Tag Archives: kaiser

Move Workers’ Comp Out of the Silo

Over the last three-plus decades, employers have grappled with dramatic increases in healthcare and workers’ compensation costs, according to the Centers for Medicare and Medicaid Services. Workers’ compensation costs climbed more than 40% just in the last five years in California, according to the Oregon Workers’ Compensation Premium Rate Ranking Summary. At the same time, the lost time and productivity associated with injuries and illnesses add to the urgency to find a new approach to managing these costs.

Wellness programs that support and encourage employee health are popular, deployed today in more than 60% of companies with three or more employees, according to Kaiser Family Foundation and Health Research and Educational Trust research. While some believe that the benefits of wellness programs are overstated, all of the recent attention on wellness and the costs of healthcare and workers’ compensation warrants a new look at the bigger picture.

Employee health and its associated costs continue to be managed in a silo — separate from, and somehow unrelated to, workers’ compensation and “lost time” programs. Yet, these initiatives are related, and smart companies should be integrating data around workers’ comp, healthcare and productivity, to identify ways to support employees, thereby reducing costs, increasing productivity and ultimately resulting in a healthier workforce.

Breaking Down the Silos

In many organizations, group health plans and workers’ compensation programs are managed separately, often with finance responsible for workers’ compensation and HR managing the health plan. Because of the occupational/non-occupational nature of the claims — and the two distinct systems for their management — this historic division made sense when overall healthcare costs were a small component of organizational spending.

However, research is finding that viewing these programs — along with their corresponding components, such as safety, wellness, disability and leave management — as competing concerns in separate silos is short-sighted and counterproductive.

For example, based on recent research by Kaiser, we now know that smokers in the workforce are 40% more likely, and obese workers twice as likely, to have a work injury than non-smokers or leaner counterparts. Other corresponding data demonstrate similar links — obese workers who have a work injury generate seven times greater medical costs and spend 13 times more time away from work.

Organizing in traditional silos can create a hidden incentive to shift cost and risk to another internal program (“that injury happened on the job, didn’t it?”) rather than working together to reduce or eliminate the costs for the benefit of the company as a whole. Viewing these issues in a vacuum masks the true nature of healthcare costs, as is easily seen when data is analyzed in an integrated fashion. The traditional silos prevent organizations from (a) realizing improved productivity and the profit it brings and (b) maximizing the potential of internal efforts such as safety or wellness programs.

Taking an Integrated Approach

Kaiser Permanente has studied this approach and offers some startling numbers. Figures provided by the Workers’ Compensation Insurance Ratings Bureau of California (WCIRB) show the losses per indemnity claim nearly doubling since 1998, to a total of nearly $90 billion. The holistic view provided by new data enables Kaiser to look at employee health, workers’ compensation and workplace safety through a broader population health management lens.

Other insurance companies are starting to roll out programs that look at synergistic and more holistic opportunities for employee health to drive down costs, improve productivity, boost the bottom line and help employees enjoy better health. These programs help companies understand the total cost of health and safety by looking at the employee benefits and workers’ compensation costs, as well as absenteeism and “presenteeism” (an employee who is physically present at work but unproductive because of health problems or personal issues). These programs look at lost productivity, as well as identifying the specific risk factors that are driving up costs. By determining what can be modified, and creating specific action plans, employers are able to realize lower health costs, fewer on-the-job injuries and faster recoveries.

Let’s use smoking as an example. In addition to increased workers’ comp costs, numerous government and academic studies tell us that:

  • Smokers lose an average of 6.0 workdays per year — almost double the absenteeism of non-smokers;
  • Smoking exacerbates the effect of chronic disease on productivity;
  • Smokers are less likely to exercise and more likely to be heavier drinkers;
  • Smokers are estimated to spend between eight and 30 minutes a day in unsanctioned smoking breaks. This equates conservatively to more than 33 hours per year of lost time, just because of unsanctioned smoking breaks. At 15 minutes per day, the total lost productivity rises to 62.5 hours annually;
  • Lower direct healthcare and lost-time costs equal improved profit, as does greater employee productivity and morale. Combining these efforts strengthens efficiencies and drives greater profit improvement.

