Voluntary Benefits Magazine

VoluntaryBenefitsMagazine.com | May 2011 | Voluntary Benefits1

Volume 9, No 2 | March 2011


EDITOR’S LETTER

Jonathan Edelheit

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

am very excited at this year’s upcoming Employer Healthcare Congress, October 26-28th, 2011 in Chicago. This will be our 3rd year, and each year we have focused on making improvements. Last

year, only in our second year, we became one of the largest employee benefits conferences in the country beating out almost all other benefits conferences, some of which have been around for over 23 years.

We have moved to Chicago this year because of it’s central location which will draw a much larger audience. Our attendance this year is already almost at 200% higher than at this same time last year, and I believe this is because of our location and that Chicago is home to a high concentration of mid-size and large employers.This year we have reinvested in the congress significantly to make this the biggest and best year yet. We have two great keynote speakers, Bill Rancic, the winner of Donald Trump’s 1st “Apprentice” TV Show, and Cecil Wilson, the President of the American Medical Association.

We have changed the format of the congress to have more cross-overs as to bring our symbiotic conferences closer together, and we will have more advanced educational sessions and workshops. We have also expanded our VIP program and will be including not just employers but agents and consultants also this year.

What I am most excited about is our new networking software which has been newly built and is more of a social networking tool on top of meeting scheduler. It will make it easier for attendees to view who is coming to the conference, through photos, bios and allow for attendees to synch to twitter, LinkedIn and Facebook to see who in their network is attending the conference.

Tomorrow I am headed to New York City for an interview with FoxNews. See you soon.

IUS Employee Benefits Industry Players Head to Chicago

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NAD1121

CONTENTS

FOLLOW US ON:

Issue 23 • May 2011

FEATURES

Debit Card Cheaters& How to Choose the Best Third Party Administrator For Your Consumer Driven Health Plan

How Brokers Can Find Opportunities in the Healthcare Reform Era

INSIDE THIS ISSUEGive Me Drugs!.....................................................................................................26

Connecting Employee Health to Voluntary Discount Dental Plans......................32

Teamwork Is Not “Voluntary”....................................................................... ...... 24

Health Reform and the CLASS Act: Threat or Opportunity?...............................35

The Costs of Doing Business Reducing Administrative Burdens in a State Health Exchange...............................................................................................................41

Meaningful Thoughts Beyond “Meaningful Use”................................................44

Unions Cheat Members Out Of Health and Wealth............................................ .48

What is the Biggest Myth about Electronic Fund Transfers?............................. .52

Workers’ Compensation Cost Escalation..............................................................55

6PharmaceuticalImportation ~Logical, Legal, Safe

12 20

CONTENTS


Debit Card Cheaters & How to Choose the Best Third Party Administrator for Your Consumer Driven Health Plan By Isaiah D. Joyner


lose your eyes, you’re beginning to become very sleepy, very, very sleepy...Relax your entire body

and now imagine you are a human resources professional at XYZ Company, in charge of vendor selection.

You’ve been with “PoorFlex Company” for several years for your company’s Flexible Spending Arrangement (FSA) services without much issue, unless you or your employee’s need to call in or get an issue remedied. Over the years you’ve had several reports and personal

experience with slow phone answering, employee’s not being able to understand the call center representatives, and poor follow up.

This has irritated your boss and your participants enough to warrant searching for a new FSA

Administrator or Third Party Administrator (TPA).

Through your research you discover several reputable TPAs that would fit the bill. You make your selection with a TPA with better customer service called, “GreatFlex Company.” Everything has been fantastic with “GreatFlex.” The complaints about poor customer service have all but disappeared and you’re finally able to get back to work! After several months you start seeing those old familiar faces stroll

into your office complaining of receiving something called a, “Substantiation Notice” from “GreatFlex.”

Through some research you discover that these “Substantiation Notices” are required by the IRS for any claims that cannot be identified completely via the debit card.

After further research, you discovered that all claims must have the service date, description of the charge, and the amount of the charge in order to be in full compliance with the FSA plan

or Section 125 Cafeteria Plan. You begin to wonder amongst the complaints received about “PoorFlex” why the substantiation request issue never showed up…

As you proceed with pressing investigation, you discover several negative reviews online about “PoorFlex” indicating hefty penalties, fines, and fees by the IRS for companies who had been audited for not providing substantiation for their participant’s FSA or HRA plan claims. You begin to wonder, “How long have we been out of compliance!?”

You are now woken up with a snap of the fingers. “Snap!” Aren’t you glad you aren’t XYZ Company!

