National healthcare Reform magazine

1w w w. He a l t h c a r e R e f o r m Ma g a z i n e . c o m

National Healthcare Reform Magazine

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w w w. He a l t h c a r e R e f o r m Ma g a z i n e . c o m

C O N T E N T S04

The Costs of Doing BusinessReducing Administrative Burdens in a State Health Exchangeby Bob Barry

16 Give Me Drugs!by Mark Roberts

12 UNIONS CHEAT MEMBERSOUT OF HEALTH AND WEALTHby Lisa Holland and Gregory J. Hummer

38 Worker’s Compensation Cost Escalation:Technology to Roundup the Usual Suspects

by Ritza Vaughn

Copyright © 2011 Healthcare Reform. All rights reserved. Healthcare Reform Magazine is published monthly by. Material in this publication may not be reproduced in any way without express permission from Healthcare Reform Magazine. Requests for permission may be directed to [email protected]. Healthcare Reform Magazine is in no way responsible for the content of our advertisers or authors.

08 Meaningful ThoughtsBeyond “Meaningful Use”by Kevin Shrake

22 Health & Care Are they going indifferent directions?by Rajiv Mudumba

Going Ahead of the CLASS: The Advantages of Private Long-Term Care Coverageby Samuel H. Fleet

What is the Biggest Myth aboutElectronic Fund Transfers?by William H. Davis

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28EDITORIAL

Editor-in-Chief

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Jonathan Edelheit

Letter from the Editor US Employee Benefits Industry Players Head to Chicagoby Jonathan Edelheit

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44 Reducing Narcotics Abusein Worker’s Compensationby Tron Emptage

How Brokers Can Find Opportunitiesin the Healthcare Reform Eraby Lydia Jilek

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5 Steps to Good Decision Makingby Kescia D. Gray

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am very excited at this year’s upcoming Employer Healthcare Congress, October 26-28th, 2011 in Chicago. This will be our 3rd year, and each year we have focused on making improvements. Last year, only in our second year, we became one of the largest employee benefits conferences

in the country beating out almost all other benefits conferences, some of which have been around for over 23 years.

We have moved to Chicago this year because of it’s central location which will draw a much larger audience. Our attendance this year is already almost at 200% higher than at this same time last year, and I believe this is because of our location and that Chicago is home to a high concentration of mid-size and large employers.This year we have reinvested in the congress significantly to make this the biggest and best year yet. We have two great keynote speakers, Bill Rancic, the winner of Donald Trump’s 1st “Apprentice” TV Show, and Cecil Wilson, the President of the American Medical Association.

We have changed the format of the congress to have more cross-overs as to bring our symbiotic conferences closer together, and we will have more advanced educational sessions and workshops. We have also expanded our VIP program and will be including not just employers but agents and consultants also this year. What I am most excited about is our new networking software which has been newly built and is more of a social networking tool on top of meeting scheduler. It will make it easier for attendees to view who is coming to the conference, through photos, bios and allow for attendees to synch to twitter, LinkedIn and Facebook to see who in their network is attending the conference.

Tomorrow I am headed to New York City for an interview with FoxNews. See you soon.

IUS Employee Benefits Industry Players Head to Chicago

Jonathan Edelheit

EDITOR’S LETTER



The Costs of Doing BusinessReducing Administrative Burdens in a State Health Exchange

by Bob Barry

he health insurance industry is loaded with back-office costs from marketing to plan and rate maintenance to enrollment paperwork. The introduction of exchanges will soon add administrative burdens of its

own to both state governments and health insurance carriers. Exchanges will not only need to be integrated into the operations of health plans but they will also need to be managed.

Determining the best way to integrate the capabilities and processes of insurance providers within the operations of the exchanges will determine the most efficient way to fulfil customers’ needs.

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Carriers want to automate the transfer of information to and from the exchange. They do not want to compile and send a spreadsheet to the exchange for plan and rate information. Carriers also do not want to manage their plans and rates on their own systems and then a second time on the state health insurance exchange.

Carriers already have systems that maintain products and rates, store membership information and handle financial services. The more that state health insurance exchanges can interface directly with carrier systems, the less administrative functions and duplication of effort will need to occur. States would also benefit from streamlining the communication process with carriers.

One of the key purposes behind the exchange is to centralize and lessen the administrative costs associated with distributing individual and small group health insurance. Plan and rate maintenance, enrollment, and financial services are three areas where the state health insurance exchange runs the risks of adding to carriers’ administrative burden. To streamline this process and reduce administrative costs for both the state and the carrier, states should make every effort to allow for the automated transfer of information to and from the exchange.

States should focus on providing a health insurance exchange solution that is sustainable and affordable over time. In order to achieve sustainability, administration costs need to be minimized by eliminating duplication of efforts. One critical way to minimize administration costs is by using technology to automate and streamline time-intensive processes.

Plan and Rate Administration Tools

Plan and rate administration tools allow carriers and / or the state administrator to maintain products, rates, and rating algorithms easily and directly on the web-based health insurance exchange site. These tools

provide two key benefits to states. First, the product and administration tool will allow carriers that may not have the ability to integrate directly with the exchange to maintain their products and rates on the web portal. Having such a tool would simplify the process of maintaining products and rates for both the carrier and the state.

Secondly, states need a way to review carrier products and rates prior to their release on the health insurance exchange. In addition, states would be able to perform modeling, allowing them to better understand the impact of new rates.

Application Administration Tools

Another function that can further assist the states in building a sustainable and affordable health insurance exchange is to utilize an application administration tool. The tool allows a state business user to modify the application rather than a technical developer. Business users could make changes to the style, branding, and images used on the application. In addition, the



business user can add/remove fields, add business rules, and adjust error messages. This functionality allows the health insurance exchange administrator to quickly create and modify any application that is a part of the exchange. It is likely that state health insurance exchanges will include separate enrollment applications for individuals, employers, and employees. The exchange will also likely require a navigator to complete an application to become qualified to assist the consumer in the plan selection process. By enabling a business user to make application changes directly in the web-based exchange versus involving a developer, states will incur less administrative costs related to maintaining the multiple applications.

eBilling and Premium Collection

Offering consumers and employers the convenience of online bill presentment and payment will improve customer satisfaction, while minimizing paperwork and processing time. eBilling and premium collection functionality exists today and can be leveraged in

state health insurance exchanges. However, there are complexities unique to state exchanges that states need to consider during the planning process, including the coordination of premium subsidies in the individual benefit exchange and the multi-carrier list bill in the small group (SHOP) health insurance exchange. Most likely, much of the financial services will fall on the exchange with the financial information being passed to the carrier once subsidies, individual, and group payment has been collected.

Technology can reduce administrative efforts and therefore reduce costs. By integrating technology into every aspect of the exchange, insurance carriers can manage rates and plans in one solution and automatically push the updates to all channels.

Self-service tools and straight-through connectivity are key sales tools that aid in reducing administrative costs while engaging potential and current enrollees. Giving more control to customers not only improves their satisfaction, but when paired with full integration to back-end systems, it also reduces a health plans’ administrative burden. Virtually instantaneous case installation, fewer errors, and reduced resource requirements are just some of the benefits that an integrated sales technology solution offers.

BioBob Barry’s 28 years of experience in the health and life insurance industry give him great insight into the challenges of the industry. At Connecture, Bob is responsible

for identifying market needs that InsureAdvantage solutions can serve. His ongoing client interaction, industry experience and expertise ensures that current and future health plan business needs are met in the InsureAdvantage suite.

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Meaningful Thoughts Beyond “Meaningful Use”

by Kevin Shrake

Healthcare reform issues have frequently dominated the headlines over

the past year. There are many new changes yet to roll out depending on the final regulations of the bill still being debated by our legislators. One major change has been in full swing and has captured the attention of healthcare organizations across the country. The need for an electronic health record (EHR)

is obvious and ties to issues of privacy, efficiency, medical errors and duplication of tests to name a few. The healthcare industry has clearly lagged behind when you acknowledge the fact that we have had ATM cards for several decades that allow us to perform banking transactions all over the world. Although the federal government is not always the leading edge innovator of change, in the case of the electronic health record, they have actually led the pack as evidenced by the system that has existed in their Veteran’s Administration (VA) network



Meaningful Thoughts Beyond “Meaningful Use”

for many years. Recognizing the value of such a system, the government developed an incentive program as part of the American Recovery and Reinvestment Act (ARRA) of 2009. Under this act, provisions were developed for a program known as the Health Information Technology for Economic and Clinical Health (HITECH) Act. The final rules of this program were released in July of 2010 and offers financial incentives under Medicare and Medicaid to hospitals and eligible professionals who demonstrate “meaningful use” certified EHR technology. Although clearly an important step, health care leaders must look beyond meaningful use to implement a solution that will fit seamlessly into the process of patient care and provide value rather than turmoil.

“Meaningful Use”

There has been an enormous amount of attention placed on these two words and information is available from a variety of sources. A prudent approach is to go right to the source and gain information regarding rules and regulations from the Centers for Medicare and Medicaid Services (CMS). www.cms.gov

Demonstrating meaningful use is the key to receiving the incentive payments but it is not the driver of the key objectives of the program which relate to achieving health and efficiency goals. The recovery act specifies three main components of meaningful use:

• The use of a certified EHR in a meaningful manner (e.g.: e-Prescribing);

• The use of certified EHR technology for electronic exchange of health information to improve quality of care; and

• The use of certified EHR technology to submit clinical quality and other measures.

Once established, providers must demonstrate meaningful use of their installed system for 3 months prior to becoming eligible for any financial incentives. For hospitals there are a total of 24 meaningful use objectives. There are 14 core objectives that are required and a remaining 5 that may be chosen from the list of 10 menu set objectives. Facilities that are on the leading edge of this change process may become eligible for the financial incentives beginning in mid 2011.

The Real Objectives

Although the government is providing financial objectives to incentivize providers to develop an EHR solution, the real objectives of the program are as follows:

• To improve the quality, safety and efficiency of care while reducing disparities;

• To engage patients and families in their care;

• To promote public and population health;

• To improve care coordination; and

• To promote the privacy and security of EHR’s

In practical terms those goals relate to such things as reducing medication errors due to the inability to read a physician’s handwriting, or eliminating duplication of tests because the results of previous tests do not easily follow the patient as they seek care in multiple locations. Health care leaders must meet the criteria to qualify for the incentive payments but then clearly focus on how an EHR can improve quality and lower costs in their organizations.

The Change Process

Health care executives must realize that implementing an EHR requires understanding of the

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change process as well as a commitment to a “total solution” and not just software implementation. The acceptance of this major change by the end users; physicians, nurses and other clinical professionals is critical to the process. Physicians want to know, how easy will it be for me to locate information, make rounds on my patients, order medications and establish routine order sets, etc. Nurses have their own issues related to availability of computer terminals, ease of documenting nurse’s notes and accessing test results. Intimate involvement of the key stake holders in the evaluation and implementation process is a major factor in success or frustration.

One Size Does not Fit All

Clearly there are differences in capabilities and resources in a 25 bed critical access hospital and a 700 bed medical center. The former often has very little on site information technology (IT) personnel and support unless they are part of a larger health system. Larger institutions often have a full complement of IT support and have different needs when it comes to EHR implementation. For this reason, when evaluating vendors, health care executives should look for a total solution which has a menu of options to choose from that can be customized to the specific needs of the client. This

could range from a total outsourced solution for smaller hospitals to working in a support capacity utilizing existing resources in a larger facility.

