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New Avatar of Value Based Benefit Designby Bhushan Deopujari &Dr. Vandana Rahadwa

16 Medical Loss Ratios.. Agent or No Agent.. ‘Freedom to Choose’by Larry Steep

13 Technology Innovation,US Healthcare andby Apporv Reddy

29 The Time is Now Ten Steps Organizations can Take to Successfully Comply with ICD-10by Manish Nachnani

Copyright © 2011 Healthcare Reform. All rights reserved. Healthcare Reform Magazine is published monthly by. Material in this publication may not be reproduced in any way without express permission from Healthcare Reform Magazine. Requests for permission may be directed to [email protected]. Healthcare Reform Magazine is in no way responsible for the content of our advertisers or authors.

10 What is the future of the Health Insuranceby Jane Ames

19 The MLR Provision: Unraveling the Mystery of Three LittleLettersby Pamela Mullahy

The Challenges for Accountable Health Organizations (“ACO’s)by Tony Barber

33 HEALTHCARE...WHO CARES?by Mark Troutman

38 HEALTHCARE BENEFITS INNOVATION:EMPLOYERS CREATING THEIR OWN CAPTIVE INSURERSby Melvin J. Howard

THE BEHAVIOR DRIVENHEALTH PLANby Russ Swallow

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How obesity and workers compis crippling companies and Preventionby Mel Okeefe

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22EDITORIAL

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Jonathan Edelheit

Letter from the Editor Transparency in Healthcare Reformby Jonathan Edelheit

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LETTER FROM THE EDITORTransparency in Healthcare Reform

There is something that has been eating away at me for months. It is the utter lack of transparency by government and by both Republicans and Democrats regarding healthcare reform. It is almost impossible to find one person in the US Government who can talk about Healthcare Reform. I don’t know if it’s because no one in DC or up on

the hill knows anything about healthcare reform or if there is some kind of unofficial “gag order” in place. No one realizes it because no one even knows what the right questions to ask. But when our magazine goes out to ask questions of people in the Government, whether Republicans or Democrats, we are told they won’t do interviews. When these same people in government who are involved in the healthcare reform process go and speak at conferences, they put a “gag order” on the conference. No recordings, no pictures, and no stories are allowed to be written about their speech? Can you believe this? Where is the freedom of speech and where is the transparency? Is it because they know people won’t like the answers, or because they don’t know the answers and that will be very embarrassing. The saddest part is that both sides are so focused on fighting each other and “one-upping” each other, they have forgotten about the American people. They have forgotten that while they fight for political standing and positioning for 2012, we the people lose out. I feel the recent elections were supposed to be a big wake up call to BOTH parties. To cut it out and to do what’s best for America and to teach them to start working together. Unfortunately both parties missed the message and we may find no progress until two years from now, when Americans correct inaction and political infighting at the next set of elections.

Jonathan Edelheit

Jonathan Edelheit is editor-in-chief of the Healthcare Reform Magazine and has been involved in Health Insurance industry for over ten years. His background includes running a national healthcare administrator that designs insurance products for employers and insurance companies and working with thousands of health insurance agents and consultants around the country. Mr. Edelheit has been mentioned or featured in hundreds of magazines and media over the past few years and is considered an expert in health insurance and healthcare. Mr. Edelheit is also the editor of the Self Funding Magazine, the Corporate Wellness Magazine, the Voluntary Benefits Magazine and the Global Benefits Magazine. Mr. Edelheit also runs one of the largest healthcare conferences in the country, the Employer Healthcare Congress, www.employerhealthcarecongress.com.

ABOUT THE EDITOR



New Avatar of Value Based Benefit Designby Bhushan Deopujari & Dr. Vandana Rahadwa

Patient Protection and Affordable Care Act (PPACA) stresses on increasing the coverage, providing preventive care and value based insurance design, there-by curbing the health care costs in the long run. It has also brought number of regulations which restricts the insurance companies from denying coverage to individuals based on their pre-existing conditions. The insurance companies are now prohibited from charging co-payments or deductibles for preventive care along with

complying with medical loss ratio of 85%. With all these changes, it will be challenging for insurers to retain existing members and to attract new members while remaining compliant with regulations. PPACA thus puts intense pressure on payers to reduce costs and improve efficiency. At the same time it also provides a big opportunity for insurers to attract new members eligible for coverage. To leverage this opportunity, payers need to develop value based insurance plans supported by strong data analytics and also increase their focus on disease prevention strategies. Value Based Benefit Design (VBBD) is emerging as an approach to promote services and behaviors proved to be effective in improving health of the members. The central focus of VBBD

ABOUT THE EDITOR

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is increasing value for patients — the health outcomes achieved per dollar spent VBBD is based on the concept of providing additional incentives to the members with chronic disease conditions to be compliant towards prevention and care management strategies. The strategies include preventive medications, regular checkups, diagnostics, disease and care management etc. Incentives can be in the form of providing financial benefits, in terms of lower co-pay, coinsurance, lowering tiers of certain branded drugs, starting prevention and wellness programs etc. Thus, for Members VBBD program aims to improve the overall health while for payers, it aims to reduce long term health care costs.

VBBD Programs – Today:

Today, a very limited number of employers and insurers have implemented VBBD programs for their members. A study done by Centre for Value Based Insurance Design, University of Michigan shows that currently less than 20% of the employers have implemented some type of VBBD program and approximately 50% are planning to adopt these programs in near future. One of the existing VBBD program is designed to offer $20 discount on certain prescription drug co-payments for plan participants who refill their medications on a timely basis, while another is designed to offer lowered co-pays for asthma and diabetes medications. There is also a program which creates a personal health profile of the members and benefits are designed considering the suitability and effectiveness of the program for the particular member. To be effective in the post-reform world, VBBD concepts need to be altered considering the other non-compliance reasons which include lack of awareness on the VBBD concepts, lack

of motivation, perceived health behavior, among others. VBBD Programs- Suggested implementation considerations:

Insurers will need to think of innovative strategies to reduce healthcare cost, maximize ROI and improve member retention. VBBD programs will also be appealing to employers who will need to focus on increased productivity encouraged by healthy lifestyle choices.

Cost Benefit Ratio

VBBD program is usually implemented by employers, with a large member base, having substantial number of members suffering from chronic diseases. The group with high non-compliance will be benefited the most from VBBD programs. The cost benefit analysis should be done in the planning phase for deciding the minimum participation number and the target compliance level, for justifying the ROI.

Redesigning the Benefits

Benefits should be designed considering the non-compliance factors. Carefully designed benefits are likely to provide rich dividends towards the success of VBBD program. Benefits can be in the form of financial incentives, educational seminars, counseling, prevention programs, disease and care management programs etc., Designing benefits should be dependent on factors such as economic cost, targeted increase in compliance, presence of prevention, disease and care management programs etc. For example, in case of economic constraints, the incentives requiring low investment but having maximum impact on compliance should be first implemented. Remaining benefits can be



subsequently extended to members as the program evolves.

Tracking Program Effectiveness

It is also very important to track the effectiveness of program at predetermined intervals to ensure the success of the program. Necessary changes should be made to benefits from time to time depending upon the prevalent non-compliance factor. The non-compliance benchmarks set up for program should be reviewed periodically for continuous improvement. The success of VBBD program will depend upon end to end analytics starting from VBBD conceptualization stage to tracking the success of VBBD program post-implementation.

Active Member Participation The success of VBBD programs is heavily dependent on active participation of members. The members should be provided with all possible tools such as self-health monitors, dedicated customer service etc. encouraging them to take increased ownership towards their health.

Payer-Provider Collaboration With increased focus in pay for performance, it is imperative for providers to participate in disease management and quality initiatives. Payer-provider collaboration will further enhance the success of VBBD programs.

The collaboration can be achieved with:

• Insurers providing financial incentives to members for visiting recommended providers.• Insurers providing financial incentives to providers based on quality compliance.• Episode Treatment Group (ETG) /Bundle payment system for providers to promote quality care which will help providers comply with ACO (Accountable Care Organization) mandate.• Tiering: One approach to steering consumers and patients towards the use of high valued health care services and health providers is “tiering.” Broadly defined, tiering refers to the classification of healthcare providers (e.g., hospitals and physicians), pharmaceuticals, or treatments/therapies, based on objective or subjective criteria such as cost, quality and value. The members leveraging high value services from the tiered providers are incentivized by the insurance companies

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Insurers adopting VBBD framework are likely to be insurer of choice post health care reform Such insurers will also be better placed to comply with the regulations and contain health

care costs in the long run.

Challenge Description Suggestions to address the challenge

VBBD program implementation requires upfront investment in setting up the IT framework, providing incentives to members while redesigning benefits, starting and maintaining prevention and wellness programs, administrative costs to run the program, provider incentive programs and clinical research.

With accurately predicting the ROI using advanced analytics, necessary investment can be justified for implementing the VBBD program. Also implementation of the program can be done in a phased manner starting from simpler to complex there-by reducing the initial implementation cost.

ROI realized from the VBBD program is very difficult to measure quantitatively.

Advanced analytical capabilities can prove useful in quantifying the financial impact of VBBD program and can also provide exact ROI realized from the program.

VBBD provides incentives such as co-pay / coinsurance reductions to encourage members to use the high value services. This will result in increased utilization of high value services, ultimately increasing the healthcare cost.

Value realized from various initiatives of the program can be evident only after few years of implementation. Long term savings achieved through reduction in high cost claims and member wellbeing will justify the investment made for VBBD programs.

If an insurer offers VBBD to small groups, it is likely to attract more people having that disease thus increasing the overall risk of the group. This leads to adverse selection and challenges the basic principle of insurance. Also in order for insurers to realize benefits from VBBD program, it’s necessary that the group / individuals continue to be enrolled with them for long term.

Pre PPACA, small groups and individuals were not the ideal candidates for VBBD programs. The risk of adverse selection is for real while implementing VBBD for small groups or individual market. With PPACA prohibiting insurers from denying coverage to members with pre-existing conditions, insurers need re-think of innovative ways to balance the risk of adverse selection. Even if insurers decide against implementing a full-fledged VBBD program for small groups / individuals, they can implement specific VBBD components to minimize the risk of covering individuals with pre-existing conditions.

Cost of implementation

Quantifying Dollars Saved

Increased utilization of high value services

Adverse selection and Continuity in VBBD programs:



One way to address these challenges is to implement the VBBD program on pilot basis.

• Target a single chronic disease• Implement VBBD program for a small plan sponsor• Redesign few benefits to start with• Implement the program from simpler to complex

The learning can then be used for implementing it to a larger population. Apart from this, there also needs to be a trade-off between the cost and the return on investment. Higher the complexity of VBBD, higher the returns it is likely to provide in the long run. Hence, the success of VBBD also depends on long term goals of payers and their investment capabilities.

