Thursday, December 31, 2009

Health Care Reform: Small Business Impact

Thursday, December 31, 2009

Although we are still awaiting the final reconciliation of the House and Senate versions of health care reform, small businesses will likely be impacted greater than any other business entity. The House’s version of health care defines “small” by sub-dividing this group designation into three categories: Smallest, 25 or less employees, Smaller, 26 to 50 employees, and Small, 51 to 100 employees. The Senate’s version defines “small” as from 1 to 100 employees. Currently, the Health Insurance Portability and Accountability Act (HIPAA) defines small group size as those businesses with 2-50 employees. The National Association of Insurance Commissioners (NAIC) defines small group size as those businesses with 50 or fewer employees with mid-sized being defined as 51 to 100 employees. America's Health Insurance Plans (AHIP, http://www.ahip.org) defines a small group size for health insurance to be 50 of fewer employees. AHIP is the member association of some 1,300 member companies that provide health insurance to over 200 million Americans.

How are small businesses important to the US economy? Small firms:
• Represent 99% of employers.
• Employ over 50% of private sector employees.
• Pay 44% of US private payrolls.
• Generated 64% of new jobs in past 15 years.
• Create more than half of nonfarm GDP.
• Hire 40% of high tech workers.
• Are 97% percent of exporters.
• Produced 30% of export value in FY 2007.
• Produce 13 times more patents than large firms
U.S. Dept. of Commerce, Bureau of the Census and International Trade Admin
http://web.sba.gov/faqs/faqindex.cfm?areaID=24

It is apparent that “small” businesses play a sigfincat role in the US and global economies and whatever impacts those businesses ripples throughout the entrie business economic system. One of those “impactors” is healthcare. Health care for new small businesses is expensive and difficult to obtain even though HIPAA guarantees issue and renewal of groups under 50 employees. However, HIPAA does not control the cost of coverage.

Typically, groups that lack creditable claims experience are rated (quoted/priced) for premiums using the carrier’s “standard” or “book” rates for fully insured groups based on the group’s demographic and occupational characteristics. Typically, standard rates are those rates approved by the carrier’s respective “commissioner of insurance” for similar unrated groups. The issue for small business is that these rates are often high due to the unknown and unpredictable nature of the small group’s future claims experience.

Since there is a high degree of unpredictability relative to the cost of small group coverage, small businesses may be reluctant to offer health care to their employees. While renewal for groups under 50 is mandated by HIPAA and the renewal rates are NOT; small businesses may be reluctant to offer coverage that they may discontinue in the future. Carriers generally require both a minimum enrollment by eligible employees and financial contributions by the employer; however, small businesses may have difficulty meeting both requirements. Small groups are highly sensitive to a small number of high dollar claims; even 1 or 2 large claims can result in significant premium increases at the next renewal time. Finally, many carriers simply decline to quote new small groups due to the instability of the business entity and the volatility of claims.

The House and Senate versions of health care reform attempt to bring stability to small group rates by placing limits on rates, rate increases, and the methodology of how rates are calculated. In addition, by offering coverage through “Exchanges” small business will have an alternative to traditional carrier coverage.

Monday, December 28, 2009

Excise Tax on High-Dollar Health Care Plans

Monday, December 28, 2009

The Senate’s version of health care reform contains a provision to impose a 40% tax on excess benefits for individuals with premiums above $8,500 for single coverage and $23,000 for family coverage, commencing in the 2013 plan year. The House’s version does not contain a similar provision. In order for the Senate’s (or some variation of it) version to find its way into the final law, the two houses must reach a mutual agreement on its features. The tax is designed to impact those individuals, presumably top corporate employees, who have access to “Cadillac” style plans. By including such a provision, it can only be assumed that the Senate’s intent is to limit or restrict benefits above this level in a manner similar to restrictions on Highly Compensated Employees found within 401(k) plans. However, this feature could have the reverse affect for those individuals who have higher than normal premiums due their current claims expense.

From the view of someone who has designed and administered health care plans for a number of years and employers, it takes more than a “premium” to make a plan a “Cadillac”. It is necessary to look at a number of factors including: the plan sponsor’s industry, competitors, out-of-pocket expenses (deductible, co-pay, and co-insurance payments), geographical location(s), financial position, and the overall (total rewards strategy) compensation philosophy of the sponsor. These are typical factors when attempting to determine the relative nature of a given plan compared to the marketplace and competitors.

It is not uncommon for a plan sponsor to offer a number of health care plans to its employees depending on factors such as: business line, geographical location, union vs. non-union, executive, vs. non-executive, salaried vs. hourly, … etc. In addition, a sponsor may offer a diversity of plan types that include: PPO’s, POS’s, and HMO’s. And within such choices, there may even be a High Deductible, HSA, and/or HRA (consumer-directed health care) style options as well. Plan sponsors do this in an effort to attract and retain their desired workforce in a financially effective manner. One feature I have personally used is to differentially price one type of plan, i.e., PPO, POS or HMO, in a way that focuses enrollments on a specific plan type that is more financially effective for the plan sponsor.

Health care is expensive, in its 2009 Health Care Cost Survey, Towers Perrin reported US employers participating in the survey spent an average of $9,660 per employee for health care benefits in 2009, an increase of 32% from 2004. As costs have risen, plan sponsors have absorbed the larger part of the increase while employees have picked up the remainder. The Towers’ survey reports that employers have taken on 73% and employees 27% of the 2004-2009 cost increase respectively. During this time plan designs have been amended to reflect higher employee out-of-pocket expenses in an effort to shift direct service costs to the employee. Finally, Towers reports employee salary increases as indexed to health acre cost increases have lagged behind at a rate of 33% vs.148% for the period 1999 to 2007. (Towers Perrin 2009 Health Care Cost Survey)
http://www.towersperrin.com/tp/showdctmdoc.jsp?url=Master_Brand_2/USA/Press_Releases/2008/20080924/2008_09_24b.htm&country=global

While the Towers’ survey was directed at health care costs, the survey’s finding does point to one in disputable fact; better performing (financially) organizations have lower overall health care costs for both the employer and the employee and a higher degree of employee engagement in the process of managing those costs. Tower’s report this is accomplished by:

o Clearly articulate their strategies............................... o Engage leaders
o Understand their employee populations.................... io Engage employees
o Optimize investments................................................ io Support employee health
o Measure for success

For more information on the Towers Perrin 2009 Health Care Cost Survey, please contact: Joe Conway, Towers Perrin, Phone:(914) 745-4175,
joseph.p.conway@towersperrin.com

Wednesday, December 23, 2009

COBRA Subsidy Extended

Wednesday, December 23, 2009

On Monday, December 21, President Obama signed intro law the Department of Defense Appropriations Act for 2010 (HR 3326) that contained amendments extending the 65% COBRA health insurance premium subsidies for an additional six months. Assistance Eligible Individuals (AEI's) will have the ability to extend subsidized COBRA coverage for 15 rather than the original 9 months of coverage as mandated in the American Recovery and Reinvestment Act (ARRA). The new provisions effective retroactively amends ARRA, enacted earlier this year. Plan sponsors and COBRA administrators will need to take action now in order to meet the upcoming compliance deadlines.

ARRA was scheduled to expire on 12/31/2009, however, the amendments extends eligibly for the 65% subsidy through 02/28/2010. AEI’s were eligible for a 65% subsidy of their COBRA premiums for a period up to nine months, provided their loss of group health coverage resulted from “involuntary” separation of employment, excluding gross misconduct and the qualifying event occurred within the period from 09/01/2008 to 12/32/2009. AEI’s are now eligible for the COBRA subsidy if the qualifying event (involuntary separation) occurs by 02/28/2010.

In summary:
The subsidy time frame is expanded from 9 to 15 months.

The eligibility period for a qualifying event is expanded from 09/01/2008 – 12/31/2009 to 09/01/2008 – 02/28/2010.

