Tag Archives: president obama

CEOs Defy Common Sense on Wellness

By now, readers of this and many other outlets know that conventional workplace wellness doesn’t work. Period. It’s not that there is no evidence for it. It’s that all the evidence is against it. The “evidence” in favor of conventional wellness is easily disproven as being the result of gross incompetence or dishonesty. Occasionally, as in the American Journal of Health Promotion, investigators even manage to disprove their own savings claims without intending to. As we say in Surviving Workplace Wellness: “In wellness, you don’t have to challenge the data to invalidate it. You merely have to read the data. It will invalidate itself.”

Just before Thanksgiving, both Health Affairs (with our blog post) and Soeren Mattke, the often-misquoted author of multiple RAND studies (in a comment to that post), weighed in with the same conclusion, as described in the headline: “Workplace Wellness Produces No Savings.”

No longer can anyone claim with a straight face that “pry, poke, prod and punish” wellness programs saved money, or were even beneficial for employee health.

And yet…

Within one business day of the posting, Reuters’ Sharon Begley reported that on Tuesday, Dec. 2, the Business Roundtable’s (BRT) CEO is having a sit-down meeting with President Obama to demand exactly the opposite of what all the evidence shows: He wants more flexibility on wellness. In particular, the BRT wants the administration to call off the EEOC watchdogs, who have recently attacked Honeywell  and others for forcing employees into medical exams that appear to violate the Americans with Disabilities Act.

The BRT’s goal is to allow companies to punish unhealthy workers to the limits of the Affordable Care Act’s wellness provision. (Recall from our earlier postings that the ACA wellness provision was modeled after the Safeway wellness program, which Safeway later admitted did not even exist during the period for which the company claimed it saved money.) In essence, the BRT leadership wants to make their employees love wellness whether they like it or not.

This complete disconnect between the data and the BRT demands can be explained only one of two ways.

(1)    The CEOs who compose the Business Roundtable have been duped into thinking wellness saves money, because they aren’t bright enough to Google it for themselves and learn that it doesn’t.

(2)    The CEOs who compose the Business Roundtable are very bright and have figured out that the only way they can seriously manage their healthcare costs is by fining or shaming employees with chronic disease or obesity into leaving their companies…or at the very least collecting large fines from them.

Let’s examine each possibility in turn.

As to the first, people don’t get to the C-Suite by simply accepting information that their vendors tell them, especially when the numbers obviously don’t add up. Events that can be prevented by wellness programs, like heart attacks, account for only about 8.4% of  hospital spending, or less than 4% of total medical spending in the commercially insured population. The C-suite also must know that, as with the tobacco industry years ago, when the only people defending an industry are people who make their living from it, then the industry is a wholly illegitimate enterprise. The first possible explanation would therefore need to be termed an impossibility.

The second alternative seems like something only a conspiracy theorist could conjure, but as Sherlock Holmes said: “When you have eliminated the impossible, whatever remains, however improbable, must be the truth.”

These CEOs must know that these “let’s play doctor” programs and fines are expensive, intrusive, ineffective and embarrassing for the employees…and take a major toll on morale. One organization, Penn State University, faced an employee revolt and backed down. Vik is currently in a wellness program that is eerily Penn State-like, and he is documenting his experiences.

And surely someone has informed the BRT that the heart attack rate is only about 1 in 800 annually in the commercially insured population, while using wellness programs to identify all the other diseases they hope to prevent or control will merely drive up employers’ drug spending; these nascent conditions wouldn’t become debilitating until years into retirement. Guidelines promulgated by the U.S. Preventive Services Task Force (USPSTF) call for judicious use of clinical screenings in various at-risk subpopulations, (with a few exceptions, such as blood pressure). By contrast, wellness screening is done to all employees usually at least once a year. That screening frequency multiplies the odds of false positives, especially in younger populations.

So why go to the mat with the president over these programs? Perhaps CEOs believe that fatter employees have lower productivity, which is probably the case – if you happen to own a package delivery service or a ballclub. Otherwise, it’s hard to imagine that weight affects one’s ability to answer the phone, conduct a meeting or handle almost any other task commonly required in today’s workplace. And these CEOs’ own actions contradict any claims about how weight loss leads to greater productivity: Most of the growth in line manufacturing jobs takes place in states with high obesity rates…but lower wages. Obviously, the tangible benefit of the latter overwhelms any offset by the former, or hiring practices would be different.

Unless there is an alternate explanation (or the BRT simply doesn’t understand the data), this BRT demand of the president must be interpreted more cynically: It’s the opening salvo in an attack against aging and chronically ill employees whom employers simply aren’t allowed to fire any more. Employers want to get rid of these employees because – often due to circumstances beyond these employees’ control – their healthcare expenses are believed to be higher.

Obamacare Backlash: What Comes Next?

The firestorm over comments made by MIT economist Jonathan Gruber has not helped the cause of the White House and defenders of the ACA in Congress. The historical landslide in the recent mid-term elections will also bring a major legislative backlash in the new House of Representatives and U.S. Senate early in 2015.

