Tis the season for reflections on the past and predictions for the future. As we kick off 2015, here are my thoughts on the workers' compensation issues to watch this year. What Does TRIA’s Non-Renewal Mean for Workers’ Compensation? Thanks to congressional inaction, a last-minute rewrite added this subject to the issues for this year. I’m not about to predict what Congress will do with TRIA legislation in 2015, as there are no sure things in the legislative process. We have already seen the reaction from the marketplace. Back in February 2014, carriers started issuing policies that contemplated coverage without the TRIA backstops. We saw some carriers pull back from certain geographic locations, and we also saw some carriers change the terms of their policies and only bind coverage through the end of the year, giving themselves the flexibility to renegotiate terms or terminate coverage if TRIA wasn't renewed. But while some carriers pulled back in certain locations, others stepped up to take their place. While some carriers tied their policy expiration to the expiration of TRIA, other carriers did not.  Going forward, some employers may see fewer carrier choices and higher prices without the TRIA backstop, but ultimately most employers will still be able to obtain workers’ compensation coverage in the private marketplace. Those that cannot will have to turn to the State Fund or assigned risk pool. Rising Generic Drug Prices The opioid epidemic, physician dispensing and the increased use of compound drugs are issues the industry has faced for years. While these issues continue to be a problem, I want to focus on something that is getting less attention. Have you noticed that the costs for generic prescription drugs are increasing, sometimes significantly? In the past, the focus was on substituting generic drugs for brand names, which provided the same therapeutic benefit at a fraction of the costs.  But now the rising costs of these generic medications will drive costs in 2015. These price increases are being investigated by the Federal Drug Administration (FDA) and Congress, but I do not expect this trend to change soon. Medical Treatment Guidelines Another issue to watch on the medical side is the continued development of medical treatment guidelines and drug formularies in states around the country. This is a very positive trend and one that our industry should be pushing for. There is no reason that the same diagnosis under workers’ comp should result in more treatment and longer disability than the same condition under group health. One troubling issue that I see here is the politics that come into play. Sorry, but I do not accept that human anatomy is different in California or Florida than in other states. I feel the focus should be on adopting universally accepted treatment guidelines, such as Official Disability Guidelines, or “ODG,” rather than trying to develop state-specific guides. The ODG have been developed by leading experts and are updated frequently. State-based guidelines often are influenced by politics instead of evidence-based medicine, and they are usually not updated in a timely manner. How Advances in Medical Treatment Can Increase Workers’ Comp Costs There is one area in which advances in medicine are actually having an adverse impact on workers’ compensation costs, and that is in the area of catastrophic injury claims. Specifically, I’m referring to things such as brain injuries, spinal cord injuries and severe burns. Back in 1995, Christopher Reeve suffered a spinal cord injury that left him a quadriplegic. He received the best care money could buy from experts around the world, and he died less than 10 years after his injury.  But as medicine advances, we are now seeing that a quadriplegic can live close to normal life expectancy if complications can be avoided. Injuries that used to be fatal are now survivable. That's great news. The downside for those paying the bills is that surviving these injuries is very costly. The cost of catastrophic medical claims used to top off around $5 million, with a $10 million claim being a rarity. Now, that $10 million price tag is becoming more the norm. The Evolving Healthcare Model For years, workers’ comp medical networks focused on two things: discount and penetration.  