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Human Resources and Surviving Health Reform

As the first snowflakes of change fall on the eve of health reform, HR professionals may soon wake up to an entirely transformed healthcare delivery landscape.  The Patient Protection and Affordable Care Act (PPACA) clearly will impact every stakeholder that currently delivers or supplies healthcare in the United States.

While the structural, financial, behavioral and market-based consequences of this sweeping storm of legislation will occur unevenly and are not fully predictable, this first round of healthcare legislation is designed to aggressively regulate and rein in insurance market practices that have been depicted as a major factor in our “crisis of affordability” and to expand coverage to an estimated 30 million uninsured.  However, fewer than 30 percent of employers polled in a recent National Business Group on Health survey believe reform will reduce administrative or claims costs.

Yet, it is unlikely that reform will be repealed.  For all its imperfections, PPACA is the first in a series of storm systems that will move across the vast steppe of healthcare  over the next decade resulting in a radically different system.  Whether reform concludes with a single payer system or emerges as a more efficient public-private partnership characterized by clinical quality and accountability remains obscured by the low clouds and shifting winds of political will.  One thing is certain during these first phases – inaction and lack of planning will cost employers dearly.

As the U.S. government struggles to rein in an estimated $38 trillion in unfunded Medicare obligations, the private sector and commercial insurance will feel the weight of the government’s efforts to reduce costs and impact our $12T of public debt.  HR professionals will have to act thoughtfully to insulate their plans from the inflationary effects of regulatory mandates and cost-shifting.

So while many HR professionals are getting hit from all angles – finding it difficult to  continue to transfer rising costs to employees, unwilling to absorb double-digit trends, under-staffed to intervene in the health of their populations and uninspired to assume the role of market catalyst to eliminate the perverse incentives that reward treatment of chronic illness rather than its prevention – they must forge ahead to address the intended and unintended impacts on the estimated 180 million Americans covered under their employer-sponsored healthcare plans.

To prevail over the elements, one must have a map and a flexible plan.  It also helps to have a qualified guide.  Consider the following as you brace for the “new normal.”