The new law requires only that the COBRA qualifying event occurs by 02/01/2010 and NOT the
commencement of COBRA coverage by that date.

COBRA participants who failed to pay or made partial payments, will have the ability to make-up missed payments during a transition period i.e., 01/01/2010 to 02/28/2010.

During the transition period, COBRA participants will be treated as having paid timely if they: were covered by COBRA preceding the transition period; i.e., 01/01/2010 to 02/28/2010 and the participant makes payment within 60 days after the law’s enactment date or within 30 days after the new notices are distributed.

If the AEI paid the full COBRA amount (up to 102%) during the transition period, the new law allows for the AEI to be reimbursed for the excess amounts.

Plan sponsors or their administrators must notify, wintin 60 days, current COBRA participants and individuals who have a qualifying event of the law’s extension rights. This applies to AEI’s on or after 10/31/2009 through 02/28/2010.

Plan sponsors can expect the departments of Labor and Health and Human Services as well as the Internal Revenue Service to possibly issue guidance concerning the subsidy extension. However, there is no certainty that any of these agencies will produce any instructions quickly.

Plan sponsors should contact their legal council or COBRA administrator to determine the next steps required to ensure they are in full compliance with the amended law.

Tuesday, December 22, 2009

Senate Passes Health Care Reform

Tuesday, December 22, 2009

Over the past weekend, the Senate passed its version of health care reform. Now the two houses must work together to reconcile the two separate versions to iron out any differences. The goal is to have a reconciled version before the end of the year, some hope by Christmas. While many of the features in the two versions are the same or similar, as I am often fond of saying, “the devil is in the details”. Even what may seem like a small insignificant point to the casual reader, could present a stumbling block to our elected officials. Even a point that appears to be a minor issue could have far reaching and unintended consequences to millions of individuals and thousands of employers.

Both houses passed legislation that eliminates the pre-existing medical condition rules. The Health Insurance Portability and Accountability Act of 1996 or “HIPAA” currently limits how far back a carrier or plan sponsor may apply a pre-existing medical condition. Six months is the maximum amount of time that a plan may impose for a pre-existing medical condition and then only if actual medical advice, diagnosis, care or treatment was recommended/received during the 6 months prior to the member’s initial enrollment date. HIPPA also limits the amount of time coverage that a pre-existing medical condition may be excluded from coverage. A carrier or plan sponsor may, under HIPPA, exclude coverage for specific pre-existing medical conditions for up to 12 months, 18 months for late enrollees, i.e., after their initial enrollment date.

As with most things, there are exceptions to HIPPA’s 6/12/18 month rules. As long as the member can show proof, in the form of a Certificate of Creditable Coverage, and any break in coverage is less than 63 days; a carrier or plan sponsor cannot apply a pre-existing exclusionary rule. So, as long as prior medical coverage, including COBRA, did not lapse for more than 63 days and that coverage was “creditable”; the member is treated as if they had continuous coverage with no breaks.

Plan sponsors who self-insure their members have had the managerial capability to waive the pre-existing exclusionary rule. However, any claims incurred for the waived condition usually is excluded from the plan sponsor’s stop loss coverage. Should the member’s claims exceed the plan sponsor’s stop loss limit, claims above the limit become the responsibility of the plan sponsor and not the stop loss carrier. Plans that are fully insured, have not had the capability of waiving a pre-existing condition since the insurance carrier bears the sole risk associated with all claims.

The elimination of the pre-existing exclusionary rule. effectively means that a ”qualified health benefits plan” must accept all enrollees regardless of any gaps in coverage or the type of prior coverage, creditable or non-creditable. Even if a new member previously sought medical treatment and ignored the advice of their physician, they will be permitted to enroll in and be provided with treatment for that condition. Thus members may be entering plans in an advanced stage of medical need and therefore incurring higher medical costs than would otherwise be the case. All other things being equal, will this not drive the overall costs up for that specific plan and its members and plan sponsor? Does this create an incentive for plan sponsors to drop their health care plans and allow individuals to purchase their coverage through an Exchange? Wouldn’t Exchanges be practicing a kind of “community” style of rating and underwriting where the risk and costs are borne by a wide segment of the general population? Does this sound similar to HMO’s that are community rated rather that rated to a specific group?

Monday, December 21, 2009

Health Insurance Exchange-Benefit Options

Monday, December 21, 2009Monday, December 21, 2009

The Health Insurance Exchange is required to offer a Basic, Enhanced, Premium, and/or Premium Plus health care plans. To participate in the Exchange, a carrier must offer at least a Basic plan within the carrier’s service area (geographical premium rating area). It appears the carrier will be restricted to one Basic plan within the service area. (Will there be more than one carrier per geographical premium rating area, most likely.) The carrier may also offer one Enhanced plan within the specified service area. In addition, if the carrier offers an Enhanced plan, they may also offer one Premium plan, within the service area. Finally, if the carrier offers a Premium plan, the carrier will be allowed to offer “one or more” Premium Plus plans for the service areas. (Will there be a restriction on the number of Premium Plus plans offered?)

The Basic plan is actuarially equivalent to 70 percent of the full value of the benefits provided under the reference benefits package, i.e., “essential benefits package”. Special attention is applied to Affordable Credit Eligible Individuals who are covered by the Exchange plans. The benefits offered in the Basic plan are adjusted to provide reduced cost-sharing based on their respective income tier. (Does this mean the “benefits” are reduced OR does it mean that the deductibles, co-pays, and/or co-insurances are modified for lower income individuals?) The Enhanced and Premium plans both offer the same benefits found in the Basic and also offer lower levels of member cost sharing, i.e., less out-of-pocket expenses for the member. (Premium levels will have to be adjusted to reflect the actuarial offset between the Basic and the Enhanced and Premium plans cost-sharing amounts.) The Premium Plus Plan offers the same benefits found in the Basic plan and also includes dental and vision care; provided those benefits have been approved by the Commissioner. The costs of these additional benefits are to be separate and distinct from the health care costs.

The Act directs the Commissioner to create a range of permissible variations in the cost-sharing for the Basic, Enhanced, and Enhanced plans. That variation is within the range of plus or minus 10%. Tiering in cost-sharing is also permitted relative to participation of preferred providers and prescription drugs. (The concept here is that carriers may be able to negotiate discounts, as they do today, with certain providers (provider networks) and pharmaceutical firms (formularies), allowing some cost sharing to passed on to the members.)

Over the years, many individual states have mandated that certain medical procedures be included in individual and group insurance policies sold within their respective states. Health care plans that are “self-insured” are generally exempt from such mandated benefits while those that are “fully-insured” are not. The Act does not exempt Exchange plans from offering state specific mandated benefits. However, states must reimburse the Commissioner for premiums amounts above the affordability premium credits, if such mandated benefits result in a net increase.

As might be expected, carriers will be allowed to provide health care plans thorough the Exchange only after successfully completing a bid solicitation, review, and negotiation process overseen by the Commissioner. The Commissioner will also be able to deny those premiums and/or premium increases that are “excessive”. (Of course this later step will have some form of an appeals process.)

Friday, December 18, 2009

Health Insurance Exchange

Thursday, December 17, 2009

The Affordable Health Care for America Act directs that a “Health Insurance Exchange” be created within Health Choices Administration under the oversight of Commissioner. The role of the Exchange to provide affordable access to quality health insurance and includes provisions for a “public health insurance option”. (As we know, the public option may not be included in the reconciled House and Senate bills.) Assuming that it is included in the final bills, the Commissioner will set the standard for health care, i.e., the reference or essential health care benefits package, negotiate with health care insurance carriers, facilitate enrollment of members and employers, and create risking pooling methods.