Sign up as many physicians as you can as long as they will agree to accept a discount below fee schedule for their services. I’m happy to say that we are slowly, finally, evolving away from that model. Payers are realizing that a better medical outcome for the injured worker results in lower overall workers’ compensation costs, even if that means paying a little more on a per-visit basis. We are now seeing larger employers developing outcome-based networks, not only for workers’ compensation, but for their group health, as well. Employers are also starting to embrace less traditional approaches such as telemedicine. Finally, more and more employers are recognizing the importance that mental health plays in the overall wellness of their workforce. In the end, we are slowly starting to see is a wellness revolution. The Need for Integrated Disability Management The evolving healthcare model is tied directly to an evolving viewpoint on disability management. More employers are realizing the importance of managing all disability, not just that associated with workers’ compensation claims. Employees are a valued asset to the company, and their absence, for any reason, decreases productivity and increases costs. I feel this integrated disability management model is the future of claims administration. Employers who retain risk on the workers’ comp side usually do the same thing with non-occupational disability. These employers are looking for third-party administrators (TPAs) that can manage their integrated disability management programs. And make no mistake: Having an integrated disability management program is essential for employers. Human resource issues such as the Americans With Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA) cross over into the workers’ compensation realm. The same interactive process required on non-occupational disability is required in workers’ compensation. Employers must be consistent with how they handle any type of disability management, regardless of whether the cause is a workers’ compensation injury or non-occupational. Will We See a Push for 'Opt Out' in Other States? Most people know that non-subscription, or opt out, has been allowed in Texas for many years. The Oklahoma Option that started last year is viewed as a much more exportable version of opt out. Under this system, employers can opt out of workers’ compensation, but they must replace it with a benefit plan that provides the same (or better) benefits available under traditional workers’ compensation. While some view the Oklahoma Option as the start of an opt-out revolution, it is just too early to tell what impact it will ultimately have. But, make no mistake, discussions about opting out are spreading to other states. A group called the Association for Responsible Alternatives to Workers' Compensation is currently investigating the possibility of bringing opt out to other states. I expect to see opt-out legislation in a handful of other states in the next three to five years. Marijuana Marijuana legislation is a very hot topic these days.  In national polls, the majority of Americans favors legalization of marijuana in some form.  Recreational use of marijuana is now legal in four states (Colorado, Washington, Oregon and Alaska), and 23 states allow medical marijuana. When it comes to workers’ compensation, much of the attention has been focused on medical marijuana as a treatment option for workers’ comp because a judge in New Mexico allowed this last year. My concern is around employment practices. Employment policies around marijuana have been centered on the fact that it is illegal, so any trace in the system is unacceptable. That is going to change. I fully expect the government to reclassify marijuana from Schedule I to Schedule II in the next few years. When that happens, zero-tolerance policies in the workplace will no longer be valid. Instead, the focus will have to be like it currently is with alcohol: whether the person is impaired. The Next Pandemic Another hot topic these days is Ebola. While the threat from this particular disease seems to be subsiding, the concerns about Ebola last year showed we are not ready for that next pandemic. People who were exposed to the disease were allowed to interact with the general population and even use commercial travel. Government agencies debated whether travel to certain countries should be limited. The problem is, diseases don’t wait for a bureaucracy to make decisions. While this threat didn’t materialize, you can see how easily it could have. With work forces that travel around the globe, the threat of a global pandemic is very real. You know where you send your workers as part of their job, but do you know where they go on vacation? As an employer, are you allowed to ask about what employees do during their personal time? Are you allowed to quarantine an employee who traveled to an infected country during vacation? These are very complex legal questions that I cannot answer, but these are discussions we need to be having. How do we protect our employees from the next pandemic? Rates and Market Cycle You cannot have a discussion around issues to watch without talking about insurance premium rates in workers’ compensation. After several years of increasing rates around the country, the National Council on Compensation Insurance (NCCI) is projecting that, in 2014, workers' compensation combined ratios were below 100% for the first time since 2006. This means that, as an industry, writing workers’ compensation is profitable again. So what should buyers expect in 2015? Well, it depends. California continues to be a very challenging state for