How to Reduce the Impact of ObamaCare

How to Reduce the Impact of ObamaCare

The Congressional Budget Office projected enormous cost increases under the current congressional plan for national health care.  It was promoted as saving taxpayer’s money, but the CBO estimates a health care cost increase over $1 trillion. In order to fund this program, taxpayers will experience an increase in federal income taxes resulting in a tax increase of up to a 60%, thus, resulting in government bureaucrat’s ballooning the cost of what is already the most expensive health care system in the world.  The devastating financial impact of ObamaCare for the nation and every citizen is now overwhelmingly clear.

This white paper discusses how employers, brokers/agents, TPAs and consultants can provide new solutions that can off-set the negative and impending financially disastrous effects that ObamaCare will have on United States businesses, the insurance industry, health care providers, families, and public health providers.

Additionally, this paper will discuss:

• The legislative, organizational and individual behaviors negatively impacting health care costs
• Innovative strategies to off-set the negative impact of the ObamaCare plan
• Benefit strategies for the future or during the era of ObamaCare

Behaviors Driving Health Care Cost in the United States

Legislative Behavior.  The political scientist Frances Lee makes this particularly clear in her new book, “Beyond Ideology.”  “Parties,” she writes, “are institutions with members who have common political interests in winning elections and wielding power, not just coalitions of individuals with similar ideological preferences.”  According to her data, senators in 2004 were 63% more divided along party lines than senators in 1981, and suggests that this is still relevant in 2010.  It’s no coincidence that the rise in party-line voting has coincided with the ideological realignment of the parties. Now that the parties agree internally, they can focus their efforts on winning power.

Organizational Behavior concerns how individuals, and groups act with in organizations and react to their environment and their markets i.e., leadership style, corporate culture, business model, competitive profile, manpower philosophy etc.

Individual Behavior.  According to researchers at the University of Rhode Island, the likelihood that someone will take action to prevent illness depends upon the individual's perception that, they are personally vulnerable to the condition; believe that the consequences of the condition will be serious; that the precautionary behavior effectively prevents the condition; and, the benefits of reducing the threat of the condition exceed the costs of taking action.  These four factors, which are influenced by mediating variables, indirectly influence the probability of performing protective health behaviors by influencing the perceived threat of the illness and expectations about the outcome.

Since the United States is a free market economy and is driven by market demand, those organizations that provide a high-quality product and services offerings normally become market leaders.  The above outcomes neither do nor exist in the health care economy because health care decisions are not based on quality cost and quality outcomes but rather steerage to providers due to health plan design and/or physician referrals. Transparency is virtually non-existent in the health care industry, as well. In addition, the health care industry has randomly evolved and is not consumer friendly. The industry is 20 years behind the business community in the use of information technology that is necessary to connect a fragmented market and information sources. Also, government regulations and the lack of standards related to the assessment of health status and treatment protocols contribute to health care cost increases, which are unsustainable, and have contributed to the industry not being consumer friendly.

What does this have to do with ObamaCare and Health Care Cost?

The number one biggest obstacle to controlling health care cost is culture change. In order to lay the groundwork for change you must create an environment that will provide the individual a reason to change within the cultural setting.  In addition, change will happen at the pace of the environment, as long as the cultural setting is dynamic and readily accepting of each phase of change.

Legislative Behavior.  The federal government has not demonstrated the ability to manage cost-effective and high-quality Medicare and Medicaid programs. If there is a role for the Federal government in health care it should be limited to tort reform, establishing health care protocols for the treatment of medical conditions and diseases, and requiring transparency, cost, and quality measures for providers.  The Health Chain Solutions (HCS) business model centers on establishing health care baselines, individual responsibility, and eventually competition amongst providers.

Organizational Behavior.  The ObamaCare legislation will accelerate problems in the present health care delivery system including significantly increasing health care cost to employers while destroying the world’s best health care system.  This will require actions of all organizations in the provision of health care plans as a result of legislation as apposed to the operation of the free market related to health care. Business behavior is predicting that the additional cost of the ObamaCare legislation will be passed on to the employees and subsequently the customers.