Who is eligible to enroll via the Exchange? Anyone who is NOT enrolled in a qualified health care plan or who otherwise has “acceptable coverage”, including legal dependents. Employers are considered eligible to enroll if they fall into one of three categories: smallest (1-25 ees), smaller (26-50 ees), and small (51-100 ees). After 2 years following enactment, the Commissioner may define employers with greater than 100 employees as “Exchange-eligible employers”. The plan is to phase in these categories over the first, second, and third years following the enactment date, starting with the smallest employers. Since we are over half way through the month, it seems unlikely the Senate can finalize and pass their version of health care for a January 1, 2010 effective date.

Who is exempted from Exchange plans? Individuals enrolled in a qualified “group” health care plan, Medicare/Medicaid members, individuals covered by the Child Insurance Health Insurance Plan (CHIP), members of the military, VA participants, and individuals covered by an approved state high-risk pool. It is therefore possible that individuals could move into and out of edibility status over time as their personal circumstances change. Consider the active employee who becomes eligible for Medicare or the child of an employee who is approved for CHIP.

Will Exchange eligible employers be required to make a financial contrition towards the cost of a qualified health care plan? Yes, for full time employees, 72.5% for individual and 65% for family coverage of the lowest cost qualified health benefits plan offered. The contribution for part time employees, will be a proportion based on the employee’s weekly hours and the full time threshold hours set by the Commissioner and the Secretaries of Labor, Health and Human Services, and Treasury. Will Exchange eligible employers be required to make a contribution for employees who are covered as a spouse by another employer’s plan? No, however, if the employee declines coverage in the employer’s Exchange plan and then enrolls in an individual Exchange plan, the employer will be financially responsible.

This later point seems to be in contradiction to the language of the Act that speaks to automatic enrollment of Exchange eligible employees. If it works like auto enrollment in 401(k) plans, at the employee’s plan entry date, the employee is automatically enrolled with a default contribution and investment option. However, the employee is provided an opportunity to cancel/chnage prior to commencement of the actual deductions. Why would the employee be allowed to decline the employer’s plan and opt for individual coverage? It must be in the name of choice. Under traditional insurance underwriting rules, an employer sponsored plan generally must meet minimum contribution and participation levels. Allowing individuals to selectively decline enrollment would undermine those underwriting rules. Will this create an opportunity for adverse selection to occur among and between employer Exchange group plan and individual Exchange plans? Do the traditional underwriting rules and adverse selection even apply under the concept of “universal coverage”?

Thursday, December 17, 2009

Health Care Reform: House vs. Senate

Wednesday, December 16, 2009

While the House passed its version (HR 3962) of national health care reform earlier this month, the Senate continues to debate its own bill (HR 3590). It now appears that a number of changes are being considered, including the so-called “public option”. Regardless of the contents of the Senate’s final version, the two separate laws must eventually be reconciled to eliminate any differences between the House and Senate versions before the “law” can be implemented. The task of reconciling almost 4,000 pages contained in the combined documents is no mean undertaking (the devil is in the details). Although, the reconciled version will most assuredly not contain 4,000 pages, it can be expected that the final version will still be a significantly sized document. What’s more, you can expect that the final law will be amended over time, as is the case for virtually all major legislative acts, i.e., ERISA.

Whether you are a supporter or not of a public health care option, you must acknowledge that today we have a number of such options funded in part by local, State, and/or Federal taxpayer monies in the form of Medicare, Medicaid, Children's Health Insurance Program (CHIP), State high-risk pool programs, VA, TriCare, FEP, … et al. In addition, many health care providers write-off indigent care and care provided to others who fail to pay. In the case of indigent care, these write-offs may be fully or partially reimbursed by local, State, and/or Federal entities. And in the cases of taxable organizations, such write-offs (bad debt) may be deductible against earnings. In any case, the cost of such care eventually becomes the financial burden of the taxpaying public either directly through taxation or higher health care costs, i.e., increased insurance premiums.

Based on the findings of a USA Today/Gallup poll released yesterday, December 16, 2009, 48% of those polled would advise their Senators to vote against healthcare and 46% to vote in favor of healthcare, with 6% offering no opinion. The poll was based on phone interviews with 1,025 adults, 18 and older taken between 12/11 and 12/13, 2009. The poll had a 95% confidence level with a margin of error of ±4 percentage points. See the complete poll at:
http://www.gallup.com/poll/124715/Majority-Americans-Not-Backing-Healthcare-Bill.aspx

While 48% is not an absolute majority, there are a number of individuals who are unable to put their full support behind the current health care legislation. On the other hand, 46% (no small number) of those polled felt that legislative action was needed and they are willing to support their elected officials in national health care reform. It is safe to say, that Americans are almost equally divided between what course of action to take relative to this debate. Whatever is the final outcome, half of Americans are going to be dissatisfied with the results, at best. At worst, no one will be pleased with the final product and it will be a source of discontent for both supporters and non-supporters.

There is much at stake with health care reform. It is suggested that as a nation, we are at a competitive disadvantage relative to other nations due to the added cost the American health care system places on our manufactured goods. We are told that Americans spend more on health care per capta than others and receive less value than those who spend less, i.e., Britain, France, Germany. It is reported that a significant portion (47m +/-) of the US population is uninsured and thus represents a loss of productivity for those Americans and an avoidable and unnecessary economic burden on the country.

As someone who has witnessed the growth in health care expenses and the difficult decisions individuals, employees, and employers have been forced to make, the outcome of the current national health care reform will have a far reaching impact.

Tuesday, December 15, 2009

Other Laws and Requirements

Tuesday, December 15, 2009

Laws, rules, and regulations do not live in isolation from other laws, rules, and regulations. Rather they must coexist in an environment full of amendments, exceptions, and caveats. I am often asked to provide or obtain a “hard and fast rule” for some specific situation. Usually my response and the response others include a number of exceptions. The Affordable Health Care for America Act is going to be no exception.

The Act does not relieve carriers, providers, and plan sponsors form complying with the various State and Federal laws, including the Hawaii Prepaid Health Care Act. The Hawaii Prepaid Health Care Act is considered to be “qualified health benefits plan” and has met the “essential benefits package” test to the extent that the Secretary of Labor finds that the Act “is substantially equivalent … to the essential benefits package”. The Act is silent and does not specifically address Massachusetts’s health care reform of 2006, which has severed as somewhat of a model for the current national health care reform. Are the carriers, providers, and plan sponsors in Massachusetts somehow exempted from the Act? Are health care plans that meet the requirements under the Massachusetts law to be afforded the same treatment as Hawaii?

One interesting aspect of the Act is the repeal of the exception of health insurers, including malpractice insurers, form antitrust laws. While efforts to repeal this provision in the antitrust laws date back to the Regan era, it appears to have been successful with the passage of the current Act. It is somewhat difficult to predict the outcome of such a repeal since insurers are regulated by State insurance commissioners to a high degree. When Christine Varney, an antitrust official at the Department of Justice, testified before Congress. she reported that “the most egregiously anti-competitive claims, … are virtually always found immune.” Varney testified that repeal of certain antitrust laws, “would allow competition to have a greater role in reforming health … insurance markets than would otherwise be the case.” Does increased competition “always” resulting lower costs? Does increased competition “always” result in better services or products? Why were health insurers exempted from antitrust in the first place? Did some wise person conclude 60 years ago that it was in the national best interest to exempt insurers?

Since significant savings are expected through the deployment of electronic health care recordkeeping systems (EHR), the Secretary of Health and Human Services is required to study methods to increase their use in small providers (How big is small?) Methods might include monetary incentives to implement such systems, development of low cost software, make VA software available to providers, provide training, and provide implementation support.

in addition, this subtitle of the Act addresses issues as wide ranging as discrimination, whistleblower protection, collective bargaining, state and federal laws regarding abortion, rights of conscience on abortion.

Monday, December 14, 2009

Health Choices Administration

Monday, December 14, 2009

The Health Choices Administration Commissioner, Inspector General For The Health Choices Administration, and the Ombudsman for the health choices administration are responsible for the overall day-to-day operation and administration of the agency under the oversight of Congress and in cooperation with State attorneys general ,insurance regulators, National Association of Insurance Commissioners, appropriate State agencies, Federal Trade Commission, other, Federal agencies, and Indian tribes and tribal organizations.

