February 2012 Newsletter

"There's a way to do it better -- find it."
---Thomas Edison

I believe in today's world Mr. Edison would be applying those thoughts to Healthcare, our New Frontier.

Recently, I was bestowed an honor to attend a National Accounts Healthcare Conference focused on finding a
better way. It was conducted by Blue Cross Consortium Plans titled: Transformations in the New Frontier. The
Consortium is a group of Blue Cross Associations across the country who make up their national accounts
distribution model. Collectively they insure over 100 million people, certainly carrying a strong influence on the
future of healthcare.

It was great to gain insight into what the market will be seeing in the next few years. If healthcare reform will be
credited with one thing, it will be innovation. From new improved pay structures for primary care doctors to
electronic medical data sharing to new delivery systems like Accountable Care Organizations (ACO) or Patient
Centered Medical Homes (PCMH) offering pay for performance bonuses for best outcomes. One hospital system
(10 hospitals) in Illinois testing an ACO model for the past year had early results showing that test group alone
lowered medical trend for the whole state's book of business by 1%!

Other innovations included technology for use in many facets of healthcare from showing transparency of provider
cost and quality ratings to apps for smartphones promoting games that engage wellness efforts faster than any
current efforts. Although change is difficult, many of these will have a fast adoption cycle as they mean so much
in cost savings and quality for everyone involved.

In the upcoming Supreme Court hearings on whether PPACA is constitutional, let's hope no matter how our
Justices rule it will still encourage innovation and early adopters to help find a better way to mitigate our rising
healthcare costs and bring us to the New Frontier in Healthcare.

Read about other innovative strategies in the Insurance Carrier and Provider Strategy section below.

I hope you find this month's newsletter timely and of interest.

Warm Regards,

Mike

__________________________________________________________________________________________

ph: (708) 845-3126 • mike.wojcik@thehortongroup.com

Market Trends and Strategies
Health Reform Law Gaining Wider Acceptance:
Harris Interactive/HealthDay Poll
"The public is still divided, mainly on partisan lines, as to whether to implement or repeal all, parts, or none of the
health care reform bill, says Harris Poll Chairman Humphrey Taylor.

The mid-January 2012 online poll found 36% of adults want the law repealed, 21% want it to remain as is and
another 25% would like to see only certain elements of the law modified.

As the Patient Protection and Affordable care Act (PPACA) is engaged, support seems to be increasing slowly
with time. Another way of looking at it is as more people enjoy some of the early benefits, the law will become
difficult to reverse.

Some of the more note-worthy approval spikes versus a survey in November 2010 include:

 71% support pre-existing condition coverage vs. 64%
 57% like coverage for dependents up to age 26 vs. 55%
 59% support insurance exchanges vs. 51%
 70% like tax credits for small businesses vs. 60%
 53% support employer mandate for groups over 50 vs. 48%
 53% support measuring effectiveness of treatments vs. 44%
 38% support an Independent Payment Advisory Board for Medicare spending vs. 32%
 The least supported aspect of the law is the individual mandate that requires all adults to have health
insurance or face a fine with only 19% of those polled supporting it.

The poll also found that 55% believe health care reform should be addressed by each state separately, rather
than at the federal level. For a copy of the Harris survey click here. For the HealthDay news article click here

Legislative Updates and Impacts
Have a Nagging Health Care Reform Question?
For Help Navigating Through The Health Care Reform I recommend the following sites:

Health Care Reform Latest News >>

FAQs from The Council of Insurance Agents & Brokers >>


This site offers easy to research answers to 287 high level Health Care Reform questions, all organized in 12
categories. Content is provided by the Council of Insurance Agents and Broker's attorneys at Steptoe & Johnson,
LLP., Washington, D.C. and updated weekly.

PPACA 2012: Comparative Effectiveness Research (CER)
Little heard of until now, is a provision of PPACA that will impact fully insured and self-funded plans with plan year
effective dates of October 1, 2012 and is scheduled to cease in 2019. The Comparative Effectiveness Research
(CER) provision will assess plans $1 per member (belly-button) covered under the plan and will increase to $2 in
2014. For more details click here.

CER fees will be used to help offset the cost of a newly created Patient-Centered Outcomes Research Institute
(PCORI) to advance comparative effectiveness research and help patients, clinicians, purchasers and policy-
makers make informed health decisions. It has a projected cost of $3 billion over the next 10 years.