Individual Behavior.  The impact of the Obama Care legislation on individuals will be magnified, resulting in increased cost, rationing of health care services, physicians leaving the industry, and decreased research and development.  This ultimately responds then to the fundamental issues of cost, quality, standardization of care, tort reform etc.  This will result in a greater risk to individuals with chronic disease and those who do not manage diseases effectively, resulting in a profound negative financial and quality of life position.  The key driver of health care cost increases is personal behavior. Obesity and smoking are the 2 major cost factors driving health care cost, directly and indirectly, representing 80% of the insurance dollar. Obesity is the leading issue, and complicates many other medical conditions: Hypertension, Type 2 Diabetes, Osteoarthritis, Stroke, Coronary Heart, Gallbladder, Sleep Apnea, Respiratory Issues, and even some cancers.  Individual behaviors and lifestyle changes will determine how well the U.S. controls future health care costs.  Most obesity is caused by poor diet and lack of exercise, and behavioral and lifestyle choices, which have the potential to be changed.

Behavior Summary

Examining behavior and its role in rising health care cost requires an understanding of the factors driving behavior. In addition, any further strategy that is designed to control health care cost must integrate and calculate the role behavior will play in the ability to make positive change.

Behavior Does Drive Increased Cost

Although the current political environment has a great deal of impact on this countries future nothing will be more devastating to individual Americans then the current Health Care Reform Act Titled HR 3590 which is a major health care reform bill that has absolutely no chance of controlling health care cost.  In the short-term future this legislation will negatively affect current retirees, the Baby Boom Generation nearing retirement and Baby Buster’s currently in their early to mid-forties.  Long term future generations will now be saddled with the unintended consequences of HR 3590 i.e., increased taxes, cuts in Social Security/ Medicare,  lower Individual retirement, shrinking personal wealth and a comprised health care delivery system.

This legislation cuts Medicare Reimbursements, imposes higher taxes on persons making $250,000 and above, increases capital gains and imposes an increase death tax.  All of these taxes will impact an individual’s quality of life, personal and retirement income.

Alarming and Impactful Data

• More than 75% of health care costs are due to chronic conditions; Heart Disease and Stroke, Cancer, Diabetes, Obesity, and Arthritis.  Source: Center for Disease Control (CDC).
• 20-25% of employer healthcare costs are the result of non-compliance. Source: 10th Annual Survey of large employers: Watson Wyatt Worldwide and National Business Group on Health.
• U. S. health care dollars are wasted in excess of $600 Billion through Healthcare industry inefficiencies in administration, management, and delivery.  Source: New England Healthcare Institute.
• The sick account for 80 percent of the costs but only 20 percent of the users.  Source: Regina E. Herzlinger, Professor at Harvard Business School and author of "Who Killed Health Care?"

The Perfect Storm that can lead to Change

The US is in the depths of the worst economic depression since the Great Depression, hovering around 10% unemployment, double-digit health care cost increases, and housing foreclosures at an all time high.  The impact of the massive Trillion-dollar big-industry government bailouts, government control of private industry, and massive government spending, will burden our children and grandchildren for years to come.  In addition, the only way out of massive government debt is tax, tax, tax.

The Climate for Change

Americans are consumers and spending drives our economy.  With health care costs rising and out of control, jobless claims continue to rise, with personal wealth being drained due to extended periods of unemployed periods.  At some point the American will need to recover personal wealth.

The health care is a $2.7 Trillion market, with 1% of people using 30% of all dollars, 5% using 50%, 10% using 80%, and the healthiest 50% using 10%.  In addition, 75% of all dollars consumed, are by people with chronic diseases related to lifestyle.  In addition, 80% of the health care dollars are consumed by people who have at least 5 conditions, with Care Coordination deficiencies being the primary driver.

Employers have provided incentives in an attempt to get employees to manage their personal health and control health care spending.  They have shifted cost to employees, began implementing Consumer Health Care Plans (high deductible plans) placing an increasing burden on employees and their families.

Innovative Strategies to Control Cost

American’s have very little influence over the current Legislative and Organizational Behaviors but have the ability to focus on personal accountability for their health and finances.  HCS focuses the tools of our services on individuals.  By influencing individuals through education regarding how their personal choices impact their lifestyle choices, health, and financial well-being, HCS can slow healthcare cost increases, which are currently plaguing many employers and families.