  • Think Twice When Someone Suggests Dumping Health Coverage– Many smaller and razor-thin margin employers will be tempted to drop medical coverage and pay the $2,000 per full-time employee penalty – essentially releasing employees to buy guarantee-issue coverage through health exchanges, which will be available in 2014.  Aside from impacting employers’ ability to attract and retain employees (consider how many of your employees will fall into the class of individuals eligible for federal subsidies), the assumption that the $2,000 will remain the baseline assessment per employee for those choosing to not offer coverage is a dangerous variable.  While it is clear that PPACA as it is currently constructed creates obvious incentives for employers to drop coverage and allow those eligible for federal subsidies to purchase through exchanges, it is unclear how the government can continue to subsidize proportionate contributions on behalf of those buying through exchanges when costs start to inevitably rise.  The General Accounting Office ( GAO) has already forecasted an increase of almost $500B in cost due to rising costs of subsidies as medical costs trend upwards. The forecasted CBO savings of $140B versus the GAO’s estimates of a $500B increase in costs have yet to be reconciled. Whether the $2,000 penalty was intentionally set low to entice employers to drop sponsored coverage and move America one step closer to a national system, or whether someone from the CBO missed a decimal, we expect the employer penalty for dropping coverage to increase as costs rise.  Employers should be certain to model their own costs to subsidize minimum levels of coverage today against an uncertain future of variable taxes that will only increase to fund coverage subsidies.
  • Pay attention to Section 105(h) now. – Many employers may be unaware that self-funded plans that discriminate in favor of highly compensated employees must comply with Code Section 105(h) non-discrimination rules.  As of the first plan year following September 23, 2010, these rules now will apply to non-grandfathered, fully insured plans.  Insurers may choose to exercise their right to either load rates for potential adverse selection or decline to quote because employers have failed to meet minimum participation percentages.  Section 105(h) testing is critical for industries, such retail, hospitality and energy that historically have excluded various classes of rank-and-file employees or provided better contributions and/or benefits to their top-paid groups. Penalties for not complying with the new regulations are $100 per day per employee.
  • Understand the sources of cost shifting pressure – As Congress and state governments wrestle with Medicare and Medicaid reimbursements and begin to focus on fraud, over-treatment and accountability for clinical outcomes, providers will feel the increasing pinch of reimbursement reform and will pivot in the direction of trying to shift costs to commercial insurance.  Physician hospital organizations (PHOs) and other integrated healthcare delivery systems – wherehealth systems operate primary care, specialty and inpatient care – are accelerating – giving more clout to providers in contract negotiations and increasing commercial insurance unit costs, potentially exacerbating already conservative insurer claim trend assumptions.  HR professionals will need to better track employee utilization patterns for in-patient facilities especially in  high-use urban and rural commercial hospitals that also derive a large percentage of their revenues from Medicare. If a hospital derives 60% of its revenues from government reimbursement and 40% from commercial insurance, proposed fee cuts will impact facility revenues and create pressure to cost shift to private insurance.  An understanding of hospital utilization and consideration of tiered networks can help insulate your plans and drive lower costs.
  • Don’t be intimidated by self-insurance – Many employers underestimate the advantages of self-insurance and overestimate its complexity and risk.  But, in a post reform world, firms with more than 200 employees should give serious consideration to partial or total self-funding.  Aside from the total transparency of commissions, fees, administrative expenses and pooling charges, employers own their own data. The sooner employers get comfortable with self-insurance as a risk financing strategy, the sooner HR professionals can construct loss control programs that can mitigate claims costs. By self-funding, employers may better manage their population’s health risk; may avoid a myriad of state-based mandates legislated to fund potential shortfalls should local exchanges prove inadequate to contain costs; and may increase flexibility with respect to plan design. Be certain to understand the economics of your self insured arrangement.  A cheap third party administrator with weaker provider discounts and limited medical management capabilities ultimately costs you much more than services provided by a national insurer with better discounts.  In other cases, insurers may have more than one PPO network and assign the less aggressive discounts to their self funded TPA based clients.  Make sure you press for the best possible discounts.
  • Forget Wellness – Think Risk Management. – Wellness has become a broad-brush term to describe any sponsored effort at health improvement. Forget wellness. Population risk management (PRM) is the operative term to describe a process of understanding embedded health risks and structuring plan designs to remove barriers to care and keep people healthy. PRM requires access to clinical data, cultural engagement and designs that have consequences for employees who do not engage. If employers do not understand the risk within their workforces, it is impossible to improve results or be confident that plan changes will drive a desired result.  For example, more than 50 percent of claims arise out of modifiable risk factors and as few as five percent of employees drive 50 percent of claims.  The great news is PPACA actually increases employers’ ability to charge up to 30 percent more in premium for individuals who do not actively get and stay healthy.  Also, employers that establish comprehensive workplace wellness programs and (1) employ less than 100 employees who work 25 hours or more per week and (2) do not provide a workplace wellness program as of March 23, 2010 can take advantage of available government grants.
  • You are the “market forces” everyone keeps talking about and you need to use this power to influence on-going reform. – Employers purchase healthcare for more than 180 million Americans – about 60% percent of all individuals who have healthcare coverage, but ironically feel less empowered, informed or in control of their spending or their employees’ behavior as they access the system.  HR professionals must become activists for public health improvement and change – promoting healthy behaviors, transparency and accountability while putting an end to public-to-private cost shifting, overtreatment, fraud, abuse and clinical variability. Congress will only listen to employers because the other stakeholders have a perceived conflict of interest in how health reform is ultimately resolved.  Employers must build up the courage and resolve to begin to reshape the local, regional and national delivery models that result in overtreatment and lack of accountability for poor outcomes.

As we look out the window, the full force of reform is still swirling somewhere off in the distance.  As we hunker down and adopt this new legislation, the question for many in HR will be – will reform happen for you or happen to you?

