Tag Archives: health plans

20 Work Comp Issues to Watch in 2016

In an “Out Front Ideas with Kimberly and Mark” webinar broadcast on Jan. 12, 2016, we discussed our thoughts around the issues that the workers’ compensation industry should have on its radar for 2016. What follows is a summary of 20 issues that we expect to affect our industry this year.

  1. Election Cycle

Everyone knows that this is a presidential election year. But election time also means governor and insurance commissioner seats are available. State insurance commissioners are elected in 11 states and appointed in the other 39. In the coming election, there are 12 gubernatorial seats and five insurance commissioner positions to be decided. The workers’ compensation industry needs to be paying attention to these elections because the insurance commissioners can have significant influence over procedures, policies and enforcement in their states.

  1. Viability of Workers’ Compensation

It is important for all of us to consider the continuing viability of workers’ compensation. Is the grand bargain still doing what it was established to do? There is a growing debate around the gaps and shortcomings of workers’ compensation. Our industry needs to engage in a critical analysis of these issues.

  1. Federalization

In October 2015, 10 high-ranking Democrats on key Senate and House committees sent a letter to the Department of Labor asking it to conduct a critical review of state workers’ compensation systems. Some are concerned that this is a sign we could see federal government involvement in state workers’ compensation systems.

In some ways, the federal government is already involved in workers’ compensation. For instance, OSHA has a tremendous impact on workers’ compensation. Medicare Secondary Payer Compliance is another example of federal law affecting the system.

Recent criticisms of workers’ compensation have focused on the vast benefit differences between states. There is also growing concern that workers who are permanently disabled are pushed off workers’ compensation and onto Social Security disability. With Social Security raising solvency concern, lawmakers will be receptive to discussions on how to keep workers’ compensation from shifting long-term claims to the federal government.

This is a substantial issue to watch in the coming years, and there is a significant chance that the federal government will suggest minimum benefit recommendations to the states at some point. This could especially affect states that have hard caps on the total amount of indemnity benefits that an injured worker can receive.

  1. Affordable Care Act

The Affordable Care Act (ACA) will continue to be a subject of discussion in 2016.

The implementation date of the high-cost, employer-sponsored health plans tax, dubbed the “Cadillac tax,” was recently delayed from 2018 to 2020. It imposes an excise tax of 40% on health plans whose value is more than $10,200 for individual coverage and $27,500 for a family. Regardless of the delay, employer-sponsored benefit plans have evolved over the past five years in preparation to avoid the additional tax. The formerly rich benefit plans were dropped in an effort to provide benefit plans within ACA’s requirements and often replaced by higher-deducible plans with reduced benefits.

NCCI and WCRI have both conducted studies on how the ACA has affected workers’ compensation. Results have not conclusively tied treatment delays or actual cost shifting to workers’ compensation. We believe continuing studies by these organizations and others are important to evaluate the impact of ACA on workers’ compensation.

Other issues that should be monitored include consolidation of health systems, providers and insurers. In 2015, there was more than $700 billion of consolidation in the healthcare marketplace. This is driven, in part, by the ACA, because scale and size assist providers with efficiency, purchasing power and the need to provide a continuum of care.

Another issue where the ACA could affect workers’ compensation is changing reimbursement models. Medicare is looking to shift into a value-based reimbursement model, and many state fee schedules are based on Medicare rates.

Although not specifically related to ACA, a healthcare topic to keep an eye on is drug pricing. Drug pricing will continue to be a topic within the media, PBMs, employer benefit managers, health plan experts and the political arena. Prescription drug pricing increased more than 10% in 2015, and this trend is expected to continue. This has an impact on the cost of workers’ compensation claims.

  1. Holes in Workers’ Compensation

What many people do not realize is that workers’ compensation protections are not available to all workers within the U.S. In 14 states, smaller employers with five employees or fewer do not have to secure coverage. In 17 states, there is no legal requirement for coverage of agricultural workers. Half of the states do not require coverage for domestic workers, and five states specifically exclude coverage for these employees. There are also states that create exceptions for certain types of workers, such as state employees in Alabama. Finally, we have seen from court cases around the country that occupational diseases that take several years to develop are often barred by the statute of limitations, leaving workers with no recourse for benefits.

These holes are yet one more thing that critics point to when talking about the inadequacy of workers’ compensation. The occupational disease issue is particularly concerning because it is very easy to question the fairness of barring a claim under the statute of limitations and, at the same time, denying the injured worker the ability to pursue a claim in civil court under the exclusive remedy protections of workers’ compensation. This is another area where we will not be surprised to see the federal government give recommendations.

  1. Blurred Lines Between Workers’ Compensation and Group Health

The employee health model is evolving. Employers are finding the need to provide a consistent healthcare experience for their workforce and plan members. Employers would like to find a model that provides both quality care and consistency for their employees, regardless of whether the need for treatment arises from a work injury or at home. Because a healthy workforce is a productive workforce, employers also feel that there is a need to tie health and productivity together.

We will continue to see health systems build accountable care organizations (ACO) and enter the health plan, insurance and risk-bearing arena with the goal of directly selling to and partnering with employers. ACOs are an attractive model for employers supporting a healthier workforce by extending the culture of health philosophy from work to the home for their employees and their families.

Mental health is a top driver for absence across employers and not simply a health cost concern. Mental healthcare should be as important as physical healthcare and is currently a focus of population health and employer programs. Employers are looking for healthcare models, which consider the person as a whole and offer consistent, engaging behavioral health and wellbeing programs for the workforce.

Workers’ compensation key stakeholders should be a part of the evolving health model discussions and early stage planning so as not to be left in the dark as health models change.

  1. Options to Workers’ Compensation

We all know that Texas has a unique system that allows employers to completely opt out of workers’ compensation benefits. The term “opt-out” refers only to the Texas system. Employers in Oklahoma have an option to workers’ compensation that allows them to develop a private benefit plan that replaces state-mandated workers’ compensation. It is this concept of an option that is looking to spread to other states. Bills on this issue will be reintroduced in Tennessee and South Carolina this year, and other states have begun preliminary discussions.