Conclusion:

With PPACA there is a renewed importance for VBBD programs, which provides a structured way to help healthcare stakeholders comply with the mandates as well as to contain healthcare costs in the long term. Considering the challenges while implementing VBBD programs, it must be well understood that the benefits realized over a long term will help justify the investments in this program. Payers / Employers will have to decide upon the strategy that suits best for them.Use of analytical capabilities by payers, right from identifying the target population to tracking the program post implementation is one of the most important factors contributing to the success of these programs. VBBD program is also incomplete without active member participation as well as involvement of provider in terms of financial incentives, bundle payments, ETGs etc. Thus, benefit design strategies are likely to be most effective when they are paired with other policies, such as provider incentives, incentives to members

based on visits to high value providers, payment and delivery system reform etc.

About the Arthor

Bhushan Deopujari is a Consultant with Healthcare Consulting Practice of Infosys Technologies Limited.

Bhushan has more than 6 years of Healthcare industry experience. He has primarily worked in Payer industry. He has extensive experience in Healthcare Data Warehousing, Claims, Rebates invoicing and Allocation (sub components of PBM). He is a certified AHIP.

Bhushan is currently working on conceptualizing and designing IT solutions for Payer industry

Dr. Vandana Rahadwa is a Senior Associate Consultant in Healthcare Consulting Practice of Infosys Technologies Limited.

Dr. Vandana comes with extensive experience over 7 years in healthcare sector. She has worked in Provider and Payer industries. She specializes in Hospital Planning, Designing, Operations Management, Healthcare Quality management, Disease Management and Healthcare IT solutions. Currently Dr. Vandana is focused on conceptualizing and designing IT solutions for addressing business challenges posed by healthcare reform.

References:• www.healthcare.gov• VBBD Purchaser guide by National Business Coalition on Health January 2009 • http://www.sph.umich.edu/vbidcenter/ • VALUE IN HEALTH CARE Accounting for Cost, Quality, Safety, Outcomes and Innovation AN IOM LEARNING HEALTHCARE SYSTEM WORKSHOP, March 2009• http://www.lifeclinic.com/fullpage.aspx?prid=530220&type=1 • http://www.uhc.com/news_room/2010_news_release_archive/ refill_and_save_program_for_prescription_drugs.htm

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What is the future of the Health Insurance

You have probably planned a vacation in the past five years. During that time you had the choice to use a Travel Agent or not. Most of us did not. ...Health Insurance Agents across the country who work in the Individual and Small Group markets are concerned that consumers will bypass them in a similar way after 2014. Is that likely? This article explores this question using analogies from other industries that have had to undergo similar changes.

Background: Starting in 2014, Health Care Reform requires that each state make available an Exchange, which is an (primarily) on-line portal

for individuals and small groups to purchase health insurance with or without Federal subsidies. There are 5 products that must be offered and each insurer must describe their products in a similar format. No medical information can be used to decline or rate up an individual or group. If a person needs help with their transaction they can call a person hired by the government called a “Navigator”. There is the option of allowing private insurance to be available outside the Exchange with different benefits, but rates are pooled so there will be no price advantage for consumers to select plans inside our outside the Exchange. (Note: This is highly summarized for purposes of this article.)

by Jane Ames



Reasons why Health Agents will still be needed after 2014

People will do their own shopping online only if they consider it a good use of their time.

In the case of travel, there are 3 reasons people shop online: (1) There are far more options available to people via the internet than through a travel agent (2) There is more information about the options (pictures, personal unbiased testimonials, prices, etc.) (3) Many consider it an enjoyable activity.

The same will not be the case with health insurance in 2014 once the Exchange is functioning. By law, the Exchange will only include the insurers and products that it offers, consumers will have to go elsewhere to learn about other options. The objective for the Exchange is to provide data to help individuals make informed decisions on the most cost-effective, high quality providers and insurers.

Even if done well, it is still likely that most people

will consider personal references more important than any data on the internet to make their selection. This is a cultural and trust issue (think about how you selected your mechanic, accountant, and dentist.) In addition, if you have a health insurance agent before 2014 and you trust them, and it doesn’t cost you extra or reduce your options, you are likely to want to keep using them for advice and service. Finally, shopping online for health insurance is not likely to be considered enjoyable, although it is likely that a consumer would explore the Internet and then contact their existing agent. Service and trust are important considerations

There will be a new level of complexity post 2014 as people become eligible for Medicaid or other Federal and State subsidies and want to know what options they have to maximize their health insurance benefits and minimize their penalties. Here you might consider as an analogy the individuals and business owners who do their own taxes online (like TurboTax) vs. those that go to a CPA or lower-priced firms like H&R Block. People make these selections based on cost, time, expertise, and trust. In the future world of Health Care Exchanges– all of these are considerations when you decide whether to go on your own or use a Health Insurance agent. If there is a cost to using an agent or if there are less options, that will be a large deterrent*, but some people may consider it worthwhile if they feel they will benefit most with the service of an expert who can explain all their options and provide unbiased recommendations.

In addition, if an individual considers the service of the Exchange call center (staffed by Navigators) to be inadequate they will be less likely to shop without assistance. What this means is that Agents who are expert on the new law and all the options within and outside the Exchange will be in demand. Classes offering CE credits will be important, or perhaps new certifications will be required or a new type of Agent designation will be created.

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Agents must add value to Financial Products

CPAs and Real Estate agents are perceived to add value to a financial transaction. They do this through saving money or time, as mentioned before, and also by reducing risk and acting as an advocate if issues arise. Do Health Insurance Agents do this? Now- definitely. Health Insurance is a very complex industry. Different carriers offer different products, have different rules and often use the same terminology in different ways. Not all information is available on how things work, and people aren’t always sure that what they see is what they will get. Facts change faster than even websites can keep track of. Consumers trust that agents will help them avoid pitfalls and hidden “gotchas.”

In the future, however, many of these risks will be mitigated through PPACA regulations. What risks will remain? A few come to mind:

• Frequent changes: a new Exchange is bound to hit bumps and make changes frequently in the beginning.

• Extreme complexity: assuming that competition continues, there will be changes in carriers, providers and plan options both inside and outside the Exchange likely involving items we haven’t even thought of yet. When individuals and businesses only look at their health insurance once a year it is very helpful for them to go to a single source for the most current advice preferably one who knows

their situation • compliance and penalties: the new law creates

numerous penalties and fines for non-compliance• Tax implications: businesses in particular have

many tax implications to consider that will likely be outside the area of expertise of a government Navigator.

Based on these points, it is apparent there is still a need for Health Insurance Agents, but it will look a lot different in 2014 than today. We, as agents, will need to carve out the more clerical tasks to Navigators and stay educated on the changes in law and continue to service and advocate for our clients. In addition, we should use any influence we have to make sure the Exchanges are designed in a way that allows for competition, keeps private health care options available and doesn’t become a government bureaucracy. One way to influence this is to join NAHU and contributed to their PACs. Things are moving fast, so do it today!*NAHU and its subsidiary organizations are working hard to avoid the following scenarios that would markedly impact the future of agents: (a) people who are eligible for subsidies can only get them through the Exchange (b) there are no commissions for Agents when placing business through the Exchange.

About the author

Jane Ames worked for a leading national Health Insurance company for 18 years where she was an underwriter, trainer and key participant in pricing system development and implementation in 11 states. In 2010, Jane started her own business, Jane Ames Consulting which provides health care consulting, education and broker services to individuals and small businesses in Georgia. She is also on the Board of the Atlanta Association of Health Underwriters. In addition to an undergraduate honors degree in Mathematics from Clemson University, she has both an MBA and MHA (Masters in Health Administration) from Georgia State University.

This article was edited by Erica LaSalle, graduate of Georgia Southern University with a Bachelor of Arts in Writing and Linguistics and English.



Technology Innovation,US Healthcare and Health Reforms

Over past couple of decades, banking industry witnessed technology innovation in the form of credit cards, ATMs and online banking which substantially reduced administrative

costs and made banking simpler for end user. The innovation in chip technologies enabled hardware industry to bring down cost of computers which lead to higher demand and reduced cost for the industry. Bookstores went online and companies like amazon brought down the cost of books by cutting down entities involved in the supply chain. There are numerous such examples across various industries where technology has played key role.

However, Technology innovation has not worked as well with US healthcare industry as it did

with other industries; it is one of the reasons why America spends 17.2% of GDP or about $2.5 trillion on healthcare. The healthcare expenses have been growing at significantly higher rate than inflation. U.S. healthcare system stands last for its performance among seven industrialized nations, despite spending the most, according to a new Commonwealth Fund report 2010.

Technology innovation has not succeeded in improving US healthcare the way it did in other industries and the actions being taken by federal government to promote Healthcare IT.

1. Slower Adoption of technology: Implementation of innovations that could bring down costs has been slow in US healthcare industry. Implementation of Electronic Health records is one such example. Partial

by Apporv Reddy

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to full penetration of EHRs in European nations such as Norway, Sweden is about 90 % whereas it stands at meager 23% in USA, according to a report. Administrative efficiencies could be achieved with innovations such as Real time claims adjudication and ICD 10 implementation. CMS report suggests that hospital productivity gains have been “small or negligible” over the past quarter century. The usage of basic communication medium like E-mails also is not widespread between patients and doctors. Usage of smartphones in healthcare is catching up, however it still has long way to go.

2. Higher Costs of Technology: Due to patent protection laws, manufacturers need not worry about price competition when they launch new medical equipment/drug; emphasis is on recovering the costs before patent expires. Insurers do not have enough bargaining power to negotiate lower prices on these costly treatments. Because of this, technology drives up the healthcare costs.

3. Consumer price insensitivity: Once members pay the premium, there is decreased motivation to opt for drugs, treatments that cost less as members tend to believe that costlier treatment is better. Costlier treatments and equipment are demanded by patients and physicians on the grounds of quality. Cost of new technology consistently accounted for 20 percent to 40 percent of the rise in health expenditures over the past forty years. Perverse incentives like this push the healthcare costs up despite innovations happening in the system.

4. Limited incentives for doctors / hospitals for cost reduction: Many of the technology innovations have not lead system efficiency or reduced healthcare costs. On the contrary, Congressional Budget Office estimates that an astonishing half or more of the increased spending on health care in past decade is due to technological,

surgical and clinical advances. An article in The Journal of the American Medical Association points out that simple surgery that eases pressure on the nerves has been replaced by complex fusion surgery to relieve lower back pain. Surgeons were paid 10 times as much for the complex surgery, hospitals were paid three and a half times as much, and manufacturers made $50,000 worth of implants for the complex surgery compared with little or no profit from the simpler fusion surgery.

5. Overutilization of technology: Overutilization of technology, increases spending with limited additional benefits. At the same time, market-based competition among provider organizations to use the latest equipment increases the utilization of expensive technology at the expense of older, less expensive alternatives. This clearly seems to be the case with US healthcare where returns in terms of improved healthcare are not in proportion to investments on technology.