Mike Turpin is frequent speaker, writer and practicing benefits consultant across a 27 year career that spanned assignments in the US and in Europe.  He served as the northeast regional CEO for United Healthcare and Oxford Health from 2005-2008 and is currently Executive Vice President for Benefits for the New York based broker, USI insurance Services.

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25 replies »

  1. Employer Based Health Care that is the sole responsibility of the employer. Would not be a benefit to the employee as much as a precursor to shed expenses,for the employer. I agree with Margalit; are lives are being manage as if we are livestock. However I will go one step further and say that is exactly true.
    Employers don’t want the responsibility of deciding the details of Health Insurance and secondly it becomes a buffer of non accountability for employers.
    I don’t care what they use as a excuse for employer based Health Care. It is not to recruit and maintain employees when it constantly becomes butchered into a entitlement contracts with insurers.Leaving greater and greater portions of out of pocket expenses to be levied on the employee. Yes! you are the CASH COW for Health Care and a contributor to insurer and provider entitlements.
    Furthermore, Employers motivations are based on a policy that maintains employer share and passing on increases to the employee. My employer decides policies like shooting craps. Certainly not the means that the employee would have chosen a policy.
    I’m glad that this article has acknowledged that Congress has failed to reason with the Citizens. How lame can it be ;that its because we have a conflict of Interests?
    Hay, Can you see me , can you hear me, Im in your face! Its not a conflict! We are the targets, You know the red rings with the bulls eye in the middle! Targets of enslavement and exploitation! It is a fact that the trifecta of Government,insurers and providers have a much greater conflict of interests when it comes to citizens.Than citizens have on these three enities.
    In my case, I have the greatest steak in my policy than my employer. Yet, I have to go thru the employer?
    Look folks,The truth is using health insurance as a employer base enticement. However, it has been forever fleeting as policies lack substance and premiums continue to rise.
    So be it for me to vent upon this blogosphere. Those holders of America’s richest and preditory capitalist.Who thrive like locust destroying everything in their path.Buying law makers to set a path against all humanity. Oh what a world we live and die in.

  2. Hmmm, so there are commenters here who do not trust government to provide health care benefits, and there are others who do not trust employers to do same. I agree with both: I don’t trust anyone else but me to manage my health care benefits, including the insurer itself, so that is why I have an HSA now and will manage my expenses unless catastrophic events force access of such insurer coverage, which I am sure I will nickeled and dimed to utilize if such calamity occurs.
    And there it is, who is best to manage your needs? Yourself and family. Not the special interests of Liberals and government, nor the special interests of Conservatives and Big Business. Sounds like one in the same to me in the end: A few people with power trying to dictate what others need and have no regard what the outcomes are in the end, as long as those in power get the perks and keep the status.
    So, America, not that I am a Tea Party fan, as it is just ultra conservative GOP in disguise, but, we need real middle ground representation and end being the ping pong ball being slapped back and forth visciously by these extremist bastards!
    Squash this health care deform legislation, squash this big business/big union screwjob, and maybe we can work on real reforms in health care.
    Yeah, well, not looking forward to monkeys pushing their way out of the south end, so hopefully those trashing the system further are voted out, look for other profit agendas, or just die!
    harsh, but from the heart!

  3. Margalit – There are a couple of differences between the Swiss system and ours regarding how health insurance is priced which I don’t have a problem with but you might. Specifically, insurance premiums are computed on a per capita basis with lower rates for children than for adults. This means that a family with, say, four children will pay a higher insurance premium than a family with one or two kids for the same set of benefits. Second, people who live in a high cost canton (there are 26 cantons in Switzerland) will pay up to twice as much as a family of similar size in a low cost canton for the same set of benefits. This is quite different from how Medicare is priced and is also different from how commercial family health insurance coverage is priced in the U.S.
    According to the August, 2010 Health Affairs article, about 45% of the Swiss population qualifies for a subsidy and, as I understand it, people are generally expected to pay about 10% of income themselves toward the cost of their health insurance premiums plus deductibles and co-pays before the subsidy kicks in. Dental care is generally not covered, nor is long term care. Altogether, the Swiss pay about 28% of healthcare costs out-of-pocket with long term care being the single biggest piece of that.
    There are 84 insurance companies in Switzerland for a country with only 7.8 million people though the six largest carriers control about 80% of the market. There are complaints among some in the population about the high administrative costs, especially for executive salaries, which is driving interest in further consolidation among insurers. Personally, I think six carriers would be plenty for a country with a population about equivalent to New Jersey’s and a land area about twice NJ’s size.