Choosing the Best Option

There are a number of qualified companies with viable EHR solutions to pick from. When choosing a vendor it is important to consider these meaningful thoughts beyond meaningful use.

• The software must be certified;

• The vendor must have an efficient process of meeting meaningful use criteria;

• System costs should be structured to minimize total costs while taking advantage of positive adjustments in Medicare Cost Reports (for critical access hospitals) or enhancing payments to larger facilities;

• Total costs of the implementation should be calculated. Is this an all inclusive package deal for a defined period of time, or will there be ongoing maintenance and upgrade costs?Beware of a low acquisition cost followed by expensive upgrades;



BioKevin Shrake is an experienced Health Care CEO . He is a Fellow in the American College of Healthcare Executives as well as an accomplished author

and public speaker. He currently serves as the Executive Vice President and Chief Operating Officer of M*D Resources, Inc. based in Fresno, California.

• Are financing options available that meet your needs? and;

• How will your system be supported and maintained and how will it interface with existing systems?

Avoiding the “CEO Nightmare”

As we enter the age of EHR we are moving into a scenario of dependence on technology that we have not experienced to this point. The typical issues that a CEO worries about have historically related to things such as patient safety, quality measures, financial performance, medical staff relations and employee satisfaction. The CEO did not have to be concerned about how orders would be processed or patient documentation achieved because it was accomplished via people and paper. This might be a good system based on “up time” but as described earlier it does not offer the safety, efficiencies and portability of data advantages that an EHR provides. The most critical issue that CEOs should ask is, “how will our EHR system be maintained and supported and by who?” Making sure that you have a clear, professional, cost effective answer to that question will avoid the CEO nightmare of frustrated physicians and staff complaining about not being able to care for their patients.

We are entering a major era of change in the healthcare industry as it relates to implementation of EHR. It is important to meet meaningful use criteria and qualify for financial incentives offered by the federal government as soon as possible. It is equally important however to engage in a process that takes in account the change process with the users as well as the need for a total solution that that is cost effective and meets your ongoing system support needs. Healthcare leaders that recognize these key elements will provide the best environment for serving their patients while enhancing the satisfaction of their clinicians.

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UNIONS CHEAT MEMBERSOUT OF HEALTH AND

WEALTHby Lisa Holland

et’s start by saying that we are pro-member, pro-health and pro-wealth! Now that we’ve gone on record stating that we are not bias towards Unions,

let’s talk about the health of America. It’s not good. It’s getting worse and union members aren’t any healthier than the general population, yet they have some of the best health benefits in the nation! So, what’s wrong with this picture? Just look at the recent CDC stats on obesity…it’s appalling.

America spends more on healthcare and is one of the sickest nations in the world. You can draw your own conclusion on that fact but it’s now obvious that the amount of money in terms of benefits that are available to an individual or union member makes no difference in their health status. It’s the member that makes the difference in their personal health. If we accept these facts as correct then union members are paying huge amounts of cash to doctors, hospitals and administrators. Why not pay union members to be healthy? Yes, that’s right. It’s the concept inherent in a Consumer Directed Health Plan with an HSA. But Unions have been loath to listen to the facts. We say it’s time for the Unions to stop cheating their members out of health and wealth. Here’s how:

The facts speak for themselves that CDHP changes an individual’s healthcare behavior. McKinsey’s research and recent findings continue to show that 25% or more of members in a CDHP change their actual health behavior for the better. They stop smoking and lose weight. First year medical trend reduction is in the range of 14-17%. Health spend continues to decline as members maintain their better health status year after year. This demonstrates how improved health behaviors and lifestyle changes can impact healthcare affordability. Where does the saved money go? In a CDHP model it goes to the member’s HSA account. Cash, tax free… accumulating tax free

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for the use of members and their families for future medical care and retirement. Who can argue with a plan that makes members healthier and wealthier? The transfer of wealth to union members might possibly be the largest transfer in history and will eclipse any rate of pay increase that most Americans may see in the next 20 years.

Union leaders continue to perceive CDHP as a “take away” rather then a benefit and continue to ignore the hard facts that members on a CDHP are not only getting healthier but wealthier.

Unions have special leverage with their management and are in a position to seek this wealth transfer to their members. This is not a wealth transfer from management but from the medical establishment as a reward for just being healthy. We think it’s a no-brainer for Unions to go to management and seek a CDHP/HSA plan that pay first dollar for preventive care, then ask management to fund the first two year deductibles essentially giving members a “ZERO” deductible plan. Stay healthy and get wealthy! It’s a win/win/win situation for members, union leaders

and management.

Here are the facts: 80% of members in any health plan never spend on average more than $800 a year on healthcare and that includes families. Most members will have their deductible accumulated within a year or two. For every dollar “shifted” from a member’s paycheck to their own HSA account they will save about 42 cents in taxes while management saves about 8 cents in taxes. For example, a contribution from management of $2,000 a year saves enough taxes ($840) to pay for 80% of all workers’ healthcare in any one year. Re-routing tax dollars for the benefit of union members seems to be a good idea too.

New point-of-service adjudication and payment technology now makes the implemention of a CDHP with HSA a hassle free experience for members, since members no longer get reams of bills at home nor have to deal with a debit card. Just walk in, get treated and walk out. It’s Simple. Imagine a system that enriches the union member with tax savings, tax free dollars, a “zero” deductible plan, paid preventive



healthcare, additional money for retirement, no more bills at home and that actually can make the member more healthy while at the same time saving management money that makes the Union leaders look like heroes. The time has come for Unions to take a real close look into the world of CDHP.

About Simplicity Health Plans

Cleveland, Ohio - Simplicity Health Plans is the best implementation of a CDHP/HSA. It aligns the interests of the Employer, Employee and the Provider to provide a turn-key, fully integrated Consumer Directed Health Plan. It also delivers a low cost, scalable solution to control claim costs. The Plan fuses unparalleled technology, point of service adjudication, real-time data, and first of its kind anti-fraud controls. Services include an ERISA compliant health plan, HSA administration and banking, medical claims administration, TPA functions, pharmacy, dental & vision, COBRA, stop loss reinsurance, real-time Utilization Review and Case Management, Health Coaching, Comparison Shopper, Health & Wellness programs, and a host of on-line tools for Providers, Employers and Members.

BioLisa M. Holland, RN, MBA has been in the healthcare care industry for over 18 years and held senior level positions within major healthcare organization

in the US. Lisa is an accomplished business development professional. Lisa’s professional objective is to promote appropriate utilization of healthcare services/solutions that empower healthcare consumerism.

Gregory J. Hummer, M.D., has spent the last 18 years developing and perfecting Simplicity Health Plans to solve the vexing complexities, out-of-control costs, burdens and inefficiencies that are associated with healthcare coverage in America today. Dr. Hummer is chairman and CEO of Simplicity Health Plans.

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Give Me Drugs!by Mark Roberts



he pharmaceutical industry is big bucks…research, manufacturing, registration with the Feds, marketing, and sales. Billions and

billions of dollars every year are spent not only on new medications, but also existing medications, whether they are generic or brand name. Is America the most medicated nation on Earth? Could be, according data released by the Department of Health and Human Services (HHS). At least half of all Americans take at least one prescription drug, with one in six taking three or more medications. Prescription drug use is rising among people of all ages, and use increases with age. Five out of six persons 65 and older are taking at least one medication, and almost half the elderly take three or more. Man, that’s a lot of meds!

Among the report’s findings:

• Use varied by sex, race and ethnicity. Three times as many white adults as black or Mexican adults took antidepressants, and women take more drugs than men;

• Boys were prescribed drugs to treat attention deficit hyperactivity disorder (ADHD) twice as often as girls,

but antidepressants were prescribed to boys and girls at the same rates;

• Private health insurance covered almost half of prescription drug costs, and 30% of people pay out of pocket.

• Those who were without a regular place for health care, health insurance, or prescription drug benefit hadless prescription drug use compared with those who had these benefits.

• The most commonly used types of drugs included: asthma medicines for children, central nervous system timulants for adolescents, antidepressants for middle-aged adults, and cholesterol lowering drugs for older Americans.

According to the CDC, these patterns reflect the main chronic diseases common at these ages, but may also likely reflect more aggressive treatments for chronic medical conditions such as high cholesterol and high blood pressure as recommended in the updated clinical guidelines. Lack of access to medicines

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may impact health and quality of life, as prescriptiondrugs are essential to treat acute and chronic diseases.

Finally, with older Americans using multiple medications, this likely reflects the need to treat the many diseases that commonly occur in this age group; however, excessive prescribing or polypharmacy is also an acknowledged safety risk for older Americans, and a continuing challenge that may contribute to adverse drug events, medication compliance issues, and increased health care costs.

Prescription drug use in the U.S. has been rising steadily in the past decade and the trend shows no signs of slowing, the CDC says. Plus, according to WebMD, the CDC also says that:

• People with a regular place for health care were 2.7 times as likely to have used prescription drugs in the past month compared to those without the benefit.

• People with health insurance were about twice as likely to have used at least one prescription medication in the past month as those without health insurance.

• People with prescription drug benefits in their health insurance plans were 22% more likely to use prescription medications than those who did not have that benefit.

All these statistics boggle the mind, especially when the cost of prescription medications continues to increase. According to HealthExecMobile.com, a market basket of 100 commonly used prescription drugs increased at an average annual rate of 6.6% from 2006 through the first quarter of 2010, compared with a 3.8% average annual increase in the consumer price index for medical goods and services (medical CPI).

The increase in the price index from the first quarter of 2009 through the first quarter of 2010--prior to passage of health reform in March 2010--was 5.9 percent, less than the increase for the 2 years prior but higher than in 2006. The study also found that the U&C price index for the second basket of 55 brand-name drugs increased at an average annual rate of 8.3 percent during the time period. In contrast, the U&C price index for the third basket of 45 generic drugs decreased at an average annual rate of 2.6 percent.

What do all these numbers mean? Drugs cost money, and in certain cases people are forced to choose between medications, and food and rent. Typically, those that are not insured experience the greatest hardship as the price paid at the pharmacy is out of pocket and not covered by an insurance plan. That’s one reason that the Wal-Mart $4 generics are so popular. Seniors who are in the Medicare Part D “doughnut hole”, and those under 65 who are low income families and individuals are forced to find alternative ways to pay for their prescription medications.

According to the Kaiser Foundation, prescription drugs are vital to preventing and treating illness and in helping to avoid more costly medical problems. Three main factors drive changes in prescription drug spending: changes in the number of prescriptions dispensed (utilization), price changes, and changes in the types of drugs used. The cost of drug-related morbidity, including poor adherence (not taking medication as prescribed by doctors) and suboptimal prescribing, drug administration, and diagnosis, is estimated to be as much as $289 billion annually, about 13% of total health care expenditures. The barriers to medication adherence are many: cost, side effects, the difficulty of managing multiple prescriptions, patients’ understanding of their disease, forgetfulness, cultural and belief systems, imperfect drug regimens, patients’ ability to navigate the health care system, cognitive impairments, and are reduced sense of urgency due to asymptomatic conditions.



