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06/11/2006 - About A3 Absence Management
A3 Absence Management is a professional services firm offering unique and powerful solutions to the greatest threat to America’s competitiveness in the global marketplace: the rapidly growing cost of employee benefits and the loss of productivity driven by unplanned, unscheduled time away from work.
04/10/2007 - Physicians & Out of Pocket Costs
According to the Center for Studying Health System Change, in an article entitled “Physician Consideration of Patients’ Out-of-Pocket Costs in Making Common Clinical Decisions“, while most physicians pay attention to costs associated with the medicine they prescribe, far fewer consider cost when assessing clinical treatment.
Citing a study (subscription required for fulltext view) in the Archives of Internal Medicine, (Vol. 167), by Hoangmai H. Pham, G. Caleb Alexander, & Ann S. O’Malley:
The study found that while almost 80 percent of physicians consider patient costs when prescribing a generic over a brand-name drug, far fewer consider patient costs when deiding what diagnostic tests to recommend (40.2%) or deciding whether to hospitalize a patient when outpatient treatment is an option (51.2%). Cost-sharing arrangements targeting patients are likely to have limited effects in safely reducing health care spending because physicians do not routinely consider patients’ out-of-pocket costs when making decisions regarding more expensive medical services.
Much of the adjustment required to control run-away health cost increases in the US involves behavioral change. Some of that change will be in patient behavior.
But some of the behavior of service providers seems clearly to be in need of change, as well.
12/19/2006 - DOL issues HIPAA clarification for wellness programs
According to their frequently asked questions:
Are wellness programs allowed under HIPAA€™s nondiscrimination rules?
The HIPAA nondiscrimination provisions generally prohibit group health plans from charging similarly situated individuals different premiums or contributions or imposing different deductible, copayment or other cost sharing requirements based on a health factor. However, there is an exception that allows plans to offer wellness programs.
If none of the conditions for obtaining a reward under a wellness program are based on an individual satisfying a standard related to health factor, or if no reward is offered, the program complies with the nondiscrimination requirements (assuming participation in the program is made available to all similarly situated individuals). For example:
- A program that reimburses all or part of the cost for memberships in a fitness center.
- A diagnostic testing program that provides a reward for participation rather than outcomes.
- A program that encourages preventive care by waiving the copayment or deductible requirement for the costs of, for example, prenatal care or well-baby visits.
- A program that reimburses employees for the costs of smoking cessation programs without regard to whether the employee quits smoking.
- A program that provides a reward to employees for attending a monthly health education seminar.
Wellness programs that condition a reward on an individual satisfying a standard related to a health factor must meet five requirements described in the final rules in order to comply with the nondiscrimination rules.
The wellness program rules are generally effective for the plan year starting on or after July 1, 2007.
and this:
What are the five requirements for wellness programs which base a reward on satisfying a standard related to a health factor?
- The total reward for all the plan€™s wellness programs that require satisfaction of a standard related to a health factor is limited €“ generally, it must not exceed 20 percent of the cost of employee-only coverage under the plan. If dependents (such as spouses and/or dependent children) may participate in the wellness program, the reward must not exceed 20 percent of the cost of the coverage in which an employee and any dependents are enrolled.
- The program must be reasonably designed to promote health and prevent disease.
- The program must give individuals eligible to participate the opportunity to qualify for the reward at least once per year.
- The reward must be available to all similarly situated individuals. The program must allow a reasonable alternative standard (or waiver of initial standard) for obtaining the reward to any individual for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to satisfy the initial standard.
- The plan must disclose in all materials describing the terms of the program the availability of a reasonable alternative standard (or the possibility of a waiver of the initial standard).
12/12/2006 - Health care market schizophrenia?
Or, perhaps more appopriately stated, “health care marketing schizophrenia”
The industry press has, for much of the last year, been filled with stories about how Consumer Driven Health plans have been taking off.
But today, this bit, entitled “Future Unclear for CDHPs“:
While consumer-driven health plans still are a relatively new concept, many industry experts are fearful that if the model doesn€™t begin gaining public trust and interest within the next two years, then CDHPs could fall by the wayside and open the door for other concepts, such as universal health care.
Employers and consultants who pitch CDHPs need to be more engaged with employees and understand their audience, according to experts speaking yesterday at the Consumer Health World conference in Washington, D.C. €śThe marketplace has changed underneath us, and we need to change with it,€ť said David Saltzman, a consumerism consultant with the health insurer Humana. €śThe worst thing to do is not communicate.€ť
Employees often don€™t like cost-shifting strategies, have problems understanding deductibles and the cost-savings benefits of CDHPs and are confused by the varying plan designs, which include health savings accounts, health reimbursement arrangements, medical spending accounts and flexible spending accounts. €śWe really need to sell the HSA,€ť remarked Scott Stevens, an employee benefits specialist with NP Dodge Insurance in Omaha, Neb.