Some employers feel that they can provide better benefits to their injured workers at a lower cost with these option programs. Others are concerned that these programs lack the controls and oversight of state workers’ compensation. One thing is certain: This issue is not going away any time soon. Perhaps these discussions around options to workers’ compensation can lead to discussions about workers’ compensation reform, including employer medical control, increasing thresholds of compensability and reducing the bureaucracy of the workers’ comp system.

  1. Evolving Claims Model

There are significant discussions around the evolving claims model. The industry realizes that we need to focus more on the injured worker as a consumer. The model needs to focus more on advocacy, but what does this really mean? Should there be a person who assists the injured worker in understanding the claims process, or is there a need to change the culture of our industry to be less adversarial?

Other parts of the evolving model involve who actually touches the claim. Are there elements that could be automated? Should there be more specialization with different individuals performing different tasks instead of the current model where the claims adjuster is a generalist performing multiple tasks across multiple jurisdictions?

The claim handling model also needs to adapt to new technology and the way in which different generations want communication. Some injured workers prefer text instead of e-mail or phone calls. Some like to access claims information in an app on their mobile device or simply, 24/7, as they want it that moment. The model must evolve to take full advantage of new technology and communication methods.

The March 15 “Out Front Ideas with Kimberly and Mark” webinar will focus on the evolving claims model and include guests who are passionate about an advocacy-based design.

  1. Florida Supreme Court

Over the last two years, four cases challenging the constitutionality of various aspects of the Florida workers’ compensation statutes have made it to the state’s Supreme Court. The first of those cases, Padgett, ended in late December when the Supreme Court declined to review it. That case had been thrown out on procedural grounds during the appeal process, so the Court of Appeals and Supreme Court never addressed the underlying constitutional challenge.

There are three cases still to be decided:

  • Westphal, which deals with caps on temporary disability benefits.
  • Castellanos, which addresses limitations on attorney fees.
  • Stahl, which focuses on post MMI medical co-payments and the elimination of permanent partial disability payments.

The expectation is that the Florida Supreme Court will address all of these cases in 2016, but nobody knows when that will occur.

  1. Bureaucracy

Workers’ compensation is one of the most highly regulated lines of insurance, and regulators are increasingly aggressive in pursuing fines and penalties. Every form filed and every payment transaction is an opportunity for a penalty. EDI allows regulators to automate the fines and penalties. Some states perform retrospective audits on activity five to 10 years in the past. The IMR process in California adds administrative cost to claims without necessarily improving outcomes, and states with self-imposed penalties may be driving up the cost of doing business beyond the benefit of the penalty payment. Lobbying is becoming an increasingly important area for payers and service providers to consider.

The significant costs associated with the bureaucracy of workers’ compensation regulations are not improving the outcomes on claims. Most of the money collected from the fines and penalties is paid to the states. The programs may cover the operating costs of state workers’ compensation division and not be paid to the injured worker or medical provider.

This topic is an important issue to watch in 2016 and will be the topic of our Feb. 9 “Out Front Ideas with Kimberly and Mark” webinar.

  1. Regulatory Change

There are four states in particular that we should be keeping an eye on in terms of potential regulatory reforms in 2016:

New York

Employers in New York are continuing to push for additional workers’ compensation reforms to reduce their costs because the savings projected with the last round of reforms never fully materialized. Whether there is enough momentum to get a bill through this year remains to be seen, but the efforts are there.

Florida

In Florida, the situation is going to depend on what the state Supreme Court does with the cases mentioned earlier. If any of those cases punch holes in the constitutionality of the workers’ compensation law, then the legislature is going to need to address this. Again, this is a waiting game.

Illinois

Illinois Gov. Rauner has made it a priority to enact workers’ compensation reforms to reduce employer costs. But his efforts have been blocked by the state legislature, and there is a budget stalemate in the state. There has been much political back-and-forth on this budget and the workers’ compensation reforms. It remains to be seen if the governor has the political muscle to get his legislation passed.

California

Ever since the Schwarzenegger workers’ compensation reforms in 2004, and continuing with SB 863 passed by Gov. Brown, the California legislature has been trying to undermine these workers’ compensation reforms. Every year, multiple bills are passed by the legislature, and every year both Gov. Schwarzenegger and Gov. Brown have vetoed those bills. Gov. Brown is committed to preserving his workers’ compensation reforms, and there are three years left on his term. Once he is gone, there is concern about what could happen with workers’ compensation in California. But, for now, significant change is not expected.

  1. Talent Acquisition

Talent acquisition and retention is probably the biggest issue facing the entire insurance industry. Consider:

  • 25% of insurance industry workforce will retire by 2018 (McKinsey)
  • There are 2.3 million workers in the insurance industry. More than 1 million will retire in the next 10 years, and 400,000 positions will be left open by 2020 (Deloitte and Jackson Group)
  • Workers over the age of 45 represent 48% of the insurance workforce

Are we doing enough with colleges to show the career opportunities in the insurance industry? Although more colleges and universities are offering risk management programs, the reality is that there are very few of these programs nationwide. Our industry needs to support these programs with both grants and internship opportunities.

In workers’ compensation, we need to be looking at the role of the examiner. Are there tasks that we could automate and reduce workload need? Millennials say they want to work with purpose. The role of the claims adjuster is to assist injured workers in their recovery. Could we be doing more to highlight the positive aspects of the claims adjuster role to make it more attractive to millennials?

We also need to be looking at ways to be flexible with work schedules and at whether someone is tied to the home office or able to work from a remote location. Finally, we need to continue to focus on promoting diversity and inclusion within our workforce.

In May, we will be doing an “Out Front Ideas with Kimberly and Mark” webinar devoted to this topic.