Prescription drug spending is affected when new drugs enter the market and when existing medications lose patent protection. New drugs can increase overall drug spending if they are used in place of older, less expensive medications; if they supplement rather than replace existing drugs treatments; or if they treat a condition not previously treated with drug therapy. New drugs can reduce drug spending if they come into the market at a lower price than existing drug therapies; this can occur when a new drug enters a therapeutic category with one or two dominant brand competitors. New drug use is affected by the number of new drugs (new molecular entities) approved by the US Food and Drug Administration.

Employers are the principal source of health insurance in the United States, providing coverage for 176 million (58%) of Americans in 2008, according to Kaiser. Sixty percent of employers offered health insurance to their employees in 2009, and 65% of employees in those firms are covered by their employer’s health plan. Other employees may have obtained coverage through a spouse. Nearly all (98%) of covered workers

in employer-sponsored plans had a prescription drug benefit in 2009. For individuals, according to a survey by America’s Health Insurance Plans, the vast majority of policies purchased by individuals (rather than employer or other group coverage) had drug benefits.

Department of Health and Human Services data show that as of February, 2010, approximately 41.8 million (90%) of the 46.5 eligible Medicare beneficiaries had drug coverage. The total number of beneficiaries in a Medicare Part D plans was 27.7 million (60%), including 17.7 million beneficiaries (38%) in stand-alone prescription drug plans and 9.9 million (21%) in Medicare Advantage drug plans. Another 14.2 million beneficiaries (31%) had coverage from either employer or union retiree plans including FEHB and TRICARE (8.3 million, or 18%) and drug coverage from the VA and other sources (5.9 million, or 13%). About 4.7 million Medicare beneficiaries (10%) had no drug coverage.

Medicaid is the joint federal-state program that pays for medical assistance to 60 million low-

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income individuals and is the major source of outpatient pharmacy services to the nonelderly low-income population. Although prescription drugs is an optional service, all state Medicaid programs cover prescription drugs for most beneficiary groups, although there are important differences in state policies with regard to copayments, preferred drugs, and the number of prescriptions that can be filled. Since January 1, 2006, states have been required to make payments to Medicare (known as the “clawback”) to help finance Medicare drug coverage for those who are dually eligible for both Medicare and Medicaid.

According to the Kaiser Foundation, the new PPACA provides for a significant expansion of coverage to the uninsured through a Medicaid expansion, an individual requirement to obtain health insurance, and subsidies to help low and middle income individuals buy coverage through newly established Health Benefit Exchanges. PPACA provides that prescription drugs are one of the “essential health benefits” that must be included in health plans in the Exchanges and in the benchmark benefit package or benchmark-equivalent for newly eligible adults under Medicaid.

Also, it provides for a $250 rebate to Medicare

Part D beneficiaries with out-of-pocket spending in the Medicare Part D coverage gap in 2010, a 50% discount for brand name drugs for beneficiaries in the coverage gap that started this year, a phasing-in of coverage in the gap for generic and brand name drugs which will reduce the beneficiary coinsurance rate from 100% in 2010 to 25% in 2020, a reduction between 2014 and 2019 in the threshold that qualifies enrollees for catastrophic coverage, and elimination of the tax deduction for employers who receive Medicare Part D retiree drug subsidy payments, starting in 2013.

The HHS projects US prescription drug spending to increase to $457.8 billion in 2019, almost doubling over the next several years. In the coming years, implementation of various provisions of PPACA will affect prescription drug coverage, utilization, prices, and regulation. Coverage and utilization of prescription drugs will be expanded by PPACA’s health insurance mandate and premium and cost-sharing subsidies; the designation of prescription drugs as an essential health benefit to be covered by private health plans through the new health benefit Exchanges and by Medicaid for newly eligible adults; and Medicare’s prescription drug rebate, cost-sharing, and catastrophic threshold changes, according to the Kaiser Foundation.



Prices charged to government programs will be affected by changes to Medicaid rebate requirements and expansions to the Section 340B program. Prescription drug regulation will be affected by the new process for licensure of bio-similar versions of brand name biological products and by drug labeling requirements. These and other PPACA changes will ultimately impact national spending for prescription drugs in ways yet to be seen.

Another option is to include a discount pharmacy card for customers. There are many of these available through various sponsors; including pharmaceutical companies such as AstraZeneca, pharmacy benefit managers (PBMs) like CVS Caremark, plan administrators like Careington International, and other sources. Customers can enroll through websites, over the phone, or at pharmacy counters based on the business model for the card. Typically, in this arrangement, the customer gets a discount at the point of sale (and via mail order in some cases) and is able to save on both brand name and generic medications without worrying about over using or worrying about a maximum utilization of their pharmacy card. Discounts can range from 5% up to 40% depending on the store and the medication. Often, PBMs will share available some small revenue for eligible prescriptions with the sponsor to help offset the cost of marketing to consumers.

Discount pharmacy cards can be used by anyone at almost any pharmacy nationwide, and the savings are immediate. The cards have broad application for uninsured and underinsured individuals, and the cards can be used as a stand- alone service or embedded as a value added component in a health plan, limited medical benefit plan, or discount medical plan with other services. However, you cannot use a discount pharmacy card in conjunction with a co-pay; no double dipping just to save extra money.

Pharmacies make money when they dispense medications, so the more medications available to

sell, the more profit is generated for the manufacturer, the pharmacy, and the sponsor. And, since PBMs have tracked utilization for years with electronic adjudication of claims, you can find out how much has been saved and what drugs are being dispensed. Although HIPAA regulations will not allow personal customer information to be disclosed, at least information is available on the types and amounts of drugs being dispensed. Plus, the customer saves money. Everybody wins.

So, when someone says “Give me drugs,” let’s hope it’s for the right reason. Profitability, patient care and advocacy, and prescriptions—a great antidote for what ails you.

BioMark Roberts’ professional sales background includes almost 30 years of sales and marketing in the tax, insurance, and investment markets. Currently his key focus is developing relationships with clients at Careington International (www.careington.com). Mark also is a licensed life, health and accident insurance agent in all 50 states and DC. Additionally, Mark has been writing a health care blog for the past 3 years, found at www.yourbesthealthcare.blogspot.com , which is a topical weblog about various health care issues. He has been noted recently as the Medical Reporter for an online news service with over 110,000 subscribers at www.thecypresstimes.com , and he has been pleased to regularly contribute articles to magazines for both medical and dental topics both in the US and the UK. You can contact Mark at [email protected] or 800.441.0380.

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Health & CareAre They Going in Different Directions?

ealth is an indicator of well -being that has implications not only on the quality of life of an individual but also for an entire society in terms of the production

of economic goods and services.

On an average, the developed world has pledged about 14-20 percent of its annual GDP to healthcare while the developing countries have pledged anywhere from 3-20 percent of the annual GDP, most of them at the lower end of the scale.

Cases in point - The United States spends 16.5% percent of its GDP on health care expenses. Mexico uses 11.8 percent and Morocco spends 4.8 percent.

The health care of South Africa is 9.1 percent of GDP. In India, health care spending is 5.2 percent. Thailand spends 11.3 percent of its money on its health care while Indonesia sends 6.2 percent.

Now, let’s take a closer look at healthcare in 2 countries - India, an emerging economy which currently spends a humble 5.2 percent of its GDP on healthcare and USA, a country that spends the most on healthcare than any other country in the world. Of course, they are two very different countries with their own varied population matrices, epidemiology and political/social strategy as to how these healthcare dollars are spent. These two provide an interesting glimpse into healthcare of the world in general.

by Rajiv Mudumba

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The Indian healthcare industry is growing and is poised to become a US$280 billion industry by 2020.[1] The Indian healthcare market is expected to reach over US$70 billion by 2012 and US$145 billion by 2017.[2] According to the Investment Commission of India, the healthcare sector has grown at 12 percent per annum in the last 4 years.[3] This growth comes from several sources such as rising income levels in a growing economy, a growing elderly population, changing demographics, endemic disease profiles and the shift from chronic to lifestyle diseases.[4]

Despite efforts in the direction of improving healthcare in the country, India continues to have high levels of morbidity, especially among children, women and elderly. There is also the issue of poor infrastructure leading to low levels of sanitation, public and personal hygiene. These contribute to a higher incidence of diseases. Infrastructure to support a billion plus people is not easy to build. Slowly but surely, India is ramping up on its infrastructure which will help manage the issues associated with health. More important is the fact that a majority of the billion plus population is under the poverty line and there are things such as education, awareness etc. that need to be worked on to help people improve their lives which again will ultimately show an improved effect on healthcare.

One more fact to note about India’s growing healthcare economy is that a part of it is attributed to the rise in private players that cater to a population that demands a higher quality of care no matter the cost. The opportunity remains huge for insurance providers entering into the Indian healthcare market since 75% of expenditure on healthcare in India is still being met by ‘out-of-pocket’ consumers.[5] Even though only 10% of the Indian population today has health insurance coverage, this industry is expected to face tremendous growth over the next few years as a result of several private players that have entered into the market. Health insurance coverage among urban, middle and upper class Indians, however, is significantly higher and stands at approximately 50%.[6] In summary, India’s healthcare spending is poised to grow but there is still a long road of health improvement to be worked on while addressing care in order to ensure that root causes to improve the health standards of the population are worked on which will eventually ensure that all the spending is geared more towards health improvement rather than just care improvement.

Ironically, USA is a country with the highest % of its GDP spent on healthcare but US Life Expectancy is ranked at 50th place in the world.[7] It faces conditions

of escalating healthcare spending and poor health conditions similar to India.

According to a CMS published report, U.S. healthcare spending in 2009 was at 17.4% of GDP at $2.47 trillion and is projected to reach $4.5 trillion by 2019. This equates to approximately one fifth (or 19.5%) of the gross domestic product (GDP). Hospital spending is expected to increase and gradually slow down through 2017, going from $696.7 billion in 2007 to more than $1.3 trillion in 2017. Prescription drug spending is expected to slow down initially and then start to accelerate through 2017. Drug spending will increase from $231.3 billion in 2007 to $515.7 billion in 2017.

How is the U.S. health care dollar spent?

As shown in the figure below, hospital care and physician/clinical services combined account for half (52%) of the nation’s health expenditures. That shows that a majority share of healthcare spending finds its way into hospital coffers and physician pockets. The question remains, is this high percent of spend due to the need of a larger number of people visiting physicians and hospitals and/or on a more frequent basis because their health demands it or is it that the physicians and hospitals get to charge what they deem fit per their corporate policies and are operating as free economy private enterprises.

The answer is out there since the US has the highest incidence of lifestyle diseases and despite the spending, health of the population in general is not improving. Moreover, the country is not acing other countries in mortality, morbidity etc. What’s ironic is that there is a 10% spend on Rx programs (it doesn’t show how much of it is on research) but definitely, there is a heavy spend on Rx advertising and push to get consumers to avail these drugs. Eventually, there is more spending around care than prevention, whether prudent or not. As a result, spending as well as healthcare



costs go up each year while the insurance carriers are out scouting to support the providers that give the most discounts. This just goes to show that it’s again cost that is impacting service decisions and not the quality of care.

