First, benefit plans offered on Exchanges are evolving rapidly, with smaller, closed networks getting a lot more traction. A recent report from Avalere found:

from 2014 to 2016, the percentage of plans offering PPO networks dropped from 39 percent to 27 percent. This represents a 31 percent decline over the three year period. Meanwhile, use of health maintenance organization (HMO) and exclusive provider organization (EPO) networks has increased.

This isn’t surprising; health plans get better reimbursement, tighter relationships, and fewer management with small networks.  Expect this trend to continue.

But not without major challenges from regulators, health care providers, and consumers. In New Jersey, the dispute between Horizon Blue Cross/Blue Shield and a big hospital over Horizon’s value-based care initiative and that initiative’s impact on St Peter’s University Hospital is now before a judge.  Essentially, St Peter’s isn’t on Horizon’s Tier One provider list, which means consumers would have to pay more for care there.  They don’t like that, and want in.  Horizon claims St Peter’s is not committed enough to population-based care.

Expect these disputes to become commonplace.

Next, Co-ops – those start-up health insurance programs designed to add competition to the marketplace, are failing left and right.  Clear evidence that PPACA is failing, and another example of government’s inability to get anything right.  RIght?

Well, no.

In reality, this Congress screwed the Co-Ops.  

Long story short, the start-up Co-Ops were supposed to get financing in part from a risk corridor program that was part-and-parcel of PPACA.  The idea behind the arrangement was to help small players get started so they could provide an alternative to the behemoth health plans dominating our world.

Then Congress intervened.  Here’s Louise Norris:

On October 1, 2015 the federal government notified health insurance carriers across the country that risk corridor payments from 2014 would only amount to 12.6 percent of the total owed to the carriers. The program is budget neutral as a result of the 2015 benefit and payment parameters released by HHS in March 2014. And the “Cromnibus bill” that was passed at the end of 2014 eliminated the possibility of the risk corridors program being anything but budget neutral, despite the fact that HHS had said they would adjust the program as necessary going forward. But very few carriers had lower-than-expected claims in 2014. So the payments into the risk corridors program were far less than the amount owed to carriers – and the result is that the carriers essentially get an IOU for a total of $2.5 billion that may or may not be recouped with 2015 and 2016 risk corridors funding (risk corridors still have to be budget neutral in 2015 and 2016, so if there’s a shortfall again, carriers would fall even further into the red).

Many health insurance carriers – particularly smaller, newer companies – are facing financial difficulties as a result of the risk corridors shortfall. CO-OPs are particularly vulnerable because they’re all start-ups and tend to be relatively small. All of the CO-OPs that have announced closures since October 1 have attributed their failure to the risk corridor payment shortfall.

So, what happened is entrepreneurs based their business plans in part on the risk corridor program.  Congress, in its infinite wisdom, decided to not deliver on its original commitment, thereby killing off competition in many key markets.

One analyst has what I think is a pretty insightful take on non-financial enrollment challenges faced by new entrants to the health plan markets:

For a thoughtful piece on just what it takes to start an innovative health insurance plan/company/business, read this.  A key takeaway is it is not just about financing…

What does this mean for you?

Health plans are evolving rapidly, painfully, and some successfully. It’s not pretty but it is necessary.

Okay, poor grammar, but true.

High deductible health plans (HDPHs) are designed to a) reduce health insurance premiums by b) making people better consumers of health care. It’s also been suggested that lower costs of HDHPs may make it possible for more small employers to provide health insurance.

Let’s take these in order.

First, a bit more background these plans allow members to contribute, tax free, dollars to a Health Savings Account.  These contribution limits in 2014 were $3,300 for individual plans and $6,550 for family coverage.  The idea is folks will be more careful spending their “own” money than their employer’s or insurer’s.  Of course, the members have to actually fund these accounts; more on that in a later post.

Comparing a HDHP plan to a “regular” lower deductible plan, premiums are reduced – but that’s only because the cost is shifted from the employer/insurer to the consumer.  It’s a shell game, and the consumer ends up with the empty shell.

There’s no evidence that these plans make us better consumers of health care, and growing evidence that there’s no such result.  Here’s a quote from a story about a recent study of high deductible plans…

employees who reduced their use of care the most before reaching their deductibles were the sickest workers, even though they were also the most likely to continue using services after their deductibles were reached. Once such workers did exceed their deductibles, their use of medical services increased, the study found.

This brings up the main reason high deductible plans don’t control costs; the 20% of consumers who incur 80% of health care dollars blow thru their deductible sometime in March.  After which their care is free, so they use a lot of it.

Couple that result with the fact that many healthier folks avoid preventive care – including maintenance medications – because they don’t want to spend the money.

When it comes to controlling costs, high deductible plans are counter-productive.

As to the possibility that HDHPs help smaller employers afford coverage, that’s indeed possible.  Notably, according to a Health Affairs article, less than 2% of the smallest employers offered HSA plans in 2012 compared to about a quarter of the largest employers.