The Health Choices Commissioner and the Inspector General For The Health Choices Administration are both appointed by the President and confirmed by the Senate. The Ombudsman is appointed by the Commissioner. (I am sure the Commissioner will “consult” with the President and others concerning this appointment. Conceptually, this means that as Presidents come and go, these officials may also so change and so may the “flavor” of the agency?)

The Commissioner’s role will be to establish qualified heath care plan standards, the Health Insurance Exchange, and individual health insurance affordability credits. In addition, the Commissioner is required to promote accountability on the part of those entities offering health care coverage (carriers, providers, plan sponsors), conduct compliance examinations and audits, and recover the of costs of those examinations and audits. (I assume this will be through monetary penalties?)

A major function of the Commissioner will be to collect data, data on plans offered, procedures covered, financial aspects of plans, … etc. This will be used for various reasons including the measurement of the agency’s success or failure in “promoting quality and value, protecting consumers, and addressing disparities in health care”. Along with collecting data, the Commissioner is charged with the setting of standard medical definitions and terms.

By direction, the Commissioner is required to consult, coordinate, and cooperate with numerous Federal, State agencies and regulatory bodies in an effort to deliver effective and efficient enforcement of the Act’s administration. While this may sound somewhat negative, the Commissioner is required to “achieve uniform standards that adequately protect consumers … that does not unreasonably affect employers and insurers”.

The Act creates a Commissioner and an Inspector General, but then a Health Insurance Ombudsman is also created. The Ombudsman is responsible for receiving complaints and providing assistance, presumably from and to consumers, i.e., the public and to do so in a “linguistically appropriate manner”. In addition, the Ombudsman will be responsible for submitting annual reports to both Congress and the Commissioner.

How long is it going to require for the Commissioner to pull together the various and numerous bodies he has to consult, coordinate, and cooperate with in order to come up with a workable solution to the current health care system? As carriers, providers, and plan sponsors; are we going to be faced with one, two or more years before final rules and regulations are published?

Sunday, December 13, 2009

Consumer Protections and Information Standards

Saturday, December 12, 2009

Previously, I noted that to be a “qualified health benefits plan”, a plan must meet provisions for affordable coverage, essential benefits, and consumer protection. Similar to ERISA and other “worker rights” laws, the Act outlines appeals and informational dissemination processes.

The Act grants the ability to the Health Choices Commissioner (Commissioner) and the Secretary of Labor (Secretary) to jointly establish, standardize, coordinate, and “harmonize” various consumer, provider, and carrier marketing protections and informational practices. This standards apply to plans offered through Health Insurance Exchanges and may apply to non-Exchange and other plans “only to the extent specified by the Commissioner”.

The Act outlines mechanisms to protect consumers, providers, carriers, and others:
o Timely grievance/appeals process for internal/external claims reviews/payments
o Accurate/timely informational/plan transparency/disclosures, including enrollee/participant rights
o Plain language use (Similar to requirements in ERISA for SPD’s, SMM’s, & SAR’s)
o Cost-sharing transparency (deductibles, co-pays, coinsurance) (Many plans currently provide this via enrollment materials and/or web portals.)
o Reimbursement transparency between the carrier and provider (How will provider confidentiality be maintained?)
o Pharmacy benefit managers (PBM) transparency, statistical reports on numbers of Rx’s, average payments , mail-order vs retail, discounts, rebates, generic vs name-brand, enrollment turnover, and other information.
o Confidential annual public PBM transparency reports by Commissioner.
o Annual PBM reports by Commissioner to: State/Federal law enforcement (fraud), Comptroller General, Medicare Payment Advisory Commission, Secretary of Health and Human Services, and Director Congressional Budget Office
o Penalties for PBM’s who fail to comply or falsify information.
o Standardization of coordination/subrogation of benefits/claims process
o Administrative simplification of processes
o State prohibitions on discrimination against health care providers
o Protection of physician Rx information/Congressional biased marketing/sales practices report
o Dissemination of advance care planning information
o Information related to other “end-of-life” planning tools
o Does not promote suicide, assisted suicide, euthanasia, or mercy killing. regardless of legality
o Does not require advanced directive or a physician’s order for life sustaining treatment or other end-of-life planning document
o Does not require consent to restrictions on the amount, duration, or scope of
medical benefits otherwise covered under a plan
o Advanced directive defined: includes living will, comfort care order, or
durable power of attorney for health care
o No restrictions on palliative/hospice care or service for pain or discomfort
o No preemption of state law regarding advance planning, palliative
care, or end-of-life decision-making.

How will plans be able to achieve “administrative simplification” with all of this additional compliance and reporting requirements? Will new reporting requirements add to the cost of Rx and PBM’s?

Friday, December 11, 2009

Essential Benefits Package

Friday, December 11, 2009

While the Act mandates and enumerates coverage for various benefits, nothing prevents a plan from offering benefits beyond what the Act defines as “Essential”. Those plans that operate inside and outside the Health Insurance Exchange may continue to provide the essential benefits identified in the Act and even offer additional coverage. However, these benefits must be “offered under a separate policy, contract, or certificate of insurance.” The Act provides for inclusion of any and all medical practices, provided those practices are medically appropriate for the patient being treated.

The Act requires the Secretary of Labor to survey employer-sponsored plans to determine what benefits are included in those plans. The Secretary is then required to report his findings to the Health Benefits Advisory Committee and to the Secretary of Health and Human Services. This report will then be used by the Office of the Actuary of the Centers for Medicare & Medicaid Services to determine the “average prevailing employer-sponsored coverage in the” first year after enactment. This now becomes a benchmark or “reference package” with which to develop the benefits of the “Essential Benefits Package”.

The Act does set certain “minimum” services to be included:
o Hospitalization, outpatient/outpatient clinic, including emergency services
o Professional/physicians/other health professionals
o Medically required equipment/supplies
o Prescription drugs
o Rehabilitative/habilitative care
o Mental health/substance abuse, including behavioral health care
o Preventive services including recommended vaccines
o Maternity care.
o Well-baby/well-child care
o Oral health, vision/hearing services for children under 21
o (Adult oral health is pending a study by the Secretary of Health and Human Services)
o Durable medical equipment, prosthetics, orthotics/supplies
o Assessment/counseling cervices associated with domestic violence

The Act prohibits cost sharing for preventive services, (This is not an uncommon practice in many plans today). However, total cost sharing is capped at $5,000 and $10,000 annually for individual and family coverage, respectively. These amounts will be indexed and potentially adjusted annually. Cost sharing will be restricted to “co-payments” rather than “co-insurance”, where possible. (For most of the plans I have managed, it will be difficult for members to reach these levels with current co-payments around $30 to $50.) The goal is to provide benefit coverage that is 70% of the “full actuarial value of the benefits provided under the reference benefits package”. The “reference benefits package” are those services defined in the “Essential Benefits Package” without any cost sharing provisions.

In order for a carrier to participant in the Health Insurance Exchange, they are not “required” to offer abortion coverage, carriers and/or plan sponsors may include or exclude such services as they see fit. The public heath care option also appears to be free to offer or not offer abortion services “based on the law as in effect as of the date that is 6 months before the beginning of the plan year involved.” (Depending on the final outcome current developing legislation, this may change for the public option.)

The Act creates a Health Benefits Advisory Committee, chaired by the Surgeon General and composed of nine members appointed by the President, nine members appointed by the Comptroller General, and up to eight additional members “as the President may appoint”. Committee members serve a 3-year term, except initial member’s terms will be adjusted to stagger their appointments. Members are intended to be representatives reflecting a broad spectrum of health care experts including: providers, patients, employers, labor, carriers, financing/delivery, oral health, racial/ethnic disparities, health care needs of the disabled, governmental agencies, physician/health professionals, and child/adolescent health care. The role of the Committee will be to develop recommendations for the Secretary concerning “benefit standards” and provide periodic updates to its recommendations based on State and public input.