  4. “Do you ever wonder what your beliefs would be if you based them on actual facts or experience instead of your political bias?”
    Nate, do you ever wonder what your responses would be if you actually read what people write?
    We were talking about the Swiss, like in Switzerland, system.
    I did say that when it comes to talent, people think about those 1-2 “highly skilled” employees. How about the remaining 198 workers?
    Since you mentioned bias, did it ever occur to you that you may have some serious bias yourself?

  5. “There isn’t much competition when it comes to unskilled, or low paid, labor and this is where the problems usually are.”
    Margalit you make the same liberal mistake time after time. What do you base this comment on? Your years of running small businesses reliant on low skilled workers? You have a political bias that permeates everything you based that has no basis on actual experience, everything you believe is from what your told to believe and you never question it.
    Have hundreds of small business clients for close to two decades I can say without hesitation that almost every owner had 1-2 key workers they rely on. That is one reason why owners provide insurance and care about their workers, without them they wouldn’t have a business. Rather it is the guy running the trench digger, the big printing press, or the best counter installer, very few businesses have monolitic skilled work forces.
    Do you ever wonder what your beliefs would be if you based them on actual facts or experience instead of your political bias?
    Curious which Swedish model it is you want to copy, the single payor or the new Market driven one they are switching to?
    “In 2007 legislation for the first time allowed hospitals to be privatized, and for-profit healthcare operations to be launched. By 2008 a third of outpatient visits were to private providers, paid primarily by public insurance since fewer than 5% of Swedes have private health insurance. This year the state’s monopoly on running pharmacies has been broken, allowing competition from privately run operations.”
    This sounds like Obama care;
    “A 32-year-old took the needle into his hands when he tired of the wait at Sundsvall hospital in northern Sweden and sewed up the cut in his leg himself. The man was later reported to the police for his impromptu handiwork.”
    Some interesting on the swedish healthcare strikes, not sure if they really are sexist but it appears the low wages aren’t going to last. 9% will be a fond memory.
    Will Amerian’s accept this?
    “Mr. D., a Gothenburg multiple sclerosis patient, was prescribed a new drug. His doctor’s request was denied because the drug was 33 percent more expensive than the older medicine. Mr. D. offered to pay for the medicine himself but was prevented from doing so. The bureaucrats said it would set a bad precedent and lead to unequal access to medicine.”
    “Malmo, with its 280,000 residents, is Sweden’s third-largest city. To see a physician, a patient must go to one of two local clinics before they can see a specialist. The clinics have security guards to keep patients from getting unruly as they wait hours to see a doctor. The guards also prevent new patients from entering the clinic when the waiting room is considered full. Uppsala, a city with 200,000 people, has only one specialist in mammography. Sweden’s National Cancer Foundation reports that in a few years most Swedish women will not have access to mammography.”
    Margalit are you ok with women not have access to mammograms?
    You want the Swedish system but I am certain you would not accept the rationing. Our current system could acheieve equal or better results if our public accepted the rationing they do.

  6. I would be very happy with a Swiss model, and I would not make the two changes suggested by Barry. The first one will just add administrative costs and the second one will keep the profit camel’s nose under the tent.
    I understand that the employer based system is deeply embedded in our system, but we have a history of changing deeply embedded stuff when it is the right thing to do.
    Nate, I do understand your deep mistrust of Government, which by the way is not always run by Democrats. I hope you can understand my deep mistrust of private corporations who have an equally long history of taking the public to the cleaners, so to speak, and no built in mechanism to ensure ethical/moral considerations are part of decision making. Not that it will help much on this side of the ocean, but I’m happy to see that Pope Benedict is expressing the same concerns.
    In an economy where unemployment is high and likely to stay high for the foreseeable future, I don’t find any comfort in the supposed competition of employers for talent. Furthermore, I somehow think that when people talk about this type of competition, they usually have in mind highly educated and highly skilled workers who can easily afford health insurance. There isn’t much competition when it comes to unskilled, or low paid, labor and this is where the problems usually are.