While the concept and math are simple, changing deeply entrenched organization models, long-standing procedures and practices and the outmoded personal attitudes and behavior they encourage and reinforce is challenging. But it can and should be done. By finding the right consulting partner, companies can tear down the silos and look at the world through a broader lens of integrated, holistic safety, health and wellness. Everyone — the organization, its people and the stakeholders — will win.

Employers Can Stop Worrying on Health

With the launch of Apple’s HealthKit, the pieces are now in place to enable employers to get out of the health risk business within five to 10 years, if not sooner. Notice I use the term “health risk,” by which I mean that the cost of the employee’s health insurance will not be priced by the employer. The cost will no longer be based on the average age of the employee population, claims experience or any of the standard underwriting/pricing rules used today.

That does not mean an employer will not contribute to some of the cost, but the employer will not have to worry about setting budgets based on its medical renewal. Employers won’t have to worry about managing large claims, employee wellness (unless they want to), hospital networks or plan design. While I do think employers don’t mind helping employees pay for healthcare, I don’t think they ever wanted to be in the health insurance risk business, or the claims management business or the wellness business, or to wonder if the person they just hired has a wife at home expecting triplets.

There are three main reasons why employer-based health insurance is coming to an end: reductions in Medicare/Medicaid reimbursements, the advancement of mobile technologies by firms such as Apple and cost shifting to employees.

Medicare/Medicaid reimbursements

The combination of the expansion of Medicaid under Obamacare along with the reduction in reimbursements for services provided under government programs is forcing hospital systems to change the way they do business. In fact, hospital systems are looking to get into the insurance business (a la Kaiser) because they need to get money from healthy people, not just sick people.

Almost everybody wants this to happen. Employers want out of the risk business. Hospitals need and want capital. The government wants the relationship to be between the doctor and the patient. The employee wants lower healthcare costs. And, I don’t know about you, but I would prefer that my primary care physician — not my employer — worry about my health and wellness.

So, in my opinion, the nation is going Kaiser, the staff model HMO route, because that’s what the market will want.

Advancing mobile technologies

If a provider system is responsible for my health care, then it needs access to my information to manage my health. Apple, with its HealthKit, and others want to make it easier to gather a person’s health information and make that information available to the provider responsible for caring for that person. Kaiser is one of the first provider systems on board with Apple. I am not surprised.

Today, I can get on a scale in the morning, and my scale can send my weight via Bluetooth to my smartphone. Blood pressure tests, blood glucose tests and other relevant health information can be also easily be sent to my cell phone, which I can then make available to my doctor in real-time. The doctor would be responsible for my wellness, because she is working for the system that is responsible for keeping me healthy and, I hope, out of the hospital. Imagine the doctor having a system that would house all this information on her patients. The system could automatically send me an email or text message to call and set an appointment because I put on 10 pounds. Today, I get an email from Jiffy Lube saying I need an oil change for my car but never get an email from my doctor saying I need a physical. This is about to change.

Employees want to pay less

I’ve heard this before: HMOs were tried in the ’80s, but they really didn’t totally grab the market. Well, things are different now.

In the ’80s, the employer paid close to 100% of an employee’s health insurance costs. So, the No. 1 variable when selecting a plan back then was provider access. Is my doctor/hospital in the network? That is all I ever heard. As a result, every doctor and hospital joined every network. Today, it is different. Employees are paying 40% to 50% of the costs, and the percentage is going up. Cost has become the No. 1 variable for an employee when making a health insurance purchase decision. The statistics are out there: When given a choice in plans, employees are choosing lower-cost options. They are now willing to change doctors and sign up for smaller networks for lower costs.

