3. It is vitally important that you understand the historical perspective and current plan designs of health care. This is C. 6 and 7 We will then discuss how the Patient Protection and Affordable Care Act of 2010 (”Health Care Reform”) affects our current health care landscape. 11/26/10 Thomas E. Murphy 3 Now – later – 2014 – & Beyond!
5. Origins of employer sponsored health care Wage controls and “fringe benefits” Current issue: the high cost of health care in the U.S. and the uninsured. The evolution of health care plan designs: market conditions, quality, efficiency, preserve choice, and reduce the cost. Note: the principle of compensating differentials. (Which billfold do we take from?) Thomas E. Murphy 5 Health Care – Historical Perspecive 11/26/10
6. Health care inflation jeopardizing Medicare and Medicaid. New employer plans designed to better control costs. Small employers struggling. Individual purchases require trade-offs. 11/26/10 Thomas E. Murphy 6 Health Care – Cost Crisis
7. Cost shifting to employees? We must introduce better health management and reduce health care utilization and the costs of treatment 11/26/10 Thomas E. Murphy 7
8. The 2010 Mercer Health Study Mercer Survey on H.C. Reform Getting Ready for 2011 Inflation for 2011 will be 9-12% unless, Cost savings are implemented. Could jeopardize the “grandfathered” status With cost cutting inflation can be 6% Employer coverage holding at 65%. R/X inflation at 7.6% Cost per single employee: $9,000. Premium contribution per employee – 23%. For family – 30% Thomas E. Murphy 8 11/26/10
10. Current Health Plan Design Features U.S. subsidies Some choices? Not taxed to employee as income Tax deductible to employer Why not just give the employee cash? Sponsor has negotiating leverage and cash is taxable. To insure or self-insure – the employer’s dilemma Cost sharing with employee/participant What is a TPA? Are there true market conditions? Thomas E. Murphy 10 11/26/10
11. What is causing inflation? H.C. Inflation exceeds other costs of doing business. Cost impedes access. Longevity New technology New drugs Inappropriate care Consolidation of health care practices and provider groups – more leverage Crazy quilt – administrative system Lack of true market conditions Consumer has very little “skin” in the game. It’s our prices, stupid. Thomas E. Murphy 11 11/26/10
12. Choosing the right health care plan - - - Employer’s Decision Choice, Quality, Cost What are the demographics of your workforce? What type plan would be a good fit? What are your labor competitors offering? What can you afford? Benefits Model 11/26/10 Thomas E. Murphy 12
13. What will be the impact of Health Care Reform? 11/26/10 Thomas E. Murphy 13
14. Internal fairness – coverage, plan benefits, same plan for employees with families and single? Should your plan lead, lag, or meet your labor market competitors? What are the relevant factors here? Can your plan positively affect employee behaviors? Effect better health and higher productivity? Do employees make cost effective choices? Thomas E. Murphy 14 Relevance of the Benefits Model 11/26/10
15. Is plan cost effective and well administered? Are there adequate provider choices? Does plan assure quality health care, choice, and cost effectiveness? Is it affordable for both employer and employee? Thomas E. Murphy 15 Choosing: Use the Benefits Model 11/26/10
16. Basic principles of today will probably endure in spite health care reform. Limits on coverage, choices of plans, reimbursement of providers Cost sharing. 11/26/10 Thomas E. Murphy 16 Plan designs on the precipice?
19. Designing the indemnity plan Basic features Special features Coverage Eligibility Which procedures covered? What level of reimbursement will be provided? Review and controls over health care resource utilization. What are the techniques? What do your employees need? What about cost sharing? Goal? Encourage quality? What’s your H.C. market? Employee choice? Encourage healthy life style? Thomas E. Murphy 19 11/26/10
20. Bundling or un-bundling? Coordination of benefits? What are your values? 11/26/10 Thomas E. Murphy 20 Designing the indemnity plan
21. Premium paid by employee Deductible Co-insurance Office co-pays Out-of-pocket maximum (usually = co-insurance amounts paid, not deductibles, etc) Life time maximum Tiering/Means Testing/Coordination Note: to keep “grandfathered” status plan cannot make certain changes in cost sharing 11/26/10 Thomas E. Murphy 21 Cost sharing – how does it work?
