by Jorge A. Alvidrez

Transcription

1 by Jorge A. Alvidrez Plan sponsors may decide the easiest route to providing health care benefits is by sending employees to public or private exchanges. But the health system continues to evolve, and plan sponsors need to examine their options carefully. 28 benefits magazine july 2015

2 MAGAZINE Reproduced with permission from Benefits Magazine, Volume 52, No. 7, July 2015, pages 28-33, published by the International Foundation of Employee Benefit Plans ( Brookfield, Wis. All rights reserved. Statements or opinions expressed in this article are those of the author and do not necessarily represent the views or positions of the International Foundation, its officers, directors or staff. No further transmission or electronic distribution of this material is permitted. Where Are We With pdf/615 Health Care Reform? In the few years since its enactment, the Patient Protection and Affordable Care Act (ACA) has brought unprecedented change to the U.S. health system. Most health sectors, including government programs, the insurance industry, provider groups, plan sponsors and individuals, have been directly impacted as many of the major provisions of the legislation have been implemented. Growing success of the public exchanges and widespread interest in private exchanges signal fundamental changes coming to the way our health system operates. In the midst of all the activity, we must not lose sight of the fact that while ACA has set in motion many important and purposeful programs, the ultimate outcome will be shaped by the actions and reactions of the various stakeholders and the successes and failures of the many initiatives underfoot. Plan sponsors, too, must decide what changes they wish to see happen and help promote those changes out in the marketplace. This will require greater commitment, a deeper understanding of how the health market is changing and a willingness to explore emerging alternatives that support organizational objectives. Unfortunately, this is not what many plan sponsors were hoping to hear, and they may be tempted to gravitate to one of the many exchange solutions. In one fell swoop, they could outsource future compliance and administrative headaches while giving members a choice of plans and limiting plan sponsor costs under a defined contribution arrangement. While we did not need ACA to create a benefit administration outsourcing solution, it could be argued that the competition existing in the private exchange space could usher in a previously unseen level of service innovation and administrative cost reduction. But if we did achieve outstanding levels of service and administrative cost reduction from both a plan sponsor and member standpoint, would that be enough? Would it be enough to say that members could readily reduce their portion of health insurance costs by electing a cheaper plan or by taking better care of their health? Would it be reasonable to expect that members who already have chronic conditions would see a defined contribution health plan as a financially desirable choice? For many plan sponsors, the answer to these questions is no. So, despite some expectations, many organizations have hesitated to jump into an exchange. There are too many unaddressed concerns, and it is still too early in the reform process to incur the switching costs or commit to a given operator. Besides, with so many players entering the space, we are likely to see a shakeout in the not-too-distant future. A similar dynamic likely will play out in the adoption of other reform approaches approaches that attempt to address more directly the cost and quality of care and the concerns of members. While there is a lot of interest, discussion and activity around patient-centered primary care, accountable care organizations (ACOs) and technology-enabled care improvement, we don t see widespread integration of these approaches into organizational benefit strategies. These approaches are in their nascent stage and not available in many markets and, consequently, there is a lack of evidence that these programs are achieving the desired results. Plan sponsors face a quandary: How do they mitigate organizational risks while using their market power to influence the transformation of a fluid marketplace that is time-constrained by rising health care costs and the looming 2018 excise tax? Following are steps plan sponsors might use to manage this process so we can discuss how current health market options meet certain plan sponsor needs and things to look for in new programs. july 2015 benefits magazine 29