  1. Market Conditions

You cannot forecast the coming year for the workers’ compensation industry without talking about rates. Recently, for the first time in years, the Fed increased interest rates. This is good news, but the change is still insignificant and will not have a material impact on the workers’ comp industry. Because investment opportunities are limited for carriers, they continue to be very diligent with their underwriting. What does this mean for rates? Right now, the market is relatively stable. Accounts with good loss histories could see steady to slightly decreased rates, while accounts with poor loss histories will likely see slight increases. Overall, significant rate changes across the nation are not expected in the coming year.

  1. Predictive Analytics

Predictive analytics have been a buzz word in our industry for a number of years. Most data models identify at-risk claims, which may benefit from additional intervention in terms of nurse case management or a more skilled adjuster. The goal of the intervention(s) is to change the trajectory of the claim, to do something different than in similar prior claims, so the result is improved over the past experience. Although most payers reflect having predictive analytics and a variety of models available, there are limited published results on the outcome and effectiveness. Watch in 2016 to see if organizations begin sharing outcomes as a way to market their business or provide industry thought leadership on what is working and should be considered to drive success.

There is a need to evolve predictive analytics and big data models so that some human tasks are automated. Instead of just identifying cases where intervention is necessary, we should also identify claims where minimal intervention is needed. This approach frees resources and allows attention on claims, which will benefit from the touch. Future claims models will benefit from analytics using learning models similar to IBM Watson-type smart analytics.

  1. OSHA

OSHA continues to be a challenge for employers. Going into 2016, OSHA has increased reporting and recordkeeping requirements. It is also increasing its focus on certain industries, including healthcare, and employers are seeing a significant increase in fines. This is an area that is constantly evolving.

Our April 5 “Out Front Ideas with Kimberly and Mark” webinar will focus on these continuing developments and discuss the continuing issues that employers should track.

  1. Utilization Review

There is industry buzz and sidebar conversations around utilization review (UR) and the current approach deployed by employers, payers and service providers. Physicians are asking more than ever how they can help streamline treatment requests, obtain decision outcomes electronically and more quickly and provide timely, appropriate care for patients.

Utilization review should ensure that injured workers receive appropriate care within the right setting and for the correct duration. But what is the right UR model? Should all treatment be subject to UR or select treatment requests? Is UR a process strictly addressing the request for treatment and medical documentation submitted against guidelines of care or collaborative with adjusters, providers and the injured workers? Are denials of care driving up litigation unnecessarily? Do utilization review referral triggers change if the physician providing care is part of a high-performance network or known to be a top-performing physician? These are questions being raised by industry veterans and newcomers alike and are likely worthy of a review and further dialogue.

In the consumer-driven health world where we find ourselves, there is greater interest from injured workers to understand treatment options and outcomes. If not a part of UR, is your case management or claim model providing medical treatment option education, inclusive of outcomes awareness? Transparency is becoming increasingly important to consumers.

  1. Exclusive Remedy

Plaintiff attorneys are always trying to find ways around the exclusive remedy protections of workers’ compensation, and these efforts are becoming increasingly successful. In early January 2016, the District Court of Appeals in California allowed an injured worker to pursue a civil claim against a utilization review provider because the provider failed to warn him about the potential risks of medication withdrawal.

More and more, judges are allowing such litigation to survive a motion to dismiss on summary judgement because of workers’ compensation exclusive remedy protections. This creates enormous costs for employers and carriers, which then must spend hundreds of thousands of dollars or more defending such lawsuits and face the risk of a jury award that could be worth millions. In addition, an employer’s liability award based on the “intentional actions” of the employer may have issues with insurance coverage. The entire industry should be paying close attention to this area of increased litigation around exclusive remedy.

  1. ICD-10

The ICD-10 medical classification came along last year with a lot of hype and a significant amount of work effort to update systems and train teams. There was concern that the new diagnosis codes would result in slowed claims processes and treatment decisions. Thus far, workers’ compensation key stakeholders report little to no impact from the change. This may be because states did not mandate the use of ICD-10 for workers’ compensation and most organizations continue to accept ICD-9. Bill review receipt to pay timeframes have not lengthened, and e-billing rejections did not increase, which were two areas to watch after the ICD-10 go-live.

In 2019, Medicare plans to roll out an incentive-based reimbursement model tied to patient outcomes (MACRA). The American Medical Association believes this will be a significant reimbursement change for physicians. Changes to Medicare reimbursement could impact workers’ compensation because some state fee schedules are Medicare based.

History has proven Medicare does not always follow through with what it says it is going to do in terms of changing reimbursement models, but the MACRA implementation is an issue worth monitoring.

  1. Marijuana

Thus far, New Mexico has been the only state allowing medical marijuana for treatment under workers’ compensation. But as the use of medical marijuana spreads, it is inevitable that we will see other states take on this issue. The answer is simple –if states put something in their statutes barring medical marijuana under workers’ compensation, then that solves the problems. Some medical marijuana states have already indicated that insurance is not responsible covering medical marijuana. State legislators and regulators can stop this before it becomes a legitimate problem.

The bigger issue is employment practice concerns. Many expect the federal government to reclassify marijuana as a Schedule 2 drug, possibly by the end of this current administration. Once that happens, it will no longer be an “illegal” drug. Employers are going to need to adapt and drug test for impairment rather than just testing the presence of the drug. Standards are going to need to be developed on what constitutes “impairment” with marijuana. The science needs to catch up with the realities of this new normal when it comes to marijuana in the U.S.

  1. On-Demand Economy

The on demand economy is creating new concerns about what constitutes an employee/employer relationship. Is an Uber driver an employee of Uber or an independent contractor? What about a repair person you hire through Angie’s List?

While the on-demand economy is a newer dynamic, determining what constitutes independent contractor vs. an employee has been a challenge for the workers’ compensation industry for many years. In July 2015, the Department of Labor issued an interpretive memorandum indicating that the DOL feels “most workers classified as independent contractors are employees under the Fair Labor Standards Act’s broad definitions.”