workers’ compensation costs. New York is challenging, as well. Given the percentage of the U.S. workforce in those two states, they have significant influence on the entire industry. Some employers will see rate reductions this year, and some will not. In the end, your individual loss experiences will determine what happens with your premiums. That seems to be the one constant when it comes to pricing. Employers with favorable loss experiences get lower rates, so it pays to stay diligent in the areas of loss prevention and claims management. Will We See More Constitutional Challenges Similar to Padgett in Florida? While I don’t think the Padgett case will be upheld on appeal, I am concerned that the case is the first of many similar ones we could see around the country. Look at the main arguments in Padgett: The workers’ compensation system is a grand bargain between injured workers and employers. Workers gave up their constitutional right to sue in civil courts in exchange for statutorily guaranteed, no-fault benefits. Over the last 20 years, many workers’ comp reform efforts around the country have focused on lowering employer costs. Standards of compensability have been tightened. Caps have been put on benefits. The judge in Padgett looked at these law changes and ruled that workers’ compensation benefits in Florida had been eroded to the point where it was no longer a grand bargain for injured workers. He ruled that the workers’ compensation statutes were unconstitutional on their merits because the benefits provided are no longer an adequate replacement for the right to sue in civil court that that the workers gave up. Attorneys tend to mimic what succeeds in other courts, so I expect we are going to be seeing more constitutional arguments in the future. Impact of the Evolving Workforce One of the biggest issues I see affecting workers’ compensation in 2015 and beyond is the evolving workforce. This takes many forms. First, we are seeing technology replace workers more and more. When was the last time you went to a bank instead of an ATM? I have seen both fast food and sit-down restaurants using ordering kiosks. Also, we are seeing more use of part-time vs. full-time workers. Some of this is driven by concerns around the Affordable Care Act. But part-time workers also have fewer human resource issues, and their use allows employers to easily vary their workforce based on business needs. Unfortunately, part-time workers are also less-trained, which could lead to higher injury frequency. Finally, the mobile work force is also creating concerns around workers’ compensation. Where is the line between work and personal life when you are using a company cell phone, tablet or computer to check e-mails any place, any time? Where do you draw the line for someone who works from home regularly? There have been numerous court cases around the nation trying to determine where that line is. This is a very complex and evolving issue. To view a webinar that goes into these topics in more detail, click here: https://www.safetynational.com/webinars.html

Individual life insurance ownership in U.S. has been decreasing over the past decade, and the figures are even more depressing when we look at the figures over the past 50 years. Life insurance ownership (both group and individual) among U.S. adults has dropped from 70% of individuals in 1960 to 59% in 2010. The number of individual policies owned by U.S. adults has dropped from 59% in 1960 to 36% in 2010, according to the Life Insurance and Market Research Association (LIMRA). The world has seen accelerated change over the past several decades, and, as entire industries transform, even leading and innovative companies can get trampled. The life insurance industry is no exception. The figures clearly demonstrate the slowing demand for life insurance. Are we seeing the "death" of life insurance, or is this just a temporary "blip" as the industry re-designs itself for changing demographics? Are there innovative business models that can change the situation? The Case for Big Data and Analytics The life insurance industry needs to innovate and needs to innovate fast. Innovation has to come from understanding end consumer needs better, reducing distribution costs in addressing these needs and developing products that are less complex to purchase. By leveraging new technologies, particularly new sources of data and new analytics techniques, insurers will be able to foresee some of these changes and prepare for disruptive change. There are at least two distinct ways in which new sources of data and analytics can help in the life insurance sector.

• Underwriting: Identifying prospects who can be sold life insurance without medical underwriting (preferably instantaneously) and speeding up the process for those who do require medical underwriting
• New non-standard classes: Identifying and pricing prospects who have certain types of pre-existing conditions, e.g., cancer, HIV and diabetes.