6. Lack of innovation in chronic disease prevention: Prevention is the key to both better health and lower healthcare costs. One third of American population is overweight (about 97 million people) and America spends whopping 75% on chronic diseases which can be prevented to large extent by closely working with consumers. However the focus is more on disease care rather than on preventive care. According to a recent New England Journal of Medicine article, over 2 million Americans die due to preventable reasons like smoking, high blood pressure, obesity, diabetes etc. UnitedHealth Group estimates that Diabetes may cost America approximately $3.4 Trillion in the next 10 years. Improper eating habits and unhealthy lifestyle are prime reasons behind these problems. Innovative ways to promote prevention may go long way to bring down healthcare costs. Solutions need to be introduced and implemented to involve all stakeholders and push consumers to lead healthier lifestyle. Health 2.0 technologies could go long way to promote healthier lifestyle.



7. Defensive Medicine costs: In many cases, physicians opt for comprehensive treatment that include extra tests and scans to make sure that they don’t have to face litigation for medical malpractice. This practice of defensive medicine costs $55.5 billion to US healthcare every year according to a study. Doctors also pay hundreds of thousands of dollars a year in malpractice insurance. These expenses can be limited to an extent with Electronic Health records implementation.

8. Failure in reining the inefficiencies: Significant innovations are required to rein in the key areas of system inefficiency such as administrative inefficiency, Provider errors, lack of care coordination, unnecessary care, fraud and abuse etc. $40 billion of costs could be saved in the U.S. health system in terms of inefficiencies reduction with implementation of EHRs, according to Mckinsey report. Fraud and abuse are prevalent, more prominently in Medicare. Healthcare costs would be significantly lower (A Thomson Reuters report claims that almost $700 billion are spent in wasteful spending and significant chunk here can be saved) with innovations in this area which has not happened so far.

Federal government is pushing the changes

which would enable Healthcare IT to usher into new era where technology would simplify healthcare with big ticket implementations such as HIPAA 5010 changes, ICD 10 implementation, Grants of $19.2 Billion to address the meaningful use of health records and privacy / security concerns associated with the electronic transmission of health information as part of ARRA act of 2009.

PPACA act of 2010 has outlined various changes with regards to healthcare IT. The proposed changes include implementation of health benefit exchanges, promoting administrative simplification with enhanced interoperability, promoting new models such as Accountable care organizations which would need various technology innovations ( Remote health monitoring, telemedicine) to be successful, creating Innovation Center within the Centers for Medicare and Medicaid Services and performance bonuses for organizations that demonstrate successful implementation of HIT initiatives among other steps.

The change that all these reforms are set to bring in would not be easy on stakeholders involved in US healthcare, however if Healthcare industry has to be transformed into an efficient one, this change is a bitter pill that the stakeholders would have to swallow !!

About the author

Apoorv Surkunte works as Lead Business Analyst in Healthcare IT area with one of leading Health insurance companies in USA with experience of 7 years. His areas of interest include healthcare innovations, health reforms, Electronic Health records and ICD 10 implementation, health 2.0. Apoorv is certified project management professional (PMP) and possesses various international healthcare certifications from AHIP. Apoorv can be reached at [email protected]

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Medical Loss Ratios..Agent or No Agent.. ‘Freedom to Choose’

Unknown to most consumers, a couple of days before Thanksgiving, coincidentally a historically slow news holiday, HHS and the NAIC decided to

force Insurance Carriers to include Insurance Agents commissions in the mandatory Medical Loss Ratio (MLR) requirements. The aforementioned, immediately opened the door for Insurance Carriers to dramatically reduce Insurance Agent commissions.

So what’s the harm? Why should the consumer be concerned about an overpaid Insurance Agent receiving less money.

Answer: The concern should not be for the Insurance Agent, but what soon could be, the defenseless consumer.

Let’s examine the most critical points in framing, the virtually ignored, debate, concerning Medical Loss Ratios (MLR)...Obama Care and the future role of Health Insurance Agents’s.

To everyone who understands the dynamics of the debate, the future is clear; the MLR requirements will eventually remove the Insurance Agent from the consumer transaction of purchasing Health Care. To fully understand the devastating Market Disruption this will create; it is necessary to examine the basic function of a Health Insurance Agent; specifically, as it relates to the President’s ‘Stated’ Goal in passing Obama Care (PPACA).

The ‘Stated’ goal of Obama Care is, to provide ‘AFFORDABLE’ Health Care to the consumer; both the currently insured as well as the current uninsured population. The goal of Health Insurance Agents, is to provide their clients, whether they are Individual or Employer Group Health Plans, the most competitively priced ‘AFFORDABLE’ quality Healthcare in the prevailing market.

The reason the relationship exist between an Health Insurance Agent and a Healthcare Consumer,

by Larry Steep



is to provide an ‘Uninformed Buyer/Consumer’ (Individual or Employer) with representation against an ‘Informed Seller’ (Insurance Carrier).

Competition between Insurance Carriers is created by the Annual or Semi -Annual ‘Insurance Carrier’ Renewal Marketing process that is conducted on behalf of the ‘Uninformed Buyer/Consumer’, by their Health Insurance Agent. The aforementioned process, is the sole reason Insurance Carrier premiums stay competitive. Additionally, this annual marketing of Insurance Carriers motivates/forces the Carriers to continue to provide ‘state of art’ innovated products.

Now to the MLR situation/debate.

If Insurance Carriers are only allowed to retain 15% to 20% of the Premiums they receive; lets call that the Pie and if this 15% to 20% of the Pie is not sufficient for their book of business; What will they do?

Answer: Simple, they will increase the size of the Pie. With the Consumers representation IE. their Health Insurance Agent having been removed from the transaction.

Who will stop them.

Answer: The Goverment.

How? If Insurance Carrier premiums rise in unison; the increased premiums become the new accepted Cost Basis.

Answer: I would proffer that, The Government won’t make any real attempt to curb the rising Premium. The Government will allow the Insurance Carriers unbridled greed for profit destroy their own future.

How?

Answer: Without Health Insurance Agents holding Insurance Carriers accountable, the Carriers will continually raise their premiums. At which time, the consumer will say ‘No Mas’ and welcome any financial relief.

Who will be the financial savior?

Answer: A new, even more robust form of Government run Health Plan..Obama Care on Steroids..HealthCare Security for everyone.

Most consumers, who are provided Healthcare thru their employers are unaware that annually, Insurance carriers request millions of dollars in rate increases; that are never fully realized.

Why not?

Answer: The Annual Health Insurance Agent / Renewal marketing process. On behalf of their clients, during this marketing/comparative process, Health Insurance Agents force Insurance Carriers to compete against each

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other, prompting them to be remain both Competitive and Creative.

If the rate increases Insurance Carriers requested were realized, the money to pay these increases, would flow out of the local business/consumers hands and into the pockets of Insurance Carriers.

Let’s consider the financial impact of just one regional firm. Our firm, The Benefit Planning Group is a regional firm representing clients primarily in Georgia. Currently TBPG clients spend over $300,000,000 in annual Health Insurance premiums.

Conservatively, in 2010, we reduced the average ‘requested’ rate increase from our clients various Insurance Carriers by 10% or $30,000,000. The $30,000,000 that our clients did not have to pay, remained in their own respective corporate economy.

Consider this: If our average client yields a profit of 10% off Gross Revenue, they would have had to increase products / services sold by $300,000,000; just to pay for the Insurance Carrier Increases negated, by their ‘Informed Advocate/Representative IE their Health Insurance agent.

The debate over MLR’s brings to the forefront the financial importance of an Health Insurance Agent. The Financial Impact of taking away the Consumers Informed Advocate/ Representative..IE their Health Insurance Agent, will eventually cause irrefutable damage and disruption to the Health Care System and the Consumer.

By the way what did it cost those clients to save the $30,000,000 in rate increases? Just how much did the Health Insurance agent receive?

Answer: Less than 10% of their total savings or less than 1% of their total premium.

In summary it is impossible to provide Consumers with AFFORDABLE Health Care if their informed representatives are taken away.How can the consumer remain protected and the country miss the financial disaster created by HHS forcing Insurance Carriers to adhere to MLR’s?

Answer: Give consumers ‘Freedom to Choose’ give them a ‘BOX’. A “BOX” that allows the consumer the right to have a knowledgeable representative (Health Insurance Agent).

How?

Answer: This can be accomplished by the State Insurance Exchanges providing a BOX on the exchange’s enrollment system; that the consumer can check For example...Agent ___ or NO Agent___.

In conclusion, one last question; Why wouldn’t HHS or the State Health Exchanges want consumer’s to have the ‘Freedom to Choose’?

About the author

Upon graduating in 1978, from University of Georgia, Mr. Stepp entered the Healthcare arena with Sun Life of Canada as a Risk Management Analyst and Underwriter. Based on his interaction with his assigned Broker /Agent contacts he believed Employers were ‘under represented’ in the area of Healthcare expertise. As a result of this conclusion, Mr.Stepp began his pathway to becoming a Healthcare Consultant.

The Benefit Planning Group (TBPG)is a mutlti faceted Healthcare Consulting firm which represents a wide diversity of Employers. TBPG’s diversity of discipline in the Healthcare field creates opportunities from both sides of the Healthcare aisle. Services range from traditional Employer representation to working on behalf of Providers in providing representation for Physicians and Hospitals in the field of Managed Care; Medicare; Health Continuam Management; Healthcare Insurance Carrier market.etc



The MLR Provision: Unraveling the Mystery of Three Little Letters

The Patient Protection and Affordable Care Act (the “PPACA”) provides that insurance carriers are required to satisfy certain medical loss ratio (“MLR”) thresholds; otherwise they are required to provide rebates to enrollees. Beginning in 2011, carriers will be required to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement. On November 22, 2010, the Department of Health and Human Services issued an interim final regulation on the MLR provision of the PPACA.

The intent behind the regulation is to hold insurance companies accountable and increase value for consumers. While these rules apply to insurance carriers, and not employers, it is important for plan sponsors to understand their impact.

Reporting Requirements Insurance carriers will be required to publicly report on how they spend premium dollars. The reported information will clearly demonstrate how

much money goes towards actual medical care and activities to improve health care quality versus how much money is spent on administrative expenses like marketing, advertising, underwriting, executive salaries and bonuses. Carriers are required to submit their MLR reporting by June 1 of 2012 for the 2011 year.