The aforementioned situation is all too common

C


in the TPA world and not requiring substantiation for FSA claims is one of the most common audit concerns when dealing with these types of plans. In a company’s defense, you don’t know what you don’t know. And how could you? Many insurance agents spend much of their training on the “bigger ticket” items, such as medical insurance and its ins and outs. Why shouldn’t they? That’s how they make their living. Pre-tax benefits are taught and are a required teaching to obtain your broker’s license, however since these products don’t tend to be dealt with on a daily basis in their industry, much of it leaves the brain and is only revisited when disaster strikes!In the Third Party Administrator (TPA) industry “PoorFlex” would be called a, “##&%& Debit Card Cheater” amongst other things…

What is a debit card cheater you ask?

Well, simply put, a debit card cheater is a Third Part Administrator (TPA), Agency, or company who does not substantiate the claims they receive from participants for section 125 cafeteria plans i.e. Flexible Spending Arrangements (FSAs), Health Reimbursement Arrangements (HRAs), or sometimes they are referred to as MERPS Medical Expense Reimbursement Plans, this is an interchangeable term. If you are unfamiliar with the FSA and HRA, here are some brief explanations;Flexible Spending Arrangements (FSA) is a great way for both employers and employees to save money. In fact, they are one of the only benefits that save both employees and employers money. These pre-tax plans work by allowing employees to set aside money pre-tax (before taxes are deducted from their paychecks) to pay for common everyday medical, travel, and dependent care expenses. Pre-tax plans save money on Federal, FICA and state taxes.

Benefits of FSAs:

• Employers save 7.65% in FICA taxes for every dollar employees contribute to an FSA.

• Employees get an “instant raise” in the form of tax-savings.

• Employees enjoy the peace of mind that money for their health needs is there when they need it -no worrying about paying for unexpected (or expected) medical expenses.

• Morale Booster

Health Reimbursement Arrangements (HRA) have increased in popularity due to the rising cost of health care premiums. Because HRAs are flexible, employers can purchase higher deductible health plans with significant premium savings. They then self-fund a portion of the high deductible (or benefits) with an HRA so employees don’t feel the burden of the high deductible plan.

Employers and Employees win in several ways:

• Flexibility in controlling escalating benefit costs

• Flexibility in benefit choices

• Employee retention and attraction

• FICA Tax savings of 7.65% on every dollar that is utilized through the plan.

Why does it matter if my administrator substantiates claims?

If your administrator chooses not to substantiate claims, they are putting the employer and broker


in unnecessary risk. The IRS requires that all claims provide non auto-adjudicated i.e. when the debit card is able to substantiate claims at the “point of service.” According to publication 502 printed by the Internal Revenue Service (IRS), only certain qualified health related expenditures are eligible for reimbursement. E.g. co-pays, RX, teeth cleaning, eye glasses, and over twenty six thousand other items.

The issue of non-compliance with section 125, has to do with services rendered and paid for that do not classify as eligible as defined in publication 502 by the IRS. (www.irs.gov/pub/irs-pdf/p502) E.g. Teeth Whitening, Non RX Over the counter medicines, cosmetics, etc. See below clarification dated July 31st, 2006:

“All other charges to the card are treated as conditional pending confirmation of the charge by the submission of additional third-party information, such as a receipt. Claims that are identified as not qualifying for reimbursement because of lack of additional information or otherwise, are subject to certain correction procedures. Rev. Rul. 2003-43 concludes that the procedures adopted by the employer in Situation 1 meet the requirements of § 105(b) because all claims for medical expenses are substantiated, either automatically or by the submission of additional information. Card systems that do not meet the requirements of § 105(b) result in all payments provided by the cards being included in the participant’s income.” (Pie, 2006) I’d hate to be that employee!

What is a Valid Receipt?

Store/Pharmacy receipt, including name of product and date of service Co-pay receipt from medical provider, including date of service Itemized bill from medical provider, including date of service Insurance company’s “Explanation of Benefits”, including date(s) of service. Canceled checks and credit card statements are not valid receipts.Documentation from a physician must accompany receipts if they are for medical expenses that seem as if they would not be accepted for reimbursement. For example, cosmetic treatments or massage therapy are not typically reimbursable, but could be if prescribed by a physician.