 Priorities for research will fall into five categories:
o Research comparing options for prevention, diagnosis and treatment
o Research on improving health care systems
o Research on communication and dissemination
o Research addressing disparities (race, gender, socio-economic status)
o Research on how to accelerate patient-centered outcomes research

Click here for the PCORI website.

Early Retiree Reinsurance Program Update
The Centers for Medicare & Medicaid Services (or CMS) announced on Friday (February 17, 2012) that the Early
Retiree Reinsurance Program (or ERRP) had disbursed nearly $4.8 billion of the $5 billion the Affordable Care
Act appropriated for the program. The remainder of the $5 billion is committed for reimbursements already in
progress and program administration costs.

For more information on the update, please read the Feb. 17, 2012 announcment and review the Early Retiree
Program: Reimbursement Update February 17, 2012.

Release of Essential Benefits Bulletin-The Rest of The Story
On December 16, 2011 HHS released an informational bulletin outlining its proposed approach for defining
Essential Health Benefits (beyond the original 10 categories originally listed). This bulletin gave states more
flexibility and freedom to implement the Affordable Care Act.

For many years healthcare was looked at from a regional view. The Harris poll (above) even suggests state
governance would be better received. With input from the American people, the Department of Labor, the
Institute of Medicine and research conducted by HHS, a new approach was developed.


The original 10 Essential Benefits (categories) included: 1) Ambulatory patient service; 2) Emergency services; 3)
Hospitalization; 4) Maternity and newborn care; 5) Mental Health and substance use disorder services, including
behavioral health treatment; 6) Prescription drugs; 7) Rehabilitation and habilitative services and devices; 8)
Laboratory services; 9) Preventive and wellness services and chronic disease management, and 10) Pediatric
services, including oral and vision care.

 One of the three largest small group plans in the state by enrollment
 One of the three largest state employee health plans by enrollment
 One of the three largest federal employee health plan options by enrollment or
 The largest HMO plan offered in the state's commercial market by enrollment

This approach is moving forward, but yet to be finalized by most states. The plan must include at a minimum, an
equivalent to the original 10 coverage categories. In reality. most of the plan options offered include state
mandated benefits which are over and above the original 10 categories. Remember the original view of the law
was that if states offered mandated benefits that exceeded the 10 coverage categories, the state would be
responsible for funding subsidies on the Exchange that were impacted by the extra cost. Lucky coincidence--this
move now accommodates states that are heavy on state mandated benefits to buy some time as the federal
government will provide the subsidies through the transitional years of 2014 and 2015. HHS plans to re-evaluate
the state's essential health benefit package in 2016 and may exclude some state benefit mandates at that time to
cut back the cost. For more information on Essential Benefits, click here.

Public Sector News
Health Benefits for Local Government - 2011 ICMA Study
Through the collaborative efforts of the International City/County Management Association (ICMA) and Cigna, a
nationwide survey was conducted to better understand the challenges of providing comprehensive, cost-effective
health care benefit programs. Regardless of size or location, this was identified as a common problem.

Some of the study findings:

 The top three operating concerns included budgeting for the expense of employee and retiree benefits,
unfunded mandates and their ability to effectively serve the needs of their constituents - given the intense
pressures they face.
 The majority (75%) of local governments share the premium cost of benefits with active
employees. Nearly one-third pay the full premium costs.
 A slight majority of the plans were fully insured however as populations exceeded 500,000 the majority
were self-funded
 The majority have or intend to increase the share of health costs paid by employees
 Benefits included Medical, Pharmacy, Dental, Employee Assistance Plan (EAP) and Disability Insurance
 Overall, about 26% of local governments currently offer account-based high - deductible health plans


 Most (75%) continue to offer medical coverage for early retirees, but not pharmacy or dental, 60% provide
coverage after age 65
 Top Workforce Health Concerns included Obesity and Weight Control, Stress Management and Fitness.

Cost saving strategies include:

 Up to 89% have introduced health promotion programs
 65% have taken on or are planning significant increases to co-pays, deductibles, or coinsurance
 61% are ramping up communication and education and promoting living healthier lifestyles.
 60% audit eligibility
 48% create incentives to encourage employees to use high quality/low cost hospitals and physicians
 41% have reduced plan options
 35% reward / penalize employees based on their tobacco-use status
 34% have taken action to introduce programs to help employees maintain their body mass index (BMI)
with target levels

Top Purchasing Considerations: (regardless of size and location)

 Price / copays and other charges
 Network access and discounts
 Ability to improve employee health through wellness programs

Local government concerns of controlling healthcare costs are of great importance in today's economy. They
tend to be even more challenged due to industry characteristics such as collective bargaining, a very loyal and
long term work force and as a result an aging population and a large dependent participation pool. The
ICMA/CIGNA study gives a very good overview of not only the challenges but the solutions to mitigate rising
healthcare costs. For a copy of the full study, click here.