I had high hopes for the ACA. I have been a supporter of healthcare reform dating back to my college days and at graduate school many decades ago. The goals of universal coverage, elimination of pre-existing condition limitations and allowing dependents to stay on their parents plan until age 26 are all things I fully support.

However, the rollout of the ACA was a debacle. The campaign promise that, “You can keep your plan if you like it” and that “you can keep your doctor” was given 4 Pinocchios by the Washington Post, not exactly a friend of the GOP. Ask Nixon.

Now after the self-proclaimed architect of the ACA touts the lack of transparency in the design of the ACA to fool the American voters and how stupid “we” are, don’t expect a warm and fuzzy reaction in a GOP-controlled Congress. House Democratic leader and the White House are now busy “misremembering” the major role that Gruber played in drafting the ACA and are hoping the public will eventually, too.

What’s next? Both the House and the Senate will vote to repeal Obamacare in January. The House has already done this a few dozen times, but now Harry Reid can’t block a vote in the Senate. The president will veto this legislation. There will be political grandstanding with press conferences and dire predictions on both sides. Nothing will happen. There is a very little, if any chance, the GOP will have the votes to override a presidential veto.

What will most likely pass is a repeal of the tax on medical device manufacturers, which reportedly has bipartisan support. This will be problematic to the president and ACA supporters, because this will directly affect the proposed financing of the ACA. That lost revenue will have to be accounted for. Let me guess? Higher costs to consumers and companies providing health benefits to employees and their families? Is that correct, Mr. Gruber?

What will also likely pass Congress is a bill repealing the little-known provision providing a safe harbor to health insurance companies under the ACA, which essentially allowed a federally financed bailout if they end up losing money.

The ACA is here to stay, in my opinion, but incremental changes will be attempted. The GOP will support legislation to lower malpractice costs, allow small employers to band together in purchasing cooperatives, allow health insurance to be sold across state lines and make the implementation and administration of the ACA a state responsibility and not run by the federal government.

The president’s own recent in-house advisory group recommended that the ACA be run by the states, because healthcare, like politics, is all local. This received very little, if any, play in the mainstream media. In fact, at least two major, national, mainstream news outlets have yet to even mention the controversy surrounding Jonathan Gruber’s videotaped comments and the firestorm it has created.  I guess they misremembered to run the story.

Finally, for other possible changes, see a previous article of mine at Insurance Thought Leadership on April 9, 2014, regarding how the ACA has gutted major elements of the bipartisan healthcare reform efforts in Massachusetts by virtually eliminating experience rating for small to mid-size employers.

Gruber predicted health insurance premiums are going down because of the ACA. Please tell that to all the small and mid-sized employers across the U.S.  I have not heard from one whose costs are going down. Maybe they misremembered.

It’s time to fix the ACA with a bipartisan effort and study what works and what doesn’t, and certainly not be based on what someone in an ivory tower believes. He thinks we all are stupid anyway.

The FIO Report on Insurance Regulation

The December 2013 issuance of the Federal Insurance Office (FIO) report, How to Modernize and Improve the System of Insurance Regulation in the United States, may in hindsight be regarded as more momentous an occasion for the industry and its regulation than the muted initial reaction might suggest. History’s verdict most likely will depend on the effectiveness of the follow-up to the report by both the executive and legislative branches, but current trends in financial services regulation may serve to increase the importance and influence over time of the FIO even in the face of inaction in Washington.

Insurance regulation has traditionally been the near-exclusive province of the states, a right jealously guarded by the states and secured by Congress in 1945 after the Supreme Court ruled insurance could be regulated by the federal government under the Commerce Clause of the Constitution.

Any fear that the FIO report would call for an end to state regulation proved unfounded, but industry members might be well-advised to prepare for the eventualities that may result as the FIO uses both the soft power of the bully pulpit and the harder power of the federal government to achieve its aims. As the designated U.S. insurance representative in international forums that more and more mold financial services regulation, and as an arbiter of standards that could be imposed on the states, the FIO and this report should not be ignored.

Having met with the FIO’s leadership team, we believe there are concerns that uniformity at the state level cannot be achieved without federal involvement. We further believe the FIO plans to work to translate its potential into an actual impact in the near future, making a clear-eyed understanding of the report and what it may herald for insurers a prudent and necessary step in regulatory risk management.

The concerns

The biggest surprise about the FIO report may well have been that there were no surprises. There were no strident calls for a wholesale revamp of the regulatory system, and praise for the state regulatory system was liberally mingled among the criticisms.

The lack of any real blockbusters in the details of the FIO report may seem to lend implicit support to those who foresee a continuation of the status quo in insurance regulation. But, taken as a whole, this report and the regulatory atmosphere in which it has been released should be considered a subtle warning of changes that may yet come.

The report may quietly help to usher in an acceleration of the current evolution of insurance regulation. The result could be a regulatory climate that offers more consistency and clarity for insurers and reduces the cost of regulation. The result could also be a regulatory climate that offers more stringent regulatory requirements and increases both the cost of compliance and capital requirements. Most likely, the result could be a hybrid of both.

