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Benefits and Beyond, C. 6<br />Health Care<br />Thomas E. Murphy<br />
11/26/10<br />Thomas E. Murphy<br />2<br />Health Care Today<br />
It is vitally important that you understand the historical perspective and current plan designs of health care.<br />This ...
11/26/10<br />Thomas E. Murphy<br />4<br />Health Care – 2014 <br />
Origins of employer sponsored health care<br />Wage controls and “fringe benefits”<br />Current issue: the high cost of he...
Health care inflation jeopardizing Medicare and Medicaid.<br />New employer plans designed to better control costs. <br />...
Cost shifting to employees?<br />We must introduce better health management and reduce health care utilization and the cos...
The 2010 Mercer Health Study<br />Mercer Survey on H.C. Reform<br />Getting Ready for 2011<br />Inflation for 2011 will be...
Thomas E. Murphy<br />9<br />Parties and interests in the system<br />11/26/10<br />
Current Health Plan Design Features<br />U.S. subsidies<br />Some choices?<br />Not taxed to employee as income<br />Tax d...
What is causing inflation?<br />H.C. Inflation exceeds other costs of doing business.<br />Cost impedes access. <br />Long...
Choosing the right health care plan - - -<br />Employer’s Decision<br />Choice, Quality, Cost<br />What are the demographi...
What will be the impact of <br />Health Care Reform?<br />11/26/10<br />Thomas E. Murphy<br />13<br />
Internal fairness – coverage, plan benefits, same plan for employees with families and single?<br />Should your plan lead,...
Is plan cost effective and well administered? Are there adequate provider choices? Does plan assure quality health care, c...
Basic principles of today will probably endure in spite health care reform.<br />Limits on coverage, choices of plans, rei...
Thomas E. Murphy<br />17<br />The Evolution of H.C. Plan Design<br />11/26/10<br />
Thomas E. Murphy<br />18<br />Some preliminary questions<br />11/26/10<br />
Designing the indemnity plan<br />Basic features<br />Special features<br />Coverage<br />Eligibility <br />Which procedur...
Bundling or un-bundling?<br />Coordination of benefits?<br />What are your values? <br />11/26/10<br />Thomas E. Murphy<br...
Premium paid by employee<br />Deductible<br />Co-insurance<br />Office co-pays<br />Out-of-pocket maximum (usually = co-in...
11/26/10<br />Thomas E. Murphy<br />22<br />The Evolution Progressed<br />
Problem: indemnity plan reimbursed “customary and usual” provider fees.<br />No provider discounts<br />So, TPAs and emplo...
Easy to administer – the PPO<br />New market conditions introduced. <br />But, no real control over the utilization of hea...
Thomas E. Murphy<br />25<br />Enter the POS (Point of Service Plan)<br />The Primary Care <br />Physician is now <br />“TH...
Same as indemnity plan<br />Same as PPO<br />Added feature: no visit to specialist unless the Gatekeeper makes the referra...
With a POS you are preserving the right of choice of physician or other provider.<br />You are merely offering an incentiv...
No choice - assure network providers of real increased volume? <br />Bigger discounts?.<br />It’s an HMO (Health Maintenan...
No out of network coverage<br />Often the HMO comprises an integrated network of providers who coordinate care amongst spe...
The plans developed treatment protocols and critical paths to better manage the care.<br />Fee arrangements with HMO provi...
Thomas E. Murphy<br />31<br />Many employees chose HMOs and were very satisfied with them<br />11/26/10<br />
Plan design and the market<br />HMOs part of Medicare<br />Significantly reduced costs<br />Must exist in highly competiti...
11/26/10<br />Thomas E. Murphy<br />33<br />Truthfully what does a TPA do?<br />
Assumes short-term financial risk<br />Develops network<br />Negotiates reimbursement levels.<br />Does pre-utilization re...
In highly competitive provider markets, why not directly contract with providers? <br />Pay them a per capita fee and avoi...
