Though the Patient Protection and Affordable Care Act (PPACA) was signed into law by President Obama in March 2010, the debate over its implementation and the future of health reform in the United States rages on. PPACA may yet be revised, repealed, defunded, or declared unconstitutional. Here are some of the more salient issues, with information that will allow you to make your own informed judgments:

• Confused about how the new health reform law really works? Watch “Health Reform Hits Main Street” from the Kaiser Family Foundation. This short video provides a basic explanation of the problems with the current health care system and what to expect from health reform initiatives.
• In February 2011, McKinsey & Company commissioned a survey of 1,329 U.S. private-sector employers – Employer Attitudes About Health Reform – to measure their attitudes about healthcare reform. The results indicate 30% of respondents that currently offer employer-sponsored health insurance said they would “definitely” or “probably” drop coverage in the years following 2014. Critics are attacking this study, but McKinsey is standing by the integrity and methodology of its survey.
• Accountable Care Organizations (ACOs) are one of the centerpieces of the health-reform law. An ACO provides a comprehensive set of services to a predetermined population in exchange for a fixed rate of payment, thereby rewarding providers for higher quality care and better results. However, some of the leading provider organizations in the country (e.g., Mayo Clinic, Geisinger) that served as the models for the ACO concept are unhappy with the content and complexity of the new ACO regulations being written by the Department of Health and Human Services (see The Accountable Care Fiasco).
• A Bloomberg News survey assesses support for repealing the Affordable Care Act and for changing Medicare. Bloomberg reports that there is significant public concern about the potential impact of the Ryan Medicare Plan and that most Americans prefer that the new healthcare law not be repealed, though it may need modification.
• There has been widespread use of waivers from the Affordable Care Act by the Obama administration. As of the end of May 2011, a total of 1,433 1-year waivers have been granted. For example, mini-meds (e.g., a basic plan such as the one offered by McDonald’s to its hourly workers) do not meet minimum coverage requirements and have been temporarily exempted so the employer would not be forced to drop coverage. There has been significant criticism over the need for these waivers and the criteria used to their issuance.

I call your attention to a recent article in CDHC Solutions magazine, called “HSAs Continue Strong Growth, Despite Challenges.” Some of the highlights include:

• According to the Association of Health Insurance Plans (AHIP), enrollment in HSAs reached 11.4 million in 2011, an increase of 14% over 2010 (and representing 87% growth since 2008).
• This growth has taken place despite certain efforts under health reform to weaken the appeal of HSAs (e.g., removal of over-the-counter drugs as an eligible expense, increased penalties for withdrawal of funds for non-health purposes, medical loss ratio restrictions).
• Demographic data shows that HSAs appeal to families with children, older couples approaching retirement, and people at all income levels.
• Senator Orrin Hatch and Representative Eric Paulsen have introduced legislation (S.1098/H.R.2010) that will fix certain problems and increase the market appeal of HSAs, and they deserve our support.

A recent study from the RAND Corporation addresses the impact of consumer-driven products on “vulnerable” populations – those that are less healthy and less wealthy. Their findings show the reductions in overall spending and reductions in care that are considered beneficial for all groups. HSAs are a more efficient approach to purchasing health insurance, and they will play an increasingly important role in a private healthcare system. As such, it is also likely to play a role in your future. Email or give us a call at 610-975-4415 if we can help.

1. Which employer groups can save the most money?
2. Why are organizations in a position to save significant dollars?
3. What does your organization need to do to bring about change?

Which Employer Groups Can Save the Most Money?

Readers of this newsletter know that a significant portion of healthcare spending– approximately 30% – is wasted because of overuse, underuse, and misuse of our healthcare system. In which types of organizations do we find the greatest opportunities for cost savings because of wasted dollars?

1. Larger employer groups.
2. Organizations with a tradition of rich benefits.
3. Organizations with significant barriers to change.

