The recent blog post by Al Lewis, Vik Khanna and Shana Montrose titled, “Workplace Wellness Produces No Savings,” has triggered much interest and media attention. It highlights the controversy surrounding the value of workplace health promotion programs that 22 authors addressed in an article published in the September 2014 issue of the Journal of Occupational and Environmental Medicine, titled, “Do Workplace Health Promotion (Wellness) Programs Work?” That article also inspired several follow-up discussions and media reports, including one published by New York Times columnists Frakt and Carroll, who answered the above question with: “usually not.” There are certainly many points of contention and areas for continued discussion on this topic. It turns out that Lewis et al. and I agree on many things, and there are other areas where we see things differently.

Where we agree…

Biometric screenings. Biometric screenings are important for collection of baseline health risk data and are often viewed as an added value by employees participating in workplace health promotion programs. Lewis et al. and I agree that employers should screen their workers for health risks in accordance with guidelines recommended by the U.S. Preventive Services Task Force (USPSTF). These guidelines are clear about the necessity and periodicity of biometric screenings for high blood pressure, obesity, cholesterol, glucose, triglycerides, cervical cancer, colon cancer, breast cancer and other conditions. We agree that over-testing people is not a good idea and may lead to false positives, as well as unnecessary medical interventions that are costly and add little value. For readers seeking guidance on biometric screenings in a workplace setting, I refer them to a peer-reviewed article published in the October 2013 issue of the Journal of Occupational and Environmental Medicine. Incentives. Workplace health promotion programs are not the same as incentive programs. “Smart” incentives are part of a well-designed program, but such programs need to be embedded in healthy company cultures where employers encourage and reward healthy behaviors. Comprehensive wellness programs often use financial incentives to attract participation and, in some instances, encourage behaviors that lead to risk reduction. Most experts in workplace health promotion agree that creating intrinsic motivation for health improvement is an essential component of an effective program. As Daniel Pink points out in his book Drive, people are motivated to behave a certain way when they feel a sense of autonomy, when they are able to master certain skills needed to change a behavior and when they can connect changing that behavior to a larger purpose in life. This applies to individuals wishing to achieve certain health goals, such as quitting smoking, being more physically active and eating a healthier diet. Paying people to improve their health in an unhealthy work environment is a futile strategy. Workers will expect higher payments each year, will view “non-compliance” as a penalty and will mistrust their employer for trying to do things to them instead of with them. To summarize, incentives need to be practical, ethical and legal. The Affordable Care Act (ACA) legislation should not be used as a vehicle or excuse for “blaming” workers for poor health habits, or to penalize them financially for not achieving certain health outcomes. Employers share responsibility for the health and well-being of workers and can do much to create a healthy company culture. For readers interested in a more in-depth discussion of health promotion incentive programs, I refer them to a series of Health Affairs blog posts and a guidance document prepared by the Health Enhancement Research Organization, American College of Occupational and Environmental Medicine, American Cancer Society and American Cancer Society Cancer Action Network, American Diabetes Association and American Heart Association. Culture of health. We also agree that effective workplace health promotion programs need to be embedded within a culture of health that respects workers’ rights to make informed choices about personal health matters. Without question, workplaces need to be safe, and employees need to be treated with respect and dignity. Workers also have a right to be in a healthy work environment where positive health behaviors are encouraged and supported. That means making healthy food available in vending machines and cafeterias, encouraging physical activity, prohibiting on-site smoking, offering vaccination programs and providing health insurance. The list of programs, policies and environmental supports for a healthy workplace is long, and there are hundreds of environmental and policy interventions available to employers who wish to send a clear message that the company encourages and supports good health. For a more complete discussion of how companies can achieve a healthy culture, see the May 2013 issue of The Art of Health Promotion. The importance of studying “wellness-sensitive” events…in addition to overall utilization and costs. Lewis et al. highlight the need to focus on “wellness-sensitive” medical events when conducting cost analyses. I agree but ask the authors: What are these events? Where have descriptions been published? Who has reviewed them? Why do they only apply to in-patient claims? Are there not any “wellness-sensitive” events that would appear in out-patient settings? The idea of analyzing claims for conditions likely to be most readily influenced by health promotion programs is sensible. In many of our studies, we have analyzed utilization and cost patterns for what we call “lifestyle diagnosis groups,” or LDGs. For example, in a 1998 peer-reviewed study, we evaluated Procter & Gamble’s health promotion program and found a 36% difference in lifestyle-related costs in the third study year when comparing 3,993 program participants with 4,341 non-participants. Although it’s important to analyze a subset of diagnoses when evaluating wellness programs, it is equally important to analyze utilization and costs for all conditions. After all, one’s actual well-being and perception of well-being influences health holistically, not just any one particular organ or body system.