  7. Paolo – Personally, I wouldn’t have a problem with the Swiss model for the most part. Indeed, if it were up to me, I would phase out the employer provided health insurance tax preference completely and offset the tax impact on individuals by lowering marginal income tax rates, raising the standard deduction and increasing the Earned Income Tax Credit (EITC) to ensure that the federal government does not collect any more net revenue than under the current system. The two aspects of the Swiss model that I would change are (1) allow the purchase of a catastrophic only policy, at least for those who can pass an income test to show that they can afford to pay for routine care without subsidies and (2) allow insurers to earn a profit on the basic plan which, in Switzerland, is quite comprehensive, though it does allow for deductibles between the equivalent of about $300 and $2,400 or so. As you probably know, Swiss insurers cannot earn profits on the basic plan but they can profit from selling supplemental insurance.
    While you are correct that our employer based system is an accident of history related to attempts to get around World War II era wage controls, the fact is that the unions are wedded to it and will defend it at virtually all costs. The Wyden-Bennett proposal sought to phase out the employer tax preference in favor of individual tax credits to purchase health insurance but it went nowhere. Even the tax on so-called Cadillac plans was heavily watered down and won’t even begin to take effect until 2018. The bottom line, for better or worse, is that employer based insurance is deeply embedded in our culture and we will have to build a reformed healthcare and health insurance system that continues to incorporate it.

  8. In regards to the second part of Barry’s comment, if your a liberal, there is no money to misredirect, earmark, or spend for other services. Catostrophic insurance is a very efficent, low margin business. Liberals in the 106 years they have been proposing national healthcare have never truly been interested in national healthcare, they are only interested in all the money spent on national healthcare and all the great things they could do if they had control of it. That is why Medicare turned out the way it did, it was never about what grandma needed, it was all about what the Democrats needed. This is why I find it so ironic people like Margalit have so much trust in the govewrnment to do the right thing when they never have.
    Margalit would you be so kind as to read the history of how Medicare was passed then explain to us why we should trust the democrats? Even the Democrats who voted on the bill said the public was hoodwinked. Why didn’t they pass the catostrphic coverage the public thought they were instead of the crappy plan they did? Why does their 45 years of lies not bother you at all or lower your trust in them to do right a bit?

  9. A third solution is well-regulated individual private insurance, similar to the Swiss model. I want to minimize the role of both government and employer in the type of care I get.
    Employer-based insurance is an anomaly. It’s a historical accident that persists only because of the unfair tax exclusion of health benefits provided by companies. It encourages wasteful over-allocation of resources into health care. It hinders employment mobility. It’s just a matter of time before this form of insurance goes away.
    Government insurance has left the train station 30 years ago. It’s not going to happen.
    The future is private insurance/providers with strong regulations to guarantee access and align private incentives with the public good.

  10. The argument between Marglait and Nate as to whether government (taxpayers) or employers (employees as part of their total compensation) should finance the cost of health insurance boils down to the following:
    Margalit prefers government (taxpayer) financing because she thinks it’s well intentioned, claims to have our best interests at heart, and isn’t trying and doesn’t need to make a profit. Nate wants employers (employees) and the free market to handle the job because if employers (companies) don’t satisfy enough customers and employees enough of the time, they will either go out of business or will find it difficult to attract enough competent employees. In short, they are subject to the discipline of the market. I prefer the latter approach, some bad actors here and there notwithstanding.
    Regarding the issue of catastrophic vs. comprehensive health insurance, I think if we opted for catastrophic insurance, we probably could have had national health insurance 40 or 50 years ago. Insurance against the cost of very expensive claims is what the middle class needs most. The upper half of the income distribution should be able to handle the cost of routine care out of pocket just as we pay for oil changes, leaky faucets and burnt out light bulbs. We could help the poor cover the cost of routine care through means testing just as we do today with free and reduced rate lunches for lower income school children while the middle class, upper middle class and the wealthy pay their own way as they should.

