Tag Archives: healthcare benefits

Three Ways to Fix Health Insurance (No Matter What Happens With Obamacare)

Whether Obamacare is fully implemented or collapses under the weight of its 906 pages of law, its 15,000 pages of regulations, and the well-publicized glitches in its rollout, the underlying, ineluctable problems with health insurance remain largely unresolved. How we respond will determine whether we hit the iceberg and sink or veer away in time to save our private health care system.

To understand some of the real cost drivers for health insurance, let’s look at the “Doe” family. John and Jane Doe pay $600 per month for health insurance for their family of four. Most states have a list of benefits, or “mandates,” that, by law, insurers must cover – from gastric electrical stimulation to breast implant removal. While some states have fewer mandates, others have piled them on. (Utah has 26, while Rhode Island, Maryland, and Minnesota all have at least 65.) The Doe family could see savings up to 50% or more on their insurance rates if they could just buy a basic health plan without the mandates. That could drop their monthly premium to as low as $300.

Premiums would come down even further if tort reform ended “jury lotto,” where patients get large, unjustifiable settlements or jury awards for medical treatment gone awry. While doctors are human and are certainly capable of errors, the legal system allows for these big settlements even when doctors are not at fault.

Here’s the scenario: Imagine that Doctor Smith treats a woman who complains of an ear infection and gives her a prescription, telling her to call if the condition doesn’t improve. The woman dies a few days later from a brain tumor. The family sues, alleging the doctor should have been able to diagnose the tumor. The jury sympathizes with the grieving family, believes that doctors should be omniscient, and reasons that rich doctors and their insurers can easily afford a large payment, so the family receives a $10 million award. The pestilential result is that everyone’s health insurance rates go up to cover such settlements, the doctor’s malpractice rates increase, and he now orders extra tests for the next patient to protect himself from the next lawsuit.

Tort reform could provide significant savings to the health care system, resulting in insurance premiums dropping as much as 10%. The Doe family might now see its insurance rate go down to as low as $240 – a whopping 60% drop in their monthly premium.

(Some have talked about allowing consumers to buy across state lines to reduce premiums even further by increasing competition and making it easier to buy policies in states that mandate fewer benefits, though this has not yet been shown to be true.)

A third way to drive insurance rates down is consumer engagement – changing the dynamic so that people actually know and care about what their health care costs. As long as it is Other People’s Money (OPM), there is little incentive to lower the cost of care, which continues to rise and, in turn, drives up insurance rates. (Contrary to public opinion, a recent analysis by the accounting firm PriceWaterhouseCoopers found that health insurers pay an average of 87 cents to providers of medical and pharmaceutical services out of each premium dollar and, after expenses, earn just three cents in profit. The problem, then, with health insurance isn’t that insurers are gouging people; it’s that costs are high, and consumers are generally unaware and unconcerned.)

So how can we get engaged? Even while we wait for the regulatory and legal changes that will need to occur to reduce mandates and rein in unjustified malpractice awards, here are two things for consideration in lowering health care costs.

First, we need to change our mindset as consumers when it comes to health insurance. What if we treated health insurance more like homeowner’s insurance? In other words, what if we bought coverage for the unexpected (illness or injury), while paying for our day-to-day medical needs out of pocket, as we do for home repair and maintenance? Great insurance options to consider include high-deductible health plans with linked Health Savings Accounts (HSAs). In general, we need to shift our thinking on health care from OPM (Other People’s Money) to MM (My Money).

Second, how about a radical “Groupon” type of approach? Let’s say John Doe is diagnosed with a hernia and needs an operation. There are three hospitals in town. All three are fully credentialed and meet quality standards. John’s surgeon can admit to them all. Hospital 1 is an older, traditional facility in a more frugal setting, with an estimated cost for the surgery at $10,000. Hospital 3 is a new, state-of-the art “Hyatt” hospital with high end amenities and a fancier environment – estimated cost: $50,000. Hospital 2 is in the middle, with an estimated $25,000 price tag. Here’s what John’s health insurance company tells him:

“You are covered at all three hospitals. But if you go to hospital 3, you have an additional $2,000 copay. If you go to hospital 2, we’ll cover the cost at 100%. If you go to hospital 1, we’ll pay you $2,000. Your choice.”

John is comfortable at hospital 1 and likes the idea of getting rewarded for choosing a lower cost setting. He has his surgery done there. He gets the $2,000, while the insurance company saves $38,000 off the cost of hospital 3.

This kind of savings will eventually be reflected in lower premiums for everyone. Decisions like John’s will also encourage hospitals to lower costs, as market forces come into play, leading to even more reductions in insurance costs.

Conclusion

We are not going to reform the health care system and resolve our health insurance problems overnight. And even if Obamacare is fully implemented, we still need to make fundamental changes, including how we see and use health insurance as consumers. If we are going to steer the Titanic away from the iceberg, we as consumers need to change our mindset and get engaged – and have financial incentives to do so, leading to powerful market forces. Once the sleeping giant of the American consumer awakens, watch out.

The New Pregnancy Disability Regulations – Clarity and Complexity

For years, California has been one of the few states with specific, independent pregnancy disability protections. The protections include freedom from discrimination and the right to take time off from work. Further protection was added last year with the mandate to continue employer-paid health care benefits during a pregnancy disability leave of absence.