Where we disagree…

Whether only randomized trials can determine whether workplace programs are effective. Health services research and the field of epidemiology have a long track record of studying naturally occurring phenomena and drawing conclusions from observations of those phenomena. That’s how we have learned what causes hospital-acquired infections. We have also learned from long-lasting epidemiological investigations like the Framingham studies that a sedentary lifestyle, smoking and obesity are causes of heart disease, diabetes and cancers. These “natural experiments” inform the scientific community about what happens to individuals or groups “exposed” to a condition, where others are not. Natural experiments are employed when a randomized controlled trial (RCT) is impractical or unethical. How does this apply to evaluation of workplace health promotion programs? Imagine trying to convince the head of human resources of a company to approve a double-blinded randomized trial that would test the effectiveness of a wellness program, over three to five years, by randomly assigning some workers to a comprehensive health promotion program that includes health coaching on smoking cessation, weight management, physical activity and stress reduction while other workers are denied access to the program. Not only that, the HR executive would be asked to allow the researcher to administer a series of blood tests to participants and non-participants, access their medical claims and ask workers to complete periodic health surveys. The employer would also be prohibited from instituting organizational policies promoting health while this experiment is underway. It’s hard to imagine a situation in which a company executive would allow this, never mind an institutional review board at a university. Alternatively, when health services researchers conduct natural experiments, care is taken to control for any confounding variables and address alternative hypotheses. In our research, we use statistical techniques such as propensity score matching and multivariate regression to compare the health and cost experience of “treatment” workers (those offered health-promotion programs) and “comparison” workers (those not offered the programs). Most often, when comparing participants with non-participants, we match entire populations exposed to a program (whether or not individuals participate in that program) and those not exposed. In that regard, we are investigating program impacts on population health and not only comparing outcomes for motivated participants in programs compared with less motivated non-participants. We publish our analyses in peer-reviewed journals so that the scientific community can review and critique our methods. We are also transparent about the limitations to our research in these peer-reviewed articles. By the way, there are experimental studies focused on large populations (not necessarily at the workplace) demonstrating the value of health-promotion programs. One such trial was recently concluded by the Centers for Medicare and Medicaid Services (CMS) as part of the senior risk reduction demonstration (SRRD). Two vendors were involved in the demonstration, which lasted two to three years.  Beneficiaries participating in Vendor A’s risk-reduction programs achieved statistically significant improvements in stress, general well-being and overall risk, and beneficiaries participating in Vendor B’s program achieved statistically significant improvements in back care, nutrition, physical activity, stress, general well-being and overall risk. Interestingly, the interventions were determined to be “cost-neutral,” meaning that Medicare spending for participants in the intervention group was not statistically different from spending for participants in the control group. This was a large-scale study where about 50,000 beneficiaries were recruited and approximately 20,000 participated in the health-promotion program in any given year. The bottom line: Significant health improvements were achieved at no cost to the government. Interpreting the data. Lewis et al. highlight errors in others’ presentation of results. I have no argument with that. That is, after all, what a peer review process is all about: Conduct the study, subject it to peer review and publish the findings. The problem is that Lewis et al. have not (yet) published any studies in which their interventions are evaluated, nor have their methods been subject to peer review. That is unfortunate because I believe (truly) that all of us can learn from vetted research studies and apply that knowledge to future evaluations. I am the first to admit that the methods we use to evaluate wellness programs have evolved over time and are still undergoing revisions as we learn from our mistakes. I invite Lewis et al. to reveal their methods for evaluating workplace programs and to publish those methods in peer-reviewed publications — we can all benefit from that intelligence. Lewis et al. point to a study conducted by Health Fitness Corp. (HFC) for Eastman Chemical, which earned the company the C. Everett Koop Award. (In the spirit of full disclosure, I am the president and CEO of the Health Project. which annually confers the Koop prize to organizations able to clearly and unambiguously document health improvements and cost savings for their employees.) Eastman Chemical’s application is online and subject to review. In their analysis of the Eastman Chemical application, Lewis at al. complain that costs for participants and non-participants diverged in the baseline years of the program; therefore, it was not the program that explains cost savings. Here’s the real story: Eastman Chemical’s program has been in place since the early 1990s. The chart found on the website (unfortunately mislabeled) shows participant and non-participant medical costs at baseline (2004), in subsequent years and in the final year of the study (2008). The study compares medical and drug claims for minimally engaged (non-participant) and engaged (participant) employees matched at baseline (using propensity score matching) on age, gender, employee status, insurance plan, medical costs and other variables. No significant differences were found between participant and non-participant costs at baseline, but their claims experience differed significantly at follow up. Although not a perfect study, the economic results, coupled with significant and positive health improvements in many of the health behaviors and risk factors examined for a multi-year cohort of employees, convinced the Health Project board that Eastman Chemical earned the C. Everett Koop prize in 2011. Whether return-on-investment (ROI) is the only metric for evaluating workplace health promotion programs. It seems that too much of the debate and controversy surrounding workplace health promotion is focused narrowly on whether these programs save money. If that were the aperture by which we judged medical care, in general, we would withhold treatment from almost every patient and for almost every procedure, with the exception of a few preventive services that are either cost-neutral or minimally cost-saving. That makes no sense for a compassionate society. In a February 2009 Health Affairs article, I argued that prevention should not be held to a higher standard than treatment; both should be evaluated on their relative cost-effectiveness (not cost-benefit) in achieving positive health outcomes and improved quality of life. Take a simple example of two employees. One has just suffered a heart attack and undergoes a coronary bypass. If the individual is willing, he is then engaged in counseling that encourages him to quit smoking, become more physically active, eat a healthy diet, manage stress, take medications to control blood pressure and see the doctor for regularly scheduled preventive visits. For that individual, I would be surprised if an employer providing medical coverage would demand a positive ROI. How about a second employee? That person is overweight, smokes cigarettes, eats an unhealthy diet, is sedentary, experiences stress at work and has hypertension. He has not (yet) suffered a heart attack, although most would agree he is at high risk. To justify a health promotion program for that employee and others in the company, many employers insist on a positive ROI. Why is that a requirement? If a well-designed program can achieve population health improvement (as demonstrated using valid measures and an appropriate study design), and the program is cost-neutral or relatively inexpensive, why wouldn’t an employer invest in a wellness program, especially if is viewed as high value to both workers and their organization? It’s time to change the metric for success. Instead of demanding a high ROI, employers should require data supporting high engagement rates by workers, satisfaction with program components, population health improvement, an ability to attract and retain top talent, fewer safety incidents, higher productivity and perceived organizational support for one’s health and well-being. That’s where program evaluations should be focused, not simply on achieving a positive ROI. I appreciate the reality that some employers may still require an ROI result. Fortunately, there is evidence, published in peer-reviewed journals, that well-designed and effectively executed programs, founded on best practices and behavior change theory, can achieve a positive ROI. I won’t re-litigate this point, other than to point newcomers to a large body of literature showing significant health improvements and net cost savings from workplace heath promotion programs. (See, for example, studies for Johnson & Johnson, Highmark and Citibank and several literature reviews on the topic). I challenge proponents and opponents of workplace wellness to direct their energy away from proving an ROI to measuring one or several of the important outcomes of interest to employers. Achievement of these outcomes is only possible when management and labor work toward a mutually beneficial goal — creating a healthy workplace environment. Health promotion programs require time to take root and be self-sustaining, but the benefits to employees and their organizations are worth the effort.