And, as of 2012, there were only about 6 million HSAs reported to the IRS, so it does not appear as if the takeup has been dramatic.  Of course, that may well have changed over the last two years.

So, if you’re looking to benefit design to control costs, what’s a better alternative?

Simple.  Replace deductibles and copays with co-insurance.  That is, have consumers share in the actual cost.  If treatment costs $100, then the consumer pays $20; if it is $4000, then the consumer pays $800.  This will make the consumer cost conscious without breaking their bank.

I understand that this will require the consumer, provider, and health plan to know what the cost of care is, ideally before treatment.  That is another major benefit of a co-insurance based program; it will speed adoption of transparent pricing and make consumers much more discerning buyers.

Yes, keep an out of pocket limit to protect consumers.  High utilizers will feel the pain of paying co-insurance far longer than they do today.  As a result, they will be better consumers overall.

What does this mean for you?

This isn’t that complicated, nor is it difficult.  Health plans that do this will gain a competitive advantage.

It’s the busy time – budgets, 2016 planning, getting those revenues in before year end. Tough to keep track of important stuff – no worries that’s what we at the Intergalactic Headquarters of Health Strategy Associates are here for!

First, a brief comment on the Cadillac Tax.  The cries for repeal are ill-advised and politically driven – even if they have the support of both Bernie Sanders and many in the GOP. Fact is repealing the Tax would cut Federal revenues by $87 billion; notably those calling for repeal haven’t figured out how to replace the lost income.

Under PPACA, hospitals, health care providers, insurers, drug companies, device companies are all paying their share to help reduce the number of uninsureds.  Yes, some union members and highly-paid executives with rich benefit plans are going to pay slightly higher taxes – but that’s because they are lucky enough to have incredibly generous benefits.

Whatever happened to shared sacrifice, to working together to solve big problems, to Kennedy’s call to ask not what your country can do for you but what you can do for your country?  We constantly hear politicians talking about making America great; that doesn’t happen without sacrifice from all of us.

It’s time to for Sen Sanders, his GOP allies, and highly-compensated workers and executives to stop whining, suck it up, and do their part. 

Okay, that’s off my chest.

Helios has published their latest update on regulations and legislation affecting pharmacy issues in work comp.  A helpful document to file away for future reference.

NWCDC – the Vegas confab looks to be a big event this year; don’t forget to register for the Women in Workers’ Comp Leadership event here.  It will be held the day before the Conference officially begins.

In the shameless self-promotion department, the must-attend session is the Blogger’s Panel on Thursday at 3:30.  See Mark Walls do his level best to maintain order among chaos as Becky Shaffer, David DePaolo, Bob Wilson and I opine on the great events of the day.

Bob and I will be joined by John Plotkin and Bob Reardon of ISG at ISG’s event at 5:30 on November 11 – we’re going to discuss social media as a force for good in the work comp industry.  Make sure to register here.

WorkCompCentral’s CompLaude Awards Gala will be held December 5 in Burbank.

Finally, for those docs looking to increase their income, here’s a GREAT opportunity.

As a colleague noted, if the new guy is making $700k a year, how much are the partners making??

While premium increases remain at pretty low levels, employees’ share of costs is increasing.  In fact, that’s one reason premium increases are as low as they are.  Without the higher employee premium contributions, deductibles and copays, premiums would have gone up a couple more points.  According to Bloomberg, several factors are contributing:

• the Cadillac Tax – high-cost health plans will see a tax of 40% on the cost above $10k for individuals and $27.4k for families.  This is leading some to increase deductibles and other cost sharing to keep premiums under the “Cadillac” level.
• Increasing cost-sharing keeps premiums lower – and lower premiums are more attractive to buyers.  Deductibles now average above $1000; deductibles are up 67 percent over the last six years.
• And higher premium contributions are also a driver; on average workers are paying more than $1000 towards their coverage.

Consolidation among health plans continues, although there’s little evidence that it will lead to lower costs or better quality.

CEOs from Aetna and Anthem testified before Congress last week, with both touting the benefits of their pending acquisitions of smaller health plans.  While it sure looks like the consolidation binge is concentrating power in the hands of a very few health plans, Anthem CEO Joseph Swedish claimed otherwise, stating: “health insurance is flush with competition…The number of health insurers increased by 26% in 2015 with 70 new entrants offering coverage.”

Not sure Mr Swedish’s claim accurately portrays the state of competition in health insurance, and the American Hospital Association and AMA certainly think it’s a bad thing.  An analysis by the AMA indicates

The combined impact of proposed mergers among four of the nation’s largest health insurance companies would exceed federal antitrust guidelines designed to preserve competition in as many as 97 metropolitan areas within 17 states

While I am VERY skeptical about any analysis by the AMA, I believe that in this case they have a point.  As one expert notes:

I’m aware of no peer-reviewed, published analyses that show that insurance mergers, on average, benefit consumers.

What does this mean for you?

Huge changes in the health care system will have far-reaching implications; watch for more battles between big provider groups and big payers, with smaller payers suffering fall out.  This “fall out” will take the form of higher medical costs due to lack of bargaining power,