Forbes released their report in February 2010 of the most expensive drugs in the US. It talks about expensive drugs costing a few thousand dollars per year to as much as 350K to 400K per year. These costs are being attributed to advances in technology but more than that, its basically for rare diseases for which patients have no other option but to buy these drugs. According to Forbes, “Alexion Pharmaceutical’s Soliris, at $409,500 a year, is the world’s single most expensive drug. This monoclonal antibody drug treats a rare disorder in which the immune system destroys red blood cells at night. The disorder, paroxysymal nocturnal hemoglobinuria (PNH), hits 8,000 American.Folotyn treats a rare type of lymphoma and costs $30,000 per month. Myozyme, which inspired the Harrison Ford movie Extraordinary Measures, costs up to $100,000 for a child. But according to Genzyme, the average cost of adult treatment is $300,000 per year.”[8]

These costs are guaranteed to constantly increase as time goes on and more technology is developed. There is nothing being done to lower the costs. Technology to drive advancement of drugs is great but some of the healthcare dollars need to be used to subsidize this research, thus enabling these drugs reaching the needy for a much reasonable price. There is also the need for more stringent regulation to curb the drug manufacturers from profiteering. This is a true example of where the healthcare dollars could support health and not just care.

Health and Healthcare are two separate entities divided by a very fine line. The former deals with the betterment & maintenance of health of the people (which can be very personal at an individual level)

while the latter deals with the nature of offering care to the population. Often times, these are used synonymously.

The Health Care Reform Bill that came out about a year ago professes to expand coverage to millions of uninsured Americans. It deals with establishing health insurance exchanges to help self employed and uninsured buy insurance with subsidies, details helping Medicare and Medicaid programs and insurance reforms to provide better coverage to children and adults with or without pre-existing conditions and keeps illegal immigrants from benefiting from health insurance exchanges.

Basically, healthcare reform is not about improving the healthcare we get. It’s more about re-shuffling how the care is provided and how the money to support the system is obtained and allocated. When it talks about millions of uninsured getting coverage, it’s also ensuring that more money flows through the

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system to support it. The amount of care provided across our entire population will increase because the number of patients will increase. But that doesn’t mean that the care will be any faster or better - unless you are among the millions who had no insurance and will now have access.

The healthcare system cannot dictate the type of care one needs. It will be up to the individual to self

educate and make decisions on the type of care they want/need. The system is geared to steer everyone towards more care whether needed or not. Physicians, Hospitals and Drug manufacturers are all part of a major public/private enterprise and the system is trended to run as a private enterprise. Hence, hospitals want beds filled, physicians want to prescribe tests, do procedures and prescribe drugs, some you may need; some you can do without. It’s always up to the patients to make smart decisions, whether it is to choose the right insurance plan, the right doctor, and the right hospital or understanding the drugs they are prescribed. In today’s healthcare system, education and empowerment is a crucial factor for individuals to get the care they need and deserve than what is given.

Having said that, there are still certain things that can be done within the system to contain/decrease the speed with which the costs are escalating.

Prevention & Screening - Emphasis on prevention and proactive health management will ensure that individual health improves and there is minimal care needed later in life due to the proactive measures taken initially. Timely screenings and checkups will ensure that any health issues are caught at the outset and are easier to treat and manage. In some cases, ongoing disease management can be minimized or totally eradicated.

Healthcare Quality Improvement - Focus on specific diagnoses, accurate and needed tests, timely and right treatment, less invasive procedures, etc will ensure that unnecessary or outliers in health management that are based on the principle of “more is better” are minimized and enhances accuracy in treatment as well as paves way for more focused health management.Integrated Care Management - Integrated health centers where all the needed specialties that care for a patient from diagnosis, screening and treatment are under the same roof are needed. The current system of sending the patients out to various specialties/centers based on doctor recommendations only add to



Bio

Rajeev Mudumba works with SHPS, a leading, independent provider of integrated health solutions that improve personal health and reduce spending. Rajeev has over 16 years of

leadership experience in the HRO, Healthcare and Technology consulting industries. His distinguished record of accomplishment and innovation includes high level strategy and ideation, precise execution and enhanced focus on efficiencies through the use technology in business across various verticals. He can be contacted at [email protected].

the pain and administrative burden for the patient.

Clinical Analytics - This is a crucial part of the entire healthcare strategy as no amount of work is useful until we are able to measure the outcome. Value based information comes from analyzing the data obtained from various sources that provide insight into medical conditions, treatments, patient outcomes, provider results etc. This will help patients make informed decisions about where they want to seek care and can be assured of best results. Also, this can help health plans better negotiate services with providers and ensure that the best are signed up to support patients.

Employer backed wellness strategy - To foster value towards employee health benefits, employers must come forward as leaders in the wellness arena. Employers need to spearhead healthy living by spreading the word of healthy choices; in food, entertainment, activities etc. Employers must advocate an aggressive approach to wellness, prevention, screening, and active management of chronic conditions. Many employers in the United States are already treading in this direction. Some companies have advocated healthcare consumerism and health plans associated with it. As a part of health strategy, some companies cover the costs of smoking cessation and weight loss programs, reward participation in health and risk assessment screenings with incentives in health plans. Some offer fitness programs and healthy menu choices in company cafeterias, some support local farmers markets to provide produce to their employees’ right at the place of work. Further, companies are tracking the ROIs of these investments in health with great results, thus showing that it is a win-win situation for the employees and the employers.

Employers need to influence healthcare execution - Employers need to directly engage in improving the structure of health care delivery, and thus its quality. This begins with redefining relationships with health plans away from cost reduction and discounts to

quality and value. Employers must expect health plans to direct patients to excellent providers, not those provider networks that offer the biggest discounts. A lot more needs to occur in addressing the base question of improving health. Improving health will eventually result in the need for less care. All the dollars spent today on care can infact, be aligned with an improved health strategy and how efficient would it be if the economy is health based than healthcare based.

We should move from an economy that sustains sickness and then, cares for it to an economy that sustains health and cares for the sick to turn them healthy. We thrive today on providing more and more expensive care when we could make a few strategic and tactical changes and move into an economy based on growing and improving health. A health based economy will promote health among people. There will be less need for care after the fact that one is sick but there will be a lot more to do to ensure that everyone is healthy and to keep it that way.

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Going Ahead of the CLASS: The Advantages of Private Long-Term Care Coverage

by Samuel H. Fleet



s Baby Boomers age and shoulder the responsibility for their parents’ deteriorating health, many are facing the reality that the need for long-term care is both pervasive

and costly in post-retirement years. When they look in the mirror, they know their turn is next.

That haunting reality can make one portion of the Patient Protection and Affordable Care Act very attractive. The Community Living Assistance Services and Support Act – better known as CLASS – is designed to spread insured long-term care coverage to a larger base of the nation’s population. The conduit for delivering this insurance product is the workplace.

Because of serious problems with the way CLASS is designed, however, its primary benefit may be surfacing long-term care as an issue that should be addressed, as well as driving awareness of other, more suitable options. Both employers and employees can benefit from understanding the advantages of products on the market today, particularly in comparison to CLASS.

By taking a fact-based approach to decisions about long-term care insurance, everyone emerges a winner. Employees can have policies that provide realistic coverage; employers can have a powerful cost-effective tool for attracting, retaining and rewarding employees; and brokers can have one more option in their portfolio that gives employers the value-added service they are looking for.

Need is Growing

Rather than beginning with the product, the place to start this story is with the need for long-term care. Statistics from the National Clearinghouse for Long-Term Care Information operated by the U.S. Department of Health and Human Services demonstrate the need already prevalent today and give a strong indication of the future that lies ahead. These statistics include:

• About 9 million Americans over the age of 65 will need long-term care services this year – a number that is expected to increase to 12 million by 2020.

• About 70 percent of individuals over age 65 will need some type of long-term services during their lifetime. More than 40 percent will need care in a nursing home.

• The cost of long-term care services across the United States, as calculated in 2005, totaled more than $200 billion. While 49 percent is paid for by Medicaid after individuals have exhausted their personal assets, much of the cost falls upon private resources. Medicare pays only about 20 percent, usually under very specific circumstances and for limited periods.

Other statistics from the National Alliance for Caregiving make clear why helping employees with long-term care obligations makes sense for employers. These include:

• Of the 65 million family members who provide care for someone over the age of 18 for an average of 20 hours per week, 66 percent say it has affected their job by such things as getting to work late or having to quit. One in five caregivers has had to take a leave of absence.

• One study estimates that employees taking care of family members over the age of 50 cause as much as $34 billion in lost productivity at worksites nationally.

The CLASS Act

As part of an effort to reduce Medicaid costs over time, legislators wanted a way to transition long-term care spending from the publicly funded program to an insurance-based system. The CLASS Act does that by creating an employment-based system that uses

A

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payroll deductions to cover premiums.

After a waiting period of five years, the anticipated benefit for the covered person is $50 per day, with growth in that payment based on the increase in the Consumer Price Index. Benefits, which are tax-free, are expected to be payable based on the person’s level of need, even if formal services are not received.

Because the program does not begin until 2014, federal regulators are not expected to finalize specifics until 2012 or 2013. In the meantime, different sources have offered a range of likely premiums. The American Academy of Actuaries estimates a 60-year-old enrollee should pay between $160 and $240 per month. The Congressional Budget Office has suggested $123 per month, while the Centers for Medicare and Medicaid Services is using $180 per month as its estimate.

At the moment, the expectation is that employers will be able to opt in or out. If they opt in, they

will be required to handle administration, including collecting the premiums through payroll deductions and remitting them to the program. Employees who choose not to participate if their employer offers CLASS will have to opt out individually.

While the opportunity to opt out at the employer level exists, many believe federal regulators are leaning towards requiring employers to opt in if at least one employee wants to participate.

Where CLASS Falls Short

Unfortunately, the promise of CLASS falls far short of what is already on the market today. The primary problem is that the program was not designed to cover the full price of care. In fact, it creates a significant gap in coverage that employees may only recognize after they have paid premiums for years and it comes time to use the benefits.

As the Table 1 below illustrates, a $50-per-day benefit may pay about half of needed home care,



but will not even cover a quarter of the cost of nursing home care. The government’s own website recognizes this. The National Clearinghouse for Long-Term Care Information lists average daily costs in the United States of $198 for a semi-private

room in a nursing home; $104 for assisted living in a one-bedroom unit; $84 for an average of four hours of care by a home health aide at $21 per hour; and $67 for care in an Adult Day Health Care Center.

(Source: American Association for Long-Term Care Insurance, 2008, LTCi Sourcebook)

In sharp contrast, private long-term care plans already on the market typically pay significantly higher benefits. As the table below illustrates, only 15 percent of plans pay less than $100 per day. Two-thirds of them pay between $100 and $200 per day. One comparison of the monthly cost and benefits of CLASS vs. private long-term care insurance indicates that a 59-year-old would pay very similar premiums -- $152 vs. $157 per month – under both programs, but would collect $150 per day, up to $400,000, with the private coverage.

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Why Employers Want Options

Although the CLASS Act is new, the concept of offering long-term care insurance through the workplace is not. Between 1995 and 2007, the number of employers offering plans grew almost eight-fold. A 2007 Mercer Benefits Survey indicated

that 50 percent of large employers (20,000-plus employees) offered long-term care insurance, and roughly one-third of companies with 5,000 to 20,000 did so.