As companies that depend on the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) for terrorism coverage work to understand what its Dec. 31, 2014, expiration means to them, some are likely turning to the standalone terrorism insurance market for solutions. With capacity available but potentially limited for this market, risk differentiation can be important. Terrorism risk models and effective business continuity plans can play a key role in improving business resiliency and allowing access to alternative terrorism insurance markets. TERRORISM RISK INSURANCE Standalone terrorism contracts — either to cover all or part of an organization’s terrorism risk — may provide immediate coverage in the absence of the federal insurance backstop. Maximum achievable limits in the standalone market for terrorism risks are approximately $3.5 billion; available capacity is significantly lower for exposures in the central business districts of major cities such as New York, Chicago, Washington and San Francisco. Organizations may need to access alternative sources of terrorism insurance such as stopgap coverage on a standalone basis or to approach their existing insurers to ask for non-implementation of sunset provisions. DIFFERENTIATING RISKS Organizations that have terrorism exposures in major metropolitan cities will be competing for a diminishing supply of terrorism capacity and may need to better differentiate their terrorism risks for underwriters. Organizations should carefully set their limits amid scarce capacity and increased pricing. However, this can be complicated where contractual agreements define needed limits. For example, real estate companies and construction firms may find that their lenders require proof of terrorism insurance in loan convenants for commercial real estate borrowers. QUANTIFYING TERRORISM RISKS Terrorism risk modeling and other analytical tools can help organizations determine how much coverage to purchase in a marketplace where capacity is in short supply. Such models can help organizations understand the relationship between vulnerable sites and the potential likelihood of impact from terrorist acts — or other risks — on their operations and profitability. These models seek to quantify the potential economic losses from a terrorist attack, which can inform risk quantification, insurance program design and risk financing. In a potentially scarce terrorism insurance market, the financial quantification of terrorism-related risks through risk models can help companies to:

• Better understand their financial exposure.
• Determine appropriate insurance deductibles and limits.
• Optimize risk finance strategies.
• Rate the terrorism risk to negotiate insurance premiums.
• Understand the risk’s potential impact on capital.
• Prioritize risk-mitigation strategies.
• Build efficient business continuity plans.
• Understand the correlation and potential benefits of diversification among sites, locations and regions — a key component in addressing terrorism risk aggregation issues.

SHARPEN BUSINESS CONTINUITY PLANS To improve their risk profile for underwriters and their own business resiliency, organizations should review and update their business continuity plans to ensure they are well-prepared in the event of a terrorist attack. Insurers often look for current and well-formulated business continuity plans as a foundation of good risk management. Many companies have already developed business continuity, emergency response and crisis management plans that consider the effects of a terrorist attack. Such plans may suffer from outdated facility floor plans, contact information and technology. Staff awareness of roles, responsibilities and actions to be taken during an event also may be an issue. To ensure that business continuity plans help preserve and protect operations and people, organizations should assess their plans and validate them through training and exercises, with scenarios ranging from walk-throughs to tabletops to full-scale simulations. Such measures can help organizations think through their terrorism-related risks and get a better understanding of their exposures ahead of insurance negotiations or an actual event. For more information, visit Marsh's TRIPRA Update Center.

Really ? We have all seen the articles that breathlessly announce that Google, Amazon and others are going to become insurers. And somewhere in the next sentence or within the same paragraph, the writers exclaim that insurers must change their ways because doom is nigh. Really? More detail, please I'd like to see more appreciation, more introspection and more detail concerning what insurers do (and have done since what I think is the start of the "modern insurance era," when Edward Lloyd opened his coffeehouse in the late 1600s). I'm not saying that insurers don't have to innovate: They do. I'm not saying that insurers don't need to better understand how to meet, if not exceed, the needs and expectations of customers already on the books and of their target prospects: They do. And I'm not saying that insurers don't have to reduce and bring up-to-date the far too many core administration systems keeping the company running: They do. I am saying, let's take a breath or two and identify where the competition is and could come from for an industry that is heavily regulated, requires continual licensing and training of its sales people, requires specific types of investments (different for life or P&C insurers, if my memory serves) and is capital-intensive. Further, let's not forget what an insurance policy is: a legal contract with a financial wrap (i.e. the promise to pay a claim according to the terms, conditions and restrictions of the contract). What does an insurance company really do? I welcome others to add to this list of major activities of an insurance company:

• Carries the risk
• Creates the product
• Prices the product
• Files the product forms (different for each state)
• Markets the product
• Sells the product (keep in mind that each sales person, whether an agent or a faceless person at the other end of the phone or screen, MUST be trained and licensed for each insurance product for each jurisdiction - and the training must be continued throughout their career)
• Underwrites the product (whether life or P&C, underwriters must minimize adverse risk as well as strive to put profitable business on the books)
• Services the customer who bought the product (handling administrative "change of address" service as well as claim adjudication, which includes simultaneously providing responsive and empathetic service while setting reserves, estimating incurred but not reported (IBNR) claims and identifying and avoiding/managing fraudulent loss events)
• Complies with all regulations at the federal and state levels
• Makes investments as required by regulations and industry standards

Are Amazon and Google really going to become insurers? Will Amazon or Google, or others, really become insurers? Are they going to want to do everything on that list? Or, will they decide to become rate-comparison sites? Marketing sites? (And which insurer will carry the paper - carry the risk? I'm not saying that no insurer would carry the paper, but an insurer must do so.) Will Amazon or Google provide customer service? If you love FAQ pages now or waiting on hold for 25 to 30 minutes now when you have a question. . . . Insurance service is not a FAQ, self-service situation when someone has a claim. However, .... Insurers do have to understand where non-traditional competitors could and will participate in the value chain ... and ask themselves what will happen to their business (customer retention, profits) if they don't respond accordingly. But let's take a breath. I think it is highly unlikely the digital technology firms are really going to become insurers.

Last December, I predicted social business would grow up this year, with real use cases and measurable return on investment (ROI) emerging across the enterprise. Looking back at the last 12 months, I’d say we’re right on track. From Southwest Airlines to Asos, customer engagement has already been transformed by Twitter. Representatives not only respond to customer complaints and inquiries at breakneck speeds but share content that shows off the company’s unique style and culture. Retailers from Burberry to Starbucks (where I’m proud to serve on the board) not only shine through creative campaigns and audience engagement but have also made cutting-edge social- and mobile-enabled technology their core business. Above: Starbucks' Tweet A Coffee campaign on Twitter. Below: Burberry connecting with its audience on Instagram. Even in financial services, an industry sometimes perceived as slow and sluggish because of the regulatory environment, the world’s largest banks, insurers and financial firms are “getting social.” At Hearsay Social, we now support more than 100,000 financial professionals, allowing them to meaningfully connect with clients and prospects across multiple social networks and devices. Whether it’s improved responsiveness to customer complaints, greater audience reach, more instantaneous market insight or the opportunity to connect with a new lead, compelling business cases now abound on social media. In most organizations, however, social media still sits in a silo by itself. And some companies are still investing in social just to say they are social. Therefore, my big idea for 2015 is that social media will cease to exist as an individual silo, but instead will become integrated into standard business practice. With the initial business case proven, it is time for the C-suite as well as functional leaders to institutionalize social as a core part of how business is done every day. Here’s how: Define a customer-centered vision for transformation We like to think we’ve come so far, but change comes from the top. And how much can be said when, in 2014, two in three CEOs still have no social presence on any major social network whatsoever? (Source: 2014 Social CEO Report, CEO.com.) Of those CEOs who do use social media, two in three are only on one platform. Perhaps unsurprisingly, the only Fortune 500 CEO on every major social network is Facebook CEO Mark Zuckerberg, who is arguably the best-equipped to understand the power of social. We need to change this next year. If you truly want to create a customer-centered organization -- that is, a company dedicated to long-term success amid seismic shifts in consumer expectations and behavior -- then executives at the top must articulate why the transformation needs to take place. The first step toward articulating this is leading by example: CEOs, functional and line-of-business heads and first-line managers all need to be practicing what they preach so that they are not only more credible but are also better-equipped to lead and influence from within their organizations. Create a new methodology, process, and metrics It’s no longer acceptable to be doing social media for the sake of doing it. Have a plan in place, no matter how simple. Document your plan and intended goals, train employees and managers on it, drive success by checking in regularly and, of course, measure people on it. Our customer success team at Hearsay Social, for example, has developed a four-step methodology for financial firms and their advisers who may initially feel overwhelmed when approaching social: First, establish a presence, which can be measured simply by seeing who has online social profiles. Second, grow your network by connecting with colleagues and clients where appropriate -- yet another step that can be easily measured. Next, listen to your network for opportunities that could help you grow your business. Finally, share content and thought leadership to continually stay top-of-mind with your audience. Four steps to successful social business: Establish a presence, grow your network, listen to your network ("Hear") and share content ("Say"). Having a methodology, process and metrics in place for the social program helps institutionalize social as part of a company’s DNA and standard operating procedure while ensuring repeatability and scale as the company brings on new employees. Cut and consolidate Regardless of the organization, resources are never unlimited. Employees can only get so much done in a day, and there’s only so much cash flowing to fuel projects. With that in mind, even the largest companies in the world must start thinking like start-ups by adopting a mentality of ruthless focus. In other words, you need to decide what you’re not going to do to make room for social. For example, many of the insurance agencies we power on social media have decided to stop advertising on park benches and in the Yellow Pages. Instead, they are using their funds to buy promoted posts on Facebook. Another company, a financial services firm, which previously provided two separate training programs for “inter-generational wealth transfer” and “social media,” realized that there was actually an opportunity to combine the two because social media should be core to any effort to appeal to future generations of heirs. Let your people teach and inspire one another The first three steps are all top-down, but equally important, if not more so, is the groundswell of employee engagement and feeling of ownership. Companies more than ever need to have bottoms-up evangelism and peer-to-peer sharing to succeed in the digital era. As partners of our client companies, we regularly attend national conferences hosted by our client organizations that bring together advisers across the country to share ideas about how they do business today. Time and time again, we hear anecdotes of social-savvy advisers sharing their success stories and ROI proof points, which serve to sway even the most skeptical advisers to become social media believers and practitioners. In the end, though executive buy-in is crucial, peer-to-peer evangelism will be much more credible than corporate departments pushing their initiatives down. You need both. Expect continual iteration To succeed as a company in 2015 and beyond, it is imperative to accept that change is ubiquitous and accelerating. There’s new tech coming out every day -- from mobile payments to virtual reality, connected cars and homes to the Internet of Everything -- destined to challenge and upend every established sector. In turn, each of these disruptions will cause even newer technologies like social media to evolve, and there will always be new use cases. Perhaps your company may pave the way to the next innovation in social media case studies. In 2015, social will be disrupted by going mainstream across the enterprise. Soon, we will no longer call it out separately. Social as a silo is going away. A decade ago, we spent a lot of breath talking about “online” experiences, but today we assume every customer is always online. Social will be the same.