Accountable Care Organizations<br />Listen to NPR above<br />ACO and Integrated Care<br />Primary Care MDs<br />Specialist...
Thomas E. Murphy<br />37<br />Consumer Driven Health Care<br />Well, Mr. Brooks, <br />It appears that your<br />health ca...
Flexible Spending Account<br />Health Reimbursement Account <br />Health Savings Account (High Deductible Health Care Plan...
Consumer Driven Health Care Plans<br />Tax favorable treatment<br />Preventive care preserved<br />High deductible<br />IR...
Portable – it’s your money!<br />Tax law, not your insurance company determines what is medical expense. Broader definitio...
Will the cost of health care be reduced with HDHCPs?<br />Will preventive care be a priority?<br />Will consumers make mor...
Minimum Deductibles: $1200/$2400<br />Maximum Contributions: $3050/6150<br />Out of Pocket Maximum plus deductibles: $5950...
Thomas E. Murphy<br />43<br />What is Wellness? <br /><ul><li>Gym membership?
Encourage health life</li></ul>Styles?<br /><ul><li>Company nurse takes</li></ul>B/P and cholesterol<br />Readings?<br /><...
Weight reduction?</li></ul>11/26/10<br />
11/26/10<br />Thomas E. Murphy<br />44<br />How to improve health? <br />
A comprehensive approach to affect the risk factors that lead to chronic and expensive health conditions.<br />Must have d...
I.D. High Cost<br /> Medical Conditions<br />I.D. Risk Factors<br />Driving High Costs<br />Calculate Financial<br />Impac...
How do you measure the ROI?<br />Is it particularly applicable to employers wanting longer service by its employees?<br />...
What are employers doing with retiree health care?<br />Does it encourage employees to leave?<br />How would you design a ...
Health care purchasing. . . <br />Specialized TPAs are now <br />Available. <br />How do you measure a TPA?<br />To insure...
Expectations for TPA<br />Select  the Best TPAs<br />Pay them for performance<br />Quality customer service – EOB, phone c...
Thomas E. Murphy<br />51<br />You want to avoid this . . .<br />11/26/10<br />
Thomas E. Murphy<br />52<br />And, provide more of this . . <br />11/26/10<br />Preventive<br />Care<br />
Health care insurance for employees is a value proposition!<br />Simply loading costs on the participants will not work.<b...
Thomas E. Murphy<br />54<br />Good health is the passport to a good life . . . <br />11/26/10<br />
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  • Transcript of "Benefits and beyond c. 6 and 7 health care"

    1. 1. Benefits and Beyond, C. 6<br />Health Care<br />Thomas E. Murphy<br />
    2. 2. 11/26/10<br />Thomas E. Murphy<br />2<br />Health Care Today<br />
    3. 3. It is vitally important that you understand the historical perspective and current plan designs of health care.<br />This is C. 6 and 7<br />We will then discuss how the Patient Protection and Affordable Care Act of 2010 (”Health Care Reform”) affects our current health care landscape. <br />11/26/10<br />Thomas E. Murphy<br />3<br />Now – later – 2014 – & Beyond!<br />
    4. 4. 11/26/10<br />Thomas E. Murphy<br />4<br />Health Care – 2014 <br />
    5. 5. Origins of employer sponsored health care<br />Wage controls and “fringe benefits”<br />Current issue: the high cost of health care in the U.S. and the uninsured.<br />The evolution of health care plan designs: market conditions, quality, efficiency, preserve choice, and reduce the cost.<br />Note: the principle of compensating differentials. (Which billfold do we take from?)<br />Thomas E. Murphy<br />5<br />Health Care – Historical Perspecive<br />11/26/10<br />
    6. 6. Health care inflation jeopardizing Medicare and Medicaid.<br />New employer plans designed to better control costs. <br />Small employers struggling. <br />Individual purchases require trade-offs. <br />11/26/10<br />Thomas E. Murphy<br />6<br />Health Care – Cost Crisis<br />
