Health Care Cost Management

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Characteristics of Medical Providers.
McNutt, Larry; Benefits Magazine; v49 no4 pp 26-31 Apr 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : A key component in the health care spending mix is data associated with care providers. The variety of providers is broad, covering large institutions, small clinics and individuals; in traditional settings, HMOs and alternative sites; and including a range of pharmacy and other ancillary services. The relationship between service, outcomes and cost is not entirely predictable but can be analyzed, given the right data. To be informative, that data must reflect administrative and clinical details and be carefully chosen for its potential to expose important information and lead to actionable change. Data analytics can reveal trends that can lead to plan design modifications for more effective use of plan resources.
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Drug Program Targets Costs.
Wojcik, Joanne; Business Insurance; v46 no11 p 6 Mar 12, 2012; journal article

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Abstract : An innovative drug insurance product is attracting self-funded midsized employers. EBC Rx LLC is offering Rx 'n Go, a mail order program under which employers pay for 90-day prescriptions for generic drugs. Employers note the lower cost and easy refills improves compliance with chronic condition treatment plans, potentially cutting long-term health care costs. Billing statements for the program provide drug utilization data to the employer, third-party administrator and/or pharmacy benefits manager (PBM) at no extra cost. Obstacles come from the fact that most PBM contracts prohibit employers from such outside arrangements, and there is no integration between data for drug utilization and other medical services or metrics.
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Retiree Benefits: Employees Increasingly Willing to Trade Pay for More Benefits, Towers Watson Finds.
Smith, Rhonda; Daily Labor Report; no41 p A5 Mar 1, 2012; journal article

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Abstract : A late 2011 Towers Watson survey of 3,074 U.S. workers revealed 53 percent would be willing to give up some pay in exchange for better retirement benefits. Fifty-five percent would give up some pay to have a more guaranteed retirement benefit, up from 46 percent in 2009. The desire for more retirement security is strongest among older individuals, women, low-paid workers and those in poorer health. Views toward health care benefits are similar, with 45 percent willing to pass on some pay in exchange for lower and controlled costs, up from 19 percent in 2008. Employers should consider ways to help employees cope with cost uncertainties, possibly offering advisers for financial planning and investment advice, debt control and budgeting consultations and health savings accounts.
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Characteristics of Employers and Funds.
Devendorf, Lewis E.; Benefits Magazine; v49 no3 pp 30-34 Mar 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : To manage health plan costs, it is essential to gather and analyze meaningful data. Each organization's data is unique, affected differently by its workforce demographics and impact events. Large plans typically gather and analyze their own data, while smaller plans can get historical change data and benchmarking against comparable organizations from their insurance carrier. Reports can reveal trends in cost sharing, pharmacy vs. medical claims, key expense drivers, network usage and more. Predictive modeling can project future costs and drivers based on the current health risks of the employee population. While health costs continue to rise, they represent only about one-fourth of total health-related costs, including absenteeism, disability and presenteeism, making the focus on wellness and behavior change increasingly important.
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Emergency Measures.
Prost, Marlene; Human Resource Executive; v26 no2 pp 34-35, 37-39 Mar 2012; journal article

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Abstract : The unnecessary use of hospital emergency room (ER) visits is contributing to soaring health care costs. The Rand Corp. documented in 2010 that 16.8 percent of problems prompting ER visits could be handled at an urgent care center or retail medical clinic, saving $4.4 billion annually. It takes clear communication to convince employees that there are better choices for nonemergent health care. Rice University, seeing ER charges rise up to 40 percent, used an awareness campaign and a change in copays to encourage use of urgent care centers and primary care physicians, leading to a by 12 percent drop in ER visits in the first year. Other alternatives to nonemergent care are 24/7 nurse helplines, the growing telehealth trend involving phone or Internet consultations with a physician, and even house calls through concierge health services.
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Mass Overhaul.
Huff, Charlotte; Workforce Management; v91 no3 pp 32-34, 36, 38, 40 Mar 2012; journal article