So perhaps the issue to watch here is not so much the on-demand economy, but instead whether we are going to see the Department of Labor push for fewer and fewer workers to be classified as independent contractors. This could have a significant impact on many industries as well as significantly changing the business model of services like Uber and Lyft.

More Pressure to Protect Health Data

Health plans, insurers and other health plan industry service providers need to ensure that their Internet applications properly safeguard protected health information (PHI), based on a recent warning from Department of Health and Human Services (HHS) Office of Civil Rights (OCR).

The warning comes in a resolution agreement with St. Elizabeth’s Medical Center (SEMC) that settles OCR charges that it breached the Health Insurance Portability and Accountability Act (HIPAA) by failing to protect the security of personal health data when using Internet applications. The agreement shows how complaints filed with OCR by workforce members can create additional compliance headaches for covered entities or their business associates.

With recent reports on massive health plan and other data breaches fueling widespread regulatory concern, covered entities and their business associates should prepare to defend the adequacy of their own HIPAA and other health data security practices. Accordingly, health plans and their employer or other sponsors, health plan fiduciaries, health plan vendors acting as business associates and others dealing with health plans and their management should contact legal counsel experienced in these matters for advice within the scope of attorney-client privilege about how to respond to the OCR warning and other developments to manage their HIPAA and other privacy and data security legal and operational risks and liabilities.

SEMC Resolution Agreement Overview

The SEMC resolution agreement settles OCR charges that SEMC violated HIPAA. The charges stem from an OCR investigation of a Nov. 16, 2012, complaint by SEMC workforce members and a separate data breach report that SEMC made to OCR of a breach of unsecured electronic PHI (ePHI). The information was stored on a former SEMC workforce member’s personal laptop and USB flash drive, and 595 individuals were affected.

In their complaint, SEMC workers complained that SEMC violated HIPAA by allowing workforce members to use an Internet-based document application to share and store documents containing electronic protected health information (ePHI) of at least 498 individuals without adequately analyzing the risks. OCR says its investigation of the complaint and breach report revealed among other things that:

  • SEMC improperly disclosed the PHI of at least 1,093 individuals;
  • SEMC failed to implement sufficient security measures regarding the transmission of and storage of ePHI to reduce risks and vulnerabilities to a reasonable and appropriate level; and
  • SEMC failed to identify and respond to a known security incident, mitigate the harmful effects of the security incident and document the security incident and its outcome in a timely manner.

To resolve OCR’s charges, SMCS agreed to pay $218,400 to OCR and implement a “robust corrective action plan.” Although the required settlement payment is relatively small, the resolution agreement merits attention because of its focus on security requirements for Internet application and data use and sharing activities engaged in by virtually every covered entity and business associate.

HIPAA-Specific Compliance Lessons

OCR Director Jocelyn Samuels said covered entities and their business associates must “pay particular attention to HIPAA’s requirements when using Internet-based document sharing applications.” She stated that, “to reduce potential risks and vulnerabilities, all workforce members must follow all policies and procedures, and entities must ensure that incidents are reported and mitigated in a timely manner.”

The resolution agreement makes clear that OCR expects health plans and other covered entities and their business associates to be able to show both their timely investigation of reported or suspected HIPAA susceptibilities or violations as well as to self-audit and spot test HIPAA compliance in their operations. The SEMC corrective action plan also indicates covered entities and business associates must be able to produce evidence showing a top-to-bottom dedication to HIPAA, to prove that a “culture of compliance” permeates their organizations.

Covered entities and business associates should start by considering the advisability for their own organization to take one or more of the steps outlined in the “robust corrective action plan,” starting with the specific steps that SEMC must take:

  • Conducting self-audits and spot checks of workforce members’ familiarity and compliance with HIPAA policies and procedures on transmitting ePHI using unauthorized networks; storing ePHI on unauthorized information systems, including unsecured networks and devices; removal of ePHI from SEMC; prohibition on sharing accounts and passwords for ePHI access or storage; encryption of portable devices that access or store ePHI; security incident reporting related to ePHI; and
  • Inspecting laptops, smartphones, storage media and other portable devices, workstations and other devices containing ePHI and other data devices and systems and their use; and
  • Conducting other tests and audits of security and compliance with policies, processes and procedures; and
  • Documenting results, findings, and corrective actions including appropriate up-the-ladder reporting and management oversight of these and other HIPAA compliance expectations, training and other efforts.

Broader HIPAA Compliance and Risk Management Lessons

Covered entities and their business associates also should be mindful of more subtle, but equally important, broader HIPAA compliance and risk management lessons.

One of the most significant of these lessons is the need for proper workforce training, oversight and management. The resolution agreement sends an undeniable message that OCR expects covered entities, business associates and their leaders to be able to show their effective oversight and management of the operational compliance of their systems and members of their workforce with HIPAA policies.

The resolution agreement also provides insights to the internal corporate processes and documentation of compliance efforts that covered entities and business associates may need to show their organization has the required “culture of compliance.” Particularly notable are terms on documentation and up-the-ladder reporting. Like tips shared by HHS in the recently released Practical Guidance for Health Care Governing Boards on Compliance Oversight, these details provide invaluable tips.

Risks and Responsibilities of Employers and Their Leaders

While HIPAA places the primary duty for complying with HIPAA on covered entities and business associates, health plan sponsors and their management still need to make HIPAA compliance a priority for many practical and legal reasons.

HIPAA data breach or other compliance reports often trigger significant financial, administrative, workforce satisfaction and other operational costs for employer health plan sponsors. Inevitable employee concern about health plan data breaches undermines employee value and satisfaction. These concerns usually require employers to expend significant management and financial resources to respond.