Consider a law firm with approximately 1,600 employees that was spending $20 million on its health benefits – and where we found $5 million in potential savings. Law firms have a tradition of offering rich benefits to its partners and employees because they want to attract and retain good people. And change is difficult, right? Sometimes it is, but not always. Healthcare change is oftentimes thwarted by a lack of understanding, conservatism, and political considerations. So, the specific types of organizations that we find need the most help are:

• Municipalities
• School districts
• Large law firms
• Large nonprofit organizations.

Why Are Organizations in a Position to Save Significant Dollars?

Healthcare is a complex subject. There is resistance to change and sometimes a fear of the unknown. So inertia takes over, and significant opportunities to save money without cutting benefits are ignored or missed. Some of the reasons include:

1. Too much focus on the short term.
   Many groups are concerned with only getting through the next 12 months, rather than focusing on the long term and developing a multi-year strategy to control costs.

2. Misapplication of insurance principles.
   We oftentimes fail to properly apply insurance principles to healthcare. Insurance is meant to cover large, unpredictable losses – not smaller, routine, and predictable expenses. Employers and employees will benefit from a better understanding of the proper role of insurance, including:
   • Self-insurance
   • Health savings accounts (HSAs)
   • Risk management (e.g., focus on wellness, prevention).
3. Resistance to change and organizational barriers.
   Is there a sense of urgency? Is there enough pain? If you offer the alternative to be able to go to any provider of choice, at any time, and at someone else’s expense, you won’t be able to bring about greater efficiencies in your organization.

In collective bargaining, there’s a perception that unions will resist any change and, in particular, the concept of HSAs. That has not been our experience, as we have found that HSAs – when properly understood and implemented – are one of the best ways to preserve benefits and choice for union members and their families.

What Does Your Organization Need to Do to Bring about Change?

First, expect that your organization will need to overcome the normal resistance to change, requiring participant buy-in to the need to solve the problem. In “8 Steps for Leading Change,” John Kotter talks about the process of change and how the probability of successful change goes way up by:

• Acting with urgency
• Building a leadership team
• Effectively communicating a vision and the steps leading to success
• Persevering in the group effort.

Here is one way to sell the need for healthcare change in your organization: If we can control our healthcare costs this year, there will be more money for bonuses (or next year’s raises). Changing the healthcare dynamic in large employer organizations is hard work and takes time, but it can be done. RMP can help. Email us or give us a call today at 610-975-4415.

The evidence continues to mount that shows wellness programs are an effective way for companies to cut healthcare costs. In a recently published study, for example, healthcare costs increased at a 15% slower rate among wellness participants at companies that consistently provided an employee wellness program, resulting in a savings of $332 per participant. This study by Pittsburgh-based health insurer Highmark, Inc., involved about 10,000 employees who participated in wellness programs at 47 companies, and the results were compared with those of a group of people with similar health risks who didn’t participate in a wellness program.

What Are the Key Components of Successful Wellness Programs?

The authors of the Harvard Business Review article – “What’s the Hard Return on Employee Wellness Programs?” – studied 10 organizations that had highly successful wellness programs. In addition to achieving significant savings in healthcare costs, the organizations saw increased productivity, decreased absenteeism, and higher morale among wellness program participants. Although these organizations varied in type of industry and size, the following were identified as six essential components of their well-run wellness programs:

1. Engaged leadership is provided from all levels within an organization. From the C-suite executives to the middle management to the wellness staff themselves, it takes commitment and involvement at all levels to help create and foster a culture of wellness within an organization.
2. Employee wellness aligns with and becomes an important part of the organization’s business model. An organization’s evolution to a culture of wellness takes time. Once the initial excitement over a new wellness program dies down, the real work of continuing the commitment to health begins. That’s why making wellness part of a firm’s long-term goals and a complement to business priorities is important. The organizations in this study also found that positive incentives were much more effective than enforcing mandatory participation.
3. The program offers a broad range of high-quality programs that meet individual health needs. Wellness programs need to go beyond exercise and diet to include other sources of productivity loss, such as stress and depression. Different populations often have different health needs. Determining the individual needs within an organization through lifestyle surveys and biometric tests can help an organization customize a wellness program that offers the most relevant health services.
4. Wellness services are easy to access. Low-cost or no-cost services, convenient onsite exercise classes and fitness facilities, and healthful food offerings are ways to encourage employee participation. More and more companies are also providing online access to wellness websites, which means employees can participate anytime using their laptops and smartphones. In addition, many firms are also using such online resources as email and social networks to reach employees with wellness messages.
5. Relevant partnerships are formed within the organization, as well as with outside vendors. Partnerships between the wellness staff and other departments within the organization help build credibility for the program. Plus, leveraging resources from vendors in the community – such as local health clubs and medical practices – can be especially helpful for smaller companies trying to build comprehensive wellness programs.
6. Wellness communications are broad and effective. Communicating wellness messages is often a challenge for companies given the typically wide range of services, the diversity of employees, and the need to generate enthusiasm while dealing with often personal and sensitive topics. Comprehensive communications that are tailored to specific audiences, sent using a variety of media (e.g., flyers, stickers, emails), and “embedded throughout the workplace” were found to be most effective.

Need help implementing an employee wellness program or improving your organization’s current one? Contact us or give us a call today at 610-975-4415. RMP’s Corporate Wellness Services include a broad range of wellness providers and products. We’ll help you find the best program to fit your budget and needs.

You may want to begin, for example, by finding out your employees’ perceptions about such factors as whether they think that:

• Their benefits are better/similar to/worse than other companies’.
• Employee deductibles and copayments are reasonable.
• There is good availability of participating physicians in their area.
• Claims payment is timely and accurate.
• Insurance carrier representatives are available to assist when needed.
• They have a good understanding of their health benefit options and choices.

There are a number of publicly available satisfaction surveys that can help you with this process. To find these surveys, simply do an Internet search for the term “health benefit survey templates.”

At RMP, the first step in our work with a new client is the “research” phase, where we combine input from employees with information gathered about plan history, cost increases, plan options, contribution strategies, and so forth. We then use this information to develop a strategy for addressing future health benefits and costs based on the company’s needs and financial resources.

What path will your company take, and what will be the impact on your profitability in 2011?

According to a survey from WellPoint Inc. – a health benefits company that is an independent licensee in the Blue Cross and Blue Shield Association – 83% of U.S. employees think more highly of employers who offer voluntary benefits than of those that don’t. Among surveyed employees whose employers offer voluntary benefits, 82% say they are content with their overall employee benefits package, a satisfaction percentage that drops by 30% for employees in companies without a voluntary benefits program. And, when considering taking a new job, 90% of surveyed employees said it would be very important that the prospective employer offered voluntary benefits.

What Are the Most Common Voluntary Benefits Offered Today?
Voluntary benefits encompass an array of insurance offerings, from more traditionally offered supplemental life, supplemental medical, and disability insurance, to more recent entrants in companies’ voluntary benefits packages, such as pet insurance, financial planning, long-term care insurance, and group auto and homeowners’ insurance. A survey of employers from the International Foundation of Employee Benefit Plans and trade publication Employee Benefit News, in which 84% offered voluntary benefits, found that the most common voluntary benefits were:

• Life insurance (73%)
• Vision insurance (53%)
• Long-term care insurance (51%)
• Long-term disability insurance (50%)
• Accident insurance (49%)
• Dental insurance (48%).

Today’s uncertain economy places increased importance on voluntary benefits, although it might seem that employees would be less likely to enroll at such a time. That’s because employees – especially low-income employees – see voluntary benefits as a means of providing affordable financial protection. A survey from the Employee Benefit Research Institute asked employees to rate different insurance benefits on a scale of one to five, based on the importance of these benefits in providing financial protection. Disability insurance was rated five by 39% of all employees surveyed; however, 52% of workers making less than $35,000 a year gave disability insurance a five rating. Similarly, 48% of all employees surveyed gave life insurance a five rating, a figure that increased to 67% among workers in the lower-income category.