  11. ” very few things in health care are luxury items”
    This is an opinion that many people would disagree with. Is spending 100,000s for an extra month of life not a luxury? You know the studies on how much money is spent on end of life care, most of it with no measureable benefit. Stents, what do they really accomplish? All the extra imaging we do? A large chunk of our medications treat conditions that don’t exist or could be better treated with diet and exercise but a pill is easier to take, i.e. a luxory.
    “You either get the best quality, or suffer the consequences (literally)”
    So everyone should have their cold diagnosied by a team of experts? Yopu don’t mean either of your first two statements, their absurditity is obvious. You have been listing to too many Cleveland Clinic commerciala, every life doesn’t deserve world class care for routine treatment.
    “Widely fluctuating and unexpected catastrophic costs are the second difference. Most folks cannot budget and save for a major disease”
    If only there was some financial instrument that could help us with that. I think death, auto accidents, and house fires are also major unexpected events. You don’t see the governemnt forcing everyone over 65 to sign up for burnt out light bulb, empty tank and leaky faucet insurance do you? Why did it create Medicare and not cover major prolonged illness? I think no matter how obvious the problem your political bias will prevent you from ever seeing that government is the problem. Medicare should have been catostrophic insurance, that is what they told the public they were passing. That is what the public wanted, and that is what grandma needed, they passed the exact opposit and 45 years later you still can’t admit it.
    ” I feel that even with all the corruption and inefficiency, we have infinitely more control over Government than we have over corporations of any size.”
    Wow. can’t argue with opinion but sure can look at it like it is bat Shit crazy and scratch our heads. Next time any level of government passes a bill I don’t like I’ll tell them I quit and go look for a new government and see how that works out.

  12. Nate, let’s talk about food. First, the Government is heavily regulating food, from subsidies to quality and labeling requirements. The subsidies are influencing pricing and, in my opinion, in a way that does not benefit the public.
    True,the Government is not setting the price for each box of crackers for those over 65 and is not forcing anybody to go to the store and buy a certain amount of food.
    One difference is that for any given individual basic food needs are never surprisingly unexpected. There is no such thing as a catastrophic need for hundreds of thousands of dollars worth of food.
    Also, food can vary widely in quality and price without affecting your physical well being. The expensive foods and delicacies are luxury items, not necessities.
    On the other hand, very few things in health care are luxury items, and those that are should not be provided by Government (the European way). In health care there is no “generic” bypass surgery or “day old” cancer treatment. You either get the best quality, or suffer the consequences (literally).
    Widely fluctuating and unexpected catastrophic costs are the second difference. Most folks cannot budget and save for a major disease, not because they are irresponsible, but because they could never amass the required sums of money, even if they worked a lifetime. This is why we need to pool resources and protect ourselves and our community from these risks.
    The only questions remaining are the definition of community and the choice of pool administration.
    Your preferred choice of having employers make all the decisions regarding how much we should contribute to the pool, what risks we want to cover and who is allowed in our community are frankly, a bit scary. I don’t think employers are by definition evil, but I have no desire to abdicate rights to corporations, no matter how “benevolent” they currently are. The thought of a master employer in charge of “lives”, and now also in charge of lifestyles, makes me cringe.
    I am not ecstatic about allowing Government to make those choices either, but I feel that even with all the corruption and inefficiency, we have infinitely more control over Government than we have over corporations of any size.

  13. Nate – I was referring to the big national carriers – the Blues, United, Aetna, Cigna, etc. If I have insurance with a particular carrier and I need a surgical procedure, I might be able to get a range of what the charges might be but not generally precise contract rates. I happen to have coverage through my employer with Highmark Blue Cross. If I don’t have insurance with them, ask a question like that and you’re treated like you’re trying to penetrate a CIA database. The hospitals won’t tell you what their contract rates are either even if you’ve gotten care there on an out of network basis. They (both hospitals and insurers) hide behind confidentiality agreements. Which side is insisting on those as part of their contracts or is it both sides? I’ve had insurance executives tell me that disclosure of contract rates could actually raise costs because providers who are paid less will clamor for higher rates while those who are paid more don’t have any interest in lowering their rates. Do these confidentiality agreements exist or not and, if they do, what needs to be done to eliminate them? I always appreciate your insights.