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Abstract : Massachusetts led health care reform with its 2006 state law that by 2010 had expanded coverage to 98.1 percent of residents. But the cost of health care in the state continues high, leading many employers to self fund and prompting stakeholders to push for further reform. Employers and insurers are targeting the cost differences between care providers and moving toward pricing tiers, not only for drugs but also for physicians and hospitals. Employees, such as those at Boston's Beth Israel Deaconess Medical Center, are being shown actual price differences between providers and asked to choose between unlimited access to any provider for a high premium or restriction to less expensive service providers for a more modest user cost. In 2012, nearly one in five of the employees chose the limited two tiers. The state's experience with health care and insurance reform illustrates the complexity of the problem, the need to reevaluate progress and to modify the plan as necessary.
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Medical Cost Savings for Participants and Nonparticipants in Health Risk Assessments, Lifestyle Management, Disease Management, Depression Management, and Nurseline in a Large Financial Services Corporation.
Serxner, Seth; Alberti, Angela; Weinberger, Sarah; American Journal of Health Promotion; v26 no4 pp 245-252 Mar-Apr 2012; journal article

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Abstract : Nearly 50,000 employees enrolled in group health plans through a single corporation were followed over three years to assess health cost differences between those involved in a comprehensive health and productivity management program and nonparticipants. Participation was based on competing a health risk assessment or involvement with programs geared to lifestyle management for weight, nutrition, smoking, and general health promotion; disease management; or depression management; or interaction with a nurse through a telephonic health information line. Medical claims for all participants increased less than for nonparticipants. The return on investment in the second year was 3.33:1 and 2.45:1 for the three-year program. The study demonstrated the value of a multiprong approach supported by a strong corporation-wide campaign to promote health awareness.
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Misdiagnosis: The Clinical Integration Solution.
Falchuk, Evan; Employee Benefit Plan Review; v67 no3 pp 15-16 Mar 2012; journal article

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Abstract : Research estimates the rate of misdiagnosis at 20 percent or higher. This is the result of lack of integrated clinical data, time pressure, inattention to detail and provider stress, and contributes to soaring health costs, and patient confusion and suffering. The solution is clinical integration, starting with a health plan sponsor's expectation that all vendors will coordinate efforts to support employees' disease management. Covering disability, specialty pharmacy, care providers, wellness programs and disease management, clinical integration aims to make the most efficient use of existing benefit offerings. It starts with the right diagnosis, which should be checked by a second opinion or more, considering personal and family medical history. Employers should insist that employees take active part in clinical integration, being educated about the true costs of care and being responsible health care recipients.
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New Jersey Health System Sees Results With VBID.
Rahm, Janice; Employee Benefit News; v26 no3 pp 14-15 Mar 2012; journal article

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Abstract : Employees of New Jersey's JFK Health System have a choice of health plans, but the 40 percent who selected the value-based insurance design (VBID) option are enjoying premium increases under one percent and a fifth year of no increases in deductible or copays. The health system worked with SeeChange Health Solutions to design an option that used rewards and incentives to steer members toward positive health choices. The result has been engagement with the wellness program and near doubling of screenings for breast and colon cancer. With a VBID approach, employers can design incentives to promote following treatment plans and using preventive services as well as focus on specific conditions. The objective is to simplify access to high-value services and use health care dollars in the most effective way.
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Tax Savings on Health Care for Every Size of Employer.
LeTourneau, Janet; Broker World; v32 no3 pp 56, 58, 60 Mar 2012; journal article

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Abstract : Providing insurance and health benefits for employees is an obvious plus for the employee and gives the employer a tax advantage. There is considerable variation among types of small businesses in eligibility and who pays what for group insurance premiums and other health care expenses, as well as the source and beneficiary of tax savings. Owners and employees in C corporations can participate in cafeteria plans, health reimbursement arrangements (HRAs) and health savings accounts (HSAs), but participation in these plans and premium reimbursement accounts is restricted for more than two percent shareholders in S corporations, partners in a partnership, limited liability corporations and sole proprietorships. Those operations can, however, benefit from savings on payroll taxes. Payment for individual health insurance premiums through a flexible spending account or HRA is usually permissible but seeking legal advice is recommended.
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When Wellness Works: Partnering With Hospitals Leads to a Healthier Bottom Line for Employers.
Barney-Villano, Becky; Employee Benefit Plan Review; v67 no3 pp 11-14 Mar 2012; journal article