Eligible Health Care Expenses

Pre-tax benefit plans allows for reimbursement of certain health care expenses, which may include medical, dental and/or vision related expenses. Within the parameters of expense types allowed under your plan, Health Care Expenses claimed for reimbursement must be used for the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body. The maximum range of health care expenses that may be allowed under your plan are outlined in IRS Publication 502 -Medical and Dental Expenses (http://www.irs.gov/pub/irs-pdf/p502.pdf), as well as over-the-counter drugs and mileage associated with health-related services (rate is updated periodically by the IRS.)There are several questions you can ask to ensure


your administrator or potential administrator is substantiating their claims properly and providing the much sought after quality customer service;

• “What’s your substantiation procedure,” you’ll know quickly whether they are or not based on their response.

• “What’s your substantiation rate for the

card?” This question is important, as it makes them expound on their processes for substantiation (if they have one.) And allows you to cross check number 1.

• “Have you ever been involved in litigation regarding non-compliance for any of your products?” Trends are an important warning sign. If they have trouble staying in compliance with other companies why would you be any different?

• “Do you have an Errors and Omissions Policy (E&O Insurance) to help cover costs should we be audited?” Watch out for audit guarantees!!! Some of these “PoorFlex” companies offer 6 months or more of

administrative fees should you be involved in litigation at some point. However 6 months of administrative fees is really just a drop in the bucket when you have to pay an attorney and possible penalties for non-compliance. Remember it’s your company’s money and reputation on the line not the TPAs!

• Customer service is important. It’s essential that you ask a few key questions to ensure you are getting your monies worth.

a.) “How fast do you pay claims or average claims processing time?” Many won’t know or will have to ask and get back to you. This is a big red flag that you can expect inconsistent quality.

b.) “What is your average hold time to get a live person?” This is key, you don’t want to speak with an Interactive Voice Response (IVR) system. While helpful in some cases, FSAs and HRAs generally require a personal touch and your participants will be greatful for the live person to help them with their questions.

How do I know if my administrator is substantiating properly and providing the needed level of customer service?


c.) “What is your average call abandonment rate?” i.e. how many people call and hang up the phone because they get frustrated with waiting to speak to someone. If this percentage is high run for the hills! Many won’t even know their average and that’s another big red flag.

d.) “Am I assigned an account administrator or manager. If so may I have all of their information i.e. first and last name, direct line, e-mail, fax, etc.” This is important, many of these “PoorFlex” companies don’t assign administrators or say they do, however everytime you call you are transferred to a different representative. This is frustrating and can really cause issues with trust for the employer. Additionally getting issues resolved becomes difficult as you have to start over with a new representative everytime you call.

e.) “What is your average for questions resolved on the first call?” This is a great question, you’ll be able to figure out how well the prospective vendor’s training and staff quality is by this number.

These questions are a fantastic gauge on whether or not your prospective or current TPA vendor is quality or just “one of those.” As a warning, many will not know the answer to these questions and it will most likely take them quite a lot of time to provide you with the averages for their organization; that is assuming they have the ability or willingness.

The simple fact is, if they don’t know or they have to look into it, they probably aren’t paying much attention to these very important customer

service bench marks. While it is not comforting, to say the least, you and your participant’s need an administrator that is going to provide consistent quality across the board.

That’s what it’s all about, no matter what the service in any industry. Now more than ever you want to put your dollars to good use and why shouldn’t you? You’ve earned it. The absolute last thing you need are participants calling, knocking, e-mailing, faxing, well you get the idea… to discuss why their FSA or HRA plan isn’t working properly. These plans are complex, but it’s the job of your administrator to make them simple to understand, use, and most importantly to get your money back fast. How does your potential or current administrator stack up against these questions? Do they pass or fail?

BioIsaiah has worked with eflexgroup.com or “eflex” for more than five years working in various roles such as COBRA compliance and in a sales capacity for CDH benefits. Isaiah is a certified continuing education teacher and provides such CE on a national scale. Please feel free to contact Isaiah for questions on this article or on Consumer Driven Healthcare (CDH.)For a more comprehensive list of questions to ask TPAs, please e-mail Isaiah at [email protected] to get your free one page audit sheet entitled, “Questions to Ask TPAs.”

Resources:Pie, Barbara. Office of Division Counsel/Associate Chief Counsel . Internal Revenue Bulletin: 2006-31 . Washington: Internal Revenue Service, 2006. Web. 15 Apr 2011. http://www.irs.gov/irb/2006-31_IRB/ar10.html.


Pharmaceutical Importation ~ Logical, Legal, Safe

harmaceutical costs, especially those for brand name, maintenance drugs, have been a primary driver of health

costs and, in turn, health insurance costs, for well over a decade. Interestingly, the costs for these drugs vary widely around the world and are on average 44% higher in the United States than elsewhere. That’s 44%! Countries with centralized, single-payer health systems are able to negotiate lower prices for drugs than are the myriad of insurance companies in the US.