The “benefit standards” is measured relative to the Essential Benefits Package discussed earlier, in addition, the Committee will make recommendations for two additional levels of plans: an Enhanced and a Premium Plan. The Enhanced plan will have a cost sharing level equal to 85% of the actuarial value of the Essential Benefits Package and Premium plan will have a cost sharing level equal to 95%. (This is similar to the Massachusetts Health Care Reform law that provides for a Bronze, Silver, and Gold option from which individuals may select.)

Thursday, December 10, 2009

Protections and Standards for Qualified Health Benefits Plans

Thursday, December 10, 2009

A core provision of the Act is to provide protection and certain standard plan provisions that almost every health care plan must meet. Similar to ERISA protections for retirementment plans, the Act extends these provisions with the thought of achieving affordable access and providing essential benefits to the covered members. (In reading the Act you may note that the various provisions of the Act are not always in a sequential order that make sense to the reader.)

To be a “qualified health benefits plan”, a plan must meet the provisions relating to: affordable coverage, essential benefits, and consumer protection. These three provisions apply to persons enrolled in an employer-based and individual plan. An individual is considered enrolled if the individual is a participant or beneficiary as defined by ERISA.

The Act does provide for a grace period allowing current employment-based health plans to meet the requirements of qualified health benefits plan. An exception is made for certain plans including those that cover a “specified disease or illness policy”, i.e., cancer, heart attack, accident, … etc. Would this also exempt all indemnity type limited medical plans? However, the Act makes it clear that specific disease or illness policies are “In no case shall an employment-based health plan … be treated as acceptable coverage under this division.” Lastly, the Act does permit high deductible health care plans with no apparent sunset provisions noted.

Individuals currently enrolled in an individual health care plan are ‘‘grandfathered” into their current health care plan. However, carriers may not allow new enrollees to enter the grandfathered plans except under certain conditions, i.e., new dependents. Does this mean that I can add a newborn but can I add a dependent that has lost coverage under another plan? What happens to the mother or father of that newborn who decides to become a stay-at-home parent? Any individual health care plan that is not grandfathered must be offered through a Health Insurance Exchange plan. The Act restricts premium increases by allowing a carrier to increase premiums only if it increases premium percentages for “all enrollees in the same risk group at the same rate”.

How will affordable coverage be maintained? Qualified health benefits plans will not be allowed to impose preexisting condition exclusions. Policies will be guaranteed issue, renewable, and cancellations will be prohibited, except in cases of non-payment and fraud. Policy pricing rules will allow for use of: age, geographical area, tier size (single, single + 1, … family), and actuarial value of optional services, i.e., dental, vision, … etc.

The Act prohibits discrimination in benefits; for mental health and substance abuse treatments. It attempts to ensure that provider networks are adequate, that members have internet access to plan information, and provides for an option of extended coverage for uninsured dependent children under the age of 27 and who are not otherwise enrolled in a health benefits plan. If the coverage offered under a qualified health care plan, decreases or the cost-sharing increases during the plan year, the carrier (and plan sponsor, i.e., employer) must inform members of the change within 90 days of the change or sooner to protect the health/ of the members.

Wednesday, December 9, 2009

Interim Companion Guides, Including Operating Rules

Wednesday, December 09, 2009

It is common for regulatory agencies such as the Deptpartments of Labor, Health and Human Services, and the Internal Revenue Service to issue “temporary” or “interim” regulations, and operating guidelines, while final rules are being developed. Agencies are required to seek public input and issuance of temporary regulations allows for this public input process to take place. A department’s final regulations are often very closely aligned to its temporary regulations, after all, some “temporary” regulations are known to have been in place for years before being finalized.

The Act directs the Secretary of Health and Human Services to provide interim guidelines for Medicare Advantage plans that will include:

o a standardized data transaction format for submitting medical loss ratio data, eligibility, claims status,
and other information to the Secretary by October 1, 2011.

Remember, the Act is mandating a medical loss ratio of not less than 85% for a health care plans. The medical loss ratio of a specific health care plan measures the proportion of premium dollars paid towards health care claims and does not include administrative and operating costs, i.e., expenses incurred by performing its normal business operations.

o the interim guidelines must take into consideration current and future legislation, i.e., ERISA, HIPPA, … etc.

Nothing in the Act exempts the Secretary of Health and Human Services or another Federal, state, or local governmental agency from abiding by any current or future legislation.

o operating rules for using and processing the standardized data transactions developed by the Secretary, including standards for first report of injury by January 1, 2014

Since one function of the Act is to reduce duplication of services and functions; standardizing how, when, where and by whom data transactions are executed would, in theory, move the health system towards lower administrative costs, improved delivery of health care, and lower claims costs over time.

o a unique health plan identifier by October 1, 2012

Currently, employer based health care plans that are subject to ERISA are identified by the Employer’s Identification Number (EIN, i.e., corporate tax ID number) plus a three deigit number such as: 501, 501, 503, … etc. Under the “unique health plan identifier”, I would expect that each type of plan (HMO, PPO, POS, … etc.) within an employer’s health care offering would an identifier specific to that offering. Individual plans also have a current identifier, since these plans as reviewed and approved by their respective states of domicile. However, the issue is that none of these current identifiers are “unique”, plus they may not tell the observer the type of plan, the state it is domiciled in, or the issuing carrier.

o expansion of penalties for violations by health plans (brokers, agents, and other parties in interest may also be included)

Unfortunately, without a threat of penalties, some health care providers and parties in interest may not be inclined to adhere to the guidelines.

Will all of this “standardization” result in lower costs, improved health care, greater access to care?

Monday, December 7, 2009

Digitization of Patient and Financial Transactions

Monday, December 07, 2009

Over the last three decades virtually every major industry has reached some level of digitization of their manufacturing, logistic, inventory, sales, and service delivery systems. Products are routinely bar coded and radio tagged to optimize ordering, pricing, sales, inventory control, and shrinkage. So why shouldn't health care benefit from some of the same forms of technology?

The Act attempts to obtain a similar level of technology adoption by mandating, starting within two years and completed within five years, the digitization of patient health care data and the accompanying financial transactions.

The Act’s goals are to:

o be unique, no conflicting/standards
o permit no additions/constraints for transactions, including companion guides
o be comprehensive, efficient/robust, minimal paper transactions/clarification
o be real-time/near real-time in determination of financial responsibility/service eligibility
o use machine-readable health care ID cards
o allow near real-time adjudication of claims;
o provide electronic acknowledgment, response, and status reporting
o describe all data elements unambiguously
o harmonize common data elements
o require optional paper versions of transactions (Aren’t we trying to get rid of paper?)
o enable electronic funds transfers
o require timely/transparent claim adjudication
o require standard electronic member enrollment

While many health care providers currently have systems in place to conduct most enrollment, claims, and reporting activities electronically, at best, it can be said they are not standard across providers. In addition, the availability of “paperless” and “on-line” transaction and reporting may very by group size. A provider may not offer the same level of automation to a group of 25 as it does to a group of 250 members. Furthermore, those systems in place to manage Medicare, Medicaid, Tri-Care, and state-based CHIP plans may all have differing data standards, formats, and inter-faces.

To ease the burden of converting from their current data formats, the Act does provide for “incentives” to assist various providers. The Act specifically addresses incentives for providers who are “serving rural or underserved areas”. Finally, all of this automation must comply with any current privacy laws and as might be expected, the Act provides for its own enforcement through the use of audits and penalties.

What will it take to make all of this happen over the next 5 years? Most large carriers and providers have technology staffs who have the abilities to make the changes required in data standards, formats, and inter-faces, but will they have the capacity? How will this impact the small providers who have limited or no technology staffs? Who and how are the thousands of medical office staffs going to be trained to input these standard transactions?