How is the MLR Calculated? For larger employers (51 or more employees in most states), the amount an insurance carrier spends on medical care and quality improvement activities must be at least 85% of the premiums received; for small employers (1-50 employees), the amount must be at least 80%. States are also permitted to provide for higher ratios. A carrier’s MLR must be calculated separately for each market in each state as well as each different license under which the carrier conducts business. The rebate must be provided to enrollees when less than the target premium is attributed to claim costs. It is important to note that workforce salaries and benefits, agent

by Pamela Mullahy

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and broker fees and commissions, and general and administrative expenses are not included in a carrier’s incurred claims plus expenditures. A carrier, however, is not required to provide a rebate to an enrollee if the total rebate owed to the policyholder and the subscribers is less than $5 per subscriber covered by the policy for a given MLR reporting year.

Example

ABC insurance company collects $20,000,000 in premiums from its small employer pool in a particular state. It spent $15,000,000 in qualifying medical expenses. The remaining $5,000,000 covers non-claim expenses, including operating expenses, administrative costs and profit. The MLR for this pool of ABC insurance company would be 75%, and the company would be required to rebate 5% (i.e., $1,000,000) of the premium paid by or on behalf of the enrollee on a pro-rated basis to the enrollees, after subtracting federal and state taxes and licensing and regulatory fees. If an enrollee paid $2,000 in premiums for the MLR reporting year and the federal and state taxes and licensing and regulatory fees are $150 for a $2,000 premium, ABC insurance company would subtract $150 from the premium revenue for a base of $1,850 in premium. The enrollee would be entitled to a rebate of 5% of $1,850, or $92.50.

Employer Involvement

Carriers are required to make the first rebates to consumers in 2012 (based upon their 2011 MLR) and rebates must be paid to enrollees by August 1 each year. There are three ways for enrollees to receive rebates: (1) by having their premiums reduced, (2) by receiving a rebate check or (3 if premiums were paid by credit or debit card, by receiving a lump-sum reimbursement to that account. Rebates made to former employees must be made in lump-sum by check or by using the same method for payment of the premium, such as credit or debit card. In some instances, where employers paid

premium on behalf of employees, the rebate may go to the employer.

In any event, regardless of whether a carrier provides rebates to enrollees directly or indirectly through the employer, the carrier must ensure each enrollee receives a rebate that is proportional to the premium amount paid by that enrollee (the employer may not retain more of the rebate than is proportional to the amount of premium it paid). When a rebate is provided by a carrier, the carrier must provide each enrollee receiving a rebate an explanatory notice.

Carriers may request that employers administer rebates on their behalf to plan participants; however, employers are not required to do so. At first glance, employers may not want to be burdened with this responsibility, but in order to ensure receipt of their



share of the rebate, it may be necessary for them to take on this function. In such a case, the carrier and employer should enter into a contract regarding this administration. One thing to note is that, while the carrier is permitted to delegate its rebate distribution functions to the employer, the carrier remains liable for complying with all of its obligations under the statute.

Penalties

If an insurance carrier violates the reporting and/or rebate requirements, it may face a civil monetary penalty for each violation that may not exceed $100 for each day for each individual affected by the violation, in addition to any other penalties prescribed or allowed by law.

Must Employers Take Action?

Employers are not required to take any action to comply with the MLR rules. Employers may, however, be asked to enter into written agreements to administer the rebates on behalf of the insurance carriers. Employers should also be aware that carriers may soon decide to bill employers a service fee, rather than automatically deduct commissions and remit them to brokers. Although this interim rule is effective on January 1, 2011, HHS is seeking comments and will issue further guidance, as well as a final rule later this year.

About the Author

Pamela R. Mullahy is Vice President and Benefits Counsel for Emerson, Reid & Co., a wholesale general agent. At Emerson, she helps to fulfill the mission of keeping brokers ahead of their competition by providing insights into the effects of the ever changing health care legislative environment. Ms. Mullahy has been an attorney in the employee benefits arena for more than thirteen years, specializing in ERISA, COBRA, HIPAA, health & welfare arrangements and federal health care reform, among other employee benefit areas. Ms. Mullahy began her career in employee benefits law at the U.S. Department of Labor, Employee Benefit Security Administration, where she conducted complex civil investigations of employers to ensure compliance with ERISA and other federal and state statutes relating to health care plans. Prior to joining Emerson, Reid, she was the Chief Compliance Officer for the Employee Benefits Division at a large national insurance broker. She also worked for several years in private practice as counsel to a national third-party administrator.

Ms. Mullahy received a Bachelor of Business Administration and graduated magna cum laude from James Madison University. She received her Juris Doctor from Hofstra University School of Law.

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The Challenges for Accountable Health Organizations (“ACO’s)

by Tony Barber

In a June report to Congress, the Medicare Payment Advisory Commission (MedPAC) cited ACOs as

a possible method of bringing about changes in the Medicare delivery system. In that report MedPAC examined two variations of ACO’s:

• Mandatory Model: In this model, providers receive a shared bonus payment for meeting both cost and quality targets and receive a lower Medicare reimbursement if they fail to reach either target.

• Voluntary Model: In this model, providers receive bonuses for achieving targets and would not be penalized for missing them….as the entire payment method is performance-based.

Both models establish a measurable formula of accountability for providers relative to the health and wellness of a given population of patients that they serve.

Recognizing that the current fee-for-service system drives an increasing level of utilization without regard to overall wellness and without benchmarks upon which to base achievement, MedPAC has suggested that a typical ACO would need to have at least 5,000 “beneficiaries”.

MedPAC isn’t the only one group interested in creating an ACO program. The American Affordable Health Choices Act of 2009 (H.R. 3200) includes a provision to implement an ACO pilot program to be conducted by the Secretary of Health and Human Services. If the bill is passed, the program will begin no



The Challenges for Accountable Health Organizations (“ACO’s)

later than January 1, 2012 and would run between 3 and 5 years.

A separate House bill introduced by Representative Peter Welch (D-VT) also calls for the establishment of an ACO pilot program as an amendment to the Social Security Act.

There are some clear challenges to the creation and expansion of ACO’s however and they will not be easily overcome:

1. Population shifts: The United States is the most mobile societies on the planet. The U.S. Census Bureau has reported that approximately 16% of the population relocates each year. This means that every 6.2 years, that the entire population would have a meaningful relocation

of their primary residence. This means that any reimbursement methodology would have to have a method of accounting for and managing this phenomenon so as to appropriately reimburse providers for the right population of patients. The information systems used by providers are so inconsistent and disconnected that accomplishing this would be virtually impossible. Of course the government could move forward, but if the providers are not properly compensated, access/quality/costs could all be negatively impacted.

2. Common Incentives: ACO’s focus, as has been the case in the past, in a strong primary care network that connects with specialists that have a common vision for the population being served. Additionally, hospitals and outpatient centers (Ambulatory Surgery Centers, Diagnostic Centers, and more) must also be included in the performance measurement program. There has been no significant demonstration of success in any market in achieving this lofty goal. The mindset of medical providers as well as the infrastructure that supports them is so focused on fee-for-service methodologies and there exist so many different platform organizations that bringing them together in any way that will yield a positive result is impossible without first identifying for each and all the projected impact on their businesses and bringing them together into a common incentive program.

3. Lacking infrastructure: There is a serious lack of infrastructure to support an expansive and meaningful ACO strategy. Information systems on the provider side are fragmented and do not facilitate the type of exchange needed to drive performance up and cost down. As each year passes, the information management process becomes more complicated and further fragmented…leaving providers and patients alike to fend for themselves to move data and communicate as a network of providers.

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Information systems providers have failed to create a functional system of sharing medical information sufficient to assure that patients get the appropriate care without duplication…in a common manner.

The special interests of all have taken center stage so as to assure that, regardless of the acronym, changing the reimbursement in a manner so as to pay providers based upon performance and to hold them accountable for the outcomes is clearly just a thought and not an initiative.

If the Fed wants to have a functional ACO program that can be spread widely with positive

outcomes; it behooves them to first establish a mechanism that will accomplish the following:

1. Create a simplified and standard method of managing and sharing medical information between and within ACO’s.2. Create an understandable, measurable payment program that joins the mission of specialists, primary care physicians, hospitals and outpatient centers alike.

3. Broaden the scope of the accountable population base so as to mitigate the impact of transient and disproportionate populations.

Healthcare reform should include some form of ACO program but there is a lot of groundwork to be done ahead of any such initiative…even on a trial basis.

About the Arthor

Mr. Barber is the founder and CEO of Urgent Care America, which provides management services to urgent care centers across the United States. Prior to that he served as the Senior Vice President for Health Management Associates, Inc., (NYSE: HMA). HMA is a leader in hospital management and operates 55 hospitals in 16 states. Mr. Barber has served as a hospital CEO in four different hospitals and has experience in both academic and proprietary ownership structures. Mr. Barber has been a featured speaker for several organizations and has a vast amount of experience in physician practice management, urgent care management and hospital management. Mr. Barber is well connected to physicians in many markets around the United States. Other experience includes, the creation of a Risk Retention Group, development of a corporate-wide medical staff credentials program and the creation of a comprehensive CME and physician relations program designed to better connect hospitals with staff physicians and building physician networks.

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How obesity and workers compis crippling companies

If you haven’t had the opportunity to read ‘How Obesity Increases the Risk of Disabling Workplace Injuries’ by Harry Shuford and Tanya Restrepro of NCCI Holdings, Inc. I suggest you grab some pain killers and give it a once-over. It sheds a different light on the dilemma we are facing when it comes to our obesity epidemic. Most importantly it offers up the actual cost in dollars of an obese employee compared to a healthy one. I would imagine that the ears of any CEO or CFO would perk up if they heard that the cost of an obese employee, from a Worker’s Comp perspective, can be 50 to 60 times greater over a 5 year period than an identical injury to a healthy employee. 50 to 60 times more! And although it sounds incredibly inflated, all you have to do is imagine a serious accident on the shop floor of a small manufacturing company to Joe the Jock compared to Wally the Weekend Warrior.

One is healthy the other obese. They both break a leg. Joe hobbles in on crutches and does what has to be productive until he’s recovered. He works out his upper body and figures out how to get his heart rate up in the gym. Wally, on the other hand is in some serious rehab. After a very complicated surgery to repair the broken bone – the same broken bone that was relatively easy to set for Jock because there wasn’t such a concern over his weight or BP, or medications. Not so for Wally! Then there’s the rehab. Jock heals himself. Wally gets progressively worse before he gets better. Whether its aches and pains from trying to get around on crutches to medications and complications because of his physiology. And of course there’s no chance Wally is going to be productive in his condition. A condition that could last months and months. Long enough so the company has to replace him to get his work done. It’s an ongoing and very expensive nightmare. That is avoidable.

by Mel Okeefe



Wellness programs are trendy and cool. And for the most part completely ineffective. “Heresy”, I hear in the background. Before you condemn me let me quote Thomas Paine – “a long habit of not thinking something wrong gives it a superficial appearance of being right.” So, introducing a wellness program that pays for the gym membership of Joe the Jock and the other fit and healthy employees is not a success. It’s a failure. It’s Wally the Weekend Warrior and all of his cohorts who have nothing to do with the wellness program whatsoever who should be the judge and jury of a wellness program. Their verdict? Thanks, but no thanks.