What we have is the perfect storm: government intervention, advancing technology and a cost-conscious consumer. This storm combines with the fact that everyone wants the change: the government, employers, employees, provider systems and the technology companies.

I want it, too. I don’t want my employer knowing my health information or worried about my wellness. I want my doctor to know. I want my doctor to see me because he thinks I need to see him. I want a test because I need it. I don’t know what I don’t know, so I need someone to tell me. The shift from the risk being on the employer, employee and insurance company, to the provider of care, is a welcome one. I want my physician to want me healthy, too.

In this new scenario, there is a role for the insurance companies (look at what Aetna is doing), the brokers and even the employers. I do believe the government and the providers will want the employer engaged in educating employees on what, for many, will be a new healthcare system. Employees will have to learn how to use some technology. How brokers can participate in this process is another article.

As the often-used quote says, “Healthcare should be between the patient and his/her doctor.” The stars are aligning for this to happen.

End of Health Insurers As We Know Them

I want to start by saying that I am knowingly writing an article that is going to throw fuel on a fire. Being from New England, this article strikes me as the equivalent of writing an article in the Denver Post that says New England Patriots quarterback Tom Brady is better than Denver Broncos quarterback Peyton Manning. Letters will be written. Darts will be thrown. So, I will make sure I put on my steel vest before I publish.

I already started writing on this topic, in a recent article titled, “Apple HealthKit – The Next Step to the End of Employer-Based Health Insurance.” In this article, I will provide a more detailed analysis of why the premise presented in my first article may come true — that within five to 10 years employers will be out of the health risk business. I will then provide a plan for what I think benefit brokers should do to prepare. Taking action may be the difference between those that survive and thrive in this new health insurance world vs. those that may struggle or even fail.

What do I mean when I say employers will be out of the health risk business? To repeat what I said in my last article, “By health risk, I mean the cost of the employee’s health insurance will not be priced by the employer. It won’t be a function of average age of the employee population, claims experience or any of the standard underwriting/pricing rules today.” In fact, health insurance will most likely become an individually purchased product, and the insurers of the future may not be the companies that dominate the market today.

As a consultant to benefits brokers, I educate them on technology and advise them on how they can maintain a competitive position. My future depends on brokers’ remaining significant, so I am as concerned about their future as any broker would be. If you study the significant market events over the past few years, you get a picture of what the future may be like. While many may think Obamacare is the big market change, I believe that the health insurance market is going to change much more dramatically and that, while the government may be nudging things along, competitive market forces will drive the change.

So let’s get to the point. I believe that within five to 10 years health insurance will be delivered primarily through staff model health maintenance organizations (HMOs). These will be Kaiser-like plans where the providers of care will also be the risk takers/insurers. Individuals will pay a fee directly to a healthcare system that will be responsible for the health, wellness and treatment of the person. Employers may still give employees money to pay for some of the cost, but they won’t be in the “risk” business. We are beginning to see this evolution today through the expansion of what people are calling accountable care organizations (ACOs). However, the future will go well beyond the limited risk sharing of today’s ACOs.

Four Catalysts to Change

If you had been in the health insurance business in the ’80s, you would say we tried this before, and it didn’t work. Well, today, things are different. There are four major differences that will be the catalysts for the coming changes:

Changes in consumer buying behavior

In the ’80s, employers often paid for 100% of an employee’s health insurance and a large part of the family’s. When cost wasn’t an issue for employees, they looked at access to providers as the No. 1 variable. So, all the HMOs and preferred provider organizations (PPOs) tried to expand their networks to appease more people. Today, cost is the No 1 issue. As a result, we are seeing networks shrinking to save cost.

Expansion of government health insurance programs, combined with the reduction in Medicare and Medicaid reimbursements to providers.

If I am a healthcare provider and am getting less money to perform services on a growing population, then I need to do things differently. I need to get money from healthy people and from people needing less care. I would also need to keep people healthy or provide care in more cost-effective settings.