Sunday, December 6, 2009

Simplification and Standardization of Electronic Administrative Transactions

Sunday, December 06, 2009

A common argument made of the American health care system is that it is too bureaucratic, cumbersome, dependent up on paper-based transactions, with duplication and overlap among and between the various health care providers and insurance carriers.

A personal example may serve to illustrate. I recently saw my primary care physician for a minor infection. I called the office to make an appointment since my physician does not permit on-line appointments. When I arrived for my appointment, the office staff visually reviewed my member ID card (non-machine readable), manually verified my coverage with the carrier on-line, and took my co-payment. Later, I was ushered into exam room where my medical concerns and vitals were taken and recorded on a laptop. My physician examined the finger, asked a few questions, and concluded the finger should be lanced and drained. After lancing and draining the finger and taking a sample to be analyzed, he wrote two prescription; and referred me to an orthopedic specialist for possible bone damage. I left the office, presented my two paper prescriptions to a pharmacist and had the two prescriptions filled.

A few days later I saw the orthopedic specialist who required a second co-payment (the staff wanted to under charge me for my co-pay), took the same vitals, asked the same questions, asked about any prescriptions, took an X-Ray, re-lanced and re-drained the finger, and finally concluded there is no damage to the bone.

Several weeks later, I received separate paper (some carriers provide on-line EOB’s) explanations of who I saw, what I was changed, what I paid, what was charged to my out-of-pocket expenses, and what the carrier paid to my primary care physician, orthopedic specialist, and any other providers.

In that process, all information was transmitted via paper with the exception of my phone call to initiate the appointment with my physician, manually verification of my coverage with the carrier, and the phone call from my physician to the specialist. If asked, my physician would have certainly called the two prescriptions into the pharmacist and they would have been waiting for me when I arrived at the pharmacy.

If I had analyzed that process looking to improve it, I would have found several opportunities to do so. Included, would have been initiation of on-line appointments, electronic verification of patient insurance information, and electronic transmission of patient information, X-rays, lab tests and results to other providers.

The Act proposes to simplify and standardize patient-provider interactions by requiring many to occur in real time (or near-real time) and permit patient, insurance, and claims information to be captured in standard electronic formats thus reducing or eliminating barriers to the sharing of information among and between carriers and/or providers. Hopefully, one outcome is the reduction in carrier and provider administrative costs. In addition, it is reasonable to expect increased levels of member and/or patient satisfaction, reduced errors, better utilization of resources, and more timely delivery of vital information such as laboratory results.

While there are several “devils” in the details; consider our banking system. I go to the store and pay for my purchase with my ATM card. The card has a magnetic strip that includes my basic banking information. In combination with the store’s sales system a transaction is created that determines if I have enough money to pay for my purchase, credits the store’s bank account, and updates the store’s inventory with my purchase. By the time I arrive home, my account information has been updated with my latest transaction.

While there are many opportunities to improve the current U.S. health care system through the digitization of patient and financial transactions why does it require a national mandate? The retail industry and others, did this many years ago, why do the economics at work in retail not apply to health care?

Friday, December 4, 2009

Federal Health Care Access Grants

Friday, December 04, 2009

The Affordable Health Care for America Act provides for grants (states have to match 20% of the grant) from the Secretary of Health and Human Services to establish health care programs for uninsured individuals within the respective states as a means of delivering affordable health care. States will have to demonstrate their ability to maintain these programs once the grants are exhausted.

Several different types of delivery programs are mentioned within the Act including: state insurance exchanges, community coverage, reinsurance plans, transparent marketplaces, automated enrollments, innovative strategies, and purchasing collaboratives.

1. State Insurance Exchanges: These are intended to design and develop new, hopefully less expensive, portable health care benefits for small employers and part-time/ seasonal workers.

2. Community Coverage Program: Intended to foster shared responsibility between employers, governmental or nonprofit entity, and the individual. Who or what are the nonprofit entities? Will there be a mix of charitable, religious, community service and/or philanthropic organizations?

3. Reinsurance Plan Program: Stop-Loss coverage designed to offset a portion of carrier losses in a certain “risk corridor”. What is a risk corridor? Will it work like a traditional stop-loss policy and reimburse losses at the individual and/or the aggregate levels? Will stop-loss premiums be paid by the sates, carriers, employers, members or some combination?

4. Transparent Marketplace Program: Designed to provide for a structured means for the sale of health insurance, possibly via a Web portal. Will it work like Massachusetts’ Health Connector website? (
https://www.mahealthconnector.org/) For that segment of the population that does not have access or knowledge of the Internet, how will access be provided?

5. Automated Enrollment Program: Statewide or automated enrollment systems for public assistance programs. By “public assistance programs”, is the Act addressing AFDC, Food Stamps, and other “welfare” programs or is it directed at health insurance for the uninsured?

6. Innovative Strategies: Innovative strategies to provide low-income childless adults with health care. How are the health needs of “childless adults” different than adults with children, other than the fact they have children?

7. Purchasing Collaboratives: Business & consumer relationships that provide for direct contract purchase of health care services plan sponsors. Does this mean that a plan sponsor can purchase services directly from a specific medical provider(s) for their covered members? Would each plan sponsor have to negotiate independently of other plan sponsors with providers? Will this dilute the ability of insurance carriers to build and maintain discounted provider networks?

Thursday, December 3, 2009

Extension of Cobra Continuation Coverage

Thursday, December 03, 2009

As you may recall, earlier this year, Congress passed a COBRA coverage extension and subsidy law as part of The American Recovery and Reinvestment Act of 2009 (ARRA). The Act provided for premium reductions and additional election opportunities for individuals who experienced a COBRA qualifying event after February 17, 2009.

COBRA qualified individuals paid 35% of their COBRA premiums and their former employer or plan sponsor paid the remaining 65%. Employers or plan sponsors were reimbursed for their portion of the COBRA premiums through a quarterly tax credit. The premium subsidy applied to coverage beginning on or after February 17, 2009 and lasted for up to nine months for the period from September 1, 2008 to December 31, 2009.

The result of ARRA was a large increase in the numbers of COBRA qualified individuals who enrolled in the COBRA coverage extension and the subsidy. Prior to the passage of ARRA, COBRA qualified individuals paid up to 102% of their health care premiums. Clearly, ARRA made COBRA more affordable to such individuals. By some accounts, COBRA enrollments doubled during the ARRA qualifying period.

There is current pending legislation in the Congress to extend ARRA. Three different bills are pending, one in the Senate (S2730) and two in the House (HR3930 & HR 3966). All three are under review by their respective committees. It is to be seen whether or not any of these three bills will be acted upon within the next few weeks.

In addition, the Affordable Health Care for America Act (H3962) extends COBRA coverage but only after the date of the Act’s enactment, i.e., January 1, 2010. The Act extends COBRA coverage until the “earlier of the date on which such individual becomes eligible … for health insurance coverage through the Health Insurance Exchange”. The Act removes any current state laws that bar COBRA qualified individuals from participating in a state’s “health benefits risk pool”. Furthermore, nothing in the Act addresses employer, plan sponsor or government subsidies or financial assistance to COBRA qualified individuals as part of this extension of coverage.

Tuesday, December 1, 2009

Can wellness programs stabilize or even reduce health care costs?

Thursday, November 30, 2009

I hope that everyone had a great Thanksgiving Day.

Those of us in HR engaged in the design, development, and management of employee health care plans have, long ago, come to understand the predominate factors in employee health care costs are associated with life style behaviors. These behaviors include substance abuse (both legal and illegal), nutrition/weight management and physical exercise, and mental health issues such as stress and depression.

The Act provides for “wellness program grants” to “small employers” (to be determined) to cover up to 50% of the cost (excluding food and the cost of health insurance) of a “qualified” wellness program in conjunction with an employment based health care plan. The grants are for up to a three (3) year period and are calculated by multiplying $150 times the number of employees (Are all employees of the employer or just those who are eligible and/or enrolled in the employer’s plan to be included?) up to a maximum of $50,000 for the entire grant period. (Are grants extendable or renewable?)