Insurance Carriers and Healthcare Providers In The News
WellPoint to Invest $1 Billion to Boost Doctors Fees By 10%
Starting this summer, WellPoint Inc, will increase primary care doctor fees by 10% and include additional
payments to treat patients it covers, which may increase their overall fees by as much as 50%. It is projected the
new approach will infuse an additional $1 billion into primary care. The offset can be fewer emergency-room
visits and hospital stays.

Without change, the Primary Care segment of healthcare is projected to face great shortages over the next
decade. To read more click here.


United Health Will Tie Doctors' Payments to Quality of Care in U.S. Shift
United Health Group, Inc., the largest U.S. health insurer by sales, will pay doctors based on quality of their care
in a cost -cutting effort that also benefits the company's consulting business. United expects to save twice as
much as it would spend on incentive payments for doctors because patients will be healthier. The program is
expected to extend to 70% of United's commercial business by 2015, up from less than 2% now. For more on
this story click here.

Insurer Aetna Plans to Beef Up Primary Care Pay
Health Insurer, Aetna, intends to pay doctors in practices that qualify as patient-centered medical homes an extra
$2 to $3 per member per month. The practice must be recognized as a (medical home) by the National
Committee for Quality Assurance.

Patient Centered Medical Homes try to care more for all of a patient's health needs instead of just treating the
symptom a patient came in for. Early reports show considerable savings from PCMH models. For more on this
story click here.

Human Resource Center
How to Handle Medical Loss Ratio Refunds
In late 2011, the Department of Health and Human Services released both a final and interim final rule regarding
Medical Loss Ratios (MLR). The Department of Labor also issued a technical release giving direction to
employer--sponsored health plans governed by ERISA as to how to handle rebates. The final rule was published
in the Federal Register on December 7, 2011, 76Fed Reg 76574

The advisory discusses the obligation of plan sponsors receiving rebates. The requirements differ based on plan
type. The advisory separately addresses rules for plans subject to ERISA, state and local governmental plans,
and church plans. Special rules for terminated plans are also discussed.

Insurance companies must report their MLR data to HHS on an annual basis so that residents of every state will
have information on the value of health plans offered by different insurance companies in their state. Insurers will
make the first round of rebates to consumer in 2012. They must be paid by August 1st each year. The MLR rule
does not apply to self-funded plans. Under the MLR, health insurers must spend a minimum percentage (80% for
individual and small group market accounts and 85% for large group accounts) of the dollars they collect through
premiums on actual medical services, and must limit the amount they spend on administrative costs, including
salaries, profits and commissions.

In the event the insurer fails to meet the ratios, it must issue rebates directly to the plan sponsor who in turn must
divide and use the portion of the rebate attributable to the employee's premium co-share--"for the benefit of the
subscribers".


The rule states this can be done in one of three ways: 1) reduce employee's co-share for the next policy year for
all subscribers covered under any group health policy offered by the plan; 2) reduce employee co-share of the
next policy year for only those subscribers covered by the group health policy on which the rebate was based; 3)
provide a cash refund only to subscribers who were covered by the group health policy on which the rebate is
based. The rule states employers can use whichever method is easiest.

It is anyone's guess yet as to whether groups will see a rebate this year. According to the U.S. Government
Accountability Office, of data they studied in 2010 at the request of Congress, most insurers would have met or
exceeded the 2011 PPACA MLR standards.

Click link to an HHS fact sheet on the final and interim-final rules

Horton Webinars & Seminars
Train the Trainer
Horton workshops are designed to keep busy professionals current on a range of insurance related topics. The
Horton Group engages some of the brightest minds in the country to help you fine-tune your professional skills
and assist in achieving your organizational goals. Our workshops are offered at several convenient locations
throughout the year. In addition, we can present these workshops at your company location or for your
association or trade group.

As always - if you would like to register for a webinar or workshop, please do so via the following link:

http://www.thehortongroup.com/Insurance_Workshops/


February 2012 Newsletter

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