One factor that makes long-term care an attractive benefit for employers to offer is that they can

(Source: American Association for Long-Term Care Insurance, 2008, LTCi Sourcebook)

Another drawback of the CLASS Act plan is that premiums are collected for five years before any payout can be made. Most currently offered private plans have a 90-day elimination period, after which the insured is eligible for payments based on their condition and care needs.



customize coverage to meet their goals. Unlike health insurance, federal laws allow them to provide coverage at different levels for various groups of employees. They can choose a no-cost option of offering a voluntary program where employees pay the full premium; they can have an employer-paid base coverage and offer employees the option of “buying up” to higher benefits by paying extra; and they can create an executive carve-out to reward valued employees with an employer-funded, more generous benefit.

Besides using long-term care insurance as a tool for retaining employees, employers can view this benefit as a way to protect worker productivity. Because the policies typically include care coordination, the time an employee spends on the job during business hours trying to arrange for or monitor care is reduced.

In addition, long-term care insurance provides tax benefits to both the employer and the employee. Assuming that the employer is a C-corporation the premiums are tax deductible, there is no imputed income for employees and the benefit is tax free when it is paid out.

Finally, the administrative burden imposed by CLASS is not an issue when employers opt to offer employees private long-term care insurance. Instead, the carrier handles tasks such as enrollment.

Making the Case for Long-Term Care Coverage

Waiting for CLASS to take effect has several drawbacks, the biggest being that employees will not be eligible for benefits until five years after the first premiums are collected in 2014. In the meantime, they are at risk of becoming disabled and finding the cost of necessary care beyond their reach.

People who would not think of going without fire insurance on their home or accident coverage for their car are probably unaware that they are far more likely to be faced with paying for long-term care. In fact, out of every 1,000 Americans who are over the age of 65, five will have their home burn to the ground and 70 will have an automobile accident serious enough to file a claim. But 600 – well over half – will need some form of long-term care.Employers who make getting long-term care coverage easy are providing a valuable benefit to their employees. By working closely with a broker who understands private long-term care insurance offerings, employers can offer their workforce almost immediate benefits, without the regulatory uncertainty and time delay imposed by CLASS. The advantages, to both employer and employee, make going ahead of CLASS worthwhile.

Bio

Samuel H. Fleet is President of AmWINS Group Benefits, a leading wholesale broker of comprehensive group insurance programs and administrative services. With more than 20 years of health and benefit experience, Sam has guided the rapid rise of AmWINS Group Benefits from a small regional organization to one of the most successful wholesale brokers and group insurance administrators in the country. Responding to the crisis of rising medical care and health insurance costs over the past few years, Fleet has positioned AmWINS Group Benefits as an industry leader that can offer innovative solutions to help benefit brokers assist their clients. Sam can be reached at [email protected] or 401.734.4121.

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t is a common belief today, that if a claims administrator begins to send electronic payments (EFT) to healthcare providers it will lower their fulfillment costs. When,

in fact, this is not the case. The problem is that, unless a claims administrator produces an 835 that providers will accept, the administrator must still print an EOB, so the provider can reconcile to their EFT payments. Since EFTs use trace numbers and printed provider EOBs generally using check numbers marked “void”, it creates difficulties for providers to reconcile the EFT deposit to the paper EOB. This in turn can cause an increase in either the number of customer service calls or the provider resubmitting the claims. Additionally, because the cost of an EFT is only pennies less than the cost of clearing a check, there is little savings to be gained by the administrator!

Moreover, if an administrator is moderately successful in obtaining 50% of its benefit dollars transmitted via EFT with provider adoption in accepting 835s, this rarely represents more than

five to ten percent of EOBs produced for providers. This is due to the fact that only the larger provider organizations can accept both an EFT & 835 making them the administrator’s largest payees. This means that the administrator must still bear the additional expense of producing provider payments over 90% of the time.

The truth is that EFTs help providers increase their cash flow, but save very few dollars for the claims administers. The most effective way for administers to truly save on fulfillment costs (e.g. print, postage, and banking fees) is to dramatically reduce the number of provider EOBs processed while migrating toward electronic delivery options that can reliably deliver reimbursements to a broad base of providers.

The first step in this process is to begin consolidating all payments electronically across all self-funded employer groups weekly for each individual provider in a “non-comingling and ERISA-compliant”

by William H. Davis

I

What is the Biggest Myth about Electronic Fund Transfers?

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manner. The savings in this consolidation process is dramatic, because the typical claims administrator approves different employer group’s payments on different days, and each of these groups generally pays the same providers with one check/per claim. On average, an administrator can achieve a consolidation rate of four or more claims on one provider EOB with one check, rather than generating four different checks being mailed out on four different days. By adopting this strategy with other treasury processes it will dramatically reduce the reconciliation costs and bank fees for the administrator, or its clients, as well the number of

pages to print and postage if a provider is unwilling to accept electronic delivery. This innovative process alone will reduce an administrator’s EOB print and postage expenses by over 60%, plus saving over 75% on banking fees on provider payments!

Once the administrator has incorporated this consolidation process, which is under their control to implement, providers may be contacted aggressively to begin accepting alternative payment methods of delivery.

Alternative delivery options include:

Stored Value Virtual Card: The fastest payment delivery option for the provider is the stored value virtual card. Under this payment option a provider receives a fax image of the provider’s consolidated EOB for posting and a virtual card number for instant payment by entering this number in its card processing terminal. This is the easiest and safest delivery method because the providers do not have to give the administrator their bank account information, and they have the paper EOB to back up the payment. The administrator is charged

nothing in this case, thereby completely eliminating its print and postage costs.

Provider Direct: Many claims administrators have relationships with local providers who do not have the 835 capabilities to support EFT transactions. Provider Direct takes the consolidated provider EOB and creates a PDF image of the document with the EFT trace number on the document. Once the EFT has been created, an e-mail to the provider directs the provider to the location of the EOB



PDF. In this way, the provider receives its EOB and can reconcile it to the EFT payment by comparing the trace number from its bank to the trace number on the document. Generally, a fee per transaction is charged to the administrator, but the fee is far less than the administrator’s consolidated print and postage costs. Provider Direct does require the provider to give the administrator its bank account information.

Vendor Direct: Although many providers have clearinghouses and lockboxes, most of these vendors have been unwilling to support individual 835s and individual EFT payments from the administrators due to their or their client’s inability to reconcile these individual EFT transactions to individual 835s. With weekly consolidated EOBs, however, these vendors are now more willing to take these transactions and process them on their client’s behalf. The fees paid by the administrators range from free to a per claim fee. However, all fees are again far less than what the administrator would incur paying their print vendor.

SummaryIn summary, EFTs alone do not lower the administrator’s fulfillment costs unless coupled with an 835, and only the largest providers process both. Therefore, the administrator is forced to produce 90% to 95% paper EOBs thus incurring additional costs. The only solution for administrators to reduce fulfillment costs is by consolidating payments more efficiently while utilizing alternative electronic delivery methods that are more acceptable to a broader base of providers.

Mr. Davis is the founder and CEO of ECHO Health, Inc. located in Cleveland, OH. With over 30 years of industry experience, he is recognized as a visionary and a pioneer in the application of technology in the medical payment space. Prior to creating ECHO Health, Mr. Davis was the CEO of Secure Solutions, where he developed anti-counterfeit processes for MasterCard International. Mr. Davis holds five U.S Patents and is a graduate from Ohio University.

Bio

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Worker’s Compensation Cost Escalation:Technology to Roundup the Usual Suspects

elf-funded workers’ compensation programs across the country are struggling to roundup the usual suspects that contribute to high program costs—namely medical

and indemnity expenses, claims administration costs, litigation, and compliance with reporting requirements. Whether self-insured workers’ compensation programs perform these functions in-house or utilize a third-party service provider, they must control and oversee these processes in order to impact costs and outcomes.

Traditionally, self-funded workers’ compensation programs have been hampered by legacy systems that lacked contemporary automation capabilities and resulted in inefficient operations. These systems were highly resistant to change, inter-connection with other systems and access by external third parties, such as claims specialists, loss-control experts, and attorneys.

Recognizing that today’s claims process must be flexible and extend beyond an organization’s

by Ritza Vaughn

S



Worker’s Compensation Cost Escalation:Technology to Roundup the Usual Suspects

four walls, program managers are beginning to leverage modern infrastructure to better support proven best practices. In fact, browser-based technology has become a means to automate operations, accelerate transactions, tightly manage quality and performance, and mine business intelligence to continually improve program results.

Advanced Claims Automation Since claims cost the property and casualty industry approximately $40 billion just to administer, it is a core insurance process that would significantly benefit from technological automation. In fact, it’s estimated that claim organizations spend as much as $11 – 14 billion in overpayment, waste, and inefficiency—or what the industry generally refers to as “claims leakage.” This leakage is primarily due to manual, paper-based operations and disparate information systems that result in less than optimal claims outcomes and poor customer service.

Browser-based claims technology helps organizations to achieve process transformation—moving from inefficient and disjointed operations to a more automated and integrated workflow. The following claims functions are now incorporated into a browser-based platform that exponentially increases the speed, efficiency and cost effectiveness with which claims are processed:

• Online reporting of injuries. Prompt and accurate reporting of injuries is critical to achieving best-possible outcomes. With the Internet, injuries are now reported at anytime—24 hours a day, 7 days a week. Supervisors and managers who need to be notified of injuries can receive automated, immediate alerts on the same 24/7 basis. In addition, the development of “intelligent” online forms has made the reporting process easier. These smart forms use drop-down lists, auto-population of fields, and threads of logic to navigate users

quickly through the electronic claims submission process. Due to its intuitive, user-friendly design, online reporting is often faster—not to mention less expensive—than a typical phone transaction.

• A paperless paradigm. Today, the vision of paperless claims processing is finally being realized. In its rudimentary stage, self-funded programs may have scanned documents but continued to use paper to exchange information via fax and mail. To engage in a truly paperless paradigm, however, organizations are now avoiding the generation of paper documents, relying on electronic submission and exchange of information. In this data-driven environment, information is input once and made available to all parties via the browser-based infrastructure, which spans the entire enterprise and beyond, so third-party partners can also participate in a paperless claims process.

• Consistent, quality claims handling. In the past, consistent claims handling was problematic; similar claims were often handled with widely divergent approaches and results. For example, with some complex injuries, the same case given to two different adjusters could produce a 100 percent variance in results. With business rules and workflow management, self-funded programs can consistently apply policies, procedures, and best practices throughout their organization to ensure quality results. Business rules also help to guide junior adjusters through an organization’s unique claims-handling process, essentially allowing them to receive training and handholding as they go.

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• Business rules enable straight-through processing. Ideally, claims organizations want to apply adjuster resources where they are needed most. By leveraging a sophisticated business rules engine, self-funded programs can increase their rate of straight-through processing. This means relatively simple and straightforward claims are settled with little or no human intervention. Claims adjusters are then free to focus their time and attention on more complex injury claims that require their expertise and personalized service.

• The adjusters’ automation toolkit. Adjusters can utilize automation tools—such as automated forms, diary systems, scheduling tools, electronic communication, and prioritization of tasks—to help facilitate routine administrative functions, saving as much as 20 percent in adjuster time and resources. With these capabilities, adjusters

can focus on tasks that directly impact costs and outcomes. For example, letter-writing and form-generation templates automatically produce documents with fields auto-populated from the claims database. Adjusters review, edit and send the documents, which saves time and automatically creates documentation within the claim.