Advancing mobile technology

With advancing technology, it will be easier for providers to have real-time access to a patient’s medical information. Things like weight, blood pressure and blood glucose levels can be measured in the home, sent via Bluetooth to a mobile device, and immediately be available to the primary care physician in the individual’s web-based medical/wellness record. Other health metrics will also soon be possible. Systems can automatically notify the responsible physician of any changes in the metrics that warrant attention. Information will help provide proper treatment in a timely manner.

Change in tax laws, allowing personally purchased insurance on a pre-tax basis

With Republicans taking over Congress, the idea of making an individually purchased insurance policy tax-deductible is now on the table. While this is not a necessary catalyst for change, it certainly would put the nail in the coffin and get employers out of the health risk business.

Not only is there a perfect storm forming for the coming changes, but I believe the majority of the participants in today’s healthcare market will welcome this change. We have all heard the saying that “healthcare should be between the doctor and her patient.” We know the government wants this. I think employers, employees and healthcare providers would want this, too. It is the insurers, and by extension benefits brokers, that may not want this. However, as we all know, there is little sympathy for the insurance companies.

Employers would want this because I don’t think employers got into the health insurance business after World War II to be in the position they are in today. While I don’t think they mind giving employees money to pay for health insurance, they don’t want their profit margins affected by the health of their employees. Bad claims experience, and their profits go down. Every year, they agonize over the health insurance renewal, deciding whether to charge their employees more or make changes in plans (delivering bad news, either way) or absorb increases in the business. I don’t think employers want to be in the wellness business, either. They may want to provide wellness programs to make people feel better, be more productive at work or boost morale, but not to control or reduce healthcare costs.

Employees want change, too. Do employees want their employers asking for things like health risk assessments? My health should not be my employer’s business. To me, there is a slippery slope as it is. I do want my physician to care about my health. I want my doctor to know my weight and blood tests and care whether I got a colonoscopy when I turned 50. I often joke that I get an email from Jiffy Lube saying that my car is due for an oil change, but my doctor never sends me an email to get a check-up, test or whatever is needed to keep my engine running the right way.

I believe doctors and other healthcare providers want change, too. They want to practice health care. This would include helping their patients make the right lifestyle decisions and keeping them informed about what is good for them vs. what is not. Providers don’t want the paperwork. They don’t want third-parties telling them what to do, and they are getting tired of reduced reimbursements from the government.

The Market Reacting

I am not the only one using the term “Kaiser-like.” Emanuel Ezekiel, one of Obama’s healthcare advisers, expects healthcare insurers to be obsolete by 2025. According to Ezekiel, “ACOs and hospital systems will become integrated delivery systems like Kaiser or Group Health of Puget Sound. Then they will cut out the insurance company middle man — and keep the insurance company profits for themselves.” (Source: New Republic – March 2014)

Now, I am not going to just listen to Emanuel as my source. I am listening to the market. Hospital systems have been acquiring physician practices and entering the insurance business across the country. In my own backyard, there was this acquisition highlighted in the Boston Globe.

State insurance regulators Friday signed off on Partners HealthCare System Inc.’s acquisition of Neighborhood Health Plan, a transaction that will put the state’s largest hospital and physician organization into the health insurance business for the first time.” (Source: Boston Globe September 2012)

In Massachusetts, this is very big news. Partners HealthCare owns some of the leading hospitals in the country, including Mass General and Brigham and Women’s Hospital.

Hospital systems getting into the health insurance business is not limited to Massachusetts. In New York, New Jersey, Pennsylvania, Maryland, Michigan and all across the country hospitals are getting into the health insurance business. (See Kaiser Health News.)

Concurrently, insurance companies are getting into the healthcare business. According to Hospital and Health Networks Magazine January 2012, the following insurers have made healthcare acquisitions:

  • WellPoint bought CareMore.
  • Optum bought Orange County’s Monarch HealthCare and two smaller independent physician associations (IPAs).
  • United Healthcare acquired a multispecialty group in Nevada in 2008.
  • Humana purchased Concentra, which provides occupational care and other medical services.