Well of course they’re going to say that. Who in their right mind would opt to eat healthy foods and exercise when it’s so much easier to lounge around and watch television and eat junk? “So,” some energetic and healthy individuals (consultants or employees) say “let’s incentivize people to exercise and eat healthy. And make it fun and exciting. How about we let the employees get involved with the planning and implementation. Won’t that build teamwork and camaraderie?”

Hmmmm…..sounds like a great plan. Coming from a person who, for want of a better description, has seen the light! Joe the Jock that is. But you have to get into the mindset of Wally the Weekend Warrior to appreciate how futile that approach is going to be. He/she/they don’t like exercise. They don’t want to eat healthy. Yes, they would like to be fit and healthy. But it’s too much effort. So asking them to participate in the wellness program and help design it would be akin to saying “okay Wally, we’ve decided to run a third shift. Nights. And you’re in charge. Now I know you hate coming in at 10. And we’re aware of the fact that you’re going to spend most of the shift figuring out how to pass the time and get back at us for making you work such horrible hours and be away from your warm bed and family. But, we thought that if you’d help in the design and implementation of this torture you’d be a lot happier about it.”

“Pessimist” I hear being screamed in the background. To which I reply, pragmatist. It’s no secret that 70% of people claim that they don’t like their job – there are lots of polls to validate that observation. Work, to a huge section of the population, is something they do because they have to make money to pay bills and lead

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the life they want to lead. And based on the obesity rates it’s not much of a challenge figuring out what people want to do with their free time.

So, how long would a company be in business if the policies and procedures were created by those required to produce a product or commodity? What would happen if we removed time clocks or quotas or benchmarks or anything that forces employees to do what’s got to be done so a profit can be generated?

That’s exactly the same way we need to look at our wellness programs. Paying for a gym membership for Joe the Jock is nothing more than giving him a bonus for being fit – he would be in the gym irrelevant of the program. Paying for a gym membership for Wally the Weekend Warrior is an absolute waste of money! He’ll figure out a way to circumvent the system and make it appear as if he’s going in. He’ll get as creative as necessary to make sure he can continue to live the lifestyle he does. In fact he might be able to get a couple of cash bonuses here and there if he spends some time on the computer looking at the company wellness site! What a concept. What a shame.

At some stage employers are going to realize that we can no longer wish and hope that this obesity epidemic is going to go away. Or the government will help. Or it isn’t going to affect their company. It’s not a matter of if, it’s a matter of when. But, as I say, it’s avoidable. Is it easily implemented? Heck no. In fact it may be as challenging to an employer to create a healthy workforce as it is to create a viable product or service. Mainly because it’s not their field of expertise. Companies build things, produce things or provide a service. They don’t get people fit and healthy. For now

they hope and pray that overweight or obese people will see the errors of their ways and do something to reverse the trend. Which is akin to the lunatics in charge of the asylum. If you think I’m completely off base, how about we do a simple test to validate or repudiate my observations. The CDC just came out with data that says from 2008 to 2010 the number of people with diabetes went from 23.6 million to 26 million – a 10% increase. Pre-diabetics went from 57 million to 79 million. How have you, your family, friends, co-workers and neighbors fared in the last 2 years? Are you in better shape? Are they in better shape? How many of us are doing what we have to do to lead a fit and healthy life?

About the Arthor

Mel O’Keefe is the CEO (Chief Exercise Officer) of Virtual Fitness Coach, an online wellness company. Mel has an insight into the obesity epidemic because he’s been there. He doesn’t try to hide the reasons for his obesity either. “I ate too much, I drank too much and I didn’t exercise.” At the age of 38 he had an epiphany, changed his ways and is now an accomplished Ironman triathlete and certified personal trainer/coach

Virtual Fitness Coach has taken the experience of working with a professional coach and nutritionist and have ‘virtualized’ it. Employees are guided exercise by exercise, meal by meal, day by day until they reach their health and fitness goals. Virtual Fitness Coach assists in design and implementation of wellness programs for companies of all sizes. Mel can be contacted at [email protected]



The Time is Now Ten Steps Organizations can Take to Successfully Comply with ICD-10

By Tori Sullivan

On October 1, 2013, the U.S. will join many countries in the international community by mandating the switchover in code sets for healthcare diagnoses and

procedures from ICD-9 to ICD-10. These code sets are used to report and code diseases, injuries, impairments, and other health problems, in addition to the procedures used to treat them.

Developed by the World Health Organization, ICD-10 provides a more accurate definition of services and diagnosis than its predecessor ICD-9 and ultimately leads to more precise payments, fewer rejected claims, and overall improved disease management worldwide. While the benefits are clear, many U.S. healthcare organizations today are overtaxed with competing initiatives and are not realizing the resource

requirements, planning considerations and operational challenges associated with a successful ICD-10 switchover.

While each organization’s implementation is its own unique case, the shear specificity and complexity of the new code set is a technological and operational challenge for any organization, no matter how prepared they may be ICD-9 contains around 18,000 codes and ICD-10 contains more than 141,000 codes. Remediation of ICD-10 will require extensive technology modifications to software systems, databases, reports, computing logic, data imports and extracts, and workflow procedures.

Extensive training and education will be required across many departments, and many providers fear that veteran coders near retirement will not stick around for the education and retraining, which could potentially be

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a huge loss in human capital. This challenge, combined with overall staffing shortages—particularly in the IT department—could lead to operational productivity loss across the organization. Additionally, the transition to ICD-10 is a significant financial burden to healthcare organizations, many of which are already budget strapped.

While the challenges prevail for organizations going through the switchover, the healthcare industry should not lose sight of the ramifications should they not meet the deadline or have enough time for testing before the official go-live. Claims backlogs, payment delays and denials due to coding and reimbursement discrepancies and a potential increase in fraud and abuse are just a few of the consequences should healthcare organizations not be fully prepared for the October 1, 2013 deadline.

ICD-10 is being compared to massive implementations in the past such as Y2K and HIPAA, yet many healthcare organizations have not initiated their path towards migration. While 2013 may seem far away, in reality it is right around the corner based on the magnitude of the transition. Taking the following steps to ensure proper planning and forecasting will help healthcare organizations transform a government regulation into a competitive advantage:

1. Executive Leadership: Develop an appropriate Steering Committee, representing leadership from the various impact areas within the organization. The Committee will play a key role in guiding project scope, allocating the appropriate resources as well as maintaining the organizational focus necessary to complete the project. The Steering Committee is also responsible for setting the organizational Strategy for the implementation. This process includes indentifying the “Team” or project resources, which should include leadership, staff and potentially external vendors. The



“Approach” should also be determined, including goals, scope and objectives. Finally, “Execution” should be clearly planned in terms of change management around people, process and technologies.

2. Impact Assessment: Complete an assessment of every department within the organization to identify where there will be an impact with the ICD-10 implementation. Some areas will not be impacted, while other areas will vary in their levels of impact. It is important to identify the range of impact levels so the organization can focus its resource efforts at the most severely impacted areas first and the least impact areas last.

3. GAP Analysis: A GAP analysis is conducted on the areas of impact once an Impact Assessment has been completed. This step will help hospitals determine the difference between where they are currently and where they want to be at go-live through their strategic organizational strategy.

4. Contracting Guidelines: Contractual changes typically take the longest to complete because they involve multiple resources, organizations and personalities, resulting in lengthy negotiations. It is important to review contracts early in the project timeline to determine if modifications are necessary to include terminology requiring compliance with the 5010 and ICD-10 regulations. Vendors may also include additional fees to cover software implementation or maintenance expenses, therefore identifying early on required modifications to contracts as well as budgetary expenses.

5. Implementation Timeline: The project timeline should work back from the deadline date of October 1, 2013 and include completing the Impact Assessment, Gap Analysis, Vendor Contract Updates, Hardware Modifications, Software Modifications, End-User

Training, Operations Re-engineering, Pilot Testing and Go-Live Preparation. During the GAP analysis and contract negotiations, vendor and contractor budget and timeline requirements are also determined. As there is not enough staff to make all modifications to test and integrate solutions simultaneously, each organization needs to schedule each modification per vendor so they are in line with the other changes occurring. A schedule of software testing should view like a waterfall to maintain a constant level of resource commitment as well as continue to progress toward the end goal.

6. Risk Assessment: A comprehensive risk assessment should be implemented to identify the level of risk the organization will experience while implementing ICD-10. Risk is related to outcomes not proceeding as expected and the result of such occurrences. A Risk Assessment will prepare for issues related to technology modifications, the revenue cycle, as well as coding and reimbursement discrepancies. Healthcare organizations should look to define and rank risks based on the probability and impact if each even occurred. Event ‘triggers’ and related responses such as contingency plans should be associated with each risk. Finally, resources should be assigned to manage the identified risks based on the trigger events and contingency plans throughout the implementation.

7. Budget: The budget should include four dedicated areas – Process Improvement, System Modification, Testing and Training/Change Management and Revenue Cycle Impacts. Contractor fees and other supportive services should be considered and included in the overall budget. Revenue Cycle impacts may include a reduction in coding productivity, increase in claims submission, and increase in claims rejections as well as variances in payment levels for ICD-10 codes compared to ICD-9 codes.

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8. Testing: Working closely with vendors, develop a detailed testing plan that includes expected results and outcomes, resources, specific testing for software, and hardware and support services. The testing should be closely tracked according to expected results and monitored to determine whether each function passes or fails each step of the way. Testing activities should be scheduled with both internal and external resources and locations. The last thing the organization wants is an end-user that is scheduled for a day of testing only to get a software error within the first hour and give up losing hours of productivity. Having vendor technicians on-call to support such events and track progress daily will ensure the organization stays on track with testing schedules.

9. Prepare for Go-Live: Go-live is not a one-day occurrence, but rather a series of events to help hospitals prepare for the many people and systems that need to be functioning at a specific level by October 1, 2013. The Go-live plan should identify all participants, and define roles and responsibilities, tools/resources, activity milestones and timelines, contingency/back-out plan, support contact information and a reporting process for any issues. Pilot Go-Lives have proved to be beneficial to other countries that have implemented ICD-10. Using this method in the healthcare organization’s roll-out plan will identify and resolve issues early on and maintain a manageable schedule.

10. Post Go-Live: Following Go-live, organizations will be busier than they were to prepare for the organization. However, now is not the time to forget how much work was accomplished and what was learned along the way. Each organization should summarize project results, evaluate success against established criteria, identify the key lessons learned and assess the project for future improvement.

While all these steps are critically important, organizations can not lose sight of the importance of testing before go-live. Depending on the size and

scope of the project, organizations should begin testing anywhere from 2 years – 6 months before the deadline. Virtually every system that touches an ICD-10 code has to be modified, and the longer organizations take to get started on the implementation, the less time they have to test.