The more time employers spend educating their workers on HSAs, the more likely the plans will be viewed favorably, noted Nathaniel Brinn, chief executive of HSA Bank, based in Sheboygan, Wis. A survey of HSA Bank€™s employer groups found employers that spent 90 minutes or more talking to their workers about HSAs saw a 21% increase in acceptance of the accounts.
A new survey from the Employee Benefits Research Institute and the Commonwealth Fund shows that a large majority of people with high-deductible health plans do not have a health savings account, mainly because they can€™t afford to contribute to it. About one-third of the 1.3 million adults in consumer-driven health plans do not receive employer contributions to their accounts, and nearly 20% do not contribute their own money to the accounts. It also finds that 44% of adults in CDHPs spend 5% or more of their income on medical costs and premiums, which is double the rate of those with more comprehensive coverage.
Logic dictates that one (CDHP is taking off) or the other (Future unclear for CDHP, and if it doesn’t take off, it could lead to universal health care) is true, but not both.
As a side note, when articles like this appear, and speak of “universal health care” as though it’s a bad alternative to CDHP, it would be helpful to find out what the author thinks is bad about an otherwise-excellent sounding concept like “universal health care”.
Of course, there are many legitimate concerns about the implementation and trade offs inherent in such a system. But it is imprecise and less than completely helpful or informative for average readers to simply be informed that universal health care is somehow a bad thing.
11/22/2006 - Depending on how you measure…
Health care cost acceleration (distinct from the total cost of employee illness & prevention) is going down in 2007.
No, not health care costs, health care cost inflation. But aside from that terminology choice, which doesn’t fool a CEO or a CFO, a story in this week’s (Albany NY) Business Review points out that it still depends rather heavily on the trade-offs that companies choose to make.
The article, entitled “Workers carry more of health care costs” points out that, absent any changes, inflation at three times the CPI is still the norm:
Preliminary results of a survey now being conducted by Mercer Health & Benefits LLC indicate that employers who simply renew their medical plans, with no changes, face an average cost hike of 9 percent.
For those companies who find this unacceptably high, it appears the best alternative option is inflation that’s “only” double the CPI rate:
After changes such as higher deductibles and co-pays, the average price increase falls to 5.6 percent. When Mercer polled employers in 2005, they were facing an average benefit cost increase of 6.1 percent.
Not much of a choice, in other words. And, as the headline indicates, the changes required to slow down the rate of increase in the health care component of these costs include asking the employee to bear more of the financial burden.
Under the circumstances, that seems a reasonable trade-off to make, but doing so will eventually put upward pressure on wages. This means, of course, that the tactic is primarily useful as a method of kicking the can down the road rather than dealing with the problem.
Health care costs are part of a larger mosaic in any employee intensive business, and gaining control of the whole picture can provides the ability to reduce spending on health care costs and their associated productivity drain, rather than simply shifting that cost to another line on the income statement.
11/14/2006 - Absenteeism in U.S. workplace hits highest level in years
According to an Associated Press story in Monday’s Miami Herald:
Workers are taking more unscheduled days off as bosses struggle to curb the practice.
Skipping work without good reason? You have lots of company. Unscheduled absenteeism at U.S. companies and organizations has climbed to its highest level since 1999, according to results of a recent nationwide survey of human resource executives in U.S. companies and organizations.
The survey, conducted for CCH by the Harris Interactive consulting firm, put the U.S. absenteeism rate at 2.5 percent in 2006, up from 2.3 percent a year ago and the highest since seven years ago when it was 2.7 percent.It found that personal illness accounts for only 35 percent of unscheduled absences, with the rest due to family issues (24 percent), personal needs (18 percent), stress (12 percent) and entitlement mentality (11 percent).
Measuring the problem is one thing; fixing it is something different, and requires a re-thinking of the manner in which a company deals with employee absence. The financial impetus to do so is quite strong, or it should be:
Regardless of the reason, the trend is costly for U.S. companies. CCH, which provides human resources and employment law information and services for businesses, said absenteeism costs some large employers an estimated $850,000 per year in direct payroll costs — more when factoring in lost productivity, morale and temporary labor costs.
For the record, the numbers listed above, even though they don’t account for lost productivity and other indirect costs, are either poorly articulated or quite a bit understated.