23. Problem: indemnity plan reimbursed “customary and usual” provider fees. No provider discounts So, TPAs and employer sponsors offered patient volume in exchange for discounts. How to get the volume? The PPO offered incentives (deductible) to participants. An attempt to influence their choice of providers. 11/26/10 Thomas E. Murphy 23 The evolution: The PPO
24. Easy to administer – the PPO New market conditions introduced. But, no real control over the utilization of health care resources. Providers prescribed more services to offset their reduced revenue caused by discounts And, the anticipation of increased volume was not really met. Thomas E. Murphy 24 So, what’s the problem? 11/26/10
25. Thomas E. Murphy 25 Enter the POS (Point of Service Plan) The Primary Care Physician is now “THE GATEKEEPER” 11/26/10
26. Same as indemnity plan Same as PPO Added feature: no visit to specialist unless the Gatekeeper makes the referral. So, now we have more market conditions and control over utilization. So, got a pain in your elbow? Go to PCP first. You get an aspirin instead of a referral to an orthopedic physician – cortisone injection or surgery. Thomas E. Murphy 26 Design features of POS 11/26/10
27. With a POS you are preserving the right of choice of physician or other provider. You are merely offering an incentive to choose a provider in the network. Quality is still an important value of the sponsor. But, cost effectiveness warrants some control over utilization of health care resources and the advantages of discounts. Thomas E. Murphy 27 Note: in or out of network! 11/26/10
28. No choice - assure network providers of real increased volume? Bigger discounts?. It’s an HMO (Health Maintenance Organization) Features? Same as Indemnity, PPO, and POS – except there is no choice! 11/26/10 Thomas E. Murphy 28 The evolution continues: the HMO
29. No out of network coverage Often the HMO comprises an integrated network of providers who coordinate care amongst specialists, have a single medical record system, and can offer high quality care. This is how care is “managed.” The incentives to select the HMO are lower premiums, first dollar coverage, and lower or no deductibles. Thomas E. Murphy 29 Design features of HMO 11/26/10
30. The plans developed treatment protocols and critical paths to better manage the care. Fee arrangements with HMO providers often included a capitated (per participant) annual rate. So, it was incumbent upon the HMO to manage the care. The fear that cost consciousness would imperil the quality of care did not happen. HMOs practiced preventive care to avoid catastrophic health incidents. Thomas E. Murphy 30 Design features of HMO 11/26/10
31. Thomas E. Murphy 31 Many employees chose HMOs and were very satisfied with them 11/26/10
32. Plan design and the market HMOs part of Medicare Significantly reduced costs Must exist in highly competitive markets. As the degree of provider competition increases so do the opportunities to offer managed care plans. Problem: HMOs required a lot of TPA administration and were “oversold” and “underpriced” to participants. 11/26/10 Thomas E. Murphy 32
34. Assumes short-term financial risk Develops network Negotiates reimbursement levels. Does pre-utilization reviews Establishes medical protocols Encourages integrated practices Sets full plan design including incentives Underwriting analysis. Manages Wellness 11/26/10 Thomas E. Murphy 34 What does a TPA do?