The costs of investigation and redress of a known or suspected HIPAA data or other breach typically far exceed the actual damages to participants resulting from the breach. While HIPAA technically does not make sponsoring employers directly responsible for these duties or the costs of their performance, as a practical matter sponsoring employers typically can expect to pay costs and other expenses that its health plan incurs to investigate and redress a HIPAA breach. For one thing, except in the all-too-rare circumstances where employers as plan sponsors have specifically negotiated more favorable indemnification and liability provisions in their vendor contracts, employer and other health plan sponsors usually agree in their health plan vendor contracts to pay the expenses and to indemnify health plan insurers, third party administrators and other vendors for costs and liabilities arising from HIPAA breaches or other events arising in the course of the administration of the health plan. Because employers typically are obligated to pay health plan costs in excess of participant contributions, employers also typically would be required to provide the funding their health plan needs to cover these costs even in the absence of such indemnification agreements.

Sponsoring employers and their management also should be aware that the employer’s exception from direct liability for HIPAA compliance does not fully insulate the employer or its management from legal risks in the event of a health plan data breach or other HIPAA violation.

While HIPAA generally limits direct responsibility for compliance with the HIPAA rules to a health plan or other covered entity and their business associates, HIPAA hybrid entity and other organizational rules and criminal provisions of HIPAA, as well as various other federal laws, arguably could create liability risks for the employer. See, e.g., Cyber Liability, Healthcare: Healthcare Breaches: How to Respond; Restated HIPAA Regulations Require Health Plans to Tighten Privacy Policies and Practices; Cybercrime and Identity Theft: Health Information Security Beyond. For example, hybrid entity and other organizational provisions in the HIPAA rules generally require employers and their health plan to ensure that health plan operations are appropriately distinguished from other employer operations for otherwise non-covered human resources, accounting or other employer activities to avoid subjecting their otherwise non-covered employer operations and data to HIPAA Rules. To achieve this required designation and separation, the HIPAA rules typically also require that the health plan include specific HIPAA language and the employer and health plan take appropriate steps to designate and separate health plan records and data, workforces and operations from the non-covered business operations and records of the sponsoring employer. Failure to fulfill these requirements could result in the unintended spread of HIPAA restrictions and liabilities to other aspects of the employer’s human resources or other operations. Sponsoring employers will want to confirm that health plan and other operations and workforces are properly designated, distinguished and separated to reduce this risk.

When putting these designations and separations in place, employers also generally will want to make arrangements to ensure that their health plan includes the necessary terms and that the employer implements the policies necessary for the employer to provide the certifications to the health plan that HIPAA will require that the health plan receive before HIPAA will allow health plan PHI to be disclosed to the employer or its representative for the limited underwriting and other specified plan administration purposes permitted by the HIPAA rules.

Once these arrangements are in place, employers and their management also generally will want to take steps to minimize the risk that their organization or a member of the employer’s workforce honors these arrangements and does not improperly access or use health plan PHI systems in violation of these conditions or other HIPAA rules. This or other wrongful use or access of health plan PHI or systems could violate criminal provisions of HIPAA or other federal laws making it a crime for any person – including the employer or a member of its workforce – to wrongfully access health plan PHI, electronic records or systems. Because  health plan PHI records also typically include personal tax, Social Security information that the Internal Revenue Code, the Social Security Act and other federal laws generally would require the employer to keep confidential and to protect against improper use, employers and their management also generally should be concerned about potential exposures for their organization that could result from improper use or access of this information in violation of these other federal laws. Because HIPAA and some of these other laws under certain conditions make it a felony to violate these rules, employer and their management generally will want to treat compliance with these federal rules as critical elements of the employer’s federal sentencing guideline and other compliance programs.

Employers or members of their management also may have an incentive to promote health plan compliance with HIPAA or other health plan privacy or data security requirements.

For instance, health plan sponsors and management involved in health plan decisions, administration or oversight could face personal fiduciary liability risks under ERISA for failing to act prudently to ensure health plan compliance with HIPAA and other federal privacy and data security requirements.. ERISA’s broad functional fiduciary definition encompasses both persons and entities appointed as “named” fiduciaries and others who functionally exercise discretion or control over a plan or its administration. This fiduciary status and risk can occur even if the entity or individual is not named a named fiduciary, expressly disclaims fiduciary responsibility or does not realize it bears fiduciary status or responsibility. Because fiduciaries generally bear personal liability for their own breaches of fiduciary duty as well as potential co-fiduciary liability for fiduciary breaches committed by others that they knew or prudently should have known, most employers and members of their management will make HIPAA health plan compliance a priority.

Furthermore, most employers and their management also will appreciate the desirability of taking reasonable steps to manage potential exposures that the employer or members of its management could face if their health plan or the employer violates the anti-retaliation rules of HIPAA or other laws through the adoption and administration of appropriate human resources, internal investigation and reporting, risk management policies and practices. See Employee & Other Whistleblower Complaints Common Source of HIPAA Privacy & Other Complaints.

Manage HIPAA and Related Risks

At minimum, health plans and their business associates should move quickly to conduct a documented assessment of the adequacy of their health plan internet applications and other HIPAA compliance in light of the Resolution Agreement and other developments. Given the scope and diversity of the legal responsibilities, risks and exposures associated with this analysis, most health plan sponsors, fiduciaries, business associates and their management also will want to consider taking other steps to mitigate various other legal and operational risks that lax protection or use of health plan PHI or systems could create for their health plan, its sponsors, fiduciaries, business associates and their management. Health plan fiduciaries, sponsors and business associates and their leaders also generally will want to explore options to use indemnification agreements, liability insurance or other risk management tools as a stopgap against the costs of investigation or defense of a HIPAA security or other data breach.

The Supposed Health Insurer Bailout!

As a professional who spends his entire career on healthcare issues, I get very annoyed when I read articles that put an extremely biased and misleading spin on the emerging healthcare reform activities known as ACA or Obamacare.  Whether one is for or against ACA, it is good to have accurate reporting regarding it to help refine one’s thinking and personal preferences.  Sensational articles add little value and create unnecessary confusion in the marketplace. 

