Benefits.....Opinion, Hearsay & News Review
The CBO says PPACA will cost the
economy 2 million full-time jobs and that the botched rollout of the law reduced
sign-ups by one million people.
An EBRI study showed that 74% of
employees are satisfied with their benefits, which is better than the 70% who
reported the same in 2001. Meanwhile, Gallup reports that 59% of uninsured
Americans reported having a negative experience with the new federal health
exchange and 29% said they had a very negative experience. The poll interviewed
1,500 uninsured, including 450 who
visited an exchange web site.
While plan costs in the exchange
are largely reported to be very high, even with the narrow networks offered by
most carriers, the government is now talking of forcing the carriers to cover at
least 30% of "essential community providers" in each county in 2015,
which will further raise costs. Also, consumers in 515 counties
spread across 15 states have only one insurer selling plans on the
exchange. Coverage in those counties was found to cost 23% more than counties
where there are competing interests.
The CMS Office of the Actuary
has estimated that 65% of small businesses that cover 11 million people will see
an increase in premium due to community rating under Obamacare.
At least six states and counties
from Maryland to Oregon and including Cook County (Chicago) are enrolling
inmates into the exchanges, shifting costs to the federal government.
Also, Humana has announced it will tap between $250 and $450 million from the
reinsurance risk pool for Obamacare. This amounts to about 25% of the insurer's
expected exchange revenue and is needed to offset losses due to low enrollment
and their risk pool that consists of mostly older and less healthy people.
The Obamacare law has been
changed again. Now those employers with 50-99 employees will not have to offer
coverage until 2016. Firms with 100 or more employees must offer coverage in
2015 to at least 70% of FTEs with the number jumping to 95% of FTEs in 2016.
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Trends in medical care benefits are fairly predictable and
usually return as a horse with a new name. In the early to mid-1980's, HMO's
became the rage to control costs. That didn't work once the non-healthy
employees were forced into the HMOs via the contributions they had to pay.
Predictably, HMOs fell out of style and have only a small market share today.
Today, HMOs have come back as
Accountable Care Organizations. Under this scenario, when a hospital and a group
of doctors are joined together they will supposedly provide better care. For
performing better than average, they expect to be paid more. However, neither
the doctor or the hospital has any real incentive to control costs in general
and there is no transparency to these arrangements in terms of their charges. They
won't be any more able to account for larger claims of many sick people than
panacea talked about constantly in the press in the last few years that has not
abated is the introduction of wellness programs to employer based plans.
Although originally, cost containment programs that do work, such as utilization
review and disease and case management were originally being called wellness
programs, the term has now evolved to
include anything from internet based wellness tips to programs which require
biometric screenings and coaching and which offer either incentives or
disincentives to encourage employees to participate. These programs have largely
been faith based in that there was rarely any believable data that showed a
return on investment for these plans, although most claimed a 3 to 1 ROI or
problem with these programs is that they are not allowed to be discriminatory,
so offering the program with a high turnover population
(as opposed to only low turnover management) was not effective.
Participation in these plans was largely by the already health conscious
employees. There is not enough of a disincentive/incentive allowed under
government rules to attract most employees. In addition, the program costs had
to be increased in order to have a chance of being effective if the employer
offered coverage to dependents of employees. The
RAND Corporation released a study in May 2013 that concluded that wellness
programs don't work for the cost.
in July 2013, Katherine Baicker from Harvard, one
of the early backers of these programs and one of the most effective
communicators of the need for the programs surprised the wellness industry by
admitting that there was no data that could prove cost effectiveness.
In the mid to late 1990's, many
insurance carriers started marketing medical plans where there were several
options. The employer would pay "X" no matter which plan the employee
chose and the employees could use any left over money to buy other benefits or
take in cash (taxable). These Defined Contribution Plans also fizzled out.
One reason was that despite the
best efforts to communicate these
programs, employees were confused by the number of offerings (even if there were
only 3). Also, there had to be a huge spread in the rates employees paid between
the highest cost and lowest cost
plans in order to drive employees into the most cost effective plans. However,
since employees only paid a minor portion of the total premium (as is true
today), the rate spread for employees could never be large enough to really
drive people into the lowest cost plans and make a difference, because large
claims are the major cost drivers of a benefit plan. This is because on average
90% of employee claims are less than $2,000 per year.
So, as costs went up, unless the employer increased their
own contribution proportionally, soon many employees were paying too much money
for a plan that most didn't use very much. As complaints skyrocketed and valued
employees either changed employers or threatened to, these plans went away. The
problems are the same with fully insured or self-funded defined contribution,
but the trouble with self-funded was that the true costs could never be 100%
predictable for the employer.
The advent of health exchanges under PPACA has revived the
once failed concept with a new name ("Exchange", be it private or
public). This has led people who write about the insurance industry to tout the
"new" concept (new to most of them) of Defined Contribution as being
something new and different, and supposedly better than the failed or failing
panaceas of HMO, PPO, Consumer Driven, Defined Contribution or Accountable Care.
Finally, most of the new private exchanges are being
offered by large brokerage and consulting firms, who now instead of being in the
position of advisor, are almost like an insurance carrier competing for business
with each other almost as the insurer, rather than on the strength of their
advise. In other words, now the fox is watching the henhouse in the private
exchange business. That is something that the press has conveniently forgotten
about, or more likely, never thought about.
employers who are large enough to be self-funded, the top down discounts of PPOs
are no longer sufficient. Reducing a hospital claim by 30% to 50%, when the
mark-up is 350% to 400% will not save a plan much money. Therefore, we are a
strong advocate of Cost Plus or Medicare Plus pricing based on a full audit of
hospital claims. This transparency in pricing actually has proven savings of
about $150,000 per 100 employees on average. However, you won't find the large
brokerage firms that have their own exchanges advocating this methodology of
paying claims, simply because it would cut into the fox watching the henhouse
easy commissions they make on their non-transparent exchange plans.