Medical identity theft occurs when a thief obtains treatment using the victim’s Social Security number or health insurance identification number. Authorities also report arrests of care providers who have stolen medical identities and submitted bills for treatment they never performed.  Cyber-attacks on medical data have produced a market for this kind of information. A theft victim’s biggest risk is improper medical treatment because a provider relies on an incorrect medical history. The victim could end up with a transfusion of the wrong blood type, an incorrect prescription or ineffective treatment tailored to the wrong facts. If inappropriate treatment of an industrial injury results in the need for further medical care, the additional care will also be an industrial treatment expense. Injured workers may not know their medical identity was stolen until their treatment request is denied. When medical records show non-industrial causation of the subject condition, a carrier may deny treatment. Records might also show a prior industrial claim for the condition now under review. If the injured worker denies such prior treatment, medical identity theft could be the cause of the discrepancy. When an injured worker claims medical identity theft is the reason for a record of prior treatment, record reviewers should pay close attention to notes of contact information for the patient and family members, height, weight, age and other telltale features which could confirm or weaken a claim of medical identity theft. Employers facing a claim of medical identity theft will have to use a rule of reason and tread carefully. As with other denials, once the injured worker starts treating non-industrially, the employer loses control of the treatment and may end up paying much more than if the condition had been treated within the medical provider network. When the injured worker sustained a prior disabling injury, the percentage of disability payable on the current claim will be apportioned. But what if that prior injury was to someone else using the current claimant’s identity? Parties will need evidence about the prior injury and treatment including the injured worker’s actual location and activities on the relevant dates. Given the market penetration of some medical providers (such as Express Scripts), a claim could trigger issues relating to bills incurred for stolen treatment. CMS might respond to a submission for MSA approval with a reimbursement request for treatment provided to the thief. The identity theft victim will bear the burden of cleaning up the medical record history, including notification to care providers, credit agencies and possibly law-enforcement officials. This task is another source of stress at what is already a stressful time for an injured worker.The employer needs a complete medical history relating to the industrial injury and usually obtains the relevant records by subpoena. Once the theft is discovered, new privacy issues may arise in obtaining those records. Sometimes an undocumented worker avoids detection until there is an industrial injury. Medical treatment planning can disclose a medical history at odds with the known facts of the injured worker’s life. In California, the injured worker will be entitled to treatment of the industrial injury. As with the identity theft victim, disentangling the two medical histories can complicate the treatment plan.

Most conservatives and liberals agree that we should not consider cost in deciding whether people should undergo medical procedures that have the potential to save lives and cure diseases. Unfortunately, most conservatives and liberals are wrong. Declaring the idea of cost-effectiveness a “forbidden topic in the health care debate,” Aaron Carroll shows just how averse we are to the idea of comparing money cost with health outcomes. It’s even written into the Affordable Care Act: “… We in the U.S. are so averse to the idea of cost-effectiveness that when the Patient Centered Outcomes Research Institute, the body specifically set up to do comparative effectiveness research, was founded, the law explicitly prohibited it from funding any cost-effectiveness research at all. As it says on its website, ‘We don’t consider cost-effectiveness to be an outcome of direct importance to patients.’” He gives another example: “Take the U.S. Preventive Services Task Force, which was set up by the federal government to rate the effectiveness of preventive health services on a scale of A to D. When it issues a rating, it almost always explicitly states that it does not consider the costs of providing a service in its assessment. “And because the Affordable Care Act mandates that all insurance must cover, without any cost-sharing, all services that the task force has rated A or B, that means that we are all paying for these therapies, even if they are incredibly inefficient.” Here is the brutal reality: We don’t have an unlimited pile of money to spend on anything. And if we don’t pay attention to what we get for the money we spend (which has historically been the case for government regulatory agencies), we will end up spending money in ways that actually reduce life expectancy for the average American. In a 1996 study for the National Center for Policy Analysis, Tammy Tengs found that:

• By spending $182,000 every year for sickle cell screening and treatment for black newborns, we add 769 years collectively to their lives at a cost of only $236 for each year of life saved.