The implementation of ICD-10 seems overwhelming and expensive; however, the benefits of implementing this modern code-set far exceed the costs. Currently the U.S. is the last industrialized country to implement the ICD-10 codes, limiting the collaboration and data details that can be exchanged worldwide related to healthcare issues. The more complex code set also allows for specification in reporting healthcare data that will result in newer and more advanced disease identification and treatment methodologies. In addition, ICD-10 enables an increase in detection of fraud and abuse as a result of the data contained within each claim transaction. These benefits will be the foundation for health transformation as we move more aggressively toward technology implementations throughout the U.S.

About the Arthor

Ms. Sullivan has over 10 years experience leading strategic healthcare projects, including an ICD-10 Impact Assessment for Centers for Medicare & Medicaid Services and EHR Implementation projects for clients throughout the US. Ms. Sullivan chairs the HIMSS ICD-10 Task Force and leads business development and delivery projects within Capgemini’s Healthcare sector based in Atlanta, Georgia.



Healthcare...Who Cares?By J. Dennis Wolfe

The next time you’re at the grocery store, buy $100 worth of groceries. Tell them you will pay them $25 and for them to send the receipt to your bank for the remaining $75. How many of you think there is any chance of getting out of that store without being arrested for shoplifting? Now, consider this scenario. Call a doctor’s office to schedule a visit and tell them you have no health insurance. You might not even get an appointment. There was a time when this was how we all received health care service… we paid for it! For the few patients who had insurance, it was their responsibility for filing claim forms to receive reimbursement. The provider was paid by the patient.

Over the years, rules have changed dramatically and soon, despite the new federal law mandating insurance coverage for everyone, finding insurance at an affordable premium will be difficult if not impossible. This is the hidden agenda of “ObamaCare” aka The Patient Protection and Affordable Care Act (PPACA). Marketed as universal access, the key problem is that limited capacity leads to rationing of care. Ultimately, the government will decide who gets care and who does not. Welcome to President Obama’s “Signature Legislation”! The new Patient Protection and Affordable Care Act is worse than a solution. No matter how well-marketed, this legislation has geometrically compounded the problem of delivering affordable

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health care to all. If not immediately defunded and ultimately repealed, it will irreparably harm the health of our nation. This legislation was never about health care, rather it was about taking control of every American citizen’s personal life. The path that led to its passage is directly tied to many years of apathy by Americans. When it came to Healthcare...Who Cares? Now, with eyes and minds open, it is time to examine a better solution. Make no mistake about it - we desperately need healthcare cost-delivery reform. Readers would do well to review the potential damage almost caused by a “reform” called “Section 89” over 20 years ago. I said almost because it was immediately repealed. What’s the big deal about Section 89? It was a lighter version of the PPACA mandate component, recently - and fortunately - ruled unconstitutional by a federal appeals judge (this dispute will now go to the U.S. Supreme Court). Section 89 was repealed because it was so laden with red tape and discrimination-testing requirements for employers that it would have made doing business impossible. So, how bad is the PPACA? As of the date of this article, The Department of Health and Human Services (HHS) has already granted 222 known waivers exempting some very large national companies and unions from new mandates that are far worse than the old Section 89 compliance rules. If small businesses are the backbone of America and large employers receive waivers for compliance mandates on the grounds it would destroy their ability to do business, what will The PPACA do to America’s backbone? This is why I believe that the current healthcare legislation is the most malicious and malevolent act ever passed by the United States Congress. A sales phrase called “Post-Purchase Cognitive

Dissonance” (PPCD) means that after a purchase, the buyer may get the feeling that something is not right. In some cases it results in cancellation of the sale; the item is returned or other action taken. Once the transaction is reversed, the buyer feels better. What we citizens have been demanding is reform to the economic relationship between healthcare providers and cost protection mechanisms.

Candidate, now President, Obama won election to The White House with that promise. Senator Harry Reid abused long-standing rules of the Senate to pass PPACA; in the House, Speaker Pelosi used an emotional appeal laced with arrogance, urging passage so the country could find out what was in the bill. In early 2009 in a video I posted on YouTube, I warned then that Congress would use “Reconciliation” to pass this because it could not stand up to public scrutiny and that is exactly what happened. What we have now discovered is that we do not like its contents. What we got was rationing and, as people understood what was done to them, a groundswell of anger grew. The result was visible last November. Now we want our money back! Unfortunately, the health care industry has become part of everyday life for Americans. Worse, it is too complex for the majority of people to understand. The natural tendency, therefore, is to become frustrated, angry, then walk away - muttering about blaming someone else for this mess. The only question now is whether or not the American people will stay focused and continue to hold Congress’ feet to the fire. By their actions in the lame duck session, it is obvious that Democrats don’t think so. The Republicans also fear any potential public resolve because they would have to actually develop a backbone of constitutional principles.



However, there is hope to fix this looming man-made disaster. It starts with every single American each learning about this subject. There is currently ample motivation because this is a different situation than the early 1990’s health care cost-delivery crisis. This time the problem is compounded because of the longevity of the parents of baby boomers who need more care and the baby boomers themselves simultaneously now drawing down on the system for care. Our education continues by understanding that our healthcare delivery system is a monopoly. You and I cannot hang a shingle outside our office and say we are practicing medicine. From one perspective this is a good thing. It protects the quality of care. It also means a healthcare provider (private physician/hospital, etc.) can charge any amount that the market will bear. The provider does not have to contract with any insurer nor

accept Medicare or payment from any governmental agency for that matter. There are providers in America not contracted with major insurance companies and government agencies, who reimburse for health care services. They still accept cash. They are also a small minority. When the majority of local providers want more money for their services, they do not go on strike. They simply “renegotiate” their contract by quietly raising their fees above the existing contractual allowances in their insurance reimbursement contracts. This ultimately leads to an increase of contractual allowances in various geographical areas as new reimbursement contracts for providers are written. That in turn leads to higher premiums and a perfect monopoly… except for one small problem. There is no additional money to continue

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this inverse supply and demand equation. In simple language we have addicted our healthcare providers to a steady stream of external revenue sources and that stream is drying up at the most inopportune time, at the highest demand. The worse solution we could implement is to ration the money because that, in turn, will lead to rationing of healthcare. Yet that is exactly what PPACA did. We wanted healthcare cost-delivery reform and we not only got rationing of money, we got rationing of healthcare. Another crucial component to the problem is the current cost-protection system. The insurance industry is one significant source of cost-protection and government, at all levels is another one. Of course it is understood that consumers are paying more and more as well.

Insurance companies raise premiums to cover increasing costs; the public screams about the evil insurers. What about the outcry when government is forced to raise taxes to pay for the healthcare cost protection that its many programs provide? The only difference is that consumers generally dislike the concept of insurance and there are no regional or national spokespersons extolling its value. On the other hand, we elect politicians who promise to help us get affordable health care. I say to Congress no more help, please! A better solution involves factoring in the predictability of human random actions This simple but complex-sounding component is the reason why the new law was mortally wounded on arrival. It seeks to control everyone by uniformly rationing care and federally mandating citizens to buy a product - insurance! To craft a workable solution we must view

the situation as a jigsaw puzzle. This means ridding America of The PPACA and crafting a new federal law that addresses true cost-delivery reform. Let’s call it The FEDERAL HEALTH Act. It will not ration care and there will be no federal mandates. This unpredictability can now be factored into the solution. We all function differently - earning power and lifestyles. Each community across the country has its own identity because we are human beings who individually decide where we live, what we do, etc. Everything about each of us is unique. Therefore, we are the key to true healthcare cost-delivery reform, not the politicians and bureaucrats in Washington! It is essential to weave our individuality into a system that allows people to freely move throughout the country and access care wherever they are. This innovative solution is based on capitalism. It injects competition into the present monopolistic system of how health care services are currently delivered. To develop this comprehensive approach, which will lead to a better, affordable delivery system, we do not need to reinvent the wheel. This is going to absolutely shock everyone reading this when I say what a crucial role the IRS needs to play.

However, that role is not as an enforcer. The reality is that although we fear and dislike the IRS, like every governmental agency, it is not going away. Therefore, we need to use the IRS to ensure that each local community/region gets its share of funds needed to provide care. I see this as a far better use of the IRS instead of how The PPACA creates and funds 16,000 new agents, then charges them with the task of seizing our money to fund an unaccountable, bloated federal government that offers false promises of free health



care. I have an even deeper question. Why would our federal government mandate the purchase of something we generally dislike -insurance? I unequivocally believe it was NOT done to force you to buy insurance. Instead, President Obama did this to eventually eliminate the insurance industry from the equation. The result is a single payor system. However, what few seem to know is how powerful the insurance industry really is; buildings named after carriers, etc., Like them or not, they move money through our society. Intentionally creating legislation designed to destroy the biggest mover of money through our economy is malicious and speaks to a hidden agenda in The PPACA. Wouldn’t it more sense to design a system that uses the insurers instead of economically strangling them and by extension, America? It is true that insurers pad every cost factor that goes in a rate under the global umbrella of actuarial science; you either pay the premium or go without coverage.

However, The PPACA creates more and more bureaucracies with more and more tax dollars and give us things like the new agency, The PCORI. It is under the direct control of The President. The Patient-Centered Outcome Research Institute ultimately will decide who lives or dies by regulating the care received. How is this better healthcare? Where is the reform? True reform should NOT be implemented by passing a law allowing a group of unaccountable people in The White House under direct control of one person - The President- to implement rules that control your life. In other parts of the world we call this a dictatorship. Having been a guest on radio shows all across our country and a newspaper columnist on healthcare I consistently state one request of all Americans. “Stay healthy. Stay tuned. Get involved. Learn what is being done. Your life now does indeed depend upon it.”

About to arthor

Dennis began his insurance career in 1976 after graduating from San Jose State. Immediately Dennis began to specialize in group health insurance. His clients range from small companies to Fortune 500. One of his favorite achievements involves a huge multi-national law firm who in 1997 contacted him out of the clear blue. He walked in and they told him before he sat down that he was their new broker and they needed him to fix their benefit problem. His ground breaking work on this matter set precedent for how the national individually-franchised network of Blue Cross and Blue Shield companies today work across state lines.

In 1977 he won a national award for his work in creating what we all know today as Community Health Fairs. In 1986 he began a book (published in 1991) that forewarned of the coming health care cost-delivery crisis, while also offering an innovative solution that is now - almost twenty years later - gaining traction, especially now. His community life is all about doing charitable work. He has served on his county’s grand jury - twice!. He was Chair of his county’s state-mandated Mental Health Board and implemented a program in 1999 to give greater awareness of the issues those with mental health problems face. It became the model for greater national public awareness used today.