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Abstract : A number of employers are finding that collaborating with hospitals helps them manage wellness programs and health care costs more effectively. Since Iowa's Mainstream Living turned to its local hospital, Mercy Medical Center, to take advantage of low-cost screenings and slate of healthy lifestyle classes customized for its workforce needs, the employer has seen a fourth year of lower insurance premium increases and fewer hospitalizations and doctor visits. Nearly half the workers at St. Francis Winery in Sonoma, California, had never had a physical exam when the employer partnered with St. Joseph Health System. The hospital started providing a full range of health promotion activities at the workplace in Spanish and English. The first year's savings came to $40,000. Many hospitals have established health programs and are pleased to expand to serve local businesses. Employers should be clear on goals, describe the workforce health characteristics, work out funding and plan ahead to track results.
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Time to Move Past Initiatives Around Health Awareness, Education.
Dobson, Sarah; Canadian HR Reporter; v25 no4 p 2 Feb 27, 2012; journal article

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Abstract : While wellness programs are being widely adopted, Aon Hewitt finds most do not focus on trimming risk and costs. Health awareness and education initiatives are easy and inexpensive to implement. Employee assistance programs, newsletters, lunch sessions and health spending accounts were the most common initiatives among 120 employers polled. But nearly one in three of those polled did not know what health problems are driving their medical costs. Such analysis is critical, together with benchmarking costs against peer companies. Canadian companies that analyze costs focus on disability, drugs and absence from work, factors they can measure directly, and 39 percent provide online health risk assessments. Key factors affecting productivity and benefit costs which are often overlooked are job satisfaction, work autonomy and perceived stress.
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Be Familiar With Stop-Loss Options Before Purchasing.
Dunning, Matt; Business Insurance; v46 no8 pp 10, 12 Feb 20, 2012; journal article

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Abstract : An important tool for employers to manage health plans costs, stop-loss insurance starts with setting a deductible amount below which the employer assumes payment responsibility. The sponsor can adjust risk exposure through strategies such as lasering, the practice of singling out individual plan members incurring high costs, and separate carve out coverage for expensive treatments such as transplants. Aggregate stop-loss coverage is often set to activate at an attachment point of 125 percent of expected claim costs, but the deductible and attachment point can be modified. Those variations, together with employer workforce size, demographics, industry, location and previous claims experience, can lead to significant variation in premium costs estimated by different underwriters. Experts caution employers to avoid complacency that can come from a few years of low costs and lead to taking on too much risk.
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Employers Have Options to Address 'Lasering' Risk.
Wojcik, Joanne; Business Insurance; v46 no8 p 18 Feb 20, 2012; journal article

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Abstract : It is increasingly common for stop-loss insurers to laser an individual or medical condition, excluding it from coverage or imposing high deductibles due to high cost. In a given year, up to 30 percent of self-insured employers with under 500 workers may face lasering, especially at renewal. The rise of specialty biologic drugs is fueling the trend. Employers have choices for combating the impact of lasering, starting with paying a higher premium for all participants to offset higher costs from the laser. Another option is to spread the risk by aggregating the specifics and removing the above-deductible claims to a separate risk corridor. A third strategy is tiered coinsurance, involving the employer and the carrier sharing layers of liability above a deductible threshold.
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Medical Stop-Loss Captives Help Firms Pool Risk.
Dunning, Matt; Business Insurance; v46 no8 p 15 Feb 20, 2012; journal article