However, the lost revenue from lower prices paid by the single-payer countries is simply shifted to payers in the US. Effectively, the US is subsidizing the research and development ventures of the drug companies more than their single-payer counterparts. Given free markets, this is not a sustainable business model.

As pharmaceutical costs have risen, more and more Americans have begun sourcing their brand name, maintenance medications from countries enjoying the lower price structures. As Americans, we have the right to source legitimate prescriptions, for personal use only, from whatever country we choose. Over the past decade a small industry of importation management companies has evolved.

One of the more interesting developments in this industry applies to self-funded, ASO

By J.J Summerell

health plans. Because the FDA stipulates that pharmaceutical importation must be voluntary and for personal consumption only, ASO plans can give employees the option of participating in these plans. The advantages of such an arrangement accrue to both employer and employee:

• The employer pays the lowest price available in Tier 1* countries, usually a savings of 35% to 55%.

• The employee no longer is responsible for the co-pay. This can be a significant savings for a family with multiple co-pays on brand name maintenance meds.

The remainder of this article will discuss what is involved in implementing one of these plans, including Prospective Accounts, Products and Pricing, PIM Company Analysis, Projected Savings, Future Implications and Legal Substantiation. Prospective Accounts

Only self-funded, ASO (administrative service only) groups are allowed to participate and employees can only participate on a voluntary basis. Fully insured groups are ineligible.

The reason ASO groups are eligible is because they are acting as individuals. That is, with no underlying true insurance on the group and participation only on a voluntary basis participants are legally acting as individuals. This is discussed in more detail within the links under “legal substantiation.”

Generally, group size should be 100+ employees. Older employees consume more maintenance drugs, thus increasing

P


participation. Ideally, an older employee population is better. Employee communication is paramount to the success of the program. Employees need to be assured that the imported drugs are authentic and will be delivered reliably. Most groups experience about 30% participation initially, growing to 60%+ within a few years.

Products and Pricing

The formulary of the IPP is quite important, both what is provided in the formulary as well as what is not provided. It is important for employees to have the widest possible range of drugs available that may be prescribed by a doctor. However, it is equally important that

the IPP not give employees access to:

• Narcotics. Scripts such as Valium, etc may be prone to theft.

• Illegal drugs.

• Drugs not specifically approved by the FDA for use in the US. Many drugs are approved for use in other countries but not the US. Such drugs may be available for importation but their availability ‘muddies the water’ for both the FDA and the IPP.

• Immediate needs drugs. If a patient needs antibiotics, they do not want to wait 5 days for delivery. These meds should be sourced through the traditional PBM.


Pricing is at the crux of the matter. Consider the top ten medications shipped by a leading IPP:

These are the same products, from the same manufacturers, as those available via the traditional PBM. The only difference is with Nexium, whose US advertising firm had the color changed to purple for promotional reasons.

In the rest of the world the ‘purple pill’ is pink! Otherwise, they are the exact same drugs.

Company Analysis

There are no long-established players in this market because it is so new. There are a number of firms which have targeted the individual market for over a decade, but the ASO market is just beginning to develop. No doubt, these plans are ‘pushing the envelope’ with the pharmaceutical manufacturers and regulatory bodies, but their objections appear to be negated by various pieces of legislation; points of law and precedent (see ‘Legal Substantiation’).

Look for an IPP’s ability to source meds from the top 4 Tier 1 countries: Canada, United Kingdom, New Zealand and Australia. Prices vary from country to country and you need to provide the lowest possible cost. As noted above, it is not advisable to contract with companies who also provide narcotics via overseas sources, even if

these narcotics are legal and legitimate. They are a target of criminals which you need to avoid.Another critical need is top notch customer service. Although the importation of scripts is legal for personal consumption, occasionally US Customs will intercept a 90 day supply and deem it not for personal consumption since it is for more than 30 days. In this case, the IPP should be willing to overnight a replacement script to the employee. US Customs interceptions occur in less than 1% of shipments but it is a situation which needs to be addressed.

Managerial and financial capacities are important but difficult to determine, again because of this being an ‘infant industry.’ IPP’s which have addressed the individual market have the most experience at sourcing and distributing the meds, but very few have long


term experience list-billing the client company and providing superior customer service in the HR arena.

The best bet is to look for an IPP which has been in business the longest, has the widest possible formulary of non-narcotic maintenance meds and the administrative resources to make the program simple and successful.