An excellent article written by former associate Bob Laszewski in his Jan. 6, 2014, blog titled “Will There Be an Obamacare Death Spiral in 2015? No” was recently taken completely out of context by the Weekly Standard in a second article released in their blog Jan. 13, 2014, (i.e., “Bailing Out Health Insurers and Helping Obamacare”).  It’s a big disappointment to see this type of questionable journalism.

As part of the transitional plan to implement ACA, carefully crafted, but not perfect, risk-mitigation programs designed to both protect and fairly allocate revenue among the participating health plans were embedded in ACA.  These alliterative risk-mitigation provisions have been called “the 3 R’s.”  They are:

  • Risk Adjustor – sharing of revenue between plans to be sure revenue reasonably matches the spread of risk among the plans.
  • Reinsurance – special protection for plans hit with a higher-than-expected number of catastrophic claims.
  • Risk Corridors – risk-sharing program that reduces excessive profits on some plans and uses that to fund higher-than-expected losses on other plans.

The first one is a program that will continue long into the future.  The latter two are transitional. They will end after three years, when the program is designed to be stabilized.

Because of the high level of uncertainty and risk associated with ACA, the federal government wisely incorporated risk-mitigation programs.  All are designed to minimize material financial obstacles for volunteer participant carriers to be part of ACA.  Without the 3 R’s, it is very likely the number of participating plans/carriers would have been much smaller.  One of the keys to long-term ACA success is high participation by the public and the maintenance of a reasonable competitive market for the public to choose from.  We have yet to see the results of these programs, but they are there to be sure we have a viable marketplace.  This is definitely not a bailout for health plans. Rather this is a carefully crafted plan to mitigate unfortunate implementation risks in an uncertain environment.

Now for a discussion of the controversial blog:

The initial blog did not suggest, despite the accusation in the second article, that Obamacare is almost certain to cause insurance costs to skyrocket.  The blog accurately discussed the risk corridor program and how this mitigates risk in the initial years.

The second article expressed shock “that it will also subsidize those same insurers’ losses.”  ACA, by design, utilizes private insurance companies and health plans to underwrite insurance coverage offered through ACA and the exchanges.  The uncertainty about who will sign up, their health status, the propensity to use healthcare services, etc. makes it nearly impossible for a carrier to predict what it should charge.  ACA has created a logical marketplace with standardized benefits (i.e., Essential Health Benefits) and consistent plan designs (i.e., the metallic plans–Bronze, Silver, Gold and Platinum).  Even with these features, ACA creates uncertainty, and stable premium pricing is required to have a viable and competitive marketplace.  The likelihood of premium rate stability is enhanced if over a transitional period the “big worries” are mitigated.  These include:

  • Selection bias among various carriers.
  • Some assurance that people will sign up.
  • Significant shock losses centralized in a single carrier.
  • Surprising cost of health care for this population.

The long-term risk adjustment process solves the first issue.  The individual and employer mandates help resolve the second.  The transitional reinsurance program and transitional risk corridor protection resolve the third.  The last concern is subject to a two-way risk sharing.  Those carriers that “guessed” too high and overcharged will give up some of their revenue.  Those carriers that “guessed” too low are protected.  This is not a bailout; this is an equitable risk protection to ensure an orderly implementation of ACA.

The second article goes on to say that taxpayers subsidize big companies’ business expenses.  This, again, does not specifically address the real issue.  The transitional reinsurance program provides catastrophic reinsurance protection for all health plans in the exchange marketplace (i.e., initially claims in excess of $60,000 up to $250,000) primarily funded by a $5.25 per month per person charge for all health plans whether or not they are in the exchange marketplace.  Because those in the exchange are receiving a reinsurance benefit, I am not sure this is subsidizing anything.  For those out of the exchange, they are paying a fee and not receiving any benefit.  This could be considered a tax to those carriers.  Most, if not all, carriers are building this fee into their cost structure, so it is being passed on to the public.  However, the government has already proposed an increased reinsurance benefit and is already talking about reducing the premium.

The second article continues: “Insurers don’t have to pay out all of their costs,” suggesting that the risk corridor program is a bailout.  No, this isn’t a bailout. It is a temporary protection to help smooth out the premium rates.  Those carriers overcharging will get less money and those undercharging will receive some subsidy until the cost structures stabilize.  This is a short-term program providing assistance to the carriers as they calibrate costs under ACA.  This is not a bailout.  This is a two-way risk protection mechanism.  It does rely on a balanced marketplace.  To the extent the ACA rollout is flawed and carriers are all on the unfavorable side of the risk curve, the government will have to provide assistance, but the intent of the program is to be balanced.

In summary, we need more accurate reporting of the actual situation.  There are some concerns about the implementation of ACA, and they are real; they aren’t fabricated.  Fortunately, the 3 R’s are going to help mitigate some of these issues.  Without the 3 R’s there would be more serious issues than there will be with them.  If the program failed, if no carriers participated, if no one signed up, there would likely be a major government takeover.  That would be a serious issue with a federalization of the health insurance marketplace.  That did not happen and will likely not happen. 

Perhaps reflection as to why ACA emerged might be helpful.  Health costs and healthcare premiums were escalating far faster than we can afford.  They continue to increase much faster than the rest of the economy, which cannot continue without some type of intervention.  One hopes that ACA will be able to help resolve some of the concerns and issues.  Without some long-term improvement in the economics of healthcare we, as individuals and a nation, are faced with exceptional long-term economic challenges. 

Maybe we should be talking about this!

The State of the Nation’s Private Employer Exchanges: Crazy!