It is imperative then to provide access to products and services that are aligned with business benefit philosophies and cultures.  Doing so will help to create individual accountably for personal health.  HCS services can assist with reducing health care cost and increasing the retirement income of employees.

Establish a baseline to measure future cost trends

A Return on Investment (ROI) can only be validated by establishing actual baseline numbers from which to benchmark and trend cost.  Begin by establishing cost baselines and calculating the integrated financial risk of the employer’s health care program.

1. Determine the Baseline Cost by Diagnosis.  Once the cost baseline has been established, HCS breaks down the diagnosis costs from high to low.
2. Establish the percent of compliance by diagnosis and the potential cost impact
3. If Health Risk Assessment and Biometric data exist, HCS will integrate the data into the baseline cost method.  If there is no existing HRA & Biometric data we insert the requirement in the strategy development phase of the project.
4. A proprietary HIPAA complaint Employee Health Scorecard is generated for each member of the health care plan providing each member with his or her personal health information, compliance, claims paid and projected, etc.
5. Once the cost baselines have been validated, all new claims will be tracked against the current plan design and the new strategies that are implemented.

Fiscal Focus as a Health Care Strategy

HCS has developed a health care cost containment solution that includes automated workflows, streamlined processes, industry-standard assessments, consumer/patient engagement tools, and reports that provide patients the ability to educate themselves and understand their role in impacting healthcare costs.

Consumer/Patient Engagement Tools

HCS has developed an innovative suite of tools and services that provides the ability to pro-actively assist consumer/patient to manage, support, coordinate their care and maintain their quality of life.

HCS provides:

• A Health Management checklist and information sources to encourage and support lifestyle modifications
• Detailed Care Guidelines and preventative care standards to support structured goal-oriented patient and family education related to disease management and complications
• Access to disease-specific information via the web
• Access to information via multiple telephony tools to facilitate patient contact with health care professionals

Provide Access to Individual Health Information

HCS has developed an innovative suite of tools and services that provide the ability to pro-actively assist consumer/patient to management, support, coordinate their care and maintain their quality of life.

HCS Services

• A checklist to encourage and support lifestyle modifications
• A detailed Care Guidelines and preventative care standards to support structured goal-oriented patient and family education related to disease management and complications
• Disease-specific information via the web
• Multiple telephony tools to facilitate patient contact with health care professionals
• Standardized Care Plans
• Tracking of care coordination
• Tracking of compliance with treatment plan

The Employee Health Report Card Features

• Past Personal Claims History in detail or aggregate
• Forecasted claims for next 12 months
• Personal Annual Preventive testing requirements
• Diagnosis Care Guideline compliance requirements and reference
• Prescription Adherence requirements and compliance

Health Report Card Technology Features

• Accessible through Web Portal or Mobile Phone
• Active links to consumer/patient information

                -Diagnosis/condition information

                -Preventive Compliance Standards

                -Life style management information i.e. weight management, nutrition,
   Exercise, etc.

• Pro-active messaging – Reminders pre and post compliance activities

How to get started

An educated employer would consider finding out all the latest information he could on ObamaCare.

There are three sources to consider:

• Get the weekly newsletters from attorney Larry Grudzien based in Chicago.  Go to www.LarryGrudzien.com and sign up today.
• Consider getting a Health Care Reform Kit on CD. It is continually updated and will provide the latest communication materials, forms, legal docs, SPDs, and PPTs.  Go to www.hrconsultinggroup.com and Select HSA Kit.  It will have all the details and ways to get the Health Care Reform (HSA) Kit on CD.
• Stay in touch with all the laws and notices by accessing the website of another attorney who is Mark Wincek of Kilpatrick Stockton in Washington, DC. Go to http://www.kilpatrickstockton.com/en.aspx.  You can also contact Rob Thurston at hrcg@relia.net and he will give you the IRS and Government websites for all the latest laws and notices.