Predictive Modeling in Underwriting A predictive model essentially predicts a dependent variable from a number of independent variables using historically available data and the correlations between the independent variables and the dependent variable. This type of modeling is not new to life insurance underwriters as they have always predicted mortality risk for an individual, based on variables of historical data, such as age, gender or blood pressure. With the availability of additional data about consumers, including pharmacy or prescription data, credit data, motor vehicle records (MVR), credit card purchase data and fitness monitoring device data, life insurers have potentially a lot of data that can be used in the new business process. Because of privacy and confidentiality considerations, most insurers are cautious in using personally identifiable data. However, there are a number of personally non-identifiable data (e.g., healthy living index computed by zip code) or household level balance sheet data that can be used to accelerate or "jet-underwrite" certain classes of life insurance. Some insurance companies are already using new sources of sensor data and applying analytics to personalize the underwriting process and are reaping huge benefits. For example, an insurer in South Africa is using analytics to underwrite policies based on vitality age, which takes into account exercise, dietary and lifestyle behaviors, instead of calendar age. The insurer combines traditional health check-ups with diet and fitness checks, and exercise tracking devices to provide incentives for healthy behavior. Life insurance premiums change on a yearly basis. The company has successfully managed to change the value proposition of life insurance from death and living benefits to "well-being benefits," attracting a relatively healthier and younger demographic. This new approach has helped this company progressively build significant market share over the past decade and exceed growth expectations in the last fiscal year, increasing profits by 18% and showing new-business increases of 13%. Pricing Non-Standard Risk Classes In the past, life insurers have excluded life insurance cover for certain types of conditions, like AIDS, cancer and stroke. With the advances in medical care and sensors that monitor vital signs of people with these conditions on a 24x7 basis, there is an opportunity to price non-standard risk classes. Websites that capture a variety of statistics on patients with specific ailments are emerging. Medical insurers and big pharmaceutical companies are leveraging this information to understand disease progress, drug interaction, drug delivery, patient drug compliance and a number of other factors to understand morbidity and mortality risks. Life insurers can tap into these new sources of data to underwrite life insurance for narrower or specialized pool of people. For example, a life insurance company in South Africa is using this approach to underwrite life insurance for HIV or AIDS patients. They use extensive data and research on their HIV patients to determine mortality and morbidity risks, combine their offering with other managed care programs to offer non-standard HIV life insurance policies. They have been operating over the past four years and are branching out into new classes of risk including cancer, stroke and diabetes. Surviving and Thriving in the World of Big Data The examples we have provided are just scratching the surface of what is likely to come in the future. Insurers that want to leverage such opportunities should change their mindset and address the challenges facing the life insurance sector. Specifically, they should take the following actions:

• Start from key business decisions or questions
• Identify new sources of data that can better inform the decision-making process
• Use new analytic techniques to generate insights
• Demonstrate value through pilots before scaling
• Fail forward -- institute a culture of test-and-learn
• Overcome gut instinct to become a truly data-driven culture

In summary, life insurance needs to innovate to be a relevant product category to the younger and healthier generation. Using new sources of big data and new analytic techniques, life insurers can innovate with both products and processes to bring down the cost of acquisition and also open up new growth opportunities. What cycle-time improvements have you been able to achieve in the life new-business process? How well are you exploiting new data and analytic techniques to innovate in the life insurance space?

We thank Ron Goetzel, representing Truven Health and Johns Hopkins, for posting on Insurance Thought Leadership a rebuttal to our viral November posting, "Workplace Wellness Shows No Savings." Paradoxically, while he conceived and produced the posting, we are happy to publicize it for him. If you’ve heard that song before, think Mike Dukakis’s tank ride during his disastrous 1988 presidential campaign. Goetzel's rebuttal, “The Value of Workplace Wellness Programs,” raises at least 11 questions that he has been declining to answer. We hope he will respond here on ITL. And, of course, we are happy to answer any specific questions he would ask us, as we think we are already doing in the case of the point he raises about wellness-sensitive medical events. (We offer, for the third time, to have a straight-up debate and hope that he reconsiders his previous refusals.) Ron: (1)    How can you say you are not familiar with measuring wellness-sensitive medical events (WSMEs), like heart attacks? Your exact words are: “What are these events? Where have they been published? Who has peer-reviewed them?” Didn’t you yourself just review an article on that very topic, a study that we