Tag Archives: financial incentive

A Quiet ACA Waiver — and Needed Change

Massachusetts has been on the forefront of American history since the days of Paul Revere and the Boston Tea Party. It is also the state that inspired the Affordable Care Act, a.k.a. Obamacare, by its groundbreaking universal coverage law implemented under former Gov. Mitt Romney. What has received very little, if any, national media coverage is that the heavily Democratic-controlled state of Massachusetts quietly filed for and was granted a three-year waiver on how premiums are calculated under the ACA for small employers.

The waiver request was so quiet that the Boston Globe reported that Gov. Deval Patrick, a friend and supporter of the president, signed the legislation on the Friday afternoon before the July 4th weekend last year “in private when the statehouse was empty and the majority of voters were on vacation.”

One of the major negative consequences of Obamacare for small employers in Massachusetts and throughout the country is that the ACA destroys the entire concept of “experience rating.” Experience rating has been the cornerstone of how workers’ compensation insurance premiums are calculated since time immemorial. In simple terms, employers’ workers’ comp premiums are based on the type of industry in which they operate, the number and type of employees they have and their historical safety record. Employers with great safety records pay less for insurance, and employers with poor safety records pay more. This approach is not only fair but gives employers a strong financial incentive to provide a safe workplace.

After enactment of the Massachusetts universal coverage law, (which I am told was only 70 pages long, compared with the ACA's 2,000-plus pages and growing) employers’ health insurance premiums were 15% above the national average and the most expensive in the nation. Now, under the ACA, Massachusetts health insurance premiums are projected to go up 50% for the majority of small employers.

The basic issue is that the Massachusetts universal coverage law used nine rating factors to calculate premiums for small employers. These include discounts for using healthcare insurance purchasing cooperatives and for providing a safe workplace. Those nine factors are now preempted under the ACA and have been replaced by only four: age, family size, location and smoking habits.

The Chamber of Commerce and other small-business groups protested the changes vehemently. Gov. Patrick said he privately asked for a waiver and was told “no” by the president and the Department of Health and Human Services. Obviously, it would be a political embarrassment to the president if the place where his healthcare reform began, and one of the “bluest” states in the nation, publicly requested a waiver. However, the state legislature overwhelmingly voted to require the governor to do so.

Massachusetts was, in fact, granted a three-year waiver on the ACA's requirements on rating factors. The request for a permanent waiver was denied last September by Secretary Kathleen Sebelius at HHS.

Of course, “progressive” healthcare reform advocates opposed the waiver, stating that it would be “unfair” to other employers. How is it unfair that employers who promote wellness and a safe workplace are rewarded for their efforts with reduced premiums?

A study by the Pioneer Institute predicts that Massachusetts employers will now have to cut back on employment and the number of insured. Tell me, how is that “progressive”?

The Massachusetts Department of Insurance has reported that a study by the state’s health insurers predict that 60% of small employers will see a 50% or greater rate increase after the waiver expires in 2016, on top of the normal yearly increases.

The president, during his State of the Union address, challenged anyone to identify changes needed to the ACA. Maybe it’s time to dump the ACA premium rating factors in the Boston harbor like the British tea and restore full-blown experience rating for small employers in Massachusetts and in the rest of the nation.

Pinch Me! A Healthcare Program That Works

Those of you who are regular readers of this column may have noticed my postings usually observe that most vendors don’t save money — for example, Wellness: An Industry Conceived in Lies, Retractions and Hypocrisy. (Note that this particular article was accompanied by an editorial in which Paul Carroll, ITL’s fearless leader, described how he had asked the perpetrators for rebuttals, but no one had stepped up.)

So it is with great satisfaction that I can finally recommend a company to ITL readers: Quantum Health, which really does save significant money while providing a better employee experience. One might ask: “Wait—you just said the wellness industry is conceived in lies, retractions and hypocrisy. How is Quantum any different?”

Simple: Quantum isn’t a wellness company. It’s sui generis. If categorized at all, it would be called “coordinated care.” Unlike a wellness program, Quantum doesn’t require or even involve health risk assessments, biometric screenings and checkups. Instead, Quantum leaves employees alone unless they’re sick, are high utilizers or ask for help.

Unlike wellness programs, Quantum’s offering is not bolted on to existing administrative programs. Instead, it replaces them, assuming most of the member interface functions from the carrier. Whereas, within a carrier, those functions are siloed — often in different buildings, always with their own budgets, targets and incentives — Quantum is organized by customer, with all the functions for that customer comingled.

The advantage of that arrangement is best described with a story. Once, when I was on a site visit at Quantum, an employee of a new customer called, asking if diabetic shoes were a covered benefit. In most, if not all, carriers, the person answering that query would be evaluated based on accuracy, number of rings, politeness and how many calls they handled that hour. So the person would say “yes” or “no” and then get off the phone. At Quantum, the agent answered the query but was prompted by the supporting software (and by training) to recognize that question as a red flag. Here was an employee whose diabetes was already so advanced he was asking about shoes…and yet he was nowhere in the diabetes registry. A typical carrier wouldn’t find out about this person until after the inpatient claim for his inevitable crash was filed, warehoused, prioritized and queued for telephonic outreach. And then, assuming the carrier had the correct phone number, and this patient answered the call and was receptive, rehabilitation could begin. And yet there he was – right on the phone – asking for help. So the agent probed a little further and then transferred him to a nurse in the same pod, who engaged him right away, almost certainly avoiding or forestalling a future high-cost medical event.

This is just one of many examples of touches that allow Quantum to save your clients more money than any other vendor of any other population health management service. I can guarantee this.

This performance also does not come on the backs of employees. Satisfaction rates are very high, and no one has to be bribed or penalized to participate, as happens with wellness, where the average bribe/penalty has almost tripled in five years, to $594.

Before you get too excited, here are the catches.

First, the carrier has to be willing to give up a chunk of its administrative services…and, more importantly, its administrative fees. It is unlikely that the administrative services contract that your client signed anticipated that, meaning the concession has to be negotiated.

Second, even once that concession is extracted from the carrier, the incremental fee for Quantum will in total generate a higher total administrative cost — Quantum fields several times as many member calls, often lasting several times longer than the calls of the carrier being replaced.

Third, to encourage inbound phone calls at the right times, like when a specialist referral or other high-cost resource is recommended, you need to tweak the benefits design to vary the co-pays according to whether the employee is willing to take the extra step of a phone call. Because of this financial incentive, these phone calls tend to come in at exactly the right times, when an employee is in the midst of an episode of care, and is about to fall into the “treatment trap.” That is the point at which patients are most concerned and most receptive to assistance. All good, except that human resources executives are often reluctant to tweak benefits designs.

Finally, Quantum needs to control its growth, because its performance relies to a large degree on staff training and experience. As the only vendor that has cracked the coordinated care nut, they can’t handle all comers. Consequently, they focus instead on large and jumbo employers. Therefore, you would need a minimum case size of 1,000 employees to engage them.

Still, the outcomes advantages that Quantum confers are compelling.

(Disclosure: There are no disclosures. I am not a shareholder and do not get commissions from Quantum for articles like these.)