Either way, preparing to influence and cope with any possible changes portended in the report would be preferable to ignoring the portents.

Part of the disconnect between the short-term reception and the long-term impact of this report may be because of the implicit FIO recognition in the report of the lack of political will needed to enforce any real changes in current U.S. insurance regulation, most especially any that would require increased expenditures or personnel at the federal level. In our current economic and political environment, plugging gaps in state regulation by using measures that would require federal dollars may quite reasonably be construed to be off the table.

But the difference between identified problems and feasible solutions may offer an opportunity. States, industry and other stakeholders could act together to bring needed reform to the insurance regulatory system in a way that adds uniform national standards to regulation, reduces the possibility of regulatory arbitrage and maintains the national system of state-based regulation, all while recognizing the industry’s strengths and needs and not burdening the industry with unnecessary, onerous regulation.

There is much to praise in the current state regulatory system. A generally complimentary federal report on the insurance industry and the fiscal crisis of the past decade noted, “The effects of the financial crisis on insurers and policyholders were generally limited, with a few exceptions…The crisis had a generally minor effect on policyholders…Actions by state and federal regulators and the National Association of Insurance Commissioners (NAIC), among other factors, helped limit the effects of the crisis.”

While the financial crisis demonstrated the effectiveness of the current insurance regulation in the U.S., it is also evident that, as in any enterprise, there are areas for improvement. There are niches within the industry – financial guaranty, title and mortgage insurance come to mind – where regulatory standards and practices have proven less than optimal.

There are also national concerns that affect the industry. The lack of consistent disciplinary and enforcement standards across the states for agents, brokers, insurers and reinsurers is one obvious concern. Similarly, the inconsistent use of permitted practices and other solvency-related regulatory options could lead to regulatory arbitrage. At a time when insurance regulators in the U.S. call for a level playing field with rivals internationally, these regulatory differences represent an example of possible unlevel playing fields at home that deserve regulatory attention and correction.

A Bloomberg News story in January 2014, for example, quoted one insurer as planning to switch its legal domicile from one state to another because the change would allow, according to a spokeswoman for the company, a level playing field with rivals related to reserves, accounting and reinsurance rules.

For insurers operating within the national system of state-based regulation, one would hope that that level playing field would cross domiciles, and no insurer would be disadvantaged because of its domicile in any of the 56 jurisdictions.

But perhaps one of the greatest challenges to the state-based system of regulation is the added cost of that regulation, partly engendered by duplicative requests for information and regulatory structures that have not been harmonized among states. How to respond to that may represent the biggest gap in the FIO report. It may also be the biggest opportunity for both insurers and regulators to rationalize the current regulatory system and ensure the future of state-based regulation.

Cost

The FIO report notes that the cost per dollar of premium of the state-based insurance regulatory system “is approximately 6.8 times greater for an insurer operating in the United States than for an insurer operating in the United Kingdom.” It quotes research estimating that our state-based system increases costs for property-casualty insurers by $7.2 billion annually and for life insurers by $5.7 billion annually.

According to the report, “regulation at the federal level would improve uniformity, efficiency and consistency, and it would address concerns with uniform supervision of insurance firms with national and global activities.”

Yet the report does not recommend the replacement of state-based regulation with federal regulation, but with a hybrid system of regulation that may remain primarily state-based, but does include some federal involvement.

At least one rationale for this is clearly admitted in the report. As it says, “establishing a new federal agency to regulate all or part of the $7.3 trillion insurance sector would be a significant undertaking … (that) would, of necessity, require an unequivocal commitment from the legislative and executive branches of the U.S. government.”

The result of that limitation is a significant difference between diagnosis and prescription in the FIO report. Having diagnosed the cost of the state-based regulatory system as an unnecessary $13 billion burden on policyholders, the FIO's policy recommendations may possibly be characterized as, for the most part, the policy equivalent of “take two aspirin and call me in the morning.”

Still, as the Dodd-Frank Act showed, even Congress can muster the will to impose regulatory solutions if a crisis becomes acute enough and broad enough. Unlikely as that may now seem, the threat of federal radical surgery should not be what is required for states to move toward addressing the recommendations of the FIO report.

Indeed, actions of the NAIC over the past few years have addressed much of what is in the FIO report. Now the NAIC, industry and other stakeholders can take the opportunity provided by the report to work to resolve some of the issues identified in it. The possible outcome of an even greater federal reluctance to become involved in insurance regulation would only be a side benefit. The real goal should be a regulatory system that is more streamlined, less duplicative, more responsive, more cost-efficient and more supportive of innovation.

Kevin Bingham has shared this article on behalf of the authors of the white paper on which it is based: Gary Shaw, George Hanley, Howard Mills, Richard Godfrey, Steve Foster, Tim Cercelle, Andrew N. Mais and David Sherwood. They can reached through him. The white paper can be downloaded here