3 TABLE Factors in Assessing Benefit Reform Strategies Plan Solution Administrative Market Sponsor Control Customization Complexity Power Resources Eliminate benefits/individual market Negative Negative Positive Positive Positive Outsource to group market exchange Varies Varies Varies Varies Varies Retain group plan/actively manage Positive Postive Negative Varies Varies Five steps to manage the process can include: 1. Redefine or reaffirm the plan s benefits philosophy and objectives. 2. Identify health market strategies that are consistent with benefit objectives. 3. Explore the viability of selected strategies with members and vendor partners. 4. Choose a strategy for implementation and develop an implementation plan. 5. Monitor performance and make adjustments as needed. Prioritizing benefit objectives will help a plan sponsor narrow its focus on those approaches most likely to address the plan s needs. For example, if member engagement, improved health and value are a priority as they are for many plan sponsors how might this work in practice? What are the available market strategies? Benefit Reform Strategies Broad benefit reform strategies are: Status quo/passive benefits management continues the current approach of limited member engagement and management of plan costs through incremental plan design changes that increase member cost sharing. Eliminate benefits; members decide whether to forgo coverage or obtain coverage in the individual insurance market or through public exchange. Outsource to private or public exchange(s) in the group market. Plan sponsors retain group health plans, but many administrative and compliance functions are outsourced to a private exchange or a public exchange if available. Retain group plans/actively manage sustainability. Plan sponsors retain group health plans but commit to more actively managing plan sustainability through member engagement and focus on outcomes and value. The table summarizes factors a plan sponsor might assess for differentiating among these strategies. While it is too early to measure the effectiveness of the approaches with respect to member engagement, improved health and value, these characteristics show the potential for the approaches to achieve these objectives. Individual Exchanges When a plan sponsor eliminates benefits, it loses control over achieving the desired objectives as well as the potential for customized solutions. But plan sponsor administrative complexity is greatly diminished, as is cost, even after netting the financial penalties imposed by ACA for failing to provide essential health benefits. A potential benefit of sending participants to public exchanges is that federal agencies and states have the ability to force changes in individual insurance markets that can affect member engagement, health and value through the development and application of quality metrics, required improvement plans, rate approvals and other regulatory measures. Patient-centered care, health improvement and cost control are key aims of federal reformers, and the public exchanges are designed to create competition among participating carriers by creating a flat playing field even as they seek to offer plan choice. While mechanisms for plan sponsors to subsidize coverage on a tax-favored basis are not available under this approach, many individuals would be eligible for federal subsidies in the individual public exchanges. In addition, it is clear federal agencies are eager to work collaboratively with the states to extend federal initiatives to the broader insurance market and avoid usurping state regulatory power. Public exchanges run by the federal government on behalf of a state, otherwise known as federally facilitated exchanges, exist only in states that chose not to implement their own exchange. But even under a federally facilitated exchange, states have the option to partner with the federal government and administer certain key functions, such as regulating the insurance 30 benefits magazine july 2015

4 plans and carriers offered. States also can choose to administer and regulate educational and outreach programs for individuals and businesses to learn about and access the exchange. This preserves the states traditional role of insurance regulator as well as regulatory consistency inside and outside of the exchanges. Plan sponsors can influence how the market develops in their state by continuing to lobby for state choices that support their objectives, as they do now. And plan participants buying individual policies in the broader market can benefit from initiatives that prove successful in the public exchanges. Still, there is a risk that, for various reasons, individuals will go uninsured and find themselves unprotected when they need coverage. Coupled with the potential adverse reaction of members to the loss of plan sponsor involvement with the provision of benefits, this could lead to strained relationships down the road. Even plan sponsors willing to contemplate eliminating benefits are hesitant to pursue this approach at the present time. Group Exchanges Under the second alternative outsource to a group market exchange the plan sponsor retains more control over the benefits program, and some customization is likely as exchange operators compete for business by catering to plan sponsor needs. ACA allows public exchange health insurance issuers to vary premium rates by network and managed care initiatives used in the plan, and plan choice is an overarching objective in both the public and private exchanges. So it is reasonable to expect some flexibility in this area, especially as increasing enrollment allows for more plan offerings in both public and private exchanges. Plan sponsor administrative responsibilities likely to continue under this approach include member engagement efforts, contribution strategies, care management and wellness programs, regulatory filings and other requirements, monitoring exchange activities and costs, and so on. The degree of administrative complexity depends on the extent to which these functions are outsourced to the exchange or other parties. But market power, resources and even the dynamics driving exchange strategy vary by type of exchange. Currently most group market exchange offerings fall into three categories: 1. Public exchanges (Small Business Health Options Programs, or SHOPs) 2. Broker/consultant exchanges 3. Carrier exchanges. SHOPs, where there is more regulatory oversight and the potential to achieve federal reform objectives of patientcentered care, improved health and cost control, currently are available only for smaller groups (fewer than 50 enrollees this year and fewer than 100 enrollees in 2016). Beginning in 2017, states will have the option of extending SHOP access to groups with 100 or more enrollees. So it is possible that a public exchange option will be available to groups of all sizes after 2016, depending on state-by-state decisions. In addition, states have the option of merging the individual and small-group market risk pools in their states. This means public exchanges can allow qualified SHOP participants to enroll in individual exchange policies that meet certain small-group market design requirements, thereby increasing the number of plan options available to SHOP participants. Broker/consultant exchange market power and resources vary exchange to exchange. The largest exchanges, such as those operated by the large broker/consultant firms, can exert significant market power and are very sophisticated, with access to human and financial resources. But some exchanges, such as those operated by smaller brokers, have more limited market power and sophistication. Some exchanges outsource time-consuming and costly functions, such as the technology underlying exchange operations. This allows them to focus on other important areas and reduces capital requirements and the enrollment volume needed to run a profitable and sustainable operation. Private exchanges unable to meet critical enrollment volumes will find it difficult to compete. learn more >> Education 34th Annual ISCEBS Employee Benefits Symposium August 23-26, Vancouver, British Columbia Visit for more information. ACA University Virtual learning environment for members. Visit for more information. From the Bookstore New Health Care Reform Law: What Employers Need to Know A Q&A Guide, Fifth Edition Paul M. Hamburger, Esq., and Peter J. Marathas Jr., Esq. Thompson Information Services Visit for more details. july 2015 benefits magazine 31