    7. 7. Cost shifting to employees?<br />We must introduce better health management and reduce health care utilization and the costs of treatment<br />11/26/10<br />Thomas E. Murphy<br />7<br />
    8. 8. The 2010 Mercer Health Study<br />Mercer Survey on H.C. Reform<br />Getting Ready for 2011<br />Inflation for 2011 will be 9-12% unless, <br />Cost savings are implemented. <br />Could jeopardize the “grandfathered” status<br />With cost cutting inflation can be 6%<br />Employer coverage holding at 65%.<br />R/X inflation at 7.6%<br />Cost per single employee: $9,000.<br />Premium contribution per employee – 23%.<br />For family – 30%<br />Thomas E. Murphy<br />8<br />11/26/10<br />
    9. 9. Thomas E. Murphy<br />9<br />Parties and interests in the system<br />11/26/10<br />
    10. 10. Current Health Plan Design Features<br />U.S. subsidies<br />Some choices?<br />Not taxed to employee as income<br />Tax deductible to employer<br />Why not just give the employee cash?<br />Sponsor has negotiating leverage and cash is taxable.<br />To insure or self-insure – the employer’s dilemma <br />Cost sharing with employee/participant<br />What is a TPA?<br />Are there true market conditions?<br />Thomas E. Murphy<br />10<br />11/26/10<br />
    11. 11. What is causing inflation?<br />H.C. Inflation exceeds other costs of doing business.<br />Cost impedes access. <br />Longevity<br />New technology<br />New drugs<br />Inappropriate care<br />Consolidation of health care practices and provider groups – more leverage<br />Crazy quilt – administrative system<br />Lack of true market conditions<br />Consumer has very little “skin” in the game. <br />It’s our prices, stupid. <br />Thomas E. Murphy<br />11<br />11/26/10<br />
    12. 12. Choosing the right health care plan - - -<br />Employer’s Decision<br />Choice, Quality, Cost<br />What are the demographics of your workforce?<br />What type plan would be a good fit?<br />What are your labor competitors offering?<br />What can you afford?<br />Benefits Model<br />11/26/10<br />Thomas E. Murphy<br />12<br />
    13. 13. What will be the impact of <br />Health Care Reform?<br />11/26/10<br />Thomas E. Murphy<br />13<br />
    14. 14. Internal fairness – coverage, plan benefits, same plan for employees with families and single?<br />Should your plan lead, lag, or meet your labor market competitors? What are the relevant factors here?<br />Can your plan positively affect employee behaviors? Effect better health and higher productivity? Do employees make cost effective choices? <br />Thomas E. Murphy<br />14<br />Relevance of the Benefits Model <br />11/26/10<br />
    15. 15. Is plan cost effective and well administered? Are there adequate provider choices? Does plan assure quality health care, choice, and cost effectiveness? Is it affordable for both employer and employee? <br />Thomas E. Murphy<br />15<br />Choosing: Use the Benefits Model <br />11/26/10<br />
    16. 16. Basic principles of today will probably endure in spite health care reform.<br />Limits on coverage, choices of plans, reimbursement of providers<br />Cost sharing. <br />11/26/10<br />Thomas E. Murphy<br />16<br />Plan designs on the precipice?<br />
    17. 17. Thomas E. Murphy<br />17<br />The Evolution of H.C. Plan Design<br />11/26/10<br />
    18. 18. Thomas E. Murphy<br />18<br />Some preliminary questions<br />11/26/10<br />
    19. 19. Designing the indemnity plan<br />Basic features<br />Special features<br />Coverage<br />Eligibility <br />Which procedures covered?<br />What level of reimbursement will be provided?<br />Review and controls over health care resource utilization. What are the techniques?<br />What do your employees need?<br />What about cost sharing? Goal?<br />Encourage quality?<br />What’s your H.C. market?<br />Employee choice?<br />Encourage healthy life style?<br />Thomas E. Murphy<br />19<br />11/26/10<br />