California's new pregnancy disability regulations recently took effect. If you are responsible for human resources in your organization, you likely already knew. You may have already seen summaries of the new regulations, or even reviewed the entire 28 pages yourself. If not, a brief summary of the notable changes follows. After the summary, we use the complexity of new regulations to show the importance of careful planning and documentation when handling an employee's pregnancy.

Summary Of New Regulations

Expanded Definition Of “Disabled by Pregnancy”
California law has long stated that a woman is disabled by pregnancy if, in the opinion of her health care provider, she is unable because of pregnancy to perform any essential function of her job or to perform the essential functions without undue risk to herself. The new regulations add a host of specific conditions that could meet the definition of “disabled by pregnancy.” One such condition is “bed rest.” The regulations go on to state that the list of conditions is non-exclusive and illustrative only. The regulations do provide that lactation, without medical complications, is not a condition requiring pregnancy disability leave, but it may require transfer to a less strenuous or hazardous position or other reasonable accommodation.

Amount Of Pregnancy Disability Leave Allowed
The law allows up to four months of unpaid leave for women who are disabled due to pregnancy. The new regulations change the definition of “four months.” The new regulations provide that it is the number of days the employee would normally work within four calendar months (one third of a year equaling 17 1/3 weeks), if the leave is taken continuously, following the date the pregnancy disability leave commences. If an employee's schedule varies from month to month, a monthly average of the hours worked over the four months prior to the beginning of the leave shall be used for calculating the employee's normal work month. Thus, the total amount of leave available will be based on a “one third” year measurement of an employee's normal work schedule. The regulations provide several examples of the calculation.

Intermittent And Reduced Schedule Leave
The law continues to allow an employee who is disabled due to her pregnancy to take her leave in less than four month increments. Under the revised regulations, an employer may account for increments of intermittent leave using an increment no greater than the shortest period of time the employer uses to account for use of other forms of leave, provided it is no greater than one hour.

More Guidance On Reasonable Accommodations And Transfers
The new regulations included detailed provisions on the employer's obligation to provide a pregnant employee with reasonable accommodations and/or transfers to alternative positions. While the regulations should be consulted to guide the handling of a specific situation, the new regulations closely track the employer's obligations under the state and federal disability law to engage in an “interactive process” and provide reasonable accommodations.

Reinstatement Rights And Rules Expanded
Under state and federal family/medical leave law, a returning employee must be reinstated to the same or an equivalent position. The new regulations provide that an employee returning from pregnancy disability leave must be reinstated to her “same” position. The alternative of a “comparable” position is only available if the employer is excused under the regulations from returning the employee to her same position.

The employer must “guarantee” the right of reinstatement in writing upon request of an employee. The guarantee must be honored, whether or not in writing, unless an exception applies.

The new regulations do not contain the previous language that permitted an employer to deny reinstatement if it would undermine the employer's business. Reinstatement must be made within two business days, or if that is not feasible, as soon as possible after the employee notifies the employer of her readiness to return. The new regulations specify that a position is considered “available” for the employee if the position is open on the day of the employee's scheduled return or within 60 calendar days thereafter. The employer has an affirmative duty to provide the employee with notice of available positions.

Perceived Pregnancy Protection Added
The new regulations specify that it is unlawful for an employer to discriminate against an employee or applicant because of “perceived pregnancy.” Perceived pregnancy is defined as being regarded or treated by an employer as being pregnant or having related medical conditions.

Employer-Paid Health Benefits
Beginning last year, California employers became obligated to continue paying for health care benefits for employees on pregnancy disability leave at the same level and under the same conditions as if the employee had continued working. The new regulations provide the details on this requirement and its relation to the similar requirement under family and medical leave law.

Notice Requirements Changed
The regulations continue to require employers to provide notice to employees of their pregnancy disability leave rights, but provide more detail on how employers must meet the requirement and the consequences for failing to do so. The standard form notices created by the government have been modified to reflect the changes in the law.

Example Of The Importance Of Careful Planning And Documentation

The regulations state that an employee who takes pregnancy disability leave is “guaranteed a right to return to the same position.” They state further that the employer must provide the “guarantee” in writing to the employee if it is requested. After reading or being told of these mandates, an employer with limited time and limited global understanding of the regulations might prepare the following letter and give it to an employee heading out on pregnancy disability leave:

Dear Debbi,

We have received your request to take pregnancy disability leave. We have also received your doctor's certification stating that you will need to be off work for four months. We guarantee that you will be reinstated following your leave.

Sincerely,
Well-Meaning Employer

Well-Meaning Employer has created multiple problems, but we will focus on just one. The new regulations provide that an employee is not entitled to reinstatement if the employee's job would have ended notwithstanding the pregnancy leave. For instance, if the employee's position is eliminated or the employee is included in a layoff for reasons that have nothing to do with the pregnancy or leave. Let's assume that Debbi's position is legitimately eliminated during her leave. She has no right to reinstatement under the regulations.

The regulations, however, also provide that a position is “available” and must be provided to the employee if the employee is entitled to the position by “company policy” or “contract.” The letter and the statement “We guarantee that you will be reinstated…” could certainly be interpreted as a contract entitling Debbi to reinstatement, even though her position was eliminated and she has no reinstatement rights under the pregnancy disability law.

The new regulations were designed to provide employers with clarity, and in many cases, they do. Because of the complexity, however, they also create traps for those employers who fail to carefully plan and document pregnancy leaves.