5 takeaways >> By sending employees to a health care exchange, plan sponsors can outsource future compliance and administrative headaches while giving members more choice and limiting plan sponsor costs. Many plan sponsors hesitate to move participants to an exchange because they don t know how that would affect participants. Plan sponsors need to know their benefits philosophy and objectives; identify, explore and choose a market strategy consistent with those objectives; and monitor performance, adjusting as necessary. Federal agencies and states can force changes in individual insurance markets that can affect member engagement, health and value, which may be a benefit of using public exchanges to provide health care benefits. Retaining group plans and managing their sustainability gives plan sponsors the most control and flexibility. Key features to look for in future health benefit arrangements are access to primary care, increased member and physician engagement, provider and service networks, and measurement and reporting systems. Like the public exchange market, the broker/consultant exchange market appears to be developing to service groups of all sizes. One issue for plan sponsors under the broker/consultant exchange model is to ensure that the current focus on alleviating administrative pressures, maintaining plan choice and offering supplemental benefits to fulfill unmet participant insurance needs does not eclipse health improvement and cost-control efforts. Carrier-operated exchanges, catering to small and midsized groups, are distinguishable from the public and broker/consultant exchanges in that they offer only their own benefit plans. There is significant debate about whether single-carrier exchanges can control costs without the competition created under multicarrier exchanges. Some advantages for smaller groups are the simplicity and administrative costreduction potential of a single-carrier model. Also, carriers have the resources and sophistication to provide valuable technology-enabled tools for member engagement and decision support. As with broker/consultant exchanges, plan sponsors in carrier exchanges must ensure that their objectives are not eclipsed by other priorities. The degree to which exchange market power and resources translate into the achievement of plan sponsor objectives will vary exchange to exchange, whether public or private. This is one of the areas plan sponsors must monitor as the market matures and they make decisions about whether or not to implement an exchange option and which option to implement. The longer plan sponsors wait to commit, the more pressure there is on exchange operators to demonstrate the value of their solutions. Importantly, there does not appear to be any direct evidence to suggest that using a defined contribution strategy to control plan sponsor costs ultimately leads to overall health plan cost control, improved health or member engagement. Considerations for groups that decide to explore a group exchange option include: Switching costs, including the use of proprietary tools and data that would be lost in the event of a change in exchange operators Flexibility around the number of plan options and designs Ability to integrate plan sponsorspecific communications, incentives, wellness and care management programs Technology and tools to facilitate member engagement, decision support and exchange operations Participation and contribution requirements Fees, charges and commission arrangements, with particular attention to full transparency Availability of supplemental and voluntary benefits. Sustainable Group Plans Under the third benefit reform strategy retain group plans and actively manage sustainability plan sponsors have maximum control and flexibility to manage the degree and timing of changes to their health programs and, consequently, the workload and complexity with which they must deal. This approach is likely to be preferred by plan sponsors that already have some measure of success aggressively managing their benefit programs or with a highly customized arrangement in place. Other plan sponsors may be interested in exploring their unique circumstances and specific health market opportunities such as implementing a promising ACO arrangement available through their current carrier, direct contracting with a local provider group with a compelling and well-organized 32 benefits magazine july 2015