Projecting Savings

Savings to an employer will depend upon the number of employees, the use of brand name maintenance medications and participation in the program. For example, Schnectady County (NY) projects an annual savings of $1.3 million + for their 2,300 employees in 2010 after 6 years of offering the program, an average savings of $565 per employee .

Muncie (IN) is saving $586K per year on their 750 employees, an average of $780 per employee.

How much can any individual employer expect to save? It depends, but contact me and I will share an Excel spreadsheet which will estimate

the savings. A utilization report from the current plan administrator will give the most accurate projections.

Future Implications

This may well be a temporary industry. That is, once a significant amount of meds are purchased overseas, the pharmaceutical manufacturers will adjust prices globally to address the imbalances, rendering IPPs unnecessary. However, for the next several years this is an excellent option to show prospects which other brokers may not even be aware of.

Legal Substantiation

Is this legal? The regulators and legislators have been intentionally vague on the subject. I am not an attorney and will simply use links to give readers an overview of legislation, points of law and precedents. Seniors living in the United States along the Canadian border have sourced


their scripts from Canada for years. Brokers and human resource managers should consult their attorneys regarding their individual situations.

Joe Morris is the attorney for a leading PIM. Mr. Morris was Assistant Attorney General under President Reagan and a lead negotiator for the United States with NAFTA, the North American Free Trade Agreement. His opinion is that pharmaceutical importation, on an individual basis and with a legitimate prescription, is protected by NAFTA. The FDA has not disagreed. Mr. Morris, interestingly, has recently served as Hearing Officer in Rham Emmanuel’s residency hearing regarding his eligibility to run for mayor of Chicago.

An April 2004 statement by William Hubbard, Associate Commissioner for Policy and Planning for the FDA is here. These statements were prepared for the Senate Committee on Finance, subcommittee on Health Care and International Trade.

The Council of State Governments issued a report, Prescription Drug Importation, in 2004, in response to inquiries from state and local governments.

WebMD researched the subject in an article The Letter (and Spirit) of Drug Import Laws.

Pharmaceutical importation can be a powerful tool in the effort to reduce health care costs in self-funded, ASO health plans. Though the

legality has been questioned, the regulators and legislators have opted not to pursue the matter and there is a ‘deafening silence’ from the courts on the issue. Until conclusive decisions are handed down from DC, these programs are a terrific way of opening doors to new accounts and allowing employer’s immediate savings on their pharmaceutical utilization.

BioJ.J Summerell manages Worksite Insight, a benefits communications and enrollment firm in Greensboro, NC. An independent general agency, Worksite

Insight markets exclusively through brokers and agents. Worksite Insight also owns Easy Benefit Statements, LLC, a software product sold to benefits brokers and human resource departments. Past President of the Greensboro Association of Insurance and Financial Advisors, Summerell currently serves on the Board of Directors of the Greensboro Society of Financial Service Professionals. Mr. Summerell earned his Masters in Business Administration from Wake Forest University and has industry awards include the Frederick W. Joyner Distinguished Service Award, the W.H. Andrews Member of the Year award, qualification for the Leading Producers Round Table and Golden Eagle awards.


How Brokers Can Find Opportunities in the Healthcare Reform Era

he Patient Protection and Affordable Care Act (PPACA) is designed to bring benefits to millions of uninsured Americans by decreasing health care costs and

premiums.

More than a year since the federal legislation was signed into law, the PPACA has yet to exert downward pressure on these costs and premiums. In fact, the latest reports show an opposite effect. Employers are expected to pay nearly 9 percent more for health care costs for their workers in 2011, the highest level in five years. And employers will more than likely ask their workers to absorb 12 percent of these costs.

The future savings predicted by the government also have been questioned because of the sheer cost of the health care reform package—an estimated $940

billion during the next 10 years —and uncertainty about how it’ll be funded.

For the most part, medical insurers, pharmaceutical manufacturers, medical device makers and even affluent Americans are designated to collectively foot the bill. But some predict these new financial burdens may be passed down and produce cost repercussions for Americans. And both employers and their workers believe health care reform will bring higher costs for both employer-sponsored benefit programs and health care services overall.

That’s why voluntary benefits present a clear opportunity for brokers during this time of change. Both real and anticipated medical cost increases and the associated shift to less rich medical plans will make voluntary benefits very attractive to both businesses and employees.

By Lydia Jilek

T


Today’s voluntary benefits are designed to do much more than fill gaps in a medical plan. When people see friends or family financially devastated by an illness or injury—even with solid medical insurance—they understand the need for voluntary benefits. That’s why these coverages such as short-term disability, accident, cancer and especially critical illness insurance are gaining a stronger foothold.