I’m not talking Patsy Cline’s “Crazy” or even Gnarls Barkley’s “Crazy”—I’m talking Peter-Frampton-re-release-the-same-song-and-get-totally-different-results kind of crazy!  In 1975, Frampton released “Show Me the Way” on his album Frampton, and no one cared.  The song was re-released in 1976 on the album Frampton Comes Alive—and topped the charts in both the U.S. and U.K. In Wayne’s World, the song was described as “required listening for all suburbia.”  It’s all marketing, baby!

What does this have to do with private exchanges? Most are just a re-release of technology that has been part of benefits administration enrollment for years.

The following is a short list of “new” capabilities and requirements that are typical for a private exchange:

  • Defined employer contribution, instead of defined benefit.
  • The ability to connect electronically to insurance carriers.
  • Decision support tools, to help determine employees’ best options.
  • Support for core insurance products such as medical, dental and vision.
  • Support for voluntary insurance products such as life, disability and accident.
  • Support for multiple insurance carriers (although some exchanges are single-carrier).
  • HRA and Section 125 pre-tax support.
  • Premium processing and billing support.
  • Support for insurance plan comparison and other employee shopping tools.

Nearly every function defined as “new” for a private exchange is not new—these functions have been part of group benefits administration systems for over a decade.  As I’ve said, the “new” private exchanges are 95% marketing hype and 5% enhanced decision support.

I have attended dozens of conference breakout sessions, read articles, talked to “private exchange” vendors and seen countless demos. The only word I can use to describe the whole group private exchange world is “crazy” — wonderful, “Show Me the Way” kind of crazy.

Given that we’ve been there and done that with the technology in the private exchanges, I can offer some informed observations about how they will play out as employees use them to select coverage under the rules established as part of Obamacare.

–It would be very difficult to move to an Expedia-type shopping model for employees’ insurance. Insurance carrier requirements for participation and underwriting through private exchanges make the disintermediation of the health insurance broker less likely than the disintermediation of the travel agent.  Few exchanges are even talking about vendor participation. It takes years to develop benefits administration systems simply because of the inherent complexity of insurance. A good technologically and customer service driven health insurance adviser is worth her weight in gold, and will continue to be.

–While Health Sherpa has been described as a somewhat functional equivalent to healthcare.gov, that claim is, well, crazy. Health Sherpa—although a great idea—has no ability to process eligibility, enrollment, carrier connectivity or anything required in a true benefits enrollment or exchange platform.  Health Sherpa is a clean front end for displaying plan options and rates but has no back end to support the followthrough required by the carriers or the federal or state governments.

–Recently, the president invited executives from a few of the nation’s top tech companies to the White House for a highly publicized meeting.  Why?  What do Yahoo and Amazon know about health insurance exchanges, enrollment, eligibility and carrier connectivity?  Exactly nothing!

If the president wanted more than a photo op, why didn’t he call Rich Gallun or Don Garlitz from bSwift or ask my company, benefitsCONNECT, to join the discussion? Between us, we accurately and electronically process many millions of enrollments—completely eliminating the need for paper. Either company could have saved this country hundreds of millions of dollars and produced a public exchange for Obamacare that actually works.

There’s actually one thing that’s new about private exchanges: While benefits administrations systems have become somewhat standardized, if you’ve seen one private exchange—you’ve seen exactly one private exchange. They are all different, from their front-end requirements to their back-end requirements.

As I said, it’s a craaaazy world we live in.

The Best Disruptive Writings Of 2013 – Health Care Edition

Clayton Christensen famously coined the term “disruptive innovation” to describe “simple business applications that relentlessly move up market, eventually displacing established competitors.” Disruption is not just change; it is change that gores somebody’s ox. There has never been a year like 2013 for disruptive writing about health care. Here are five “oxen” gored by the best of that writing.

Gored Ox One: The Idea That Someone Else Pays The Bills

The first salvo of the year was David Goldhill’s highly controversial book, Catastrophic Care: How American Health Care Killed My Father – and How We Can Fix It. Goldhill had the audacity to question an assumption accepted as a truism by both proponents and opponents of Obamacare: the notion that Americans can’t pay for their own health care without some kind of health coverage. Goldhill suggests that our nation’s reliance on third-party payors like health plans, Medicare and Medicaid has created – not alleviated – the burdensome problems of cost and bad quality that plague health care, and that we could run a better health care system without them. (Disclosure: Goldhill sits on the voluntary board of my nonprofit, The Leapfrog Group, though Leapfrog isn’t associated with his book).

Goldhill wasn’t the only one asking the impertinent question, “What if you paid your own medical bills directly?” Time published a powerful story by Steven Brill, Bitter Pill: Why Medical Bills are Killing Us, which points out the bizarre oddities of what goes on behind the scenes when the checks are written to pay for patient care. Bills for the same procedure vary tenfold, but few health plans actually pay the full bill. Elisabeth Rosenthal’s reporting in the New York Times pointed out the same bizarre pricing phenomena in her remarkable series on the varying charges hospitals record for their services.

The business community took note of these questions about who pays the bills, since they traditionally pay most of them. A study by S. Eappen and colleagues in the Journal of the American Medical Association found that commercially insured patients were charged an extra $39,000 every time they suffered a surgical site infection at one hospital system. Employers wondered how they missed this enormous surcharge they paid for an undesired outcome.

Where were their health plans and consultants to alert them to this waste? They were AWOL, say Tom Emerick and Al Lewis in their brilliant book, Cracking Health Costs, which all employers seem to have on their desks these days.

The book is getting attention for its strategies on how to bypass health plans and consultants and disrupt health benefits purchasing.