• Quality control through online audits. Claim departments have traditionally audited operations to ensure best practices are regularly performed. Since audits are time-consuming, they’re typically performed on a retrospective sampling of 10 - 20 percent of claims. With browser-based technology, online auditing enables greater transparency. Many organizations now perform real-time, concurrent reviews of 100 percent of their claims, enabling them to ensure a higher level of claims-handling performance. Audit findings then allow claim



managers to fine-tune operations, achieve a tighter lifecycle and ensure cost-containment at key junctures of the claims process. Some entities have extended this function to also audit external service providers, such as medical providers and attorneys.

Technology to Manage Medical Costs

Double-digit medical inflation has affected workers’ compensation programs nationwide. In fact, medical expenses now account for approximately 60 percent of the costs of an average claim. To control these costs, self-funded programs are returning to tried-and-true medical management, but with a slightly new twist – leveraging a browser-based infrastructure to streamline and automate operations, as well as to provide the data analysis capabilities to improve outcomes:

• Quality providers. The most critical component to effective medical management is utilizing an appropriate network of physicians who understand workers’ compensation requirements, return-to-work (RTW) objectives, and the importance of leveraging modified duty. Today’s latest data analysis tools can help organizations profile physicians to pinpoint providers who have the lowest overall claims costs and best outcomes. As employees are injured at work, technology helps direct these patients to quality providers in pre-established networks, ensuring the best delivery of care and the greatest level of provider discounts.

• Nurse case management. Nurse case managers should immediately be notified of urgent claims, so they can accompany injured employees to an initial medical visit; begin communication about RTW expectations and transitional work assignments; and help direct care to the extent allowed in the jurisdiction. Many of today’s nurse

case managers are mobile or work from home. The latest browser-based technology allows them to access claims and medical information securely, at anytime from anywhere—as well as to communicate and collaborate with claims management staff to enable optimal outcomes.

• Medical bill review. Medical bills must be reviewed to ensure costs are billed in accordance with fee schedules, as well as provider discounts for additional savings. Bill review technology can update fees and discounts in real-time, ensuring the highest level of savings. In the past, medical bills and reports were housed separately from claims, creating silos of information that hampered efficiency. Today, medical bills and reports can be scanned and stored in one location, and linked at the claims level to ensure the most complete claims and medical cost picture.

Litigation Management

Today, not only is the number of litigated cases growing, but average settlements are also rising. Generally, lawyer involvement drives up the cost of claims, but it does not increase the actual benefits paid to injured workers. As a result, it is in the interest of all parties to reduce litigation and lawyer involvement.

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• Rules to alert litigation specialists. The best defense to claims litigation is to enable highly qualified and experienced claims professionals to get involved early in a case to minimize the likelihood of litigation through up-front management. Business rules and alerts enable claims litigation specialists to ensure proper procedures are followed to evaluate claims and identify problems early on, so preventive measures can be taken.

• Hyperlinks to share data with attorneys. When litigation must occur, communication and sharing of information with attorneys must be seamless. A browser-based platform provides hyperlink technology. A link can be sent via email, allowing attorneys to directly access claims information. These hyperlinks are secure and access rights are defined by the sender. For instance, a claims adjuster can email a hyperlink to the defense attorney. By clicking on the link, the attorney can connect to claim notes and can add information as well.

• Analysis of litigation results. A browser-based platform also enables program managers to document and track judgments for plaintiff and defense counsels in order to identify trends and enable healthy competition among firms. For example, program managers may realize plaintiff

counsel is targeting their employees, or certain defense firms may have a higher win rate.

Analysis for Safety & Injury Prevention

Safety and injury prevention is another critical component to optimizing workers’ compensation program performance. The key to success is identifying where losses are occurring and why, and to formulate a strategy to reduce and mitigate these incidents. To do this effectively, organizations require a 360-degree view of their risks and exposures.

In the past, there was no way to effectively collect and analyze loss information at an enterprise level; instead risks were reported and monitored by department. Many organizations utilized paper-based spreadsheets with data manually entered. These reports were time-consuming and labor-intensive to generate. They often relied on poor data, and since reports were not dynamic, if information changed, someone had to update the corresponding files. In many cases, reports were delivered too late to effectively affect change.

Today, browser-based technology compiles all claims and loss information in one location and shares it with appropriate stakeholders. The resulting real-time business intelligence provides self-funded programs with the data to monitor claims activity and to recommend effective loss-control initiatives for high-cost and high-risk areas:

By regularly receiving and distributing reports, program managers systematically build awareness of program performance against defined goals and objectives. Business units and frontline managers can view departmental losses and compel respective divisions to follow policies and procedures to help reduce injuries. In this way, people at every level of



an organization contribute to program success. Supervisors use reports to identify departments with significant losses, and work with these departments to reduce frequency and severity of injuries. If a department has a high number of back-related claims, the department can respond with injury-prevention training or by providing safety equipment.

According to many industry experts, organizations that utilize advanced data analysis capabilities gain a greater awareness of risks and can save as much as three to 10 percent on their “total cost of risk” or TCOR – the costs to monitor the effectiveness of their risk management programs.

Continued Compliance with New Reporting Requirements

Finally, self-funded programs must ensure continued adherence with mandatory reporting requirements. Starting January 1, 2011, many self-insured entities started to report claims involving Medicare beneficiaries to the Centers for Medicare and Medicaid Services (CMS).

Section 111 of the Medicare, Medicaid and SCHIP Extension Action of 2007 (MMSEA) has added these new reporting requirements, and meeting these requirements will be a huge undertaking. If claims are not reported appropriately, organizations may be fined $1,000 a day per claim. Self-funded entities must invest time, money and resources to understand the CMS guidelines, which are more than 200 pages in length. Many self-funded programs do not have prior experience with mandatory reporting procedures. Some lack the right data management and IT capabilities. Others do not want to rely on a reporting vendor to perform reporting on their behalf.

Whatever the situation, self-funded programs can utilize browser-based claims technology to self-report and thereby comply with MMSEA reporting requirements.

Rounding up the Usual Suspects

Workers’ compensation has been in a state of flux, but the usual suspects in terms of cost escalation remain the same. The critical new piece is utilizing technology to tightly manage and even improve program performance. Browser-based claims and risk management technology manages timely reporting of injuries, optimizes medical cost containment, and ensures best practices are consistently applied.

Program managers should realize that a modern browser-based architecture has the ability to boost claims-handling efficiency and staff productivity. With a sophisticated IT infrastructure in place, self-funded program managers will be better equipped to put the usual suspects under lock and key. Many early adopters have already reaped the benefits: browser-based technology makes it easier for them to automate increasingly complex claims transactions, which involve multiple parties, multiple systems and various regulatory requirements.

Ritza Vaughn is the global product director of claims. In this role, she leads the strategic direction of Aon eSolutions claims product. She also leads

product planning and oversees the execution of the development lifecycle. She can be reached at [email protected].

Bio

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Best practices a PBM can implement to reduce abuse and cost

On-the-job injuries often involve chronic pain for injured workers and long-term liability for workers’ compensation self-insured payors. Many times, pain from a chronic injury is treated with narcotics. According to the 2010 Progressive Medical Drug Spend Analysis, narcotic spending accounts for 34 percent of workers’ compensation medication expenses. And while narcotics can be beneficial in the treatment plan for a patient in pain, there are serious risks involved when they are not used properly.

The Centers for Disease Control (CDC) and the Substance Abuse and Mental Health Services Administration (SAMHSA) both indicate increasing misuse and abuse of narcotics over the past decade. SAMHSA data shows that there was a significant increase from 2000 to 2006 in the treatment of substance abuse cases related to abuse of opioid

analgesics. In addition, another study co-released by CDC and SAMHSA found that emergency room visits linked to non-medical use of narcotics rose 111 percent between 2004 and 2008.

Risks Associated With Narcotics Abuse

While narcotics are considered safe and effective if used properly, they have the potential for leading to addiction and abuse if their use is not monitored and controlled. Misuse and abuse of narcotics represent three areas of particular concern for workers’ compensation self insurers including:

▪Potential for serious health risks ▪Higher percentage of medical expenses as

claims age▪Risk of litigation

As the cost of prescriptions ─ including narcotic medications ─ directly impacts the cost of a workers’ compensation claim,

Reducing Narcotics Abuse in Worker’s Compensationby Tron Emptage



insurers are looking for ways to quickly get control of cases of misuse and abuse. One of the most efficient ways to manage narcotic use in a claimant population is to partner with a pharmacy benefit manager (PBM). A PBM can clearly define a strategy for proactively and effectively monitoring narcotics. These plans and strategies help payors ensure injured worker safety and reduce expenses.

Best Practices to Reduce Narcotics Abuse and Manage Expenses

Forming a partnership with a PBM can provide workers’ compensation self insurers a valuable resource in controlling narcotics use and thereby reducing risk for all stakeholders. There are several key best practices that can be deployed by PBMs to assist self-insured payors.

Best Practice #1: Defining a strategyGetting control of narcotics usage requires a well-defined strategy. Once the PBM reviews the prescription history, it should be used to develop a customized narcotics strategy for each medication plan to identify which medications are appropriate for the injury type and body part. They also account for proper duration of use and quantity limits.

Best Practice #2: Capturing prescriptions at first fillWhen new claims are filed, it is important to capture when and what type of medication is filled at the onset of injury. PBMs should have in place a mechanism to capture this prescription information. Often these early prescriptions begin telling the story of the medication history and medication therapy to come. One method to capturing this data is through First Fill cards. These cards are typically distributed by the employer to the injured worker at the point of accident or injury. To ensure that both employers and injured workers use the program, PBMs

should offer training programs on their use.

Best Practice #3: Offering home delivery programs and retail drug cardsBoth retail and home delivery programs provide the workers’ compensation self insurer an effective means to monitor and control an injured worker’s medication utilization. They also provide self-insured payors an opportunity to fully leverage pharmacy network participation and discounts, thereby reducing medication expenses.

Retail drug cards. When an injured worker requires additional medications, a retail drug card program will give the self-insured payor control over what, when and where the prescriptions can be filled.

Home delivery programs. A home delivery program offers the injured worker the convenience of ordering prescriptions online or on the phone while providing the workers’ compensation self-insured payor the ability to engage in proactive utilization review programs. They also give the self insurer a mechanism to educate injured workers on the risks associated with narcotics through direct interaction with the pharmacist dispensing the injured worker’s prescriptions.

Best Practice #4: Managing prospective and concurrent narcotics utilization review programsThe PBM should have a clinical management process to govern narcotics utilization that is managed by clinical pharmacists. The clinical drug utilization review (DUR) program should use a combination of evidence-based guidelines, peer review journals and recommendations provided by government organizations. Both

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prospective and concurrent review processes are essential to a successful program:

Prospective utilization reviews. A prospective program allows all involved parties to plan for future outcomes with up-front information. Historical data and practices guide future decisions at the establishment of the PBM relationship. This prospective process allows for the achievement of cost control and utilization control.