    20. 20. Bundling or un-bundling?<br />Coordination of benefits?<br />What are your values? <br />11/26/10<br />Thomas E. Murphy<br />20<br />Designing the indemnity plan<br />
    21. 21. Premium paid by employee<br />Deductible<br />Co-insurance<br />Office co-pays<br />Out-of-pocket maximum (usually = co-insurance amounts paid, not deductibles, etc)<br />Life time maximum<br />Tiering/Means Testing/Coordination<br />Note: to keep “grandfathered” status plan cannot make certain changes in cost sharing<br />11/26/10<br />Thomas E. Murphy<br />21<br />Cost sharing – how does it work? <br />
    22. 22. 11/26/10<br />Thomas E. Murphy<br />22<br />The Evolution Progressed<br />
    23. 23. Problem: indemnity plan reimbursed “customary and usual” provider fees.<br />No provider discounts<br />So, TPAs and employer sponsors offered patient volume in exchange for discounts. How to get the volume?<br />The PPO offered incentives (deductible) to participants. An attempt to influence their choice of providers.<br />11/26/10<br />Thomas E. Murphy<br />23<br />The evolution: The PPO<br />
    24. 24. Easy to administer – the PPO<br />New market conditions introduced. <br />But, no real control over the utilization of health care resources. <br />Providers prescribed more services to offset their reduced revenue caused by discounts<br />And, the anticipation of increased volume was not really met.<br />Thomas E. Murphy<br />24<br />So, what’s the problem?<br />11/26/10<br />
    25. 25. Thomas E. Murphy<br />25<br />Enter the POS (Point of Service Plan)<br />The Primary Care <br />Physician is now <br />“THE GATEKEEPER”<br />11/26/10<br />
    26. 26. Same as indemnity plan<br />Same as PPO<br />Added feature: no visit to specialist unless the Gatekeeper makes the referral.<br />So, now we have more market conditions and control over utilization. <br />So, got a pain in your elbow? Go to PCP first.<br />You get an aspirin instead of a referral to an orthopedic physician – cortisone injection or surgery. <br />Thomas E. Murphy<br />26<br />Design features of POS<br />11/26/10<br />
    27. 27. With a POS you are preserving the right of choice of physician or other provider.<br />You are merely offering an incentive to choose a provider in the network.<br />Quality is still an important value of the sponsor.<br />But, cost effectiveness warrants some control over utilization of health care resources and the advantages of discounts. <br />Thomas E. Murphy<br />27<br />Note: in or out of network! <br />11/26/10<br />
    28. 28. No choice - assure network providers of real increased volume? <br />Bigger discounts?.<br />It’s an HMO (Health Maintenance Organization)<br />Features? Same as Indemnity, PPO, and POS – except there is no choice!<br />11/26/10<br />Thomas E. Murphy<br />28<br />The evolution continues: the HMO<br />
    29. 29. No out of network coverage<br />Often the HMO comprises an integrated network of providers who coordinate care amongst specialists, have a single medical record system, and can offer high quality care. This is how care is “managed.”<br />The incentives to select the HMO are lower premiums, first dollar coverage, and lower or no deductibles. <br />Thomas E. Murphy<br />29<br />Design features of HMO<br />11/26/10<br />
    30. 30. The plans developed treatment protocols and critical paths to better manage the care.<br />Fee arrangements with HMO providers often included a capitated (per participant) annual rate. So, it was incumbent upon the HMO to manage the care.<br />The fear that cost consciousness would imperil the quality of care did not happen. HMOs practiced preventive care to avoid catastrophic health incidents. <br />Thomas E. Murphy<br />30<br />Design features of HMO<br />11/26/10<br />
    31. 31. Thomas E. Murphy<br />31<br />Many employees chose HMOs and were very satisfied with them<br />11/26/10<br />