Communicate the Many Advantages of Voluntary Benefits
To keep employee interest in and appreciation of voluntary benefits high, use ongoing communications to emphasize the value these benefits provide. Illustrate what an employee might expect to pay for a particular type of insurance coverage on the open market, for example, and compare that to the cost of such coverage when enrolled through the voluntary benefits program. For insurance that employees can pay for on a pre-tax basis through the group plan, emphasize these additional cost savings. Of course, the convenience of payroll deduction – and of having the product selection brought to you, rather than having to seek it out on your own – add to the value of voluntary benefits.

If your company offers voluntary benefits, congratulate yourself on this strategic decision. Be sure to continue to periodically examine whether your current offerings serve employee needs, plus check out which new products in the ever-increasing voluntary benefits roster you might add. And if your company doesn’t currently offer voluntary benefits, get smart and take advantage of the opportunity to expand your employee benefits menu, as well as improve your standing in the eyes of both current and prospective employees.

What Is the Efficiency Gap (and Why Does It Exist)?
Presented by: David Edman, Managing Partner, Risk Management Partners LLC

In April 2009, the Business Roundtable published a study on the value of healthcare spending in the United States compared to our competitors. In the Health Care Value Comparability Study, “value” is measured based on both the cost of healthcare and performance of services rendered by healthcare providers. The study compares the value of healthcare in the United States against two groups: our historical leading economic competitors (Canada, Japan, German, Great Britain, and France – the “G-5” Group), and the emerging competitor countries of Brazil, India, and China (the “BIC” group).

The study results demonstrated:

• The United States faces a 23% “value gap” relative to the G-5 Group and a 46% “value gap” compared to the BIC group competitors.
• The G-5 companies spend only 63 cents on healthcare compared to every dollar spent in the United States, and the BIC group companies spend only 15 cents for every U.S. dollar.

This efficiency gap puts U.S. companies at a serious competitive disadvantage. Why does the gap exist? Largely because of our failure to properly apply insurance principles to healthcare and because of misaligned incentives among patients, providers, and purchasers. What can healthcare purchasers do about it? Read on for the answer to that question.

Make Healthcare Come with a Warranty
Presented by: Francois deBrantes, Executive Director of Health Care Incentives Improvement Institute

Healthcare with a warranty, such as not paying for someone else’s mistakes or “avoidable” complications? Quite a novel concept. It is though, according to Francois, precisely how providers should be paid in order to enhance value. Current payment methods are problematic: Fee-for-service payments encourage too much care, and capitation tends to result in too little care. A more sophisticated approach to provider payments, known as Pay for Performance (P4P), is the best approach when designed properly.

In the world of P4P, physicians and other providers are given financial incentives to meet defined quality, efficiency, and other targets that enhance “value.” A certain portion of today’s healthcare costs results from avoidable complications. HCI3 has developed the Prometheus Payment model, where the providers themselves must pay half of the costs from avoidable complications, which is the concept of healthcare with a warranty.

We can close the efficiency gap by shifting away from fee-for-service medicine, communicating the differences in cost and quality among providers, and encouraging employees to “vote with their feet.”

Use Data to Measure, Monitor, and Improve Performance
Presented by: Paul Manz, President of Health Care Strategic Solutions, Inc.

Perhaps you’ve heard the expression, “If you cannot measure it, you cannot manage it.” This is a great way to describe the current situation in healthcare. At the seminar, Paul explained how to use medical and pharmacy claims data to understand healthcare spending patterns, identify problem areas and opportunities for greater efficiencies or improvement, and suggest corrective actions.

Paul reviewed two case studies – one self-insured and the other fully insured. In the self-insured case, costs were trending up by 23%, far in excess of industry trends, which have flattened out in 2010. Disease management was found to be lacking, as costs for diabetic care increased by 87% and for heart/circulatory care by 46% in 1 year. Major improvement in disease management is one of several remedies called for in this situation.

In the fully insured example, the opposite was true – healthcare utilization and costs were much lower than the premiums being charged by the insurance carrier. These data tell important stories in each case study, and it’s critical for employers to understand their own situations.