Concurrent utilization reviews. The PBM triggers concurrent alerts to inform the dispensing pharmacist about possible reasons a prescription should be questioned further prior to filling. These point-of-sale alerts may establish behaviors that could indicate abuse involving the use of multiple pharmacies and physicians for different narcotics or excessive early refill attempts. The messaging from the PBM ensures that prescriptions for narcotics will not be fulfilled at the point-of-sale unless the medication is allowed or the PBM receives authorization from the self-insured payor.

Best Practice #5: Conducting retrospective drug utilization reviews and clinical intervention programs

Retrospective reviews. After a prescription is fulfilled, a PBM’s clinical pharmacist team should audit these prescriptions for indicators of inappropriate use. Indicators often include:

▪Sole use of narcotics as treatment▪Multiple physicians▪Use of multiple short or long acting

narcotics▪Excessive duration and use

These types of utilization review programs are essential to maximize the effectiveness of a narcotics usage strategy and are most effective when leveraged in conjunction with prospective and concurrent drug utilization reviews. PBM programs should be flexible enough to allow for customization of review requirements for clients, as client goals and objectives often vary even within organizations.

Physician monitoring. A PBM should continually monitor the use of multiple physicians by one injured worker. The physician monitoring program should be based on established best practices and contain multiple components including:

▪Monitoring for appropriate medication utilization using evidence-based published therapeutic guidelines



▪Overseeing prescribing patterns at the physician level to establish appropriate/inappropriate use of brand name medications when an FDA-approved generic equivalent exists

▪▪Participating in mandatory and voluntary

state reporting programs that monitor for excessive prescribing patterns

▪Clinical intervention programs. The PBM should have a range of clinical intervention programs to assist a client with evaluation needs. The range of programs should consist of registered pharmacists, nurses and other health professionals available for consultation on medication questions to more detailed evaluations including peer reviews and direct consultation with prescribing physicians. The PBM’s clinical intervention team should provide recommendations for specific claims that require further evaluation through the use of the information gathered in prospective, concurrent and retrospective review processes.

Best Practice #6: Providing ongoing consultation A quality narcotics utilization program is an essential component of controlling narcotics use. To ensure the utilization program is effective, the pharmacists managing the programs should take proactive measures to continually expand utilization review programs as the workers’ compensation industry evolves. As changes occur, they should also be available

to consult with clients on how to adapt their DUR programs accordingly.

Best Practice #7: Validating narcotics use through reportingIf a DUR program is successful, there will be a reduction in unnecessary medication usage, including narcotic use. A PBM should easily be able to validate those reductions through a wide range of real-time and ad-hoc reports.

User-run reports. The PBM should offer a tool that gives a client an option to run a wide range of reports to gain an in-depth understanding of all activity. To maximize the effectiveness and ease of use of the reports, the PBM should ensure the reports are categorized into varying levels depending on how the reports will be used. Management level users should be able to run reports to assist with managing the claims professional, such as a report that provides exception or override information as well as a report that provides details on actions sent to the PBM.

Other available reports should include: savings reports that can be sorted by a range of time periods, jurisdictions, groups and/or branches, pharmacy network utilization and savings reports, generic efficiency and opportunity, as well as a wide range of trending reports including top prescribing physicians, top therapeutic classifications, top pharmacy medications, top ICD-9, top injury type and reports detailing prescribing physician habits.

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Drug utilization review report. To provide information on savings achieved as a result of the program, the PBM should have a detailed DUR report. This report should provide information on savings achieved as a result of the program and should document savings in distinct areas rather than broad categories in order to provide the complete picture of DUR activity.

Ad-hoc reporting. The PBM should have the ability to supply ad-hoc reports to assist with narcotic utilization management. If the PBM captures the data, then the PBM should be able to provide reports based on those data elements.

Best Practice #8: Reduce Out-of-Network BillsA high number of out-of-network bills can lead to issues with managing utilization of narcotics. Not only are individual out-of-network bills typically higher than those in-network, they are often not included in the utilization process. It is vital for payors to have a process in place for properly driving those bills back into the network. This can be done by working with a PBM that offers both paper and electronic out-of-network bill solutions. This will ensure that critical injured worker data on number of prescriptions, duration of therapy, doctor information and other related factors are captured to better monitor utilization.

However, the best method for controlling out-of-network bills is to make it easier for the injured worker to go in-network as early in the life of the claim as possible by utilizing First Fill cards, which are distributed by the employer at the onset of the injury. Two other strategies for reducing out-of-network bills are home delivery and retail drug card programs.

SummaryIt is expected that narcotics will continue to play a role in treating pain in workers’ compensation, so self insurers must take proactive measures to reduce misuse and abuse. By doing so, they decrease risk for litigation, improve injured worker safety and obtain more control over medication expenses.

By partnering with a PBM, workers’ compensation self-insured payors can put an effective narcotics utilization strategy into place. A relationship with a strong PBM partner experienced in workers’ compensation will enable the self insurer to not only monitor utilization but stop point-of-sale fulfillment of unnecessary narcotics.

Tron Emptage is Chief Clinical and Compliance Officer for Progressive Medical, a leading provider of cost management solutions for the workers’ compensation and auto no-fault industries. Emptage can be reached at [email protected].

Bio

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How Brokers Can Find Opportunities in the Healthcare Reform Era

The Patient Protection and Affordable Care Act (PPACA) are designed to bring benefits to millions of uninsured Americans by decreasing health care

costs and premiums.More than a year since the federal legislation was signed into law; the PPACA has yet to exert downward pressure on these costs and premiums. In fact, the latest reports show an opposite effect. Employers are expected to pay nearly 9 percent more for health care costs for their workers in 2011, the highest level in five years. And employers will more than likely ask their workers to absorb 12 percent of these costs.

The future savings predicted by the government also have been questioned because of the sheer cost of the health care reform package—an estimated $940

billion during the next 10 years —and uncertainty about how it’ll be funded. For the most part, medical insurers, pharmaceutical manufacturers, medical device makers and even affluent Americans are designated to collectively foot the bill. But some predict these new financial burdens may be passed down and produce cost repercussions for Americans. And both employers and their workers believe health care reform will bring higher costs for both employer-sponsored benefit programs and health care services overall.

That’s why voluntary benefits present a clear opportunity for brokers during this time of change. Both real and anticipated medical cost increases and the associated shift to less rich medical plans will make voluntary benefits very attractive to both businesses and employees.

by Lydia Jilek

A


National Healthcare Reform MagazineToday’s voluntary benefits are designed to do much more than fill gaps in a medical plan. When people see friends or family financially devastated by an illness or injury—even with solid medical insurance—they understand the need for voluntary benefits. That’s why these coverages such as short-term disability, accident, cancer and especially critical illness insurance are gaining a stronger foothold.

In addition, as employers look for smart benefits strategies to deal with health reform changes, the role of brokers will continue to be extremely important. Working directly with employers to structure medical packages to better align with market reforms means brokers will have front-line knowledge of new products that may be needed to complement redefined health coverage.

Brokers who may have previously overlooked these voluntary products are now re-engaging and learning how to use this coverage to increase their revenue stream, while meeting important needs of their customers and employees.

Health Care Costs and Premiums Will be Directly, Indirectly Driven Higher

Joint research by Towers Watson and the National Business Group on Health shows nearly three-fourths (71 percent) of employers believe health reform will increase the overall cost of health care services in the United States, while 69 percent believe it will increase the cost of their benefits programs. A separate survey of U.S. workers found similar concerns. Two-thirds (67 percent) believe health reform will result in higher benefit costs, while more than one-half (54 percent) believe it would reduce their available benefits and lower the quality of health care (53 percent).

Let’s look at a few health care reform measures that have the potential to directly and indirectly drive up employers’ health care costs and premiums:

So Far• No Pre-existing Condition Limitations – Medical insurers will be required to accept all applicants without excluding any pre- existing conditions from coverage. This \ applies to children up to age 18 now, and will extend to adults in 2014.

• Total Coverage for Preventive Care – Medical insurers will be required to pay for the entire cost of preventive services specified by the Department of Health and Services and cannot ask employees to share this cost (exception for grandfathered plans).

• Child Coverage – Insurers will be required to offer coverage to eligible children until they turn 26 years old, unless they have access to benefits at work.

• Annual and Lifetime Maximums – Medical insurers will no longer be permitted to have lifetime maximums or place annual maximums on what are determined to be “essential benefits.”

• Pharmaceutical Tax Levy – A multi- billion dollar tax will be levied on branded drug manufacturers.

The Future

• Comparative Effectiveness Fee – In 2013, this fee—charged to medical insurance providers— will be used to fund a non- profit organization to study patient outcomes.

• Medical Device Manufacturer Tax – Manufacturers of medical devices, such as pacemakers and X-ray machines, will be assessed a 2.3 percent tax, starting in 2013.

• Health Insurer Levy – Beginning in 2012, a levy will be imposed on health insurers, with exclusions for insurers that meet certain criteria.

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• Excise or “Cadillac” Tax – This 2018 provision levies a 40-percent excise tax on health insurers for any plan with a premium that exceeds standards set by the Department of Health and Human Services.

These measures have many employers rethinking their entire benefits program in order to maintain some level of cost control while still providing competitive packages that appeal to current and prospective employees.

The Voluntary Benefits Market Is Expected to Grow Due to Health Care Reform

As brokers help employers create new benefits strategies to deal with these rising costs, voluntary offerings will be key ingredients. Here’s why:

Significant moves toward consumer-directed health plans are underway (CDHP). One solution experiencing resurgence is the consumer-directed health plan (CDHP). As the name suggest, CDHPs place consumers in the driver’s seat, assuming they

will make more informed and frugal health care decisions if they have a bigger financial stake in the process. Seventy-nine percent of employers expect to offer account-based CDHPs by 2012. These plans typically pair a high-deductible medical plan with a Health Savings Account (HSA), Health Reimbursement Account (HRA) or Flexible Spending Account (FSA).

Reductions in premium costs mean more employee out-of-pocket costs. To control premium costs, many employers will explore increasing deductibles and co-pays, just to name a few alternatives. As these types of strategies are rolled out, the need for voluntary benefits will grow as employees look to cover the financial gaps these new medical plans create. Since the recession, employers have become increasingly concerned about their employees’ financial welfare.

Voluntary benefits are not included in the calculation for the 40-percent excise tax. The anticipated impact of tax, revenue and enforcement provisions will be minimal when it comes to benefits other than medical, such as disability, accident, long-term care and critical illness insurance. Voluntary coverage is accepted from the market reforms such as the elimination of the pre-existing condition exclusion and the guarantee-issue requirements as well as from the excise tax on health plans when premiums are deducted on a post-tax basis.

This cost-neutral coverage fits a diverse workforce. Typical voluntary benefits can be added at little or no cost to the company while offering workers a variety of options to best protect their finances.

Employees can use these voluntary benefit payments any way they choose. They can offset expenses for deductibles, co-payments, rehabilitation, travel for treatment, home care or even daily living expenses while they are recuperating from an illness or accident.



The Stage is Set for Critical Illness Insurance to Expand Fast

Industry experts say the fear of a “worst-case scenario” has been a primary roadblock to employee acceptance of CDHPs.

Critical illness insurance is one voluntary product that is growing in popularity, thanks in part to new medical advances. These technologies help more people than ever survive serious conditions such as cancer, heart attacks or stroke. For example, federal data reveals that about one in every 20 adults in the United States has survived cancer, including nearly one-fifth of all people over 65. But the cost of this advanced medical treatment is very high, even for those with medical insurance.