    32. 32. Plan design and the market<br />HMOs part of Medicare<br />Significantly reduced costs<br />Must exist in highly competitive markets. <br />As the degree of provider competition increases so do the opportunities to offer managed care plans.<br />Problem: HMOs required a lot of TPA administration and were “oversold” and “underpriced” to participants. <br />11/26/10<br />Thomas E. Murphy<br />32<br />
    33. 33. 11/26/10<br />Thomas E. Murphy<br />33<br />Truthfully what does a TPA do?<br />
    34. 34. Assumes short-term financial risk<br />Develops network<br />Negotiates reimbursement levels.<br />Does pre-utilization reviews<br />Establishes medical protocols<br />Encourages integrated practices<br />Sets full plan design including incentives<br />Underwriting analysis.<br />Manages Wellness<br />11/26/10<br />Thomas E. Murphy<br />34<br />What does a TPA do?<br />
    35. 35. In highly competitive provider markets, why not directly contract with providers? <br />Pay them a per capita fee and avoid all the costly administration.<br />How do you select the right providers?<br />Do you have the right incentives?<br />This idea is called “direct contracting.”<br />Thomas E. Murphy<br />35<br />Evolution – omit the TPA<br />11/26/10<br />
    36. 36. Accountable Care Organizations<br />Listen to NPR above<br />ACO and Integrated Care<br />Primary Care MDs<br />Specialists<br />Hospitals<br />Full health care <br />Capitated annual fee<br />11/26/10<br />Thomas E. Murphy<br />36<br />Click file below<br />
    37. 37. Thomas E. Murphy<br />37<br />Consumer Driven Health Care<br />Well, Mr. Brooks, <br />It appears that your<br />health care is up<br />to just you and me.<br />11/26/10<br />
    38. 38. Flexible Spending Account<br />Health Reimbursement Account <br />Health Savings Account (High Deductible Health Care Plan, HDHCP)<br />11/26/10<br />Thomas E. Murphy<br />38<br />Putting the consumer in the game<br />
    39. 39. Consumer Driven Health Care Plans<br />Tax favorable treatment<br />Preventive care preserved<br />High deductible<br />IRS compliance<br />A Health Savings Account<br />Employer and employee can contribute to HSA.<br />Typically linked with a PPO<br />Can invest $$ in HSA.<br />Can carry over money not spent.<br />Cannot be used to pay premiums except for retiree health care.<br />Preventive care can be excluded from deductible.<br />Has all features of health care plan<br />Thomas E. Murphy<br />39<br />11/26/10<br />
    40. 40. Portable – it’s your money!<br />Tax law, not your insurance company determines what is medical expense. Broader definition. <br />Pre-65 withdrawals not for medical results in tax + penalty<br />After 65 for non-medical expense, there is only tax and no penalty.<br />Anyone can contribute and these are either “pre-tax” or deductible. <br />HRAs are controlled by employer<br />11/26/10<br />Thomas E. Murphy<br />40<br />Other Features Of HSA<br />
    41. 41. Will the cost of health care be reduced with HDHCPs?<br />Will preventive care be a priority?<br />Will consumers make more rational decisions?<br />How will employers encourage higher levels of participation in CDHCPs? <br />How can mini clinics and urgent care facilities be used?<br />Thomas E. Murphy<br />41<br />Some observations<br />11/26/10<br />
    42. 42. Minimum Deductibles: $1200/$2400<br />Maximum Contributions: $3050/6150<br />Out of Pocket Maximum plus deductibles: $5950/11900<br />Post 55 Catch up: $1000<br />Let’s do a calculation!<br />Or, we could try another calculation!<br />Or, how about this one?<br />Thomas E. Murphy<br />42<br />HSALimits - 2011<br />11/26/10<br />
    43. 43. Thomas E. Murphy<br />43<br />What is Wellness? <br /><ul><li>Gym membership?
    44. 44. Encourage health life</li></ul>Styles?<br /><ul><li>Company nurse takes</li></ul>B/P and cholesterol<br />Readings?<br /><ul><li>Smoking cessation?
