a 63 day break, consider new requirements for those un-grandfathered plans under age 26 and add back in the administration costs and goodwill lost ... my opinion is you will find the "pre-ex juice just ain't worth the squeeze."   This rationale is admittedly harder to make for a small business owner than a larger plan that can absorb a few outliers.   But if you use your health plan as a recruiting tool, it can make sense to clean out the closet and get rid of Mr. Preexisting Condition before the government puts him on the endangered species list ... right next to the DoDo bird.

Eliminate Pre-Existing Condition Exclusions on Enrollees Under Age 19 What's the Requirement?

All plans subject to the health reform requirements, including grandfathered plans, must remove preexisting condition limitations on enrollees who are under 19 years old.

What's the Deadline? First day of the first plan year that begins on or after September 23, 2010.   We believe "plan year" means the ERISA plan year, not the insurance contract year.

What's the Issue? Pre-existing condition restrictions are a dying pony.   Many plans no longer contain these restrictions.   For those that do, they must be amended to remove the restrictions as applied to individuals under age 19 and, by the first day of the 2014 plan year, remove them entirely.   Note that the obligation to remove the restriction for individuals under age 19 is not limited to dependent children; it applies to employees under age 19 as well.   Note also that exclusions that apply regardless of when the condition arose relative to the date of coverage are not pre-existing condition exclusions (for example, a plan provision excluding coverage for bariatric surgery is not a pre-existing condition exclusion, because it applies regardless of when the condition arose).

What Should You Do? Plans that currently apply a pre-existing condition exclusion to enrollees will need to be amended to remove the applicability of the restriction to enrollees under age 19. Ideally the amendment should be made prior to the beginning of the coming plan year.

Notice/Plan Amendment Obligation: Plans currently have an obligation to provide a General Notice of Pre-Existing Condition Restriction to enrollees prior to the date coverage begins. Plans should review this notice and modify it to make clear that it does not apply to enrollees under age 19. Amend the plan, ideally prior to the beginning of the coming plan year, to conform any pre-existing condition restriction to this requirement.

Employers Ponder Where to Put Lactation Stations

Amid a flurry of new federal legislation, employers are beginning to gain a better understanding of the new Breaktime for Nursing Mothers law (Section 4207 of PPACA).   Employers with 50 or greater employees must provide a reasonable break time for expectant mothers to express milk at the workplace.   Many sources say a reasonable break time can be estimated at 30 minutes for every 4 hours. Employers who are under 50 employees who can show signs  of hardship through "difficulty of expense" in complying will be exempt.   Our employee benefits counsel has confirmed that it is not based on the number of employees at a given location, but rather the total number of employees that work for the company as a whole, subject to Fair Labor Standard Act (FLSA) definitions.   Employers will not be required to treat the break as compensable time.   While this law is already the standard for many larger employer worksites, many  small to mid-size employers cramped for space are scratching their heads.   Furthermore, it is logical to  question a burden of compliance  for certain industries (oil & gas rig, coal mines, etc...)     The new guidance confirms the station cannot be a bathroom and that it must be free from intrusion and shielded from view.

While the effective date is coincident with the day President Obama signed PPACA into law, the rules for enforcement have not yet been released.   We anticipate Department of Labor (DOL) to provide the penalties for non compliance and give employers a time frame to  comply.   For more guidance on employer best practices, you can visit the United States Breastfeeding Committee available links.

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