Aetna Making Moves

What I have find most interesting is the acquisitions by Aetna and some of the comments by CEO Mark Bertolini. Let’s first look at some of the comments Bertolini has been making over the past few years.

“The end is near for profit-driven health insurance companies. The system doesn’t work, it’s broke today. The end of insurance companies, the way we’ve run the business in the past, is here.”

“We need to move the system from underwriting risk to managing populations,” he said. “We want to have a different relationship with the providers, physicians and the hospitals we do business with.”

In his presentation titled “The Creative Destruction of HealthCare,” he states:

“Not too far away from now – in the next six to seven – 75 million Americans will be retail buyers of healthcare. And they’ll come to the marketplace with their own money and either a subsidy from their employer or a subsidy from their government. And it doesn’t much matter – they’ll be spending their money.”

Aetna is not just talking. If you look at Aetna’s acquisitions and partnerships over the past few years, you can see that Aetna is preparing for the future that Bertolini describes. The company has spent billions of dollars acquiring technologies that can be critical to the future in managing healthcare and healthcare information, including:

  • iTriage – Mobile App for employee to check symptoms – Find doctor – Make appointment
  • ActiveHealth – View and update personal health record (PHR) – Personalized alerts and content – Communicate with doctor
  • Medicity – Promotes coordination of care – Real-time patient data

(Source: Aetna 2013 Investor Presentation)

According to Aetna’s website, Aetna was ranked #52 on InformationWeek’s 2013 list of the 500 leading technology innovators, surging ahead of many of the top names associated with technological innovation. Aetna ranked first among health insurers.

To move to this new model, healthcare providers will need to add capabilities that insurance companies currently have. For example, hospitals provide care but don’t have the actuarial skills to price their patient population in the event they were to get into the risk business. Many also don’t have the capital to assume risk. Those with enough capital can simply buy an insurance company. Others will have to partner with an insurance company that has the capital and reserves to share risk and provide the needed services.

So if I am an insurance company, I can either buy providers to stay viable or provide some products, services or capital that the new healthcare systems will need. Buying hospitals or physician groups across the country can be very expensive. So it may appear that a company like Aetna is setting itself up to be the technology, actuarial, reinsurer and other service provider for these future healthcare systems. I won’t claim to know if Aetna thinks the market will move as far as I am saying, to a Kaiser-like model, but the company certainly is preparing for a different healthcare model.

Some may think that this is somewhat what insurance companies are doing today. Here is the critical difference. Today, the risk-sharing arrangements are still in a fee-for-service environment. In the future, a hospital system may be in close to a 100% capitation environment (where the system receives a set amount per period for each person covered by the arrangement). Provider systems that purchase these services or develop a risk-sharing relationship with an insurance company in such an environment can’t have two such relationships. They will need a single risk pool to properly manage the population and risk. There won’t be a Blue Cross version, a United HealthCare version and an Aetna version of a local ACO/staff model system.

A good example of healthcare financing is my own healthcare. Since I moved back to Massachusetts 16 years ago, I have had the same primary care physician and used the same hospital facility on a number of occasions. Yet I have had seven different health insurance programs. Assuming an average insurance premium of $10,000 per year for my family, over the 16 past years I have paid $160,000 in premiums. I understand insurance, spreading the risk and all the other insurance arguments about where that money goes, but think of how it could be different if all $160,000 went to the system that was actually providing care to my family and me.

What Benefit Brokers Can Do

Okay, so the world may change. What would I do if I were a broker today to prepare for this change? First, change does not happen easily and overnight. The whole country of healthcare consumers, distributors and providers will need to adapt. As a benefits broker, your buyer may no longer be the employer but the employee. If this is the case, then some existing services may not be needed.