A 2.2% absentee rate which costs $850,000 in direct payroll costs implies total payroll of only about $38.5M/year.
There are many companies with payroll less than $38.5M, but there are no large companies with payroll less than $38.5M.
AP Story - Miami Herald - PDF
11/14/2006 - A pitfall for consumer driven healthcare?
In the same November 14, 2006 issue of Employee Benefit News referenced below, there’s another interesting piece, entitled “Doctors, patients don’t talk about drug costs”
Proving that not all statement of the obvious are a waste of the listeners’ time:
David Shore, founding director of the trust initiative at the Harvard School of Public Health and author of “The Trust Crisis in Healthcare,” comments, “We’re never going to get consumer engagement unless we get physician engagement, and physicians have checked out.”
Relying on benefits design that places the onus on the beneficiary to control costs has pitfalls, this among them, and is perhaps not the best, and surely not the only method businesses should consider while trying to tame annual benefit cost increases that still far-outstrip inflation.
11/14/2006 - Election results, and their potential effect on your business
“New political landscape may yield different health agenda”
That’s the headline of an article in Employee Benefits News (11/14/2006):
It contains several interesting assertions. The first is hard to argue:
“It really does make a difference as to who sets the [political] agenda,” Klein told the audience. “At the end of the two years, we may not see any more health care legislation emerge from the process than what we have seen in the current Congress, which is about to close. But the nature of the debate … around health care is going to be very different in the next two years than it has been.”
Of course, it’s hard to argue because it’s both potentially true and fully caveated. The second item’s a little less clear-cut, but still worthy of attention:
Mark Ugoretz, president of the ERISA Industry Committee, commented, “No benefits strategy can be developed without considering the implications of the new Democratic Congress. This is a major revolution [signaling] that the Reagan era is effectively gone.” He believes a Democratic Congress might pass more federal laws to encourage the use of long-term care insurance, given that baby boomers are living longer.
It may or may not be a “major revolution”, and may or may not signal the end of an era, but employers need to pay close attention to benefits strategy in what seems sure to be a time of active legislative effort on matters related to employee benefits.
11/02/2006 - Several potentially interesting news items
From the Oct 31, 2006 issue of BenefitNews Connect:
American workers like to play hooky, and it’s affecting the bottom line. Unplanned absences have cost some companies an estimated $850,000 per year in direct payroll costs, according to a survey by CCH, an HR and employment law publisher. (more at the link above)
EAPs help reduce disability claims:
Employee assistance programs appear to have a positive affect on disability claims, according to a recent study by The Hartford, which sells group benefits. Companies without an EAP had 6% of employees on disability leave annually, compared to just 2% of workers for employers that utilized EAP services, The Hartford reports. (more at the link)
And this, from Human Resource Executive Online - Future Outlook Unclear for CDHPs:
Moderating health-care premium costs, employer skepticism and inadequate employee-educational efforts are contributing to lackluster enrollment in consumer-driven health plans, according to one health-care expert. (more at the link)
The wise healthcare buyer, of course, would be careful to avoid putting too much faith in the recent “moderation” of health care premium costs. Those costs are not moderating, though their rate of inflation is. Far more important, their rate of inflation is still expected to outstrip the rate of inflation in the overall economy by 100% or more for the indefinite future, and that’s not economically tenable, for insurance buyers or insurance consumers.
10/30/2006 - Delays in implementation of Massachusetts Health Initiative
State to delay health care reform provision deadline
(Boston Business Journal - October 27, 2006)
No crisis, however - just what appears to be rational adjustment of the plan:
Businesses may get a break under changes to the state’s historic health care reform law passed last week.
Legislative “technical corrections” will reduce the number of forms needed to prove employees have been offered insurance. Other measures will tighten language and delay the launch of a provision that could force some employers to pay their employees’ health care bills if those workers use the state’s free care system.
Less forms, better presumption of control, and elimination of “free riders” are all important in a scheme, such as Massachusetts’, designed to treat employee health as a social, rather than business, issue.
The jury’s still out on the ultimate success of the program, but it so far appears far better thought-out than the Tenncare program in Tennessee, which, while it still has its fair share of both supporters and its detractors, has been labeled a “clear and present danger to the State’s fiscal stability”, by no less a luminary than Governor Phil Bredesen.