Two of his proudest legal achievements are his 1998 CA unanimously-passed legislation empowering parents to be more involved in their children’s classroom education, and in 2007 his CA Supreme Court precedent-setting decision regarding how laws are enacted and regulated by state agencies.Dennis can be reached at [email protected].

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HEALTHCARE BENEFITS INNOVATION: EMPLOYERS CREATING THEIR OWN CAPTIVE INSURERS

by Edmond M. Ianni

In today’s crippled economic and changing healthcare environment, businesses (both publicly-held and privately-owned) face critical challenges. They must preserve, manage and grow their precious capital and, at the same time, effectively manage their business risks, including, for example, the risks associated with their employer-provided health insurance plan and other benefits. These needs conventionally have been handled separately: capital planning and management typically have been conducted as a financial function separate from the risk management and human resources (“RM/HR”) functions. In other words, capital solutions and RM/HR solutions typically have enjoyed a “siloed” existence. Moreover, RM/HR solutions traditionally have involved a combination of purchased insurance in the marketplace and retained risk or self-insurance

(for example, the deductible liability on an employer-provided health insurance plan). Some businesses, though, have taken a nontraditional, innovative approach to meeting these critical capital and RM/HR needs, especially in the current environment. This innovative approach is interdisciplinary. It taps the unique synergy of developing a captive risk management strategy in the healthcare and employee benefits space – a strategy which utilizes many of the exportable captive insurance, governance, business entity, asset protection, tax, trust, capital management, regulatory, financial and risk management benefits that the State of Delaware offers (and which are collectively called “the Delaware advantages”). It is a customizable strategy which helps to preserve, manage and grow financial capital and to manage effectively business risks in a cost-effective



and often tax-advantaged manner. Businesses across the country are increasingly turning to this innovative approach to develop their capital and RM/HR solutions.

Let’s examine how this innovative best practice works. Assume an employer is interested in pursuing a less expensive strategy for its employer-provided health insurance plan and its errors and omissions liability. The employer and its consultant carefully analyze the available options, testing the metrics and feasibility of different alternatives, and finally determine what would be an optimal solution. That optimal solution involves the employer’s establishment of its own captive insurance company which will cover (a) the employer’s deductible liability on its employer-provided health insurance plan and (b) the employer’s errors and omissions liability. The captive insurance company will be organized and licensed in Delaware and will be “serialized” (which will be explained below) for the two types of transferred risk.

In this strategy, the employer and consultant decide to increase the level of the employer’s deductible

under the plan, thereby having the plan’s coverage attach at a higher level and lowering the employer’s cost of the plan. By doing so, and having the new captive insurance company cover the risks of the higher deductible, the employer will save substantial costs – and preserve significant capital – as demonstrated by the independent feasibility study as part of the due diligence analysis.

The other leg of this strategy involves the employer’s replacing its commercially purchased errors and omissions (“E&O”) insurance with coverage by its new captive insurance company. This similarly will result in substantial cost savings for the business, preserving (rather than permanently expending to a third-party insurer) additional capital. The feasibility study, which recognized the employer’s excellent record of no claim having been made under its existing E&O insurance policy, demonstrated that the employer can expect to achieve substantial savings in both the short-term and long-term by implementing this captive risk management solution.

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What is this captive insurance company? And how does it benefit this employer?

Nature of a Captive Insurance Company. Captive insurance is a form of private risk transfer and coverage. Captive insurance essentially involves the transfer of specified business risks from an enterprise (here, the employer) to a separate, typically private, legal entity, the captive insurance company (the “captive” or “captive insurer”). The captive economically assumes those risks and is financially responsible for any losses resulting from the realization of those risks. The captive insurer, not the captively insured enterprise, therefore is responsible for payment of claims on those losses.

Customizability for the Employer. In our hypothetical, the employer transfers its high deductible liability risks and its E&O liability risks to its newly established Delaware captive insurance company. Just as most Fortune 500 companies are incorporated in Delaware but conduct their business operations in other states, so too can an employer organize and license its captive in Delaware to cover the selected risks of its business conducted outside Delaware.

The employer organizes its captive insurance company as a Delaware limited liability company (“LLC”) and places its selected health plan deductible liability and E&O risks, respectively, in Series A and Series B of its new Delaware LLC. Series A and B are segregated divisions (called “series business units” or “SBUs”) within the Delaware LLC captive. They are not separately incorporated subsidiaries of the LLC. This structural flexibility allows the employer to establish one or more series within its new Delaware LLC captive insurer without the need or expense of creating multiple standalone entities or subsidiaries. (Note that while this employer chose a serializable Delaware LLC for its new captive, the same serializability is available through Delaware statutory trusts and limited

partnerships. In fact, Delaware is the only state which offers serializability for all three structures – the LLC, statutory trust and limited partnership.)

By utilizing this simple Delaware-advantaged structure for its new captive, the employer can establish simply one centralized governance (management) for the captive – which will be more cost-effective and efficient than having to establish two separate governance structures for two incorporated subsidiaries. The employer has the further option to engage an outside manager(s) to perform some or all of the administrative responsibilities for the captive, such as, for example, accounting, asset management, claims processing, regulatory reporting and reinsurance procurement and coordination. Business Flexibility. The serialized Delaware LLC captive also gives the employer business expansion flexibility. If the employer wishes to captively insure additional types of enterprise risk (for example, risks for which it traditionally has purchased commercial insurance, such as property and casualty risk, or selected risks associated with a newly launched business line), it will have the option of using its Delaware LLC captive. In that case, the employer simply could create an additional series business unit within its existing Delaware LLC captive. That SBU would captively insure those additional risks.

Tax Advantages. The serialized Delaware LLC captive also provides state and potential federal tax advantages. As a licensed Delaware captive, the employer’s new captive will be exempt from Delaware business income tax. As a serialized Delaware LLC captive, the employer’s new captive will enjoy favorable state premium tax treatment. For Delaware premium tax purposes, this serialized captive (including all its distinct series) will be treated as one enterprise and, therefore, will be subject to only one $5,000 minimum



annual premium tax requirement (rather than subjecting each series to a separate $5,000 annual minimum). Furthermore, Delaware caps the amount of payable annual premium tax for a Delaware-licensed captive, regardless of premium income growth.

Delaware also provides other state tax benefits to Delaware-domiciled captives. These include, for example, a cap on a captive’s annual premium tax where the captive (which is not otherwise required to do so) employs a certain number of workers in Delaware. The world’s largest captive, which is operationally headquartered and licensed in Delaware, enjoys this tax benefit.

The employer’s serialized Delaware LLC captive also has the opportunity to benefit from various federal income tax advantages. Although the serialized Delaware LLC is a single legal entity, for federal income tax purposes each series (in our employer hypothetical, Series A and Series B) can be treated as a separate federal taxpayer, allowing each SBU to possibly qualify for favorable federal income tax treatment. For example, if Series A in our example (covering the employer’s health plan deductible liability) is expected to receive not more than $1.2 million in annual captive insurance premium, that SBU possibly may qualify for favorable federal income tax treatment under section 831(b) of the Internal Revenue Code. If it does, that Series A’s premium income would be exempt from federal income taxation, thereby potentially saving that Series A up to $420,000 in federal income tax (assuming an otherwise applicable 35% federal rate) – a preservation of substantial business capital. Finally, the employer paying the premium to its captive receives an income tax deduction for those paid premiums. Capital Benefits. This captive risk management

strategy allows the employer to cost-effectively access, preserve and grow its financial capital, while providing a desired RM/HR solution. Rather than permanently expend its capital to a third-party commercial insurer, the employer in effect recycles that capital to itself (and its owners) by utilizing its own, and less costly, captive insurer. If that captive’s capital is managed well, and if the transferred risks and claims are managed well, that capital in effect can be returned to the employer over time in the forms of dividend distributions and claims payments. In addition, the employer’s captive can directly access the reinsurance market, should it decide to reinsure any of its risks, at lower rates – another means of saving additional capital.

Conclusion. In short, a properly organized and well-managed serialized Delaware captive typically is more cost-effective, less expensive and potentially more tax-advantageous than purchased third-party commercial insurance and bare self-insurance. Through a customized captive, an employer can design a strategy which addresses both its capital and risk management objectives, including its RM/HR targets.

About the Author

Edmond M. Ianni is a multi-disciplinary business counselor, strategist and manager. He has provided strategic, business development, regulatory, governance and management counsel in various spaces, including financial services, energy and international business. He currently serves as director of strategic development for the State of Delaware Department of Insurance and formerly was chief strategy officer for Millennium Wealth Management. Mr. Ianni led the regulatory team which worked on the world’s first licensed serialized captive insurance company.

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This focus is because the Centers for Disease Control & Prevention (CDC), report that more than 75% of our total health care spending is on people with chronic diseases and these are both preventable and manageable. Willie Sutton, the famous bank robber, was alleged to have said, “I robbed banks because that’s where the money was.”

According to the Centers for Disease Control & Prevention (CDC), more than 75% of our $2 trillion healthcare costs are associated with potentially preventable chronic diseases.

To control your health insurance costs, you’ll need to focuson chronic disease because that’s where the costs are.

Controlling Health Insurance Costs

If you want healthier employees, you will need to understand …

1. The impact of chronic disease. Since chronic diseases are responsible for over 75% of all health care costs, companies having a plan that “attacks” the causes will be ahead of the curve. Chronic diseases are treatable and manageable.

The Behavior DrivenHealth Plan

Centers for Disease Control and PreventionCosts of Chronic Disease

70% of all deaths• 1/3 of the years of potential life lost before age 65• $1½ trillion associated with potentially preventable

conditions• 133 million people have at least one chronic condition• Annual direct cost of heart disease and stroke is $448

billion • Annual direct and indirect costs for smoking exceed

$193 billion• Annual direct and indirect costs of diabetes is $174

billion a year

Cancer D

iabe

tes

Heart DiseaseHypertension

S

trok

e Mental Disorders

Pulm

onar

y C

ondi

tions

by Russ Swallow



2. How to influence 4 key health activities A. Identify 4 key activities that “attack” chronic disease B. Understand the combined “attack” on chronic disease

C. Design a plan to influence the 4 key health \ activities In the financial model (shown later in this report), we designed a plan with $$$ incentives that will lower the employee cost when he/she completes the 4 key health activities. In this case, the employer helps those who are willing to help themselves. Employees who complete the activities pay less than those who don’t. Whether they do or don’t, employer costs go down.

3. How wellness “attacks” chronic disease

A. You CANNOT control supply costs (healthcare services) B. You CAN influence demand (healthier employees)

Healthy employees cost less. Corporate wellness programs help employees get healthy and stay thatway. You’ll save money through reduced health insurance costs, workers’ compensation expenses, absenteeism and presenters.

The Impact of Chronic Disease Diabetes is Common, Disabling, Deadly and On The Rise.

Nearly 24 million Americans have diabetes. Of the people living with diabetes, about 18 million have been diagnosed, and about 6 million don’t know they have it.