In addition, as employers look for smart benefits strategies to deal with health reform changes, the role of brokers will continue to be extremely important. Working directly with employers to structure medical packages to better align with market reforms means brokers will have front-line knowledge of new products that may be needed to complement redefined health coverage.

Brokers who may have previously overlooked these voluntary products are now re-engaging and learning how to use this coverage to increase their revenue stream, while meeting important needs of their customers and employees.

Health Care Costs and Premiums Will be Directly, Indirectly Driven Higher

Joint research by Towers Watson and the National Business Group on Health shows nearly three-fourths (71 percent) of employers believe health reform will increase the overall cost of health care services in the United States, while 69 percent believe it will increase the cost of their benefits programs. A separate survey of U.S. workers found similar concerns. Two-thirds (67 percent) believe health reform will result in higher benefit costs, while more than one-half (54 percent) believe it would reduce their available benefits and lower the quality of health care (53 percent).

Let’s look at a few health care reform measures that have the potential to directly and indirectly drive up employers’ health care costs and premiums:

So Far

• No Pre-existing Condition Limitations – Medical insurers will be required to accept all applicants without excluding any pre-existing conditions from coverage. This applies to children up to age 18 now, and will extend to adults in 2014.

• Total Coverage for Preventive Care – Medical insurers will be required to pay for the entire cost of preventive services specified by the Department of Health and Services and cannot ask employees to share this cost (exception for grandfathered plans).

• Child Coverage – Insurers will be required to offer coverage to eligible children until they turn 26 years old, unless they have access to benefits at work.

• Annual and Lifetime Maximums – Medical insurers will no longer be permitted to have lifetime maximums or place annual maximums on what are determined to be “essential benefits.”

• Pharmaceutical Tax Levy – A multi-billion dollar tax will be levied on branded drug manufacturers.

The Future

• Comparative Effectiveness Fee – In 2013, this fee—charged to medical insurance providers—will be used to fund a non-profit organization to study patient outcomes.

• Medical Device Manufacturer Tax – Manufacturers of medical devices, such as pacemakers and X-ray machines, will be assessed a 2.3 percent tax, starting in 2013.

• Health Insurer Levy – Beginning in 2012, a levy will be imposed on health insurers, with exclusions for insurers that meet certain criteria.


• Excise or “Cadillac” Tax – This 2018 provision levies a 40-percent excise tax on health insurers for any plan with a premium that exceeds standards set by the Department of Health and Human Services.

These measures have many employers rethinking their entire benefits program in order to maintain some level of cost control while still providing competitive packages that appeal to current and prospective employees.

The Voluntary Benefits Market Is Expected to Grow Due to Health Care Reform

As brokers help employers create new benefits strategies to deal with these rising costs, voluntary offerings will be key ingredients. Here’s why:

Significant moves toward consumer-directed health plans are underway (CDHP). One solution experiencing resurgence is the consumer-directed health plan (CDHP). As the name suggests, CDHPs place consumers in the driver’s seat, assuming they will make more informed and frugal health care decisions if they have a bigger financial stake in the process. Seventy-nine percent of employers expect

to offer account-based CDHPs by 2012. These plans typically pair a high-deductible medical plan with a Health Savings Account (HSA), Health Reimbursement Account (HRA) or Flexible Spending Account (FSA).

Reductions in premium costs mean more employee out-of-pocket costs. To control premium costs, many employers will explore increasing deductibles and co-pays, just to name a few alternatives. As these types of strategies are rolled out, the need for voluntary benefits will grow as employees look to cover the financial gaps these new medical plans create. Since the recession, employers have become increasingly concerned about their employees’ financial welfare.

Voluntary benefits are not included in the calculation for the 40-percent excise tax. The anticipated impact of tax, revenue and enforcement provisions will be minimal when it comes to benefits other than medical, such as disability, accident, long-term care and critical illness insurance. Voluntary coverage is accepted from the market reforms such as the elimination of the pre-existing condition exclusion and the guarantee-issue requirements as well as from the excise tax on health plans when premiums are deducted on a post-tax basis.

This cost-neutral coverage fits a diverse workforce.Typical voluntary benefits can be added at little or no cost to the company while offering workers a variety of options to best protect their finances.

Employees can use these voluntary benefit payments any way they choose. They can offset expenses for deductibles, co-payments, rehabilitation, travel for treatment, home care or even daily living expenses while they are recuperating from an illness or accident.


The Stage is Set for Critical Illness Insurance to Expand Fast

Industry experts say the fear of a “worst-case scenario” has been a primary roadblock to employee acceptance of CDHPs.