ourselves had hyperlinked as an example of peer-reviewed WSMEs in the exact article of ours that you are rebutting now? WSMEs are the events that should decline because of a wellness program. Example: If you institute a wellness program aimed at avoiding heart attacks, you’d measure the change in the number of heart attacks across your population as a “plausibility test” to see if the program worked, just like you’d measure the impact of a campaign to avoid teenage pregnancies by observing the change in the rate of teenage pregnancies. We're not sure why you think that simple concept of testing plausibility using WSMEs needs peer review. Indeed, we don’t know how else one would measure impact of either program, which is why the esteemed Validation Institute recognizes only that methodology. (In any event, you did already review WMSEs in your own article.) We certainly concur with your related view that randomized controlled trials are impractical in workplace settings (and can’t blame you for avoiding them, given that your colleague Michael O’Donnell’s journal published a meta-analysis showing RCTs have negative ROIs). (2)    How do you reconcile your role as Highmark’s consultant for the notoriously humiliating, unpopular and counterproductive Penn State wellness program with your current position that employees need to be treated with “respect and dignity”? Exactly what about Penn State’s required monthly testicle check and $1,200 fine on female employees for not disclosing their pregnancy plans respected the dignity of employees? (3)    Which of your programs adhere to U.S. Preventive Services Task Force (USPSTF) screening guidelines and intervals that you now claim to embrace? Once again, we cite the Penn State example, because it is in the public domain -- almost nothing about that program was USPSTF-compliant, starting with the aforementioned testicle checks. (4)    Your posting mentions “peer review” nine times. If peer review is so important to wellness true believers,  how come none of your colleagues editing the three wellness promotional journals (JOEM, AJPM and AJHP) has ever asked either of us to peer-review a single article, despite the fact that we’ve amply demonstrated our prowess at peer review by exposing two dozen fraudulent claims on They Said What?, including exposés of four companies represented on your Koop Award committee (Staywell, Mercer, Milliman and Wellsteps) along with three fraudulent claims in Koop Award-winning programs? (5)    Perhaps the most popular slide used in support of wellness-industry ROI actually shows the reverse -- that motivation, rather than the wellness programs themselves, drives the health spending differential between participants and non-participants. How do we know that? Because on that Eastman Chemical-Health Fitness Corp. slide (reproduced below), significant savings accrued and were counted for 2005 – the year before the wellness program was implemented. Now you say 2005 was “unfortunately mislabeled” on that slide. Unless this mislabeling was an act of God, please use the active voice: Who mislabeled this slide for five years; where is the person's apology; and why didn’t any of the analytical luminaries on your committee disclose this mislabeling even after they knew it was mislabeled? The problem was noted in both Surviving Workplace Wellness and the trade-bestselling, award-winning Why Nobody Believes the Numbers, which we know you’ve read because you copied pages from it before Wiley & Sons demanded you stop? Was it because HFC sponsors your committee, or was it because Koop Committee members lack the basic error identification skills taught in courses on outcomes analysis that no committee member has ever passed? (6)    Why doesn’t anyone on the Koop Committee notice any of these “unfortunate mislabelings” until several years after we point out that they are in plain view? (7)    Why is it that every time HFC admits lying, the penalty that you assess -- as president of the Koop Award Committee -- is to anoint their programs as “best practices” in health promotion? (See Eastman Chemical and Nebraska in the list below.) Doesn’t that send a signal that Dr. Koop might have objected to? (8)    Whenever HFC publishes lengthy press releases announcing that its customers received the “prestigious” Koop Award, it always forgets to mention that it sponsors the awards. With your post’s emphasis on “the spirit of full disclosure” and “transparency,” why haven’t you insisted HFC disclose that it finances the award (sort of like when Nero used to win the Olympics because he ran them)? (9)    Speaking of “best practices” and Koop Award winners, HFC’s admitted lies about saving the lives of 514 cancer victims in its award-winning Nebraska program are technically a violation of the state’s anti-fraud statute, because HFC accepted state money and then misrepresented outcomes. Which is it: Is HFC a best practice, or should it be prosecuted for fraud? (10)    RAND Corp.’s wellness guru Soeren Mattke, who also disputes wellness ROIs, has observed that every time one of the wellness industry’s unsupportable claims gets disproven, wellness defenders say they didn’t really mean it, and they really meant something else altogether. Isn’t this exactly what you are doing here, with the “mislabeled” slide, with your sudden epiphany about following USPSTF guidelines and respecting employee dignity and with your new position that ROI doesn’t matter any more, now that most ROI claims have been invalidated? (11)    Why are you still quoting Katherine Baicker’s five-year-old meta-analysis claiming 3.27-to-1 savings from wellness in (roughly) 16-year-old studies, even though you must be fully aware that she herself has repeatedly disowned it and now says: “There are very