We thought is would be timely to share our thoughts on the state of healthcare & health insurance rates. Most of you have your company’s group health plan renew on December 1st or January 1st and before we know it, we will all be anxiously awaiting renewal pricing and plan changes. While we would all prefer a permanent solution or a magic bullet that makes this process easier, unfortunately we still believe “rolling up our sleeves and getting dirty is the answer”.
I think it’s important for everyone to understand what is actually going on in healthcare (not health insurance, but the actual healthcare delivery system) to better understand what the solution of tomorrow may look like as we continue to find budget friendly solutions to keeping our employees healthy. Some people say a “one payer system” is the answer, others would like to see employer’s out of the healthcare business, yet others believe self funded strategies are the key, while yet others continue to practice the ancient art of Wu Wei….just go with the flow! Perhaps if we all have a better understanding of exactly what is going on, we can at the very least be moving in the right direction vs. shooting in the dark.
The healthcare landscape as we know is going through a major transition. I have the opportunity of participating in this process with a major health care system at the Board level, and I can tell you it’s a scary venture. You are seeing major hospitals in our own backyard merge together, and then those systems joining even larger systems. Why is that? Is it because they can get greater economies of scale? Keep costs down? Attract better talent? Increase volumes? Those questions make sense to business owners, but the answer is strangely, NO, those things help, but are not the key driver for the rash of mergers and acquisitions we are seeing. And it’s just getting started!
The answer is “Population Health”. The simplistic definition of Population Health includes the “health outcomes of a group of individuals, including the distribution of such outcomes within the group.” It’s aim is to improve the overall health of a given population of people. Here is our first clue of where healthcare and ultimately the payers (medicare, commercial health insurance companies, etc) are headed. Here’s another way to look at it that may make more sense. Right now a doctor gets paid a fee for each service that is performed. We call this “fee for service”. So you charge a fee for an office visit, a fee for a blood test, a fee to read the test, a fee for an X-ray, you get the picture. The system is designed that whoever performs the most services gets paid the most. As we all know, this is not a sustainable health care delivery model and that’s the change we are just on the fringe of witnessing.
In the new, alternative payer model, healthcare delivery systems (think hospitals, medical groups, etc) get paid not by fee for service, but rather by the quality of care that is delivered to it’s community or population. Here’s the mind blower…they get paid to keep you out of the hospital. We are beginning to see the crest of the largest wave of disruption our healthcare system has seen since the advent of Medicare. In order to survive the transition from fee for service to the alternate payer system, you need lots and lots of bodies! It’s just like insurance, the more people in your system, aka population, the greater the spread of healthy and non healthy people. Populations will then be broken down into even smaller pools, like diabetics for example. This group will be given even greater focus and specialized care to keep them out of the hospital by leveraging technology and healthcare delivery systems that are on the horizon. Imagine a nurse getting a text that Mr. Martin’s glucose level just spiked to 200. A call to Mr. Martin alerts him and the nurse identifies the reason instantly, adjusts the medication right there on the spot and a costly hospitalization is adverted.
The second clue on what we may expect, comes from thinking about how can a system can possibly deliver this type of integrated care? Right now if I visit a specialist and want a second opinion, I have to get all new tests, office #1 doesn’t’ communicate with office #2, and costs are amplified because these two providers are not in sync. Everyone always says, why can’t there be a universal data system? Imagine you are a home builder and tomorrow you have to have your computer system integrate and talk to every home builder in the country…oh, and it’s all HIPAA protected info that must be triple secured. The diabetic illustration above does not happen in a fragmented healthcare delivery system. What you are going to see is “medical homes” set up to deliver your healthcare. Picture a building with a family doctor, several specialists, a team of physician assistants and nurses, a pharmacy, home health workers, and even social workers all working in unison to take care of the health of the community they are operating in. These medical homes, are surrounded by & strategically placed by “medical neighborhoods” housing hi-tech testing equipment, surgical rooms, and highly specialized care that flow from the “home”. The homes & neighborhoods are all integrated inside of what? A population.
Let’s try to tie it together and give you insight into where we believe health care is going. Medicare comprises approximately 50% of all payers for most hospital systems. It’s no secret that our government is driving a lot of this change. The challenge for any institution is going to be navigating the rough waters between today’s fee for service model and ultimately the new system. We lovingly refer to this transition time as the “Valley of Death”. I believe when this occurs you are going to see a lot of disruption yet again. If you have not moved to a qualified high deductible plan and began educating your employees on “consumer driven healthcare” you should seriously start thinking about it. We also believe that while most of you are not ready to make this jump yet, you will see EPO’s begin to slowly, but then more rapidly, crop up. An EPO is an Exclusive Provider Organization. Typically an EPO ONLY pays for in-network services with the exception of urgent or emergency care. There is zero coverage if you obtain coverage out of the network. Sounds a little like an HMO, but it’s a little more limiting because many times the EPO network is across a smaller footprint and not the entire “in-network spectrum. Is your head hurting yet? We do anticipate that there will be moderate premium savings for businesses that elect an EPO over a standard PPO product, but of course it’s not always that simple. Some of you have employees here in Lancaster county, but an office in Allegheny County…EPO would be quite challenging because of the distance.
In last week’s Kiplinger Letter this very topic graced the front page in their Healthcare section. “Here’s what bosses & workers can expect: More high-performance provider networks. By 2018, nearly 60% of companies may be on board…from 13% now. These networks offer bigger discounts and better quality of service in return for companies directing their insured employee to the groups. Eventually, they may become the only option for care”. The article goes on to say “in time, some bosses will offer only high-deductible plans and ax some PPO’s.” We believe his change is coming.
What are we doing to continue to help you navigate the second largest expense you likely face as a business? We are taking in a large amounts of information from various sources and experts, using our personal involvement in a healthcare system that employees of 15,000 people, and what I think is our most important strategy…our personal relationship with you. We know your business, we know a lot of your employees, we know the area as well as the local healthcare delivery systems. We know your individual philosophies on your role in the health of your employees as well as what your local competitors are offering to their employees.
You may read about a self fund company that saved $100,000 and wonder, why doesn’t Douple recommend this to us? If we haven’t recommended it to you yet, it’s because we know it’s not a good fit. Last year we had a group, who is going to recognize this story, but I think it does a good job of making the point. We had specific data on the group’s claims and they knew they had some high dollar medical issues. Capital rolled out their ASO product, a semi-self fund option with little downside, and we met with them to show them why this was the worse possible thing they could do. We went as far to get pricing to prove the point which came back 45% higher than what they had as a renewal option. One of our competitors strolled in a few weeks’ later claiming they had an amazing opportunity that would be perfect for this group…the Capital ASO plan! They already knew that the truth was it was the worst possible option. We spend a lot of time, rolling up our sleeves with you and anguish over the rates and plans along side with you. We believe this commitment and our knowledge will be what continues to help you get through these challenging times and we are committed to show up each year and work to find the best possible solution…for you.
Want to talk health insurance? We are always available to discuss, get your input, give you our thoughts and collaborate on putting together the very best solution.
Josh Gluck, CIC