    45. 45. Weight reduction?</li></ul>11/26/10<br />
    46. 46. 11/26/10<br />Thomas E. Murphy<br />44<br />How to improve health? <br />
    47. 47. A comprehensive approach to affect the risk factors that lead to chronic and expensive health conditions.<br />Must have detailed personal health assessments from employees to pursue the program.<br />Then, these steps should follow: <br />Thomas E. Murphy<br />45<br />Wellness Programs- Catching on!<br />11/26/10<br />
    48. 48. I.D. High Cost<br /> Medical Conditions<br />I.D. Risk Factors<br />Driving High Costs<br />Calculate Financial<br />Impact and ROI<br />Of Program<br />Take all base<br />Line costs<br />Flow chart of <br />Wellness<br />Program ©<br />Measure Impact on<br />Health Costs <br />Analyzed Data<br />From Self <br />Assessments<br />Develop<br />Wellness <br />Incentives<br />Measure Impact <br />On Risk<br />Factors<br />Integrate <br />With Health<br />Plan<br />11/26/10<br />46<br />Thomas E. Murphy<br />
    49. 49. How do you measure the ROI?<br />Is it particularly applicable to employers wanting longer service by its employees?<br />How do you integrate it into the existing health care plan? <br />Wellness is not sponsoring bike rides or hikes into the woods. <br />Wellness is reducing costs and increasing productivity. <br />Thomas E. Murphy<br />47<br />Some thoughts on Wellness<br />11/26/10<br />
    50. 50. What are employers doing with retiree health care?<br />Does it encourage employees to leave?<br />How would you design a plan that would facilitate early retirement yet limit health care expense?<br />Are younger employees really subsidizing the cost of retiree health care? Is this a problem?<br />Thomas E. Murphy<br />48<br />Some other health care issues<br />11/26/10<br />
    51. 51. Health care purchasing. . . <br />Specialized TPAs are now <br />Available. <br />How do you measure a TPA?<br />To insure or not insure<br />Community or manual ratings<br />Law of Large Numbers<br />Pooling<br />Risk premiums<br />Administrative and retention fees<br />How about a RFI or RFP from a TPA?<br />Performance contracts with TPAs<br />Steer employees to the most cost effective plans.<br />You can reduce utilization or reduce the price. How would you do these things?<br />Thomas E. Murphy<br />49<br />11/26/10<br />
    52. 52. Expectations for TPA<br />Select the Best TPAs<br />Pay them for performance<br />Quality customer service – EOB, phone calls, communications.<br />Health insurance creates value for sponsor.<br />Select the best providers for the network <br />Health assessments<br />Pay providers for performance.<br />Use integrated care.<br />Engage participants in their health care.<br />Assure patient compliance.<br />High participation rates for chronic disease management<br />11/26/10<br />Thomas E. Murphy<br />50<br />
    53. 53. Thomas E. Murphy<br />51<br />You want to avoid this . . .<br />11/26/10<br />
    54. 54. Thomas E. Murphy<br />52<br />And, provide more of this . . <br />11/26/10<br />Preventive<br />Care<br />
    55. 55. Health care insurance for employees is a value proposition!<br />Simply loading costs on the participants will not work.<br />H.C. can create new value!<br />How? <br />Accent is on prevention and avoiding the catastrophic health incidents requiring Emergency or long term chronic care. <br />Thomas E. Murphy<br />53<br />New perspective . . .<br />11/26/10<br />
    56. 56. Thomas E. Murphy<br />54<br />Good health is the passport to a good life . . . <br />11/26/10<br />
    57. 57. Thomas E. Murphy<br />55<br />But health care is not free! (Photo: www.medicine.net)<br />11/26/10<br />
    58. 58. So, let’s talk about reform! (Photo: www.medicine.net)<br />The Problem is Cost<br />Cost affects Access<br />What is it designed to do?<br />What are the choices?<br />How will it work?<br />What is needed?<br />Who are the uninsured?<br />How much will it cost?<br />What changes for plan design?<br />11/26/10<br />Thomas E. Murphy<br />56<br />
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