Critical illness insurance is one voluntary product that is growing in popularity, thanks in part to new medical advances. These technologies help more people than ever survive serious conditions such as cancer, heart attacks or stroke. For example, federal data reveals that about one in every 20 adults in the United States has survived cancer, including nearly one-fifth of all people over 65. But the cost of this advanced medical treatment is very high, even for those with medical insurance.

Even healthy people can be financially strapped by a serious injury. The cost for treatment and the potential for lost wages can create a severe financial strain.

Recent economic woes have intensified this issue. With 78 percent of American workers always or usually living paycheck to paycheck, few have any safety net of savings to rely on. In a qualified high-deductible health plan (HDHP)/HSA plan, a family living in these circumstances could be extremely hard pressed to reach their annual out-of-pocket maximum.

And if a health crisis strikes within the early

months or years an employee is enrolled in a HSA, the individual may not have accumulated enough contributions to make a dent in these catastrophic medical costs.

Critical illness coverage can help by providing employees financial assistance in the event of a serious illness, such as heart attack or stroke. The insurance may also include coverage for cancer and family members. The lump sum benefit from critical illness insurance can also supplement a disability plan, helping to keep employees “whole” during a time of financial crisis.

Opportunity Abounds for Proactive Brokers

Although some elements of PPACA may be years away, the arrival of health care reform is forcing a long-needed conversation about health care in this country while at the same time increasing the level of awareness and need for voluntary benefits. The voluntary benefits industry as a whole has seen large increases in sales—even during the recession—as individuals look to increase their levels of protection and security.

There will be plenty of opportunities for brokers to help employers proactively prepare for the changes coming from health care reform. Brokers will be in the best position to help employers take a step back and re-evaluate not only their medical coverage, but also their total benefits offerings, in light of PPACA. It will be more important than ever for employers to work consultatively with brokers to find solutions that meet their unique needs in this new era of workplace insurance. Developing a voluntary benefits program that includes relevant products to address the gaps in health coverage is a proven way to build opportunities with both existing and prospective clients.


Tips for Navigating Health Care Reform

Educate yourself. You need to be a sponge for information. Take advantage of the non-partisan, factual reports available free to the broker community. Companies such as Unum offer free resources that simplify the mandates of health reform (http://unum.com/HealthCareReform). By understanding fully how health reform will impact your customers and their employees, you can be the expert and consultative resource they need most.

Develop a voluntary benefits strategy and business plan. Focus on actively developing a voluntary benefits program. Treat voluntary benefits as a genuine revenue stream instead of a nice-to-offer service that brings in incremental income. Use it to expand existing clients’ benefits packages and open channels to new ones.

Evaluate current health plan designs based on health care reform requirements. Although existing plans may be temporarily grandfathered, future plan designs and contract negotiations may become more complex as the new health insurance market evolves.

Customize to align with other coverage. One-size-fits-all benefits packages will not work in the new workplace. Use the best combination of traditional and voluntary benefits to help employers offset their employees’ financial risk from health care reform. The right benefits mix can vary according to industry, region and specific workforce demographics.

Work with a provider offering strong benefits communication and education. Health care reform will certainly bring a myriad of complexities and questions to the workplace—for both employers and, especially, employees who are increasingly being asked to make more of their own benefits decisions. Partner with insurers that offer strong benefits communications

and education programs to support any product offering, which can boost enrollment participation. This has strong value for customers, as well. Research shows that when employees understand the value of their benefits, they report higher levels of workplace satisfaction, which can lead to greater company loyalty and increased productivity.

www.VBAssociation.com

BioLydia Jilek has been with Unum since 2006 as the director of product and market development. She is involved with developing and launching new products

and platforms offering expanded capabilities. Jilek also is the health insurance and healthcare reform expert for the company.

She graduated with her bachelor’s degree in English from Bates College and received her MBA and master’s degree in Human Resources and Industrial Relations from the University of Minnesota. Before coming to Unum, Jilek worked for Medica Health Plans in Minnesota.

1.Frank, Jackie, “Employer Health Costs to Rise in 2011,” Reuters, September 27, 2010.

2. Congressional Budget Office, Letter to Congress, Estimate of Direct Spending and Revenue of Health Care Reform, March 28, 2010.

3.Miller, Stephen, “Double-Digit Health Care Cost Increases Expected to Continue,” Society for Hu man Resource Management, February 3, 2010.

4.Ibid.

5.Towers Watson, “Rethinking Employer Strategies in a Post-Health Care Reform World,” December 1, 2010.