If current trends continue, 1 of 3 people born in the United States in 2000 will develop diabetes during their lifetime. In 2007, about 1.6 million adults were newly diagnosed with diabetes, and at least 57 million adults were at risk of developing diabetes.

Diabetes is the seventh leading cause of death. It is also a leading cause for such complications as blindness, kidney failure, and lower extremity amputationsA Stroke Involves Loss of Brain Functions.

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A Stroke Involves Loss of Brain Functions.

Strokes are caused by a loss of blood circula-tion to areas of the brain. Blockage usually occurs when a clot or piece of athero-sclerotic plaque breaks away from another area of the body and lodges within the vasculature of the brain. Within a few minutes, brain cells begin to die.

Stroke is a medical emergency. Prompt treat-ment of a stroke is crucial. Early treatment can mini-mize damage to your brain and potential complica-tions. Improvement in the control of major risk factors for stroke — high blood pressure, smoking and high cholesterol — is crucial.

Cancer

Men

Women



Heart Attack

A heart attack or acute myo-cardial infarction (MI) occurs when one of the arteries that supply the heart muscle becomes blocked. Blockage may be caused by spasm of the artery or by atherosclerosis with acute clot formation. The blockage results in damaged tissue and a per-manent loss of contrac-tion of this portion of the heart muscle.

Hypertension or High Blood Pressure

Health Impact of High Blood Pressure

• Major risk factor for heart disease, stroke, congestive heart failure, and kidney disease.

• Primary or contributing cause of death for 326,000 Americans in 2006.

• Nearly 45 million people visited their doctor for high blood pressure in 2006.

Who Has High Blood Pressure?• Almost 90% of adults aged 45–64 years will develop high blood pressure during the remainder of their lifetime.

• About 25% of American adults aged 20 years or older have prehypertension.• One of every three U.S. adults aged 20 years or older has hypertension. Nearly one of five people has hypertension and is not aware that they have it.

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High blood pressure can damage your health in many ways.

For instance, it can harden the arteries, decreasing the flow of blood and oxygen to the heart. This reduced flow can cause—

• Chest pain, also called angina.

• Heart failure, which occurs when the heart can’t pump enough blood and oxygen to your other organs.

• Heart attack, which occurs when the blood supply to your heart is blocked and heart muscle cells die from a lack of oxygen. The longer the blood flow is blocked, the greater the damage to the heart.

High blood pressure can burst or block arteries that supply blood and oxygen to the brain, causing a stroke.

How to influence 4 key health activities

A. Identify the 4 key activities that “attack” chronic disease.

Cianbro, an employee-owned construction company implemented its Healthy Lifestyle Program in 2003. The program provided for employees at all worksites to complete health risk assessments. Over two years

• 16% of participants decreased their risk for obesity

• 20% improved their blood cholesterol profile

• 49% reported improving their level of physical activity

• 68% participation rate by its third yearSource: http://www.cdc.gov/leanworks/why/casestudies.html

Health Risk Assessment

Chronic Diseases Health Activi-ties

Cancer 1) Assessment

Mental Disorders

Diabetes

Heart Disease

Hypertension

Pulmonary Conditions

Stroke

Annual Primary Care Physician Visit

Chronic Diseases Health Activities


Mental Disorders 2) PCP Visit Dia-

betes

Heart Disease

Hypertension


Stroke

Annual Screenings



Mental Disorders 2) PCP Visit

Diabetes 3) Screenings

Heart Disease

Hypertension


Stroke



Employees who have a relationship with a primary care physician (PCP) will cost you about one-third less than employees that don’t.

• Reduces ambulatory care-sensitive hospital admissions, emergency department visits, and inappropriate specialty consultations• Those with PCP have better management of chronic conditions• Better outcomes: reduced absenteeism and presenteeismSepulveda M.J., Bodenheimer T., Grundy P. Primary Care: Can It SolveEmployers’ Health Care Dilemma? Health Affairs. 2008;27:151-158

Why Are Check-Ups Important?

Regular health exams and tests can help find problems before they start when your chances for treatment and cure are better.

By getting the right health services, screenings, and treatments, you are taking steps that help your chances for living a longer, healthier life. Your age, health and family history, lifestyle choices (i.e. what you eat, how active you are, whether you smoke), and other important factors impact what and how often you need services.Source: http://www.cdc.gov/family/checkup/index.htm

Understand the combined “attack” on chronic disease

Don’t Smoke





Heart Disease 4) Don’t Smoke-

Hypertension


Stroke

Don’t Smoke





Heart Disease 4) Don’t Smoke-

Hypertension


Stroke

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Now that we can see how the combination of these 4 key health activities put a “full court press” on chronic disease, we next need to design a health plan that will influence those activities (see next page).

What about obesity?

The health activities in this section are “activity-based” so that one may qualify for employer reimburse-ments today. While one can see the physician today or quit smoking today, one cannot lose 35 pounds today.

Obesity and what to do about it is in the Living Fit and Living Lean interventions which are included as part of the Wellness Program.

Our behavioral consultants have identified other key health activities that we need to target, but these four are the first. The fifth is presently available on a case-by-case basis.

Design a health plan to influence the 4 key activities

In the example shown above, the employer’s previous insurance was a $15 office copay/$250 hospital copay HMO with 60 employees on the health plan. Premiums were roughly $400 individual, $800 two-person and $1200 full family; split 75/25 between employer and employee.

By moving to the $2,000 deductible plan, the premiums dropped by 25% or about $144,000 annually. The employer was willing to help his employees with the bulk of that deductible (when/if expenses occur) provided the employees were willing to engage in the targeted health activities.

Here’s how it worked. Employees pay the 1st $500 of the deductible with the employer paying part or all of the remaining $1500 based on which health activities they engaged in. If the employee completes the Health Risk Assessment, the employer pays $300 of the $1500. If, in addition, the employee completes the Primary Care Physician Visit, the employer is obligated for another $300 and so on up to the limit.

The more health activities completed, the less the likelihood employer and employees will be obligated for deductibles AND the employees become healthier which benefits everyone. This is win-win all around.

The extra cost to the employer? $3600 or 2½% of the annual savings.

Deductible costs

the employer

agrees to pay

WHEN the

employee

completes the

activities in the

right column.

Non-Smokeror in a Quit Smoking program

Screenings(when advised)

Primary Care Physician Visit

Health RiskAssessment

$ 600

$ 300

$ 300

$ 300

Employee pays 1st $500

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Here’s what mine looked like (not so good) in April 2010

Let’s see … in my 60’s … coronary artery disease (very mild heart attack in 1992) … didn’t move much fromOctober 2009 until April 2010 … wasn’t watching what I was eating (love ice cream) … two weeks in Aruba (great food) … ballooned up to 224 pounds (5’10” medium frame) … blood pressure and cholesterol went up …low energy level … does this sound familiar? … do you know anyone like this?

I had to do something quickly. On April 6th, I took an online Health Risk Assessment a n d flunked, scoring 59 points out of a possible 100. My Body Mass Index (BMI) was 31.3 which means I am obese. Now this is crazy. I know I’m carrying some extra weight, but obese? Not me. Oh yeah?

My bottom line conclusion? My health ain’t so good. So what do I do? Where do I start? Let me think. There’s so many things I need to be doing so I need to find a way to attack everything at once. But I can’t start today because we’re going out to dinner with some friends on Saturday, so I’ll wait until Monday to start.

OK, been there, done that, time and time again. Does this sound at all familiar?

I then actually read every page of my report …

… and discovered I could start improving my score immediately. Under the category “Improvement opportunities to consider:” was the topic of car safety. I had scored just 1 out of a possible 5 points for seat belt usage. The first thing when I get into the car now, is to strap on my seat belt. Not rocket science, but I was now up to 63 points out of 100. And that’s when I began to feel better about myself because there was something, one little step, I could do immediately.

That overview also stated my “health age” was 4 years older than my actual age. Now if that wasn’t motivation to for me to get moving today, then I don’t know what is.

When I look at my bar chart and see the high risks associated with my heart, diabetes, fitness and weight, the pieces of my puzzle start to fall into place. By starting to work on the fitness aspect, I’ll begin to lose weight which will lower both my blood pressure and cholesterol which will also lower my heart risk.

and, there are more lifestyle intervention



programs … Evidence-based cognitive behavioral training helps people change the way they think about themselves, their life and their lifestyle. The programs teach simple, personal, motivating principles that are practical and enlightening.

Healthy Employees Cost Less

Corporate wellness programs help employees get healthy and stay that way. You’ll save money through reduced healthcare costs, workers’ compensation expenses, absenteeism and presenteeism

Healthcare costs will always rise, just as the cost for most products and services do.

You CANNOT control supply costs(healthcare services)

BUTYou CAN influence demand

(healthier employees)

By influencing health behaviors, we’ve already learned we can begin to reduce the demand for healthcare services. We next need to take the results of that Health Risk Assessment and create a complete Wellness Program to help us…

• Reduce healthcare costs by decreasing the number of medical claims for preventable injuries and illness

• Increase productivity by combatting presenteeism and absenteeism

• Identify current health risks within your organization, so you can offer tailored and effective interventions

• Attract top talent and retain key employees by fostering a healthy corporate culture

If costs keep rising, what are your options?

To maintain some semblance of control, you’ll keep raising deductibles and copays. Assuming you’re already moving in this direction …

The importance of the Health Risk Assessment

We know the enemy is chronic disease and the assessment prioritizes your personal attack on these

52



conditions. Go back and review the sample where you can see how you measures up with regard to:

Here’s the bottom line

Healthy employees cost less. Corporate wellness programs will help employees get healthy and stay that way. You’ll save money through reduced health insurance costs, workers’ compensation expenses, and absenteeism and presenteeism.

About the Arthor

Russ Swallow is a Professional Employee Benefit Consultant and Broker. He is President of BenefitsLab Insurance Agency, Inc., a Massachusetts based company, and has been helping his clients with their health insurance and benefits planning needs, both business and personal, since 1970. He is a member of …

• Association of Health Insurance Advisors

• Massachusetts Association of Health Underwriters

• Northeast Human Resources Association

• Society for Human Resource Management

• Employers Association of the Northeast

• BEI Network of Exit Planning Advisors

• National Care Planning Council

• American Association for Long Term Care Insurance

• Broker Advisory Council for Medicare (Fallon

Community Health Plan)

• Worcester Regional Chamber of Commerce

• Corridor Nine Chamber of Commerce.

and a Member and Director of The Massachusetts Care Planning Council.

On a personal note, Russ was sole caregiver for his mother during the last eight years of her life. She passed away in August 2006 at the age of 94 years and 12 days. He has hands-on experience in dealing with the ongoing myriad of health challenges that are facing the elderly in their declining years and can bring this experience to help others facing similar challenges.

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