  14. ” Government intervention ensures that every person has something to eat”
    Yes but look how it is done. Do we have government farms? Government grocery stores you are required to shop at? Government mandates that you eat? Or Government mandates that Morton’s feed anyone that shows up at their door? If Government ran healthcare like they do food stamps we wouldn’t be in the mess we are. Farmers and food processors are pretty much free to innovate and deliver as they see fit and government subsidiezes the free market for select individiuals.
    You can live a lifetime without ever seeing a doctor, you can only go 30 days without food. Why does healthcare require complete government take over while we can manage just fine in regards to food?
    ” The insurance industry would oppose both of those ideas but perhaps legislation or regulation could force the issue.”
    Who’s posting under Barry’s name? The “insurance industry” who ever that monolithic entity is, already does this. I do this now as do many insurance companies. Not sure what “insurance industry” your referring to.

  15. I think it would be helpful if fully insured employer groups had full access to their claims data and it would be enormously helpful if everyone, including both referring doctors and patients, had access to actual contract rates paid to providers, especially hospitals. The insurance industry would oppose both of those ideas but perhaps legislation or regulation could force the issue.
    As hospitals have consolidated in recent years and bought up many physician practices, they acquired outsized bargaining power vs. insurers and they took full advantage of it. Moreover, even when in house doctors are on salary, their bonus compensation is often driven by how many procedures they do and/or how much revenue they generate for the mother ship. To create some countervailing power against these trends, we need, in addition to the previously mentioned disclosure of contract rates, more limited network and tiered in network insurance products whether employees like it or not. Such strategies should help to steer patients toward the most cost-effective, high quality providers.

  16. “for some reason we can’t trust the free market for healthcare, that same quasi free market that feeds, clothes, and shelters us.”
    The food market is a regulated market, not a free one. Government intervention ensures that every person has something to eat (1 in 7 Americans receive food stamps). This is true here and is true everywhere else in the world where there is a government. This is true now and was true since antiquity when Roman emperors gave free bread to the poor.
    A non-regulated free market for health care is as much of a fairy tale as a non-regulated market for food. The only countries in the world where there is no government intervention in health care are very poor countries with very inadequate care.

  17. We need to see the distinction between something being required of employers, and employers in good will assuming the responsibility for their employees. A certain political side likes to demonize all emoployers as profit driven and willing to sacrafice the lives of their employees for a penny. Even in this recission I have seen many clients dip into personal savings and stop taking a paycheck before they would consider eliminating their employees health insurance plan. An employer has an invested interest in healthy happy employees, I see no logical reason for why our government casr such dispursion on that and insist in limiting it.
    If an employer shouldn’t worry about their employees health why should they worry about their financial future, why have pensions and 401Ks? Funny you don’t see the public unions demanding we drop pensions and go single payor on retirement? Think of all the admin fees and mutual fund profits we could get rid of, All the loses that could be prevented if everyone was forced into T bills.
    American business is the most innovative force in the world, why wouldn’t you want to free it to tackle the problem of healthcare? Electricity to your home, cars, airtravel, all the things we have accomplished but for some reason we can’t trust the free market for healthcare, that same quasi free market that feeds, clothes, and shelters us.