• By spending about $253 million a year on heart transplants, we add about 1,600 years to the lives of heart patients at a cost of $158,000 per year of life saved.

• Equipping 3% of school buses with seat belts costs about $1.6 million a year, but this effort will save less than one life-year, so the cost is about $2.8 million per year of life saved.

• We spend $2.8 million every year on radionuclide emission control at elemental phosphorus plants (which refine mined phosphorus before it goes to other uses), but this effort will save at most one life every decade, so the cost is $5.4 million per year of life saved.

Tengs, along with Professor John Graham and a team of researchers at the Harvard Center for Risk Analysis, systematically gleaned from the literature annual cost and lifesaving effectiveness information for 185 interventions. Some of these interventions had been fully implemented, some partially implemented and some not implemented all. The researchers then asked: What if we reallocated funds from regulations and procedures that give us a low rate of return to those procedures that give us a high one?

• The 185 interventions cost about $21.4 billion a year and saved about 592,000 years of life.

• If that same money had been spent on the most cost-effective interventions, however, more than 1.2 million years of life could have been saved — about 638,000 more years of life than under the status quo.

• Implementing the more cost-effective policies, therefore, could save twice as many years of life at no additional cost.

This same principle applies to health insurance. Unless you want your premium to go through the roof, you should choose an insurer that follows a reasonable standard for what care is covered. But that brings us back to Carroll’s point. How are you to know what standard your insurer is using if the whole subject is a “forbidden topic”? A few years ago, Time Magazine reported that $50,000 for a year of life saved is “… the international standard most private and government-run health insurance plans worldwide use to determine whether to cover a new medical procedure…. Nearly all other industrial nations — including Canada, Britain and the Netherlands — ration healthcare based on cost-effectiveness and the $50,000 threshold.” But a Stanford University economist calculated that the threshold for kidney dialysis for Medicare enrollees should be $129,000. Mark Pauly and his colleagues suggested a standard of $100,000 in Health Affairs. Economists generally believe that such standards should be based on the implicit values people reveal when they make choices between money and risk in the job market and make choices as consumers. Studies show that the implicit “value of a statistical life year,” to use a term of art, ranges from $50,000 to $150,000. As Pam Villarreal, Biff Jones and I explained in Health Affairs: “This is not the amount of money that people would accept to give up their lives. It is instead the implicit value that people place on their lives when making choices between additional risk and money, when the risks involved and the amount of compensation needed to induce people to accept those risks are both small.” For the many problems involved in arriving at a figure, see a review by Ike Brannon. For an extension of the idea to “quality adjusted life years,” or QALYs, see Aaron Carroll’s discussion and links to the literature. The main point there is that a year spent on a respirator shouldn’t count anywhere near as much as a year doing normal activities. There remains the question of “rationing” and “death panels.” I’ll address that in a future post. This article first appeared on Forbes.com.

If you’re thinking about selling your business, try not to make it a hasty decision. Take a step back and consider all of your options. Details like, if you should sell, if you should sell right now and what you need to consider before selling are just a few of the considerations to make before reaching a final decision. So, is it time to sell your business? Here are some of those important questions to ask yourself to help figure out: Is my business ready to sell? Most businesses need at least two years of preparation before being listed on the market. This is to make sure your books are in order, tax returns are organized and the company is presented in its best condition to potential buyers. Trying to do these things in the month before you sell could reduce the selling price of your company or compromise the sale altogether. How much is my business worth? Many business owners wait too long before deciding to sell. Businesses should be sold before their technologies are outdated or they suffer a decrease in sales. It’s important to sell while operations are still strong, to get the best valuation. What are the current market conditions? Before deciding to sell, take a look at the market conditions for your industry. You may want to sell immediately, or you may wait out what you hope is a dip in the market so you can get a higher return a few years down the road. In 2006, for example, a carpentry company would have sold for three to four times as much as it would have after the financial crisis. Sometimes, even if your business is prepared for sale and with a good valuation, market conditions force you to rethink your plans. Can I cope with the changes? As a business owner, you have most likely poured yourself into your job. If you sell, are you personally prepared for the transition from business owner to the next opportunity on your horizon? This decision is primarily personal but is an important factor to consider in whether you should stay or go. Am I willing to stay on if the buyer wants me to? Sometimes, to ease the transition between owners, new buyers ask that the previous owners stay on in a consulting role for a predetermined amount of time, usually six months to a year. Having the prior owner stick around can help avoid any dips in business during the transition. For you, however, is it worth it? You should figure that out ahead of time so you don't fold under pressure conditions when you just want to close the deal. What are your deal breakers? Would you consider alternatives to a cash sale? Who gets the rights of intellectual property created during your time at the company? Will the new owner keep your current employees? These are all questions to consider sooner rather than later so they can be resolved before you’re near a deal. Ultimately, one of the best investments you can make when considering the sale of your business is to build a team of trusted advisers. Accountants, attorneys and insurance agents are just a few of the specialists who can be supremely helpful. These professionals have an understanding of each moving part and, more importantly, of how they all play together. A successful exit or transition strategy takes preparation and a wealth of time. It involves taking inventory of all aspects of your business and personal life to form an integrated strategic plan. After considering all of the questions, it’s time to come to a decision about whether the timing is right to maintain or sell your business. No matter what decision you come to, remember that preparation is the key to taking a successful step into the future.