few studies that have reliable data on the costs and benefits”? We have offered to compliment wellness defenders for telling the truth in every instance in which they acknowledge all her backpedaling whenever they cite her study. We look forward to being able to compliment you on truthfulness when you admit this. This offer, if you accept it, is an improvement over our current Groundhog Day-type cycle where you cite her study, we point out that she’s walked it back four times, and you somehow never notice her recantations and then continue to cite the meta-analysis as though it’s beyond reproach. To end on a positive note, while we see many differences between your words and your deeds, let us give you the benefit of the doubt and assume you mean what you say and not what you do. In that case, we invite you to join us in writing an open letter to Penn State, the Business Roundtable, Honeywell, Highmark and every other organization (including Vik Khanna’s wife’s employer) that forces employees to choose between forfeiting large sums of money and maintaining their dignity and privacy. We could collectively advise them to do exactly what you now say: Instead of playing doctor with “pry, poke, prod and punish” programs, we would encourage employers to adhere to USPSTF screening guidelines and frequencies and otherwise stay out of employees’ personal medical affairs unless they ask for help, because overdoctoring produces neither positive ROIs nor even healthier employers. And we need to emphasize that it’s OK if there is no ROI because ROI doesn’t matter. As a gesture to mend fences, we will offer a 50% discount to all Koop Committee members for the Critical Outcomes Report Analysis course and certification, which is also recognized by the Validation Institute. This course will help your committee members learn how to avoid the embarrassing mistakes they consistently otherwise make and (assuming you institute conflict-of-interest rules as well to require disclosure of sponsorships) ensure that worthy candidates win your awards.

Your company's financial performance is below plan. You need to act! The most common response is to cut costs to improve the bottom line or fire or reassign a senior executive to create a sense of urgency. But these actions create disruption and distraction at a time when the organization needs to be aligned and focused. There’s another approach: Empower your employees to find the solution. Step back and let them take the lead. Invest them with the power to effect change. There are three basic approaches:

1. Create a cross-functional team to focus on the problem. Early in my career, I was summoned to the office of the CEO of a major carrier along with two other people from different departments. The CEO told us that one of our smaller divisions was not doing well. He said everyone in the group was working hard, but no one had any solutions. He asked us to come up with a plan within a week to improve the division’s performance. He said there were “no sacred cows.”  We should not concern ourselves with whether our solutions were politically correct. We came up with a plan that adopted an open-architecture product approach, where the company’s product was just one of many that our insurance salespeople could offer. Broadening customer selection highlighted the benefits of our product offering, and sales increased markedly.
2. Empower your front-line employees to find the solution. Zappos, the online shoe website, empowers its customer service representatives (CSRs)to control the customer experience. Most call centers evaluate performance based on the length of a call. Calls that last beyond a certain time hurt the CSR’s performance reviews. Early on at Zappos, the CSRs reported that callers had a lot of questions and that the calls could last 10, 15 even 30-plus minutes. They suggested that Zappos not evaluate their performance based on the time a call lasted. Zappos adopted this policy and allows its CSRs to stay on the line as long as needed with a customer. This has translated into pricing power for the company. Zappos’ customer loyalty is so high, it enables the company to charge full retail for its shoes.
3. Show your employees they come before you. In the March 22, 2014, Corner Office column in the New York Times, Don Knauss, the CEO of Clorox, recounted one of his first leadership lessons while in the Marines. After a hard day of drills in the field, the commanding officer had arranged for a special meal for the soldiers. Hungry, Knauss, a lieutenant, walked to the front of the line to get dinner. A gunnery sergeant tapped him on the shoulder and said, "In the field, the men always eat first. You can have some if there is any left." As Knauss recounted, "It’s all about your people; it’s not about you. And if you’re going to lead these people, you’d better demonstrate that you care more about them than you care about yourself."

Companies with CEOs who empower their employees perform better. In a study led by University of Chicago Booth School of Business Professor Steven N. Kaplan, titled, “Which CEO Characteristics and Abilities Matter?” to be published in the Journal of Finance, performance characteristics of approximately 400 CEOs were evaluated. There was a direct correlation between company performance and whether the CEO was “open to criticism” -- another way of describing CEOs willing to empower others. Technology and the Great Recession have reduced the number of management layers between the CEO and front-line employees. This creates an opportunity for more engagement and collaboration. CEOs must spend more time focusing on how they create a culture of engagement -- in other words, a two-way conversation.

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.