  18. A couple of thoughts: Nate, I think every employer should be self funded. Insurers make 6 times the profit on insured business than on self funded business. The majority of profits are derived from insured, pooled products where underwriting is opaque and margin is leavened throughout the underwriting process ( in reserves, retention, pooling charges, margin, trend etc.) to minimize risk.
    As long as employer sponsored plans remain, self insurance instantly vests the employer in their spend versus risk transfer through insured premiums. The data on claims, compliance and clinical utilization patterns is generally good but you are right, the level of medical management, clinical intervention and oversight varies with CUBA ( I like it better than BUCA – CUBA sounds more cartel-like ).
    The carriers have only moved as fast as the employers who have not really acted as a market force to push the carriers and providers to transform. The employers have been focused on providing open access and self referrals to eliminate the mid 90s “mother may I” medicine. The problem was that the controls of primary care based gatekeeper systems worked better ( we had low single digit trend during the last HillaryCare healthcare debate ) and now we have a system totally focused on maximizing reimbursement and making up in volume what is lost in unit cost reimbursement.
    I wish we could try to allow market forces to reshape our system before we promulgate a single payer remedy. I am not sure we have the will to adopt as a society a healthy living mantra and begin to create rewards for those who choose to engage in healthy behaviors – instead of asking them to subsidize those who don’t.
    I believe a regulated private system would do a better job of managing fraud, abuse, waste and economic incentives to keep people healthy than a government system.
    As for Margalit’s question? I suppose these things do not need to be the responsibility of employers. I’d love to see more individual responsibility. I do not believe the government has the will to drive health transformation in this country and would end up managing the rising costs of our own self sabotage by raising taxes and rationing access and reimbursement to our providers. In the end, the single payer advocates may be correct that we cannot truly attack affordability until we have a single person negotiating all rates. However, when this happens, my guess is our best and brightest no longer choose medicine as a vocation and capital will move rapidly into other industries offering a greater return on investment. Again, if the price of feeding everyone means the quality of food deteriorates for all – people just need to go into it with eyes wide open.
    The US system can boast the best and worst of all that medicine has to offer. This debate and process we are witnessing is the battle for the soul of medicine. In the end, I think employers will waive the white flag and jump out of employer sponsored healthcare before they ever discovered whether the purchasing power they wielded with 180M Americans could have preserved the best parts of our system while expanding coverage.
    PS. I am married to a Brit and she believes we Americans are all whiners and should just get on with an NHS system. But – this is also the same person who believes you must be bleeding from three orifices to be worthy of medical attention…:)

  19. I agree this is very well written.
    But why are all these things the responsibility of employers?
    Why are people who abhor the idea of elected Government administering health coverage, so willing to trust British Petroleum or Goldman Sachs or various descendants of the Enron culture, to manage “lives” (perhaps more like livestock)?

  20. Very well written. And I like this part:
    ” Employers must build up the courage and resolve to begin to reshape the local, regional and national delivery models that result in overtreatment and lack of accountability for poor outcomes.”
    Truer words were never spoken. I only wish they had done this some years ago; things might be different. But better late than never!

  21. But, in a post reform world, firms with more than 200 employees should give serious consideration to partial or total self-funding.
    Why shouldn’t firms with 15-199 look at self funding as well? As long as the risk is appropriate for their size there is no minimum size group for self funding.
    “A cheap third party administrator with weaker provider discounts and limited medical management capabilities ultimately costs you much more than services provided by a national insurer with better discounts.”
    Very 2005 perspective, not very true in many major markets any more. Far more dangerous to a self funded plan is a lazy BUCA, Blues.United.Cigna.Aetna, who relies only on their 50% discount to control cost. 50% off a bill 6 times what it should be is still 3 times what it should be. Net end of year cost I hand BUCA their back side every time even if my discounts are less. If MA blues were managing your plan and pushing you into Partners how did you do? If MMO is pushing you into Cleveland Clinic how is your plan running? Which national insurer has any cost management skill? unless your tens of thousands of lives your lucky to get a personal visit let alone detailed reporting and cost management.

  22. nice post, Mike.
    One quibble: “Population Risk Management” – ick. You can almost hear CEOs’ eyes rolling back in their heads.
    Employers already doing what you’ve described seem more often to refer to it as “Total health strategy” or some other such term, to differentiate it from health benefits, with its connotation of “it’s just about medical plans”.

  23. Very informative. Whatever system we eventually end up with, it is going to be a challenge that ultimately needs to focus on finding ways to create incentives for our citizens to be healthier.

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