Overcome Barriers to Change in Large Organizations
Presented by: Dr. Larry Richard, Head of Leadership and Organizational Development Practice Group at Hildebrandt Baker Robbins

Dr. Larry Richard is a psychologist and a lawyer, and he understands organizational change. The natural human reaction to change, regardless of the type of change or the organization’s nature, is resistance. Overcoming resistance requires a sense of urgency, which may be created out of fear or through the creation of an inspiring goal for the organization. In either case, there must be participant buy-in to the process.

During the seminar, Larry discussed John Kotter’s “8 Steps for Leading Change” process. Based on 30 years of research, Kotter shows that 70% of major change efforts in organizations end in failure. Larry explained that the probability of success goes way up by:

• Acting with urgency
• Building a leadership team
• Effectively communicating a vision and the steps leading to success
• Persevering in the group effort.

Changing the healthcare dynamic in large employer organizations is difficult work and requires time, but it can be done.

I want to again thank our speakers and attendees for a terrific seminar. If you want to learn more about how to “Close the Efficiency Gap” in your organization, or about any of the specific components of this seminar, please email or call me at 610-975-4415.

David Edman
Managing Partner
Risk Management Partners LLC

You Don’t Need to Go It Alone
There are a number of pharmacy benefit managers (PBM) who can help your organization gain control of pharmacy costs—you’ll find some are better than others. When it comes to controlling the costs for prescription drugs, we recommend taking the following five steps:

1. Implement a Generic Drug Program

   The Generic Pharmaceutical Association reports that generic medications account for 69% of all prescriptions dispensed in the United States, but only 16% of all dollars spent on prescriptions. That’s because a brand-name drug costs, on average, 50% to 70% more than its generic counterpart. We want our clients to use generics to the greatest extent possible; however, a good generic program allows for the use of branded medications when clinically necessary.
    

2. Institute Step Therapy

   To increase the use of generics, patients can be required to first try the generic equivalent. If the generic isn’t effective or the patient has an adverse reaction, the physician can switch the patient to a name-brand medication. The key to success is changing behavior, which requires the appropriate financial incentives tied to patient decision-making.
    

3. Use Electronic Prescribing

   Electronic prescribing is yet another area for potential savings. Studies conducted by Henry Ford Health System, Brigham and Women’s Hospital, and the Institute for Health Policy in Boston show that physician use of e-prescribing increases the levels of generic utilization by 3% to 15%. As an employer, you may not have any control over physicians’ use of e-prescribing, but your carrier or third-party administrator (TPA) does. Ask them about the levels of e-prescribing by their contract doctors. If they don’t know or if the levels are inappropriately low, consider changing your carrier or TPA.
    

4. Use Mail-Order Pharmacy

   A significant portion of your healthcare expenses is for the treatment and management of chronic illnesses, such as diabetes, asthma, heart disease, and depression. Mail-order pharmacy is a key component in any cost-containment program, providing savings as high as 10%, according to a study by the Lewin Group and released by the Pharmaceutical Care Management Association.
    

5. Enhance Patient Compliance

   Consistent with the above steps, our goals are to promote personal responsibility and increase the levels of compliance with proven drug regimens. Success in managing chronic care conditions is enhanced through an effective disease-management program implemented by—or in concert with—your PBM. A recent study of patients with multiple sclerosis that was published in the American Journal of Managed Care showed that a combined disease self-management and medication therapy management program resulted in:

   • higher medication adherence
   • 33.6% reduction in relapses
   • significantly lower costs.

By managing pharmacy benefits, you can save money—often at substantial levels. This is done most effectively in concert with a highly professional PBM company that sets patient satisfaction as an equally important objective to saving money. In this way, it’s a “win-win” opportunity for employers and their employees.

• There is a 23-point “value gap” between the United States and the G-5, and a 46-point “value gap” between the United States and the BIC countries.
• The G-5 countries spend 63 cents per U.S. dollar spent on healthcare and the BIC group spends just 15 cents per U.S. dollar.