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Abstract : More midsized employers have been banding together and using group-funded captives for medical stop-loss insurance. Self-insuring and using a captive for stop-loss coverage adds stability to annual fixed costs and can help lower premium costs, while avoiding lasering high-risk individuals or conditions by an insurance company. Pooled employers agree on adopting PPO networks, third-party administrators, utilization review and case management. There must be strong emphasis on responsible cost management through risk management, wellness programs and participant behavioral choice. As of early 2012, the underwriting market for medical stop-loss captives was limited to five companies geared to medium-sized employers.
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More Control, but More Risk for Self-Insured Employers.
Banham, Russ; Business Insurance; v46 no8 p 7 Feb 20, 2012; journal article

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Abstract : Self-funding offers medium-sized organizations the potential for better control over health plan costs, though it means bearing full responsibility for claims. Before making a decision, organizations should embark on a feasibility study based on a comparison of unbundled costs for administrative fees, claims processing, expenses and premiums, looking at working with an insurer and self-funding. Self-funding and using stop-loss insurance may be less expensive and involves lower premium taxes. Some costs are fixed but services may be priced out separately. Company size and worker demographics are variables affecting costs, and the previous 12 months of claims experience and data on catastrophic claims will be considered. With stop-loss insurance, the attachment point where the insurance takes responsibility for claims over a threshold is a critical decision.
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Self-Funding Key Aspect of Employer's Strategy.
Kertesz, Louise; Business Insurance; v46 no8 pp 9-10 Feb 20, 2012; journal article

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Abstract : When Vail Resorts Management Co. of Colorado redesigned its consumer driven health plan and health reimbursement arrangement, it also embarked on a strong employee communications campaign to emphasize the meaning of self-funding of health benefits. By conveying the difference between self-funding and outside insurance, the company was better able to engage employees in the value of using health benefit resources with care, both for themselves and for the organization. The employer worked with UMR, a UnitedHealthGroup Inc. subsidiary, to overhaul its plan. Being self-insured, it had the freedom to change copayments to coinsurance, modify pricing and customize benefits for the group's unusual demographics and health influences, without having to find an insurer that would support unique provisions. In the first seven months after the change, the company has already appreciated the absence of cost increases.
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Special Issue: Self-Insurance: Taking Control of Your Benefits Program.
Wojcik, Joanne; Business Insurance; v46 no8 pp 3-4, 6 Feb 20, 2012; journal article

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Abstract : Nearly six in ten of employers having 200 to 999 employees self-funded health benefits in 2010, and while the figure fell to 50 percent in 2001, the rate is forecast to rise with the economy. Self-insured plans typically have lower costs, more flexibility and exemption from premium taxes and state mandates. Predictive modeling and stop-loss insurance at reasonable costs are expanding self-funding opportunities to small and midsized companies. Health insurers are joining third-party administrators, targeting the middle market to offer administrative services only contracts or bundled service arrangements. The Patient Protection and Affordable Care Act may spark self-funding growth due to lower costs, the spotlight on medical cost ratio and broker commissions, and the need for data access for cost and claim management analysis.
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Transplant Claims Can Jeopardize Self-Funded Plans.
Dunning, Matt; Business Insurance; v46 no8 p 19 Feb 20, 2012; journal article

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Abstract : An organ or bone marrow transplant can be catastrophic for a self-funded health plan, upending cost and risk management efforts with claims running over $1 million and spanning years. This can result in a stop-loss rate increase up to 50 percent on renewal. Several underwriters are offering critical care carve out policies to handle the broad range of costs associated with transplants. This strategy relieves both the plan member and employer. Transplant carve out coverage averages $7 per member per month for single members and about twice that for family coverage. The carve out is attached to the stop-loss policy as an exclusion, though the stop-loss policy remains liable for claims over a set deductible and the health plan remains obligated to provide care.
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Health Insurance: Few Small Employers Will Avoid Regulation by Grandfathering, Self-Insuring, Study Finds.
Hansard, Sara; BNA's Pension & Benefits Reporter; v39 p 303 Feb 14, 2012; journal article