Even healthy people can be financially strapped by a serious injury. The cost for treatment and the potential for lost wages can create a severe financial strain. Recent economic woes have intensified this issue. With 78 percent of American workers always or usually living paycheck to paycheck, few have any safety net of savings to rely on. In a qualified high-deductible health plan (HDHP)/HSA plan, a family living in these circumstances could be extremely hard pressed to reach their annual out-of-pocket maximum.

And if a health crisis strikes within the early months or years an employee is enrolled in a HSA, the

individual may not have accumulated enough contributions to make a dent in these catastrophic medical costs.

Critical illness coverage can help by providing employees financial assistance in the event of a serious illness, such as heart attack or stroke. The insurance may also include coverage for cancer and family members. The lump sum benefit from critical illness insurance can also supplement a disability plan, helping to keep employees “whole” during a time of financial crisis.

Opportunity Abounds for Proactive Brokers

Although some elements of PPACA may be years away, the arrival of health care reform is forcing a long-needed conversation about health care in this country while at the same time increasing the level of awareness and need for voluntary benefits. The voluntary benefits industry as a whole has seen large increases in sales—even during the recession—as individuals look to increase their levels of protection and security.

There will be plenty of opportunities for brokers to help employers proactively prepare for the changes coming from health care reform. Brokers will be in the best position to help employers take a step back and re-evaluate not only their medical coverage, but also their total benefits offerings, in light of PPACA. It will be more important than ever for employers to work consultatively with brokers to find solutions that meet their unique needs in this new era of workplace insurance. Developing a voluntary benefits program that includes relevant products to address the gaps in health coverage is a proven way to build opportunities with both existing and prospective clients.

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Tips for Navigating Health Care Reform

Educate yourself. You need to be a sponge for information. Take advantage of the non-partisan, factual reports available free to the broker community. Companies such as Unum offer free resources that simplify the mandates of health reform (http://unum.com/HealthCareReform). By understanding fully how health reform will impact your customers and their employees, you can be the expert and consultative resource they need most.

Develop a voluntary benefits strategy and business plan. Focus on actively developing a voluntary benefits program. Treat voluntary benefits as a genuine revenue stream instead of a nice-to-offer service that brings in incremental income. Use it to expand existing clients’ benefits packages and open channels to new ones.

Evaluate current health plan designs based on health care reform requirements. Although existing plans may be temporarily grandfathered, future plan designs and contract negotiations may become more complex as the new health insurance market evolves.

Customize to align with other coverage. One-size-fits-all benefits packages will not work in the new workplace. Use the best combination of traditional and voluntary benefits to help employers offset their employees’ financial risk from health care reform. The right benefits mix can vary according to industry, region and specific workforce demographics.

Work with a provider offering strong benefits communication and education. Health care reform

will certainly bring a myriad of complexities and questions to the workplace—for both employers and, especially, employees who are increasingly being asked to make more of their own benefits decisions. Partner with insurers that offer strong benefits communications and education programs to support any product offering, which can boost enrollment participation. This has strong value for customers, as well. Research shows that when employees understand the value of their benefits, they report higher levels of workplace satisfaction, which can lead to greater company loyalty and increased productivity.

Resources: Frank, Jackie, “Employer Health Costs to Rise in 2011,” Reuters, September 27, 2010. Congressional Budget Office, Letter to Congress, Estimate of Direct Spending and Revenue of Health Care Reform, March 28, 2010. Miller, Stephen, “Double-Digit Health Care Cost Increases Expected to Continue,” Society for Human Resource Management, February 3, 2010. Ibid. Towers Watson, “Rethinking Employer Strategies in a Post-Health Care Reform World,” December 1, 2010. Frankel, Steve, “Boost Employees’ CDHP Comfort Zone with Voluntary Benefits,” VoluntaryBenefitsMagazine.com, March 2010 U.S. Centers for Disease Control and Prevention, “Cancer Survivors,” March 11, 2011. CareerBuilder.com, “More Than Half of Workers Will Use Their Tax Return to Pay Off Bills, Finds New Career Builder Survey: Nearly Eight-in-Ten Workers Report They Live Paycheck to Paycheck,” April 7, 2010. Unum, “Beyond the Usual Benefits; The power of employee education to influence workforce satisfaction,” June 2010.

BioLydia Jilek has been with Unum since 2006 as the director of product and market development. She is involved with

developing and launching new products and platforms offering expanded capabilities. Jilek also is the health insurance and healthcare reform expert for the company.

She graduated with her bachelor’s degree in English from Bates College and received her MBA and master’s degree in Human Resources and Industrial Relations from the University of Minnesota. Before coming to Unum, Jilek worked for Medica Health Plans in Minnesota.



5 Steps to Good Decision Making

ach day we are faced with situations in life that require us to make choices. Some of these choices are easy, and at times, some of them can be difficult.

Easy decisions consist of things like what clothing you should wear; most people choose what to wear based on the season of the year, the weather of the day, and where they might be going. Other easy decisions consist of things like what to eat, what movie to see, and what television programs to watch. Decisions that seem to be the most difficult are those that require a deeper level of thought. Examples of difficult decisions consist of thinks like where to attend college, what career path would be best, and/or whether or not to marry and start a family. These types of decisions are difficult because they are life changing decisions; they shape who we are, and they shape our future.

Making good decisions is a method that must

be learned. It is not something with which we are innately born, but merely a step by step process that is usually ascertained from life experience. Most adults know that experience can be a costly, ineffective teacher that teaches more bad habits than good; and because decisions can vary so obviously from one situation to the next, the experience gained from making one important decision is often times of little or no use when another decision-making problem arises.

When making decisions, there are many steps that can be taken; but when making good decisions there are really only five steps that need to be considered. These steps are as follows:

Step 1: Identify Your Goal

One of the most effective decision making

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by Kescia D. Gray

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strategies is to keep an eye on your goal. This simply means identifying the purpose of your decision by asking yourself what exactly is the problem that needs to be solved? And why does this problem need to be solved?

Figuring out what’s most important to you will help you make good decisions. When you know the reason why you have making a particular decision; it will better serve you in staying with it, and defending it.

Step 2: Gather Information for Weighing Your Options

When making good decisions it is best to gather necessary information that is directly related to the problem. Doing his will help you to better understand what needs to be done in solving the problem, and will also help to

generate ideas for a possible solution.

When gathering information, it is best to make a list of every possible alternative; even ones that may initially sound silly or seem unrealistic. Always seek the opinions of people that you trust or speak to experts and professionals, because it will help you to come up with a variety of solutions when weighing all your options for a final decision. You will want to gather as many resources as possible in order to make the best decision.

Step 3: Consider the Consequences

This step can be just as important as step one because it will help you determine how your final decision will impact yourself, and/or others involved. In this step, you will be asking yourself what is likely to be the results



of your decision. How will it affect you now? And how will it affect your future?

This is an essential step because it allows you to review the pros and cons of the different options that you listed in the previous step. It is also important because you want to feel comfortable with all your options and the possible outcome of whichever one you choose.

Step 4: Make Your Decision

Now that you have identified your goal, gathered all necessary information, and weighed the consequences, it is time to make a choice and actually execute your final decision. Understanding that this step can cause some people a lot of anxiety is important because this is where you have to trust your instincts. Although you may still be slightly indecisive about your final decision, you have to take into account how this makes you feel. Ask yourself, does it feel right? And does this decision work best for you now, and in the future? When you answer those questions back, you should feel good about the result.

Step 5: Evaluate Your Decision

Once you have made your final decision and put it into action, it is necessary to evaluate the decision and the steps you have taken to ensure that it works. This final step is probably just as important as step one, if not more important, because it will help you to further develop your decision making skills for future problems. This step is also fundamental because it may require you to seek out new information and make some changes along the way.

Remember, this step requires some patience and it can also encourage perseverance. Why? Because it may take some time to see the final

outcome. Recognizing that if the first decision is not working, you may have to go back to step two and choose another option. Always looking for and anticipating unexpected problems will help alleviate undue stress, if and when a problem occurs.

Although these five steps can help assist in simplifying the decision-making process, there are some common drawbacks that you must also take into account. Consider these:

Misidentifying The Problem

Many times the problem will be obvious; but there may come a time when identifying the main problem is not that easy. When this issue arises, figuring out exactly what it is, and where you need to focus your efforts will save you a lot of time and energy in the long run.

Having a Single Source

When considering the consequences, you must be open to a broad choice of alternatives in order to find the best solution. This can become a problem if you rely solely on a single source of information because that one source may not b reliable, or may not be completely inline with the problem; thus altering your chances of making the best decision.

Having Too Many Sources

Having a variety of sources is usually not a bad thing; but not in every situation. Collecting as much information as possible can be very helpful at arriving to a decision, but an overload of information can leave you confused and misguided, and prevents you from following your intuition. Remember, trusting your gut instincts is a major key to making good decisions.

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Overestimating the Outcome

When making a decision and putting your plan into action you should have taken care to weigh all your valid options. Making a decision based upon an outcome that may not be plausible will not help you solve the problem. Poor Timing

Time can be a futile friend. Sometimes it is good, and sometimes it is not. When making major decisions, it beneficial to take your time in order to make the best choice from your options. But understanding the timing process is crucial because sometimes it is best to delay a decision, and other times delaying a response can cause more problems. There are also times when making a quick decision is advantageous because it allows you more time to make necessary changes should problems arise.

In summary we all have to make many decisions throughout our daily lives. Some of these decisions require little effort, while others require more time and deeper thought before coming to a final solution. Remember, there are five basic steps to good decision making. Why is those five the ideal number? Because a significant part of decision making skills is understanding and knowing a simple technique; and also regularly practicing that technique. When there are more steps than we can count on one hand, most people tend to either forget a step, or misconstrue the order in which the steps must be taken.

If you follow these five steps, and also remember the common pitfalls previously addressed, you will be well on your way to making good decisions for yourself.For more information on decision making skills, you can read: Smart Choices: A Practical Guide to Making Better Decisions

by Hammond, J.S., Keeney, R.L., and Raiffa, H., The Right Decision Every Time: How to Reach Perfect Clarity on Tough Decisions by Kopeikina, L., or How We Decide by Lehrer, J.

Bio

Kescia D. Gray, RN, MS, PHN, CHES is the owner and president of GrayKo Clinical Consultants, LLC. Previously published in Corporate Wellness

Magazine, she is also an international author and speaker. Some of her most recent works includes co-author of Raising Healthy Children in an Unhealthy World, The Teen Handbook for Self-Confidence, and Transformation: Reinventing the Woman Within.

GrayKo Clinical Consultants, LLC is a health and wellness education company dedicated to providing quality education programs, workshops, in-services, and seminars tailored to individuals, groups, and corporate clients. Their detail-specific program plans can be customized to fit your needs in order to foster success at meeting your goals of better health, increased productivity, job satisfaction, health safety, and more. Subject content related your needs and the needs of your company may include, but is not limited to stress management, emotional wellness, personal development, diet, and exercise. To contact Kescia Gray, please call (866) 653-2570, or go to www.graykoclinicalconsultants.com.

Documents

National healthcare Reform magazine