An employer should also attend as many webinars and learn from online publications that he could, and also contact his current broker, consultant, insurance carriers and Third Party Administrators that he works with and request their materials on ObamaCare.

astly, an employer should ask for a free “Cost Benefit” Analysis from these sources as well as from my co-author Dave Swart of Health Chain Solutions (HCS).  His contact information is at the end of this white paper.

The Future of Benefit Plan Design

It might appear obvious but the future is now.  You cannot sit back and wait for further clarification or guidance from the IRS or government.

You must take a “Pro Active” approach and make some smart decisions now.
Here are nine simple steps you should be doing today:

1.  Look at wellness and disease management improvements into your existing medical plans. It does not matter if you are small, fully insured, or a larger employer.

• Wellness will be a smart decision to do mid-year or prior to 1/1/2010. Giving financial incentives or penalties based on employee choices will bring about long term changes in behavior. In addition, the plan is designed to give incentives for use of disease management by implementing plans that encourage the consistent taking of prescribed medicines.
• Health Chain Solutions has some very creative strategies and sample reporting tools to make disease management impact the medical claims costs of your plans.
• There is some concern if you put in Wellness options that the employer would not be grandfathered or exempted from immediate implementation of ObamaCare. We feel the benefits of wellness and disease  management more than outweighs the loss of “grandfathering.”

2.  Explore taking the premiums that the employees are paying for medical premiums and putting them into a Premium Only Plan (under Section 125).  Immediately implement a mid-year an employer paid Health Reimbursement Arrangement (HRA under Section 105) for the employer’s portion of the medical premiums.

• It will create an environment where the employer is now defining a limited or set amount for the total contributions towards medical premiums. That is a “Defined Contribution” approach to medical funding.

3.  Keep your current FSAs (under Section 125) because they raise revenue but limit your    Health FSA to $2,500/yr in next 12 months.

• An FSA still has “use it or lose it” so any forfeitures revert to the employer and can be a    revenue source for the employer.  Since the $2500 annual limit is going to be required in the next 2 years, why not implement that limit now, and get  employees thinking about being more efficient with their FSA monies?
• And don’t forget that some FSA contribution levels might decrease because Over the Counter (OTC) drugs and supplies will not be reimbursed in the FSA unless prescribed by a physician.

4.  Do a Dependent Eligibility Audit.  One way an insurance carrier or administrator can terminate coverage for a participating employee is due to fraud.

• So now is the time to do that Audit and verify that all dependents (up to age 26) are eligible.  That will protect you from having the carrier do their own audit and then suddenly claiming fraud and terminating coverage.  Why pay additional premiums for dependents and for fraudulent claims?  Do a Dependent Eligibility Audit and resolve that problem today.

5.  Accurate tracking of all Dependents and employees can save $3800 a year per ineligible (the employer cost).  Look at Consolidated Billing to save money/time.

• Many employers will no longer want to spend the time to load, track, and do payroll deduction internally.  And it takes a major amount of time and head aches to add a monthly reconciliation with all the carriers for the payroll deductions. Using more advanced technology and better tracking might be a smart thing to consider.

6.  Update and amend your legal docs/SPDs now to comply with ObamaCare.  Do not wait for your carrier or administrator to do that for you.  And you need to review any new documents that they might give you since the penalties for  non-compliance and failure to have complete documents can be very expensive.  Determining what “essential Medical Coverage” is, must be addressed, and defined in the master plan document.

7.  Self-funded employers will need to evaluate their coverage and likely will need to purchase stop-loss insurance to protect themselves against large claims.  Since there will no longer be any annual or lifetime maximums; the employer needs to protect themselves against large “shock” claims.

• The actuarial amounts of lifetime claims exposure is not as great as many carriers would like you to think.  If your stop-loss insurance premiums go up over 1-2% upon renewal, or if your carrier tries to convince you that rates are increasing due to no annual or lifetime maximums; please consider the following:
• Pete Peterson, President of Big Benefits and a major broker approached several carriers.  He asked what the average amount for total claims for an employee would be until they die.  10 years ago, in 2000 it was estimated to be $268,000.  Today in 2010 its still only $450,000.  As you know most plans today prior to ObamaCare had at least a $1,000,000 lifetime maximum.  So the amounts for stop-loss or a rate increase from you carrier should not go up due solely to no annual or lifetime maximums.