To be considered a qualified wellness program, the program must be “consistent with evidence-based research and best practices”, include “multiple, evidence-based strategies”, include “strategies which focus on prevention and support”, ensure programs are “culturally competent, physically and programmatically accessible”, and cover any three (3) of the following:

1. Health Awareness Component
A. Health Education
B. Health Screenings
2. Employee Engagement Component
3. Behavioral Change Component
A. Tobacco Use;
B. Obesity;
C. Stress Management;
D. Physical Fitness;
E. Nutrition;
F. Substance Abuse;
G. Depression; and
H. Mental Health Promotion
4. Supportive Environment Component
A. On-Site Policies

The Act requires that both the Secretaries of Health and Human Services and Labor certify that each wellness program is available to all employees of the employer, no mandate that employees participate, and may include a financial incentive to participate in the program. The financial incentive cannot be tied to the premium or cost sharing of the individual under the health benefits plan. (No reduced premiums, deductibles or out-of-pocket expenses.)

As might be expected, data gathered under an employer wellness program can only be used for the administration the employer’s wellness program. The Secretaries will issue standards in the future to ensure that all employee protected health information remains confidential and used only for purposes of administering the program.

The Act requires the Secretaries to conduct an outreach program to inform employers of the availability of wellness grant programs, how to develop such programs, and how best to measure their outcomes.

Thursday, November 26, 2009

Thursday, November 26, 2009

How will retiree health care benefits be treated under the ‘‘Affordable Health Care for America Act’’?

The Act bars group health care plans from “substantially” reducing benefits paid to retirees and/or their beneficiaries, however, plans are allowed to place a “cap” on the total benefits paid to retirees. (Is this not a contradiction to the ban on annual and lifetime max’s?) Furthermore, plans may reduce benefits to retirees if and only if they also reduce benefits to active plan participants, correspondingly. Retirees are typically more expensive, claims wise, than active employees, which has resulted in many plan sponsors eliminating retiree health care plans. (Does this provide an incentive to plan sponsors to reduce benefits to both groups?) The Act defines “substantially” to mean a 5% increase in participant premiums and/or a 5% decease in the actuarial value of benefits. A decease in the actuarial value of benefits could be the result of changes in premiums, co-pays, co-insurance amount or percentages, covered procedures, and even possibly provider networks.

The Act allows the Secretary waive adherence to these restrictions if the plan sponsor, i.e., employer can demonstrate their application would result in undue hardship (i.e., pending bankruptcy) on the plan sponsor.

A retiree “reinsurance” trust fund (funded with $10b) is established by the Act to pay for certain excess health care claims. Within health care, “reinsurance” is commonly referred to as “stop-loss” insurance and is used to mitigate health care claims above a specific and fixed dollar amount when a plan is “self-insured”. Example: Plan A buys a stop-loss policy to cover any individual participant health care claims in excess of $125,000 within any single plan year and any plan aggregated health care claims in excess of $1,000,000 within any single plan year. This allows the plan to protect itself against any unexpected and excessive claims by shifting the excess portion of the claims to a third party.

To be reimbursed for excess retiree health acre claims, plans must request reimbursement from the trust fund. Once approved by the Secretary, the fund will reimburse plans 80% of the cost of the actual retiree claims paid in excess of $15,000 but less than $90,000. These amounts are annually indexed to the medical portion of the CPI in multiples of $1,000. Reimbursement must be applied to the overall cost of the retiree’s health care plan and cannot be used as general revenue by the plan’s sponsor. (Does this lessen the fiscal dependency on the plan sponsor’s revenue stream by maintaining overall plan costs? Does this encourage the retention of retiree health care plans in the face of FAS 106?)

Wednesday, November 25, 2009

I was recently asked to share my thoughts on talent retention and responded with:

Retention of top organizational talent is essential during both good and bad economic times.

Yes, you can raid your competition’s top talent pool, but that is a two way street and can lead to a bidding war, loss of customers, and public image.

The 10 Laws of Talent Retention:

1. Know the job and hire the right person for the right job.
The smartest and brightest person will fail if hired for the wrong job
and/or the wrong reason.

2. Integrate the new hire into the organization’s culture quickly.
That high achiever cannot perform unless they assimilate into your
organization, painlessly and quickly.

3. Reward them with the right monetary incentives.
Pay them for what they are worth and allow them to grow
monetarily with the organization. Use a total rewards strategy
that uses a holistic approach to rewarding the high achiever.

4. Recognize them to the organization.
Let others in the organization know about their
achievements and often. Let them mentor others as a
form of recognition, use the organization’s informational
outlets, make them the organization’s standard.

5. Fast track them on a “sustainable” track.
Build a career track that they cannot out grow. If they out
grow their development plan in 3-5 years they are going
to be easy targets for your competition.

6. Challenge them with each next hurdle.
Make them work for that next level of achievement. Pre-position
them as the only “one” who can get that assignment done.

7. Have a customized retention plan for each high achiever.
One size does not work in shoes and it does not work in career
development plans. Allow them an opportunity to pick that next
assignment, location, office or plant.

8. Ensure a proper work-life balance.
All work and no play makes for a burned out, de-motivated under
performing Jack. A divorced Jack, a Jack with substance issues or
an over taxed Jack will be no good to you, them or the organization.

9. Provide for life long learning opportunities.
That high achiever is going to need a different set of knowledge, skills, and
abilities at each new level. The skills they brought to the original job,
may not be the skills they need in 2, 3, 4 or 5 years.

10. Measure the retention climate.
You must be able to measure whether your retention plans are doing
what they are intended to do. Gather data through performance
review feedback sessions, formal and informal, talk to their peers,
and subordinates.

Some possible books:

Managing Talent Retention: An ROI Approach by Jack J. Phillips and Lisa Edwards (Hardcover - Dec 22, 2008)

Competing for Talent: Key Recruitment and Retention Strategies for Becoming an Employer of Choice by Nancy S. Ahlrichs (Hardcover - Nov 25, 2000)

The Retention of Talent: How to Connect with Young Workers by Ken Dychtwald, Tamara J. Erickson, and Robert Morison (Digital - Mar 3, 2009)

Reinventing Talent Management: How to Maximize Performance in the New Marketplace by William A. Schiemann and Susan R. Meisinger (Hardcover - Jul 7, 2009)


Some possible websites:

Talent Management Magazine
www.talentmgt.com/recruitment_retention

The Center for TALENT SOLUTIONS (CTS)
www.centerfortalentretention.com

American Institutes for Research
www.air.org/topics/topic_talent_retention.aspx

This Special Report on Talent Retention
www.deloitte.com/view/en_US/us/Services/additional-service...VCM100000ba42f00aRCRD.htm


Wednesday, November 25, 2009

How will the ‘‘Affordable Health Care for America Act’’ treat pre-existing conditions?

The Act removes the current “look-back” timeframe of 6 months and replaces it with a 30-day look-back period. In addition, the Act reduces the exclusionary period from the current 12 to 3 months. Furthermore, the Act reduces the 18-month exclusionary period in the case of late enrollees to 9 months. This, obviously, shortens the time period that a plan can review the individual’s prior medical history for possibly pre-existing conditions and lessens the future time period the plan can use to exclude coverage for pre-existing conditions that occurred prior to an individual’s enrollment into the plan. However, once a health care plan is subject to § 211 of the Act all application of pre-existing conditions are prohibited. Most group health care plans will be subject to § 211 on January 1, 2010, certain exceptions apply for collectedly bargained plans.

The Act specifically notes that group and individual plans may not treat “domestic violence” as a pre-existing condition for any plan “offered, sold, issued, renewed, in effect, or operated” on or after January 1, 2010.