6 service arrangement or implementing an on-site clinic with an integrated wraparound network. Some of these solutions may be practical only for larger groups in specific geographic markets. Other programs for example, member engagement and incentive efforts, progressive contribution strategies and wellness programs are applicable for groups of all sizes and can be continued even if the group later decides to adopt an exchange solution. Where Do We Go From Here? Regardless of the approach or platform chosen, if plan sponsors are to achieve the objectives of member engagement, improved health and value, key features to look for in future health benefit arrangements include: Access to primary care, which has both physical and financial aspects. Among the physical aspects are electronically linked options, including primary care offices, urgent care centers, retail clinics, on-site clinics, nurse advice lines and telemedicine, to enable seamless, integrated care delivery and provide timely access to care. Value-based plan design features encourage utilization of appropriate plan resources and make it affordable for members to access needed care. Increased member engagement with easy-to-use, readily accessible information and tools to understand benefit choices and care options, including self-care. Other key features are real-time support for appointment and referral processing as well as access to member clinical information such as lab results, prescriptions and medical history, along with the tools to help members understand what they are looking at. Increased physician engagement through a collaborative framework to drive provider involvement in process redesign, clinical decision support tool development and process integration. Key features are pay-for-performance mechanisms with meaningful incentives and clinical decision support tools with real-time patient data to enable physicians to provide evidence-based, outcomes-driven care. Tracking of provider performance using clinically accepted measures is consistent with health plan Triple Aim quality metrics. 1 Provider and service networks with comprehensive, integrated provider contracting and service delivery strategies to optimally manage member access, health promotion, clinical care and outcomes. These networks include the technology infrastructure, processes and incentives to enable and promote care coordination and integration that produce measurable results. Measurement and reporting systems that allow accurate and timely measurement of performance, engagement, health status, quality and value to identify improvement opportunities and manage results. Much progress has been made to implement the provisions of health care reform in the United States. Progress has come on various fronts access, technology-enabled solutions, quality metrics, member engagement, provider engagement and so on. However, the market is immature across and within geographies as new health care delivery structures and processes continue to be implemented and refined. Plan sponsors must be selective and diligent in exploring new options but may also want to play a role in influencing developments in their markets through their work with vendor partners and insurance regulators. Endnote 1. The three components of the Triple Aim, developed in 2008 by the Institute for Healthcare Improvement (IHI), are (1) improve the patient experience, (2) improve population health and (3) reduce per capita cost. IHI suggested the Triple Aim as a guide for developing new approaches to delivering health care. << bio Jorge Alvidrez, ASA, MAAA, is president and CEO of InnoQual Health & Actuarial Consulting, LLC. He founded InnoQual to help employer groups address the issues of quality, access and efficacy in the post-aca health care marketplace. Alvidrez has over 30 years of experience in health benefits and insurance and previously served as a vice president and consulting actuary at Aon Hewitt, a senior consultant at Watson Wyatt, a senior manager at Deloitte & Touche and an assistant actuary at the Principal Financial Group. Alvidrez holds a B.S. degree in engineering from Princeton University and an M.B.A. degree from the Anderson School of Management at the University of California, Los Angeles. He is an associate of the Society of Actuaries and a member of the American Academy of Actuaries. july 2015 benefits magazine 33