8.  Other Design Features to Consider.  Even if you only have 50 employees, you should consider partial or complete self-funding.  Because the carriers will be required to Rebate back to employees any overages in premiums that exceed a certain percentage for the insured plan, resulting in the refund returning to the employee.

• Instead, if the employer was self-funded, more control is available over the determination of claims costs and exposure.  Essentially, Rebating would be minimal and could be structured using a Section 501c9 VEBA Trust so that the rebates remain in the trust.
• This is an idea that should be explored with your consultant since clarification from the IRS and government might require changes to these plan design feature.

9.  Preventative Care will now be paid 100% by employers.  This could become a major expense because most plans had some form of deductible or co-pay on such expenses prior to ObamaCare.  Most were at least 20% paid by the employee and now 100% will be paid by the employer.  So a smart plan design feature would be to create your own definition of what preventative care is now and to build your plan design with this in mind.

• Using funds contributed by the employer into a HRA that would get the employee to 100% of preventative Care coverage might be another option to explore.
• But buyers beware.  No one knows at this time what further clarification and changes that the IRS and government might interpret because of ObamaCare.

New tools to drive health care cost and personal accountability

Some of the new tools that most employers will consider using are the following:

1. An outside Wellness and disease management firm since Personal Health Information (PHI) and security required due to HIPPA will give incentives to employers to outsource.
2. Better online and real-time reporting to better manage costs and outcomes
3. Managing by Return on Investment (ROI).  No longer will benefits decisions and plan changes be made on surveys or desires.  It will have to show an immediate or short term Return on Investment in order to be considered by an employer.
4. Most decisions about new benefits and plan design will be driven by the Chief Financial Officer or the Executive Suite of the company.
5. Use of attorneys and legal experts to determine what is Essential Medical Coverage and that your plans and communication materials are in writing and complete.
6. Better online tracking and coaching to help the employee realize the true costs of their benefits, wellness incentives and penalties, and to help increase personal accountability.  Such tools would include the spouse and dependents (including any child up to age 26) in educating them on personal accountability.

There are just a few of the new tools that an employer should consider in 2010 and beyond.

Summary

Education and communication plays a prime role in expecting anyone to take advice and embrace it.  Web tools including financial calculators, market analysis and pertinent articles are available. In addition, information specific to an individual’s lifestyle, personal and financial goals will drive their future decisions.The goal for employers, health care, and benefit providers will be to align future benefit designs, products, and service offerings to provide information that allows employees to make educated health and financial decisions.  Since they are the consumers that drive benefit costs, it will be important to drive new behaviors that contribute to positive impact on benefit cost to offset the negative impact of ObamaCare.

For More Information, Contact:

Rob J Thurston, President

HR Consulting Group (HRCG)

www.hrconsultinggroup.com

(888) 438-9445

hrcg@relia.net

About The Author

Rob J. Thurston, President of the HR Consulting Group, has been a national speaker and noted author on HR consulting and systems development since 1981. He has implemented and designed some of the largest selling employee benefits software systems nationwide while part of an international brokerage firm, a national administration firm and while as a consultant. Currently, he is working on the development of several advanced technology systems for both HR and for employee benefits.

He has available at no cost or obligation a comprehensive listing of software and consulting firms providing advanced technology systems for benefits enrollment, communication and administration.  Please request this list by calling Mr. Thurston.

Or

David Swart President

Health Chain Solutions (HCS)

www.healthchainsolutions.com

(513) 943-2900

daveswart@healthchainsolutions.com

David Swart has over 30 years experience as an entrepreneur, and as an executive, consultant, providing expert services and tools for business strategy development, process & workflow design, metrics development, innovation strategies and technology. David has developed new business methods, process and technology solutions in the health care, manufacturing, pharmaceuticals, consumer package goods, and government.

HCS provides its customers with the highest quality healthcare solutions utilizing the latest CLOUD technology and services solutions.  As a healthcare solutions company, HCS is dedicated to the pursuit of delivering services and tools to our customers.  HCS defines the root cause of rising healthcare cost; provide actionable information and services that reduce cost.  More importantly, HCS improves the health, quality of life, and productivity of individuals.