Having returned from a week in Dubai, where I co-chaired the 4^th Annual Middle East and North African ERM Conference and led a two-day workshop on risk and strategy, I am pleased to report that ERM is alive and well half-way around the world. This reinforces my similar experience at the same forum (2^nd annual) in 2012. While there may be a perception of free-flowing money and excess in this region, it is clear that key companies in many industries, including finance, energy and healthcare, face most of the same challenges in driving effective risk management strategies and programs as many of the companies in the West. Even though many risk leaders in the Middle East gained their educational backgrounds in Western institutions, where in many cases ERM is still a suspect discipline, many have nevertheless gained significant traction with advanced risk management strategies in their companies. An interesting angle was revealed at the MENA conference that raises challenging questions for many of these practitioners. It emerged first as an informal, anecdotal comment about the challenge of raising the profile and effectiveness of risk management functions where there was little or no tolerance for risk. While most risk professionals face this challenge at one point or another in their careers, it appears more widespread in this region. The question is: why, and how to do you manage through this dilemma? First, recognize that all organizations have a risk attitude that ranges from extreme risk aversion to a radically risk-seeking culture -- you have a risk culture by default, if you don’t actively design and implement the risk culture you desire. Most often, the actual risk attitude plays itself out in risk-taking behaviors that form the basis for a risk-appetite framework and strategy. Within the context of a risk culture, which is defined primarily by the risk-taking behaviors of employees, every person has a risk attitude and appetite for risk. The collection of these appetites and associated risk-taking behaviors can lead to what the MENA region seems to reflect, namely little or no tolerance for certain risks. That risk culture will frequently lead to performance issues or product/service pricing challenges that affect competitiveness and reputation. While it is appropriate to avoid certain risks, doing so is generally a bad choice when growth through innovation is desired; risk-taking comes with that strategy. So attendees at MENA and others who wrestle with risk aversion should realize that this is incompatible with  long-term success in a competitive environment. As a result, they should commit to developing a consensus for a risk culture that aligns with an appetite for risk that is consistent with balanced or prudent risk taking.

Two days after Congress adjourned for the year without reauthorizing the Terrorism Risk Insurance Program Reauthorization Act of 2014 (TRIPRA), many organizations are working to understand the impact on their insurance programs when the federal insurance backstop expires on Dec. 31, 2014. Most experts had expected Congress to reauthorize the law in some form. The failure to do so has implications for insureds with TRIPRA terrorism coverage in most any line, with particular concerns for property, primary and excess liability, workers’ compensation and captive programs. Organizations that purchased terrorism coverage as part of their insurance programs (and not as a standalone program) may be affected. Potential solutions will depend on individual programs and needs but may include:

1. Re-approaching insurers to see if they will not invoke sunset clauses or conditional terrorism exclusions, and provide stop-gap coverage until either Congress renews TRIPRA or the policy expires.
2. Looking to the global standalone terrorism insurance markets for stop-gap coverage. The standalone market has large but limited capacity -- it will not be able to fill all requests.
3. Canceling and rewriting insurance programs with new markets that are able to offer terrorism limits (without sunsets).
4. Seeking agreement from markets without sunsets to assume terrorism risk from sun-setting markets on the same risks.

It must be noted that these options may come with additional premium charges. Also, organizations should explore any loan, lease or other contracts or covenants that may require them to purchase terrorism coverage. Congress is set to reconvene on Jan. 6, 2015. It is unclear how congressional leadership will deal with the issue, although some have already been quoted in the media as saying TRIPRA will be a top priority for the new Congress. Among the possible scenarios are:

1. Immediately after reconvening, Congress could pass a short-term reauthorization to allow the new Congress to formulate a long-term reauthorization bill, which could be materially different than the 2014 version.
2. Alternatively, both the House and Senate could immediately reintroduce new legislation mirroring the 2014 bill and pass it on an expedited basis.

For more information from the Marsh TRIPRA Update Center, click here. 

