Benefits and beyond c. 6 and 7 health care

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  • 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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