35. In highly competitive provider markets, why not directly contract with providers? Pay them a per capita fee and avoid all the costly administration. How do you select the right providers? Do you have the right incentives? This idea is called “direct contracting.” Thomas E. Murphy 35 Evolution – omit the TPA 11/26/10
36. Accountable Care Organizations Listen to NPR above ACO and Integrated Care Primary Care MDs Specialists Hospitals Full health care Capitated annual fee 11/26/10 Thomas E. Murphy 36 Click file below
37. Thomas E. Murphy 37 Consumer Driven Health Care Well, Mr. Brooks, It appears that your health care is up to just you and me. 11/26/10
38. Flexible Spending Account Health Reimbursement Account Health Savings Account (High Deductible Health Care Plan, HDHCP) 11/26/10 Thomas E. Murphy 38 Putting the consumer in the game
39. Consumer Driven Health Care Plans Tax favorable treatment Preventive care preserved High deductible IRS compliance A Health Savings Account Employer and employee can contribute to HSA. Typically linked with a PPO Can invest $$ in HSA. Can carry over money not spent. Cannot be used to pay premiums except for retiree health care. Preventive care can be excluded from deductible. Has all features of health care plan Thomas E. Murphy 39 11/26/10
40. Portable – it’s your money! Tax law, not your insurance company determines what is medical expense. Broader definition. Pre-65 withdrawals not for medical results in tax + penalty After 65 for non-medical expense, there is only tax and no penalty. Anyone can contribute and these are either “pre-tax” or deductible. HRAs are controlled by employer 11/26/10 Thomas E. Murphy 40 Other Features Of HSA
41. Will the cost of health care be reduced with HDHCPs? Will preventive care be a priority? Will consumers make more rational decisions? How will employers encourage higher levels of participation in CDHCPs? How can mini clinics and urgent care facilities be used? Thomas E. Murphy 41 Some observations 11/26/10
42. Minimum Deductibles: $1200/$2400 Maximum Contributions: $3050/6150 Out of Pocket Maximum plus deductibles: $5950/11900 Post 55 Catch up: $1000 Let’s do a calculation! Or, we could try another calculation! Or, how about this one? Thomas E. Murphy 42 HSALimits - 2011 11/26/10
47. A comprehensive approach to affect the risk factors that lead to chronic and expensive health conditions. Must have detailed personal health assessments from employees to pursue the program. Then, these steps should follow: Thomas E. Murphy 45 Wellness Programs- Catching on! 11/26/10
49. How do you measure the ROI? Is it particularly applicable to employers wanting longer service by its employees? How do you integrate it into the existing health care plan? Wellness is not sponsoring bike rides or hikes into the woods. Wellness is reducing costs and increasing productivity. Thomas E. Murphy 47 Some thoughts on Wellness 11/26/10
50. What are employers doing with retiree health care? Does it encourage employees to leave? How would you design a plan that would facilitate early retirement yet limit health care expense? Are younger employees really subsidizing the cost of retiree health care? Is this a problem? Thomas E. Murphy 48 Some other health care issues 11/26/10
51. Health care purchasing. . . Specialized TPAs are now Available. How do you measure a TPA? To insure or not insure Community or manual ratings Law of Large Numbers Pooling Risk premiums Administrative and retention fees How about a RFI or RFP from a TPA? Performance contracts with TPAs Steer employees to the most cost effective plans. You can reduce utilization or reduce the price. How would you do these things? Thomas E. Murphy 49 11/26/10
52. Expectations for TPA Select the Best TPAs Pay them for performance Quality customer service – EOB, phone calls, communications. Health insurance creates value for sponsor. Select the best providers for the network Health assessments Pay providers for performance. Use integrated care. Engage participants in their health care. Assure patient compliance. High participation rates for chronic disease management 11/26/10 Thomas E. Murphy 50
54. Thomas E. Murphy 52 And, provide more of this . . 11/26/10 Preventive Care
55. Health care insurance for employees is a value proposition! Simply loading costs on the participants will not work. H.C. can create new value! How? Accent is on prevention and avoiding the catastrophic health incidents requiring Emergency or long term chronic care. Thomas E. Murphy 53 New perspective . . . 11/26/10
56. Thomas E. Murphy 54 Good health is the passport to a good life . . . 11/26/10
57. Thomas E. Murphy 55 But health care is not free! (Photo: www.medicine.net) 11/26/10
58. So, let’s talk about reform! (Photo: www.medicine.net) The Problem is Cost Cost affects Access What is it designed to do? What are the choices? How will it work? What is needed? Who are the uninsured? How much will it cost? What changes for plan design? 11/26/10 Thomas E. Murphy 56