Losses stemming from the destruction of the World Trade Center and other buildings by terrorists on Sept. 11, 2001, totaled about $31.6 billion, including commercial liability and group life insurance claims -- not adjusted for inflation -- or $42.1 billion in 2012 dollars. About two-thirds of these losses were paid for by reinsurers, companies that provide insurance for insurers. Concerned about the limited availability of terrorism coverage in high-risk areas and its impact on the economy, Congress passed the Terrorism Risk Insurance Act (TRIA). The act provides a temporary program that, in the event of major terrorist attack, allows the insurance industry and federal government to share losses according to a specific formula. TRIA was signed into law on Nov. 26, 2002, and renewed for two years in December 2005. Passage of TRIA enabled a market for terrorism insurance to begin to develop because the federal backstop effectively limits insurers’ losses, greatly simplifying the underwriting process. TRIA was extended for seven years to 2014 in December 2007. The new law is known as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2007. This week, Congress failed to reauthorize TRIA before members adjourned for the holiday recess. Now, with the expiration of the law on Dec. 31, some businesses may be left without insurance coverage in the event of a terrorist attack on the U.S. Both houses of Congress have been discussing legislation that would set out the federal government’s involvement in funding potential terrorism losses, but bills proposed by the two houses earlier this year differed, and no extension was passed. A report from the Wharton Risk Management and Decision Processes Center found that, under the current TRIA program, some insurers have already reached a level of exposure to losses from a terrorist attack that could jeopardize their ability to pay claims, based on a critical measure of solvency: the ratio of an insurer’s TRIA deductible amount in relation to its surplus. The report, "TRIA After 2014: Examining Risk Sharing Under Current and Alternative Designs," found that as the deductible percentage rises, as it does under the Senate bill and proposals put forward in the House, more insurers have a deductible-to-surplus ratio that is above an acceptable level. The report also sets out in detail the amount the American taxpayer and federal government would have to pay under differing scenarios. A RAND Corp. study published in April 2014 found that in a terrorist attack with losses of as much as $50 billion, the federal government would spend more dealing with the losses than if it had continued to support a national terrorism risk insurance program, because it would likely pay out more in disaster assistance. A report by the President’s Working Group on Financial Markets made public in April 2014 generally supports the insurance industry’s view that the expiration of TRIA would make terrorism coverage more expensive and difficult to obtain. The insurance broker Marsh released its annual study of the market, "2014 Terrorism Risk Insurance Report," in April. Among its many findings is that uncertainty surrounding the potential expiration of TRIA significantly affected the property/casualty insurance market. Some employers with large concentrations of workers and companies with property exposures in major U.S. cities found that terrorism insurance capacity was limited and prices higher, and some could not obtain coverage at all. If the law is allowed to expire or is significantly changed, the market is likely to become more volatile with higher prices and limited coverage, the study concludes. Before Sept. 11, 2001, insurers provided terrorism coverage to their commercial insurance customers essentially free of charge because the chance of property damage from terrorist acts was considered remote. After Sept. 11, insurers began to reassess the risk. For a while, terrorism coverage was scarce. Reinsurers were unwilling to reinsure policies in urban areas perceived to be vulnerable to attack. Primary insurers filed requests with their state insurance departments for permission to exclude terrorism coverage from their commercial policies. From an insurance viewpoint, terrorism risk is very different from the kind of risks typically insured. To be readily insurable, risks have to have certain characteristics. The risk must be measurable. Insurers must be able to determine the possible or probable number of events (frequency) likely to result in claims and the maximum size or cost (severity) of these events. For example, insurers know from experience about how many car crashes to expect per 100,000 miles driven for any geographic area and what these crashes are likely to cost. As a result, they can charge a premium equal to the risk they are assuming in issuing an auto insurance policy. A large number of people or businesses must be exposed to the risk of loss, but only a few must actually experience one, so that the premiums of those that do not file claims can fund the losses of those who do. Losses must be random as regards time, location and magnitude. Insofar as acts of terrorism are intentional, terrorism risk doesn't have these characteristics. In addition, no one knows what the worst-case scenario might be. There have been few terrorist attacks, so there is little data on which to base estimates of future losses, either in terms of frequency or severity. Terrorism losses are also likely to be concentrated geographically, since terrorism is usually targeted to produce a significant economic or psychological impact. This leads to a situation known in the insurance industry as adverse selection, where only the people most at risk purchase coverage, the same people who are likely to file claims. Moreover, terrorism losses are never random. They are carefully planned and often coordinated. To underwrite terrorism insurance -- to decide whether to offer coverage and what price to charge -- insurers must be able to quantify the risk: the likelihood of an event and the amount of damage it would cause. Increasingly, they are using sophisticated modeling tools to assess this risk. According to the modeling firm AIR Worldwide, the way terrorism risk is measured is not much different from assessments of natural disaster risk, except that the data used for terrorism are more subject to uncertainty. It is easier to project the risk of damage in a particular location from an earthquake of a given intensity or a Category 5 hurricane than a terrorist attack because insurers have had so much more experience with natural disasters than with terrorist attacks, and therefore the data to incorporate into models are readily available. One problem insurers face is the accumulation of risk. They need to know not only the likelihood and extent of damage to a particular building but also the company's accumulated risk from insuring multiple buildings within a given geographical area, including the implications of fire following a terrorist attack. In addition, in the U.S., workers' compensation insurers face concentrations of risk from injuries to workers caused by terrorism attacks. Workers' compensation policies provide coverage for loss of income and medical and rehabilitation treatment from "first dollar," that is, without deductibles. Extending the Terrorism Risk Insurance Act (TRIA): There is general agreement that TRIA has helped insurance companies provide terrorism coverage because the federal government's involvement offers a measure of certainty as to the maximum size of losses insurers would have to pay and allows them to plan for the future. However, when the act came up for renewal in 2005 and in 2007, there were some who believed that market forces should be allowed to deal with the problem. Both the U.S. Government Accountability Office and the President’s Working Group on Financial Markets published reports on terrorism insurance in September 2006. The two reports essentially supported the insurance industry in its evaluation of nuclear, biological, chemical and radiological (NBCR) risk -- that it is uninsurable -- but the President’s Working Group said that the existence of TRIA had inhibited the development of a more robust market for terrorism insurance, a point on which the industry disagrees. TRIA is the reason that coverage is available, insurers say. The structure of the program has encouraged the development of reinsurance for the layers of risk that insurers must bear themselves -- deductible amounts and coinsurance -- which in turn allows primary insurers to provide coverage. Without TRIA, there would be no private market for terrorism insurance. Studies by various organizations have supported a temporary continuation of the program in some form, including the University of Pennsylvania's Wharton School, the RAND Corp. and the Organization of Economic Cooperation and Development (OECD), an organization of 30 member countries, many of which have addressed the risk of terrorism through a public/private partnership. The OECD said in an analysis that financial markets have shown very little appetite for terrorism risk because of the enormousness and unpredictability of the exposure. RAND argued not only that TRIA should be extended but also that Congress should act to increase the business community's purchase of terrorism insurance and lower its price. RAND also advocated mandatory coverage for some "vital systems," establishing an oversight board and increasing efforts to mitigate the risks. For the full report from which this is excerpted, click here.