The Act prohibits, group and individual health care plans that offer surgical benefits, from denying coverage and treatment of a “minor child’s congenital or developmental deformity or disorder”. For the purposes of this provision, a minor child is any otherwise dependent child under the age of 21. However, the Act does exclude cosmetic surgery used to alter a normal body structure to “improve appearance or self-esteem”.

The Act prohibits the imposition of “aggregate dollar lifetime limits” on payable benefits for members and their dependents of group and individual health care plans. This provision is effective for plan years beginning on or after January 1, 2010.

Tuesday, November 24, 2009

Tuesday, November 24, 2009

How will the ‘‘Affordable Health Care for America Act’’ ensure lower health care premiums‘‘?

The Act provides that a individual or group market plan’s “medical loss ratio” cannot be less that 85%, if it is, the Act allows for rebates back to the enrollees. However, the Secretary is permitted to apply an exception to individual market plans if such rebates “destabilize” that market. Some carriers currently allow for similar rebates under certain contract or plan conditions. Furthermore, the Secretary is empowered by the ACT to establish a definition for medical loss ratios and the methodology for their calculations, excluding State taxes and licensing/regulatory fees. Provisions for rebates do expire once Health Insurance Exchanges are established, currently expected to place by 2012.

Rescission is the process by which a carrier declines renewal of either an individual or group health care plan. The Act allows for rescission only in cases of fraud and only then after the individual or group policy holder has been informed of such proposed rescission and after a “third party review” process has taken place. While the “rescission process” is under review, individual or group health care coverage remains in force.

The Act requires the Secretary, in conjunction with States, to review annual premium increases proposed by the various insurance carriers, who then must justify such increases. A typical employer based heath care group plan that renews on January 1 or each year will start that renewal process in the July-August-September time frame. This means that an additional amount of time will need to be built into the renewal to allow for the Secretary’s review process. So, even after the employer’s broker/consultant has negotiated the best possible renewal rate, that rate may not pass muster with the Secretary’s review.

Coverage for a Qualified Child, the Act allows for continued coverage of an uninsured dependent through the age of 26 within group and individual plans. The individual must be a dependent as defined by the plan and must be uninsured.

Monday, November 23, 2009

Monday, November 23, 2009

How will excess claims cost exposure be limited for “high risk pools” under the ‘‘Affordable Health Care for America Act’’?

The Act allows for three limiting or controlling factors; the premiums charged, an annual individual deductible of $1,500, and an annual out-of-pocket expenses of $5,000 and $10,000 for individuals and families respectively. The Act does allow for higher deductables for family coverage “as determined by the Secretary”. There will be individuals, due to whatever reasons, who fail or refuse (even with penalties) to enroll in a high risk plan even with subsidized premiums. Even for those who do elect to enroll, some will not seek care since the deductibles and out-of-pocket expenses will act as a gatekeeper.

Depending on the funding sources for high risk pools, states will be required to continue funding pools at a level no less than the current level. In those states where health insurance carriers are assessed fees for funding the pool, states will be required to continue that process.

Under the Act, participation in a state high risk plan will be treated as “Creditable Coverage”. That means at some future point in time, a high risk pool participant could, conceivably, obtain coverage from a standard risk plan, either through their employer or from the individual plan market. Thus it may be possible for uninsured or for individuals with gaps in their coverage to transfer into a lower cost employment based or individual plan at standard rates as their high risk health conditions are mitigated over time.

The Act does appropriate $5 billion dollars (in excess of premiums collected) to cover administrative and claims expenses from the Treasury and does so “without fiscal year limitation”. Furthermore, the Act permits the Secretary (HHS) to reduce benefits, increase premiums, and/or establish waiting lists as a means of managing costs.

Finally, high risk pools will terminate once the Health Insurance Exchanges are established. While Health Insurance Exchanges are expected to be in place by 2012, to avoid a lapse in coverage for high risk individuals, the Secretary may authorize high risk pools to be extended beyond 2012.

Saturday, November 21, 2009

Saturday, November 21, 2009

How will premiums for “high risk pools” be set under the ‘‘Affordable Health Care for America Act’’?

Anyone with an actuarial or underwriting background understands that determining the risk and setting of premiums associated with large health care plans is as much an art as it is a science. Even in a large group plan, a small number of high dollar claims can skew premiums in an upward direction in only one plan premium cycle. Presumably, since many of these individuals are going to be newly insured or have had significant gaps in prior coverage, they may have latent medical issues that have not been properly addressed. The potential for high dollar medical issues, yet to be discovered and treated looms large as these individuals are brought into the insurance arena.

The House bill proposes to allow premiums to be age and geographic specific so long as the highest premium does not have a ratio greater than 2 to 1 to the lowest premium, or premiums do not exceed 125% of prevailing standard rates for similar coverage. Clearly, without some correlation to actual claims experience, these high risk pools cannot have an actuarial basis for premium setting. By the very nature of applying only age and geographic factors and ignoring actual claims experience, resulting premiums will under price coverage thus leading to a deficit in premium dollars collected. It can reasonably be assumed that individuals eligible for a high risk pool will experience more and larger claims than their non-high risk pool counterparts.

If premiums collected from high risk pooled individuals are insignificant to cover administrative and claims expenses, from where will the balance come? It must come from Federal and/or state revenues?

Friday, November 20, 2009

Friday, November 20, 2009

As with most legislation, the “devil is in the details”, this is also true for H. R. 3962: the ‘‘Affordable Health Care for America Act’’ recently passed by the U. S. House of Representatives on November 7, 2009, by a vote of 220-215.

Title I—Immediate Reforms: the ‘‘Affordable Health Care for America Act’’ addresses the creation of temporary “high risk pools” to allow certain uninsurable individuals to purchase health insurance coverage through a state based pooled risk program. The Act provides the Secretary of Health and Human Services the power to form such pools in cooperation with states using existing or newly created pools beginning on January 1, 2010.

To be eligible to participate in such pools, individuals, including dependents, must not be eligible for an employment based plan, any of the various public health care plans (Medicare, Medicaid, … etc.), must have been without employment based coverage for at least 6 months, must have applied for and been denied coverage by a private health insurance carrier, must have applied for private coverage but been rated at a premium higher than the high risk pool rate, and/or “who has an eligible medical condition as defined by the Secretary”.

The Act provides the Secretary with the ability to assess health insurance carriers and employment based plans (i.e., employers) with penalties if the Secretary determines that the carrier and/or employment based plan “discouraged” the individual from remaining enrolled in the prior plan. Would a 25%, 50%, 75% or 100% increase in premiums constitute discouragement? If the premium increase is applied to ALL enrolled individuals, is that considered discouragement?

Thursday, November 19, 2009

Thursday, November 19, 2009

I believe that we are living in unprecedented times. Those of us in HR are faced and have been faced with many significant challenges and are now faced with the real possibility of some form of mandated national health care policy. With the debate in the House over, all that is left to be seen is the outcome of the pending vote before the Senate. I entered HR long after ERISA was passed so I can only image the debate that occurred as that historic legislation was being argued. Whether you agree or disagree on the national health care policy unfolding, you must admit that it is truly a historic event. It is hard to image that the insurance and healthcare industries will look the same in 10 years as they do today. This legislation will impact virtually every American employer and their workers and should be seen in the bright light of other social enactments that have preceded it.

While the volume and lack of details are to be found or not found in the pages of the legislation, it will fall to various departments of several Federal agencies to write the regulations to actually implement this experiment. Even with a scheduled implementation spread over many years, the challenge HR professionals face is how to help our organizations cope with such massive cultural, social, and economic changes.

Having helped one organization through the implementation of The 2006 Massachusetts Health Care Reform Law, I see many similarities to the national health care policy that every employer and citizen is now facing. If the past is any predictor of the future, our Government will need some process to “certify” that employers and citizens are complying with this new national policy. For me, that means new reports or amended reports (IRS 5500’s) for annual health care plan filings.

As an HR professional, I should begin thinking about how this will or will not impact my organization(s).