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Abstract : Patient Protection and Affordable Care Act (PPACA) exemptions available to grandfathered or self-insured plans will have little effect on the small group market since few businesses will be able to take advantage of them. Small plans are likely to buy coverage through state health insurance exchanges, according to a Rand Corp. study. Eighty-eight percent of small firms are expected to lose that status by 2016 since they will be unlikely to continue with the same health benefit coverage without some changes. The best strategy for containing premium costs may come through merging individual and small group exchanges.
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Can the Rapid Growth in the Cost of Employer-Provided Health Benefits Explain the Observed Increase in Earnings Inequality?
Warshawsky, Mark J.; BNA's Pension & Benefits Reporter; v39 p 262 Feb 7, 2012; journal article

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Abstract : The gap between lower and higher incomes is expanding, and with earnings growing slowly relative to rising health care costs, individuals receiving lower compensation are more severely affected by medical costs than those at higher compensation levels. Growth in actual earnings, the amount remaining after health care benefit costs are deducted, has lagged behind compensation growth, especially for those at lower income percentiles. The inequality in earnings reflects the rapid rise in health insurance costs, but inequality in compensation has not changed significantly. Legislative proposals and policies, including the health care reform law, have been made to address the gap, but much remains to be done to address earnings inequality as affected by health care benefits.
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Can Your Benefits Plan Touch Its Toes?
McFadden, Kevin; Benefits and Pensions Monitor; v22 no3 p 42 Feb 2012; journal article

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Abstract : Flexibility has advantages, including in employee benefits offerings. Flexible benefit plans include modular arrangements, cafeteria-type plans and the increasingly popular healthcare spending accounts (HCSAs). HCSAs are set amounts of money provided to employees by the employer to cover medical and dental expenses. An HCSA can exist in addition to traditional coverage or replace insurance. Eligible expenses are fully reimbursable up to the amount in the account. For employers, costs are fully controlled, while employees enjoy flexible use, even for deductibles and coinsurance, expenses which are not normally reimbursed.
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Decision Time.
Bauer, Gabrielle; Benefits Canada; v36 no2 pp 26-28, 30-31 Feb 2012; journal article

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Abstract : A December 2011 Drug Plan Management Forum brought together insurers, employers, pharmacists, physicians and pharmaceutical industry representatives to discuss how to make drug plans more efficient. Attendees heard Mercer survey findings that over 70 percent of employers pay at least 80 percent of drug costs, including over-the-counter drugs and rarely with out-of-pocket caps or cost pooling. Plan design changes involving tiering, copayments, dispensing fee caps, generics and biologic drugs were offered as effective strategies for cost management. Lifetime specialty drug therapy for chronic diseases may be unsustainable for plan sponsors without design changes and consumer education. Key lessons include prioritizing drugs based on outcomes, educating plan members about therapeutic effectiveness and cost sharing needs, requiring prior authorization and exploring cost pooling options for underwriting biologic drugs.
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Dissecting DNA.
Davis, Andrea; Employee Benefit News; v26 no2 pp 33-34 Feb 2012; journal article

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Abstract : Pharmacogenomics, the study of how drugs may react differently in patients based on their DNA, is a growing field in 2012. Unlike other genetic tests, a pharmacogenomic test is solely concerned with the impact of the drug, not with a patient's condition. Advocates say pharmacogenomics can help doctors prescribe medication and determine dosing and duration with greater accuracy. Others maintain that genetic testing offers little proven benefit.
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Effective Incentive Design.
O'Day, Raphaela Finkenauer; Benefits Magazine; v49 no2 pp 36-40 Feb 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Research shows that individual motivation is a key factor driving health behavior change. Incentives come in two broad types, the carrot, in which positive outcomes are rewarded, and the much less commonly used stick, in which individuals are penalized. Studies have found that monetary incentives can help participants reach short-term goals but are not very effective at creating long-term change. Two successful health and wellness design schemes are a two-tier health plan that raises participant out of pocket costs if they do not meet targets after 90 days and a gain sharing strategy that returns employer savings to the employee population that engages in wellness activities.
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