6. Frankel, Steve, “Boost Employees’ CDHP Comfort Zone with Voluntary Benefits,” Voluntary BenefitsMagazine.com, March 2010

7. U.S. Centers for Disease Control and Prevention, “Cancer Survivors,” March 11, 2011.

8. CareerBuilder.com, “More Than Half of Workers Will Use Their Tax Return to Pay Off Bills, Finds New Career Builder Survey: Nearly Eight-in- Ten Workers Report They Live Paycheck to Paycheck,” April 7, 2010.

9. Unum, “Beyond the Usual Benefits; The power of employee education to influence workforce satisfaction,” June 2010.


bacK Cover

Join the Voluntary Benefits Associationwww.VBAssociation.com


Give Me Drugs!

By Mark Roberts

he pharmaceutical industry is big bucks…research, manufacturing, registration with the Feds, marketing, and sales. Billions and billions of dollars every year are spent not only on new medications, but also existing

medications, whether they are generic or brand name. Is America the most medicated nation on Earth? Could be, according data released by the Department of Health and Human Services (HHS). At least half of all Americans take at least one prescription drug, with one in six taking three or more medications. Prescription drug use is rising among people of all ages, and use increases with age. Five out of six persons 65 and older are taking at least one medication, and almost half the elderly take three or more. Man, that’s a lot of meds!

Among the report’s findings:

• Use varied by sex, race and ethnicity. Three times as many white adults as black or Mexican adults took antidepressants, and women take more drugs than men;

• Boys were prescribed drugs to treat attention deficit hyperactivity disorder (ADHD) twice as often as girls, but antidepressants were prescribed to boys and girls at the same rates;

• Private health insurance covered almost half of prescription drug costs, and 30% of people pay out of pocket.

• Those who were without a regular place for health care, health insurance, or prescription drug benefit had less prescription drug use compared with those who had these benefits.

• The most commonly used types of drugs included: asthma medicines for children, central nervous system stimulants for adolescents, antidepressants for middle-aged adults, and cholesterol lowering drugs for older Americans.

According to the CDC, these patterns reflect the main chronic diseases common at these ages, but may also likely reflect more aggressive treatments for chronic medical conditions such as high cholesterol and high blood pressure as recommended in the updated clinical guidelines. Lack of access to medicines

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may impact health and quality of life, as prescriptiondrugs are essential to treat acute and chronic diseases.

Finally, with older Americans using multiple medications, this likely reflects the need to treat the many diseases that commonly occur in this age group; however, excessive prescribing or polypharmacy is also an acknowledged safety risk for older Americans, and a continuing challenge that may contribute to adverse drug events, medication compliance issues, and increased health care costs.

Prescription drug use in the U.S. has been rising steadily in the past decade and the trend shows no signs of slowing, the CDC says. Plus, according to WebMD, the CDC also says that:

• People with a regular place for health care were 2.7 times as likely to have used prescription drugs in the past month compared to those without the benefit.

• People with health insurance were about twice as likely to have used at least one prescription medication in the past month as those without health insurance.

• People with prescription drug benefits in their health insurance plans were 22% more likely to use prescription medications than those who did not have that benefit.

All these statistics boggle the mind, especially when the cost of prescription medications continues to increase. According to HealthExecMobile.com, a market basket of 100 commonly used prescription drugs increased at an average annual rate of 6.6% from 2006 through the first quarter of 2010, compared with a 3.8% average annual increase in the consumer price index for medical goods and services (medical CPI).

The increase in the price index from the first quarter of 2009 through the first quarter of 2010--prior to passage of health reform in March 2010--was 5.9 percent, less than the increase for the 2 years prior but higher than in 2006. The study also found that the U&C price index for the second basket of 55 brand-name drugs increased at an average annual rate of 8.3 percent during the time period. In contrast, the U&C price index for the third basket of 45 generic drugs decreased at an average annual rate of 2.6 percent.

What do all these numbers mean? Drugs cost money, and in certain cases people are forced to choose between medications, and food and rent. Typically, those that are not insured experience the greatest hardship as the price paid at the pharmacy is out of pocket and not covered by an insurance plan. That’s one reason that the Wal-Mart $4 generics are so popular. Seniors who are in the Medicare Part D “doughnut hole”, and those under 65 who are low income families and individuals are forced to find alternative ways to pay for their prescription medications.

According to the Kaiser Foundation, prescription drugs are vital to preventing and treating illness and in helping to avoid more costly medical problems. Three main factors drive changes in prescription drug spending: changes in the number of prescriptions dispensed (utilization), price changes, and changes in the types of drugs used. The