Industry Leaders Share How Organizations Can Prepare for the Future

On September 14, 2010, join us for a seminar called “Closing the Efficiency Gap.” At the seminar, we’ll discuss this issue in detail and share information about what your organization can do to prepare for the future.

Attendees will learn:

• What the healthcare “Efficiency Gap” is.
• How to align incentives, reform payments, and reward results.
• How to use medical claims data to close the gap.
• Strategies for overcoming organizational obstacles to change.

Our speakers are:

• Francois de Brantes, CEO of Bridges to Excellence and former Program Leader for Healthcare Initiatives at General Electric
• Dr. Larry Richard, Head of Leadership & Organizational Development Practice Group at Hildebrandt International
• Paul Manz, President of Healthcare Strategic Solutions, Inc., and co-founder of PATH®
• David Edman, Managing Partner of Risk Management Partners LLC and co-founder of PATH®

This seminar is designed for those in companies of over 250 employees. If you fall into this group or know someone who does, we strongly encourage you to join us. It will be well worth your time!

The seminar runs from 8:00 to 11:30 a.m. and will be held at the Pyramid Club, 1735 Market St, Philadelphia (map). Click here to register.

A 4-Step Method for Cutting Health Benefit Costs
At the recent Society for Human Resource Management (SHRM) 2010 Annual Conference, certain sessions were devoted to how companies can save money by creating a partnership between the employees and management staff. To help control healthcare costs while still providing excellent benefits to employees and their families, SHRM recommends an ongoing 4-step method. Here’s how the method, which comprises evaluation, education, communication, and motivation, works:

1. Evaluation
   Health insurance claims are processed by the provider or a third-party administrator, and in most cases, employers don’t see the complete picture of how the benefits are being used. By requesting summary claims data, employers can see how money is being spent and to whom it’s going.

   An evaluation of claims data can reveal unnecessary expenses, for example, such as miscoded treatments, erroneous charges, and misuse of the system. Employers will also notice ways to cut costs without reducing benefits, such as when they’re prescribed medicines that are available either over-the-counter or in the formulary and they can choose which they prefer. The data will provide insight into the amount of out-of-network care that is being used. A thorough evaluation gives employers the information they need to better educate their employees on how to efficiently use their health benefits and eliminate unnecessary spending at the same time.

2. Education
   Just as people tend to breeze through owner’s manuals and other instructions, they usually give insurance providers’ Explanation of Benefits statements the same treatment. Without a total understanding of how costs are determined and why rates go up, many employees operate under the guise that, “If it’s covered, just tack it on my bill.”

   Meeting with small groups of employees is a great way to educate the staff on how the prices of their insurance premiums are directly related to how they use the insurance. Higher annual costs equal increased premiums for the following year, and lower annual costs result in cheaper rates.

   In addition, give cost-efficient suggestions to the staff, letting them know how they can help reduce the amount they spend each year. For example, recommend using only in-network physicians and clinics, and explain how doctors can provide samples of medication before writing expensive prescriptions for drugs that may not work. Since many healthcare plans cover employees’ families, make sure to host educational sessions where spouses can attend, as well.

3. Communication
   Communicating the positives of cost-effective healthcare coverage should begin at new employee orientation and continue throughout employment. Dedicating a wall or bulletin board to display current usage data and dollar figures is a key component to keeping employees up to speed on the state of their insurance programs. By having this general data available, employees can hold themselves accountable and see how the improvements they’ve made are affecting the system.
4. Motivation
   With a little motivation from management, employees see that their co-workers and bosses are serious about reducing the amount they have to pay for insurance. Rewarding the employees when quarterly costs go down — such as with picnics and individual financial rewards in the form of reductions in premium charges and/or increases in HSA contributions — can motivate the staff to continue to work towards more efficient healthcare usage.

Employees are increasingly aware that total compensation is a zero sum game — when health benefit costs rise at disproportionate levels, there’s less money available for salaries. When employees and management work together, build trust, and develop strategies to reduce unnecessary (or wasteful) spending, it’s a “win-win” situation.