  • No more risk analysis/actuary and underwriting
  • No more claims analysis tools
  • No more wellness programs to reduce healthcare costs
  • No more disease management programs
  • No more company medical renewals

Before someone points out the obvious to me, I will say that I do know that most groups with fewer than 100 employees are community-rated and those with more than 100 employees are experience-rated. Small employers are still faced with balancing budgets based on their healthcare renewal. This anxiety will go away.

Most of these types of services are a core competency of many of the national benefits firms and the larger independent brokerage organizations. These services are viewed as key differentiators. For these firms, change may be even more dramatic because providing these types of analytical skills is part of their culture.

So let’s talk about the things brokers can do. I am going to break this down to a list of tasks.

1.       Understand what the players in your market are doing – Brokers should start analyzing their local medical market and see what the providers are doing in this area. Have they made acquisitions? Have they created new partnerships? What is their leadership saying publicly? Whatever they say or do, believe them.

2.       Add an employee call center – Employers will welcome the support in helping employees move to a new environment. Provider systems will welcome and pay for the support in helping those same employees navigate the market.

3.       Add personal financial consulting – It is estimated that close to 40% of employees lose some productivity at work because of financial stress. The healthcare insurance purchase is going to be a major decision for an employee, and it should be made in the context of an employee’s entire financial position.

4.       Understand the new technologies – How many of you who have read this up to this point understand what Aetna’s technologies for the consumer are? Do you know how to “Bluetooth” your weight from a scale to a smartphone? The place of employment can also be a great place to help employees with technology to track health information. Could an employer have a scale at work that is Bluetooth-enabled to send a person’s weight to their smartphone? Could the employer have a blood pressure machine at work? How about setting up a private room with teleconferencing capabilities so an employee can consult a doctor face-to-face via the web without leaving the place of employment? Could a broker make himself available to consult employees one-on-one as to how this whole system will work?

5.       Develop technology engagement and education strategy – After you learn what you need to know about the new technologies, are you ready to deliver? I believe the provider systems (the new Kaisers) will welcome the opportunity to educate the population through the employer. At the employer level, you can reach a large amount of people fairly easily. And the employers will care that their employees understand this new healthcare delivery system. Employers don’t want stressed employees, because stressed employees are not as productive. I believe employers and these new provider systems will pay to help these individual consumers.

6.       Invest in new internal technology and processes – If your entire infrastructure is geared around engaging the employer, then things will need to change. Can you record a phone call? Can you engage in online chat with an employee? Are you prepared to sell individual insurance? To sell a high volume of individual policies and service employees, you will need extremely efficient internal operations.

7.       Start thinking about helping employers exit the risk business – Rather than advise employers how to control costs and mitigate risk, should you start advising them on how to get out of the risk business? I guess private exchanges and defined contribution plans are the start. However, if the healthcare market changes, the pace will accelerate because there will be more options for the employer to get out.

8.       Engage new providers – Carrier reps are always calling on brokers, but these new organizations may not call on brokers in the same way. You may need to reach out to them. If you have something of value for the new provider system, you will need to engage the carriers.

To move to this new model, it will require that brokers invest in technology and people. To attract the provider systems benefits, firms will need to have the services, size and scale to deliver. Most independent benefits firms either don’t have the capacity or capital to move to this model. They will either have to sell to a larger firm or join forces with peers who share the same vision and are willing to collectively invest in preparing for the future. The national firms and larger independent firms with the capital and resources will need to have the will to change.

In today’s environment, many brokers may not feel the need to make these changes. Other firms have already started preparing for a much different future. For example, several national firms have opened call centers for employees. Whether that is for a future market I have described, or simply to service employees today, I don’t know, but the centers are a sign that the benefits game is changing.

I may not end up being right with my market predictions, but my advice is to pay close attention. There is change going on out there, and I think a picture of the future is being drawn that looks much different from the healthcare market today.