09/18/2006 - Conflicts we avoid
From the September 18 Wall Street Journal: (subscription likely required)
Double Bypass
Health-Care Consultants Reap Fees From Those They Evaluate
…
When Kevin Grady took over as an employee-benefits consultant for the Columbus Public Schools District in 2001, he signed a contract promising to act “in the best interest” of the schools. The Ohio district agreed to pay him $35,000 a year to help it choose a health insurer. Officials thought that was all Mr. Grady was getting out of the deal.
…
Just by way of comparison, A3 Absence Management neither sells nor represent the sellers of insurance products. Our focus is on processes, internal and external to our clients’ operations, and on the changes our clients can make to encourage employee behavior that is in both the employees’ and the clients’ best interests.
08/06/2006 - The continued employer search for benefit savings
In an August 3, 2006 article, Employee Benefit News cites a Kaiser Family Foundation report noting that
Firms that continue to offer health care benefits to employees face unrelenting cost increases. Over the course of the last six years, those benefits have nearly doubled to their current cost of $4,024 for individuals and $10,880 for families, according to Kaiser Family Foundation/HRET research.
No shock, that. A workable solution encompasses multiple components, some of which are within A3’s area of specialization. The article referred to above is the first in a series designed to report the results of the “2006 EBN-Forrester Benefit Decisions’ Impact Study”. The survey relies on the answers of “800 benefits executives from firms of all sizes”, and seems quite likely to provide interesting reading for anyone tasked with controlling benefit costs while still working toward favorable outcomes for employees.
Among the interesting results of this first part of the survey report, which we’d urge you to read, you’ll find that the chase for direct control of prescription costs seems quite low on the list.
Instead, employers are looking to skate ahead of rising costs through health promotion and preventive care.
Given the various failures over the years of attempts to tightly control consumption, a concerted effort toward holding down the need for healthcare, rather than simply rationing its use, strikes us as compelling.
06/21/2006 - Consumerism and the Health Benefits Dilemma
In an article at Human Resource Executive Online entitled “The Health Benefits Dilemma”, Dallas Salisbury comments on the ever-increasing concern with, and some reactions to, the outsized proportion of health benefit expenses in America.
Among several others, he discusses the moves by Wal-Mart to improve benefits offered to its employees, and the efforts by the Detroit Chamber of Commerce to offer a program assisting smaller employers in providing health benefits to their employees.
As part of his cautionary tale, he adds:
Yet, that movement brings another dilemma front and center: Integrated care is seen by many as providing the best cost/quality value, but it does so by limiting individual choice, while open consumer choice is the core principle for many of the advocates of moving to a consumer-driven system.
CDH programs, unless implemented carefully, might solve the provision problem while making the expenditure problem even worse. More troublesome, this forecast:
There are no easy answers, but with health care spending as a percent of GDP projected to climb from 16 percent to over 22 percent in a few short years and the number of uninsured growing, the nation will not be able to put off dealing with these issues much longer.
The components of that 22% forecast are unclear from the text of his article, but we presume them to include increased retiree medical costs, in line with the increase in retirees, post baby boom. Even without the 6 percentage point forecast increase, it’s clear that left on its present path, the provision of health benefits in America will continue to be on shaky ground.
06/12/2006 - WSJ - UAW Chief Warns Membership
WSJ - Jun 12 2006 - UAW Chief Warns Industry Needs Help
Ron Gettelfinger, president of the United Automobile Workers, plans to tell his membership today that an unprecedented crisis for the industry requires tradition-breaking sacrifices from auto workers, the New York Times reports.
In a report he will present at the union’s convention, Mr. Gettelfinger blamed the U.S. auto industry’s malaise on “bad management” and declining auto sales, the Times says. And while he declined to say what specific measures he would seek from union members at a time when car and parts makers are demanding concessions, he said the “union’s health-care benefits helped create a ballooning health cost crisis that had become ‘unsustainable’ in the face of the auto companies’ declining sales,” the Times adds.
06/12/2006 - More on union difficulties
From the June 12, 2006 New York Times:
{…}
“This isn’t a cyclical downturn,” Mr. Gettelfinger said in the report. “The kind of challenges we face aren’t the kind that can be ridden out. They’re structural challenges and they require new and farsighted solutions.”
Mr. Gettelfinger declined to say what specific moves he would ask union members to make and said he believed things could improve for the union, which he argued is gaining political and social momentum. But seasoned labor experts said the report and a speech Mr. Gettelfinger is scheduled to give on Monday on the state of the U.A.W., are meant to prepare union members to expect more concessions in critical contract talks that begin next year.
“Usually you rally them for the fight that’s ahead; he’s rallying them for the hard times that are ahead,” said Gary N. Chaison, a professor of labor relations at Clark University in Worcester, Mass.