Gored Ox Two: Keepers Of Secrets

The health care industry has long been shielded from the candor other industries live by. Writers this year went beyond complaining about the lack of transparency in health care — now, they are successfully calling out those who want to maintain it. Respected nurse-leader Kathleen Bartholomew writes in a piece in the Seattle Times that the lack of transparency in health care is simply unethical, and she points some fingers. In a blog for the influential policy journal Health Affairs, business leader Francois de Brantes argues that our nation’s remarkable lack of progress on quality and costs is a consequence of having no feedback loops — candid information on performance that provides continuous pressure for improvement. He calls for upending the incentives that keep health care opaque and dysfunctional. A breakthrough piece reported by Charles R. Babcock in Bloomberg News exposed the political underpinnings of why we still don’t have national data on many of the most common errors, accidents and injuries happening every day in hospitals — and he discusses the ongoing movement to preserve what little data we have. Author Rosemary Gibson, one of the decade’s most influential health care writers, writes in a memorable Huffington Post blog, “The military counts its dead and wounded even though politicians would prefer to hide the truth.” When we count the dead from medical errors, she says, we could fill Arlington National Cemetery in nine months.

One writer did try to quantify the problem – John T. James, a father and NASA toxicologist who tragically lost his son to medical errors. In a widely discussed piece published by the peer-reviewed Journal of Patient Safety, he used a scientific method developed by the Institute for Healthcare Improvement to estimate how many people die each year from hospital errors. The dismaying answer: anywhere from 200,000 to 420,000 – in other words, as many people as the population of Miami.

Gored Ox Three: The Passive Patient

The Hollywood-inspired idea of the patient as quiet recipient of physician infallibility is officially over. Patients don’t just do what they are told; they expect to make choices. Beth Howard’s cover story in AARP The Magazine – the most widely read publication in the United States – launched a firestorm with its advice for patients on protecting yourself during a hospital stay, including which hospitals are safest and what to look for in a hospital room.

Crystallizing this era of the disruptive new patient is its leading sage, Dave deBronkart, coauthor of Let Patients Help! Survivor of Stage 4 kidney cancer, deBronkart has a popular TED talk and delivers speeches throughout the world arguing that patients should serve as active members of the team delivering care, a job that includes supplying the wisdom and knowledge physicians and nurses don’t have. The emergence of this new patient cannot come soon enough, as evidenced in a widely discussed report published by the nonprofit Childbirth Connection, Listening to Mothers III: Pregnancy and Birth. The report shows the results of a Gallup survey of women who had recently given birth and reveals a stunning number of maternity patients whose wishes were ignored or manipulated, to the detriment of the women and their babies.

Among the most disruptive writers of 2013 are physicians who found themselves – or their families – on the wrong side of the hospital bed. Dr. Bob Wachter told a fascinating story of his mother’s stay in his own hospital (The University of California San Francisco Medical Center), candidly weighing some of the positive aspects of the care she received with the negatives that caused his family distress. Dr. Ashish Jha talked movingly about his father’s hospital stay, recounting with alarm three errors averted only because Jha happened to be in the room.

Gored Oxen Four: Conventional Wisdom About Delivering Care

The role of the patient has changed and so has the practice of medicine and nursing. Hollywood took note of one passionate nurse writer, Sandy Summers, and her colleagues, whose blog on the fascinating website http://www.truthaboutnursing.org analyzes media portrayals of nursing practice. Summers points out how TV depicts physicians performing tasks nurses actually do in real practice and generally portrays nurses as incompetent, unprofessional and/or none-too-bright. This hurts patients, she says, since the vast majority of care patients receive comes from nurses, and we need the best people on the job. Her passion had a direct impact this year, influencing advertiser choices and prompting talks with producers of problematic programs.

Physicians, too, are raising eyebrows by asking impolite questions about their practice. Atul Gawande’s article in the New Yorker asked why providers don’t always do the right thing in their day-to-day practice. It’s not malice, he says; it’s human nature. The piece explores lessons from international public health on a specific peer-education strategy that works to change practice patterns.

Another piece of conventional wisdom stood on its head in 2013 came from the University of Michigan’s John Birkmeyer and his colleagues, concerning surgical skill and its implications for patients. The study in The New England Journal of Medicine prompted tumultuous debate in the surgical suite when it demonstrated widespread variation in the skill of surgeons performing the same surgery. The study also suggested that skill level correlated with complication rates, raising significant new questions about what surgeons and hospitals can do to improve outcomes in health care.

But it’s not enough to identify and test new innovations for delivering care better; if they work, they must be hard-wired into practice, says Paul Plsek in his book, Accelerating Health Care Transformation with Lean and Innovation: The Virginia Mason Experience. He describes how the Virginia Mason Medical Center applied principles of lean manufacturing to balance the seemingly contradictory objectives of expanding innovation and improving adherence to the routine.

Gored Ox Five: Sacred Cows Of Public Health

Almost everyone agrees that the best strategy for improving Americans’ health would be to prevent people from needing health care in the first place. But as these writers demonstrated in their powerful arguments, beware the easy answers.

Does more health coverage mean better health? Not necessarily. A study of the impact of Medicaid in Oregon found that coverage had no impact on emergency room visits or health status (though it did relieve financial stress, an important advantage).

Does employee wellness save money? Not really. That was the reluctant conclusion of Rand researchers in a shocking study: Employee wellness programs did not appear to save money nor measurably improve health status. For more thoughts on the topic, The Health Care Blog’s series by Al Lewis and Vik Khanna is also worth following. The blog posts have prompted employee backlash and even a call for revocation of the C. Everett Koop award for a wellness program with questionable outcomes.

Should we cut the fat to fight obesity? Maybe not. A summary in the British Medical Journal of the research on obesity is prodding the nutrition science community in new directions. The exhaustive research overview by science journalist Gary Taubes found that most of the assumptions and guidelines we rely on are not supported by research, and policymakers ought to rethink our approach to the problem from the bottom up. Among the surprising observations: There’s no evidence that saturated fat is the culprit, and attempts to eliminate it from the diet may have accelerated the obesity epidemic.

Optimism For The New Year

I am confident that health care is headed in the right direction as we welcome 2014, thanks in no small part to the courage and eloquence of these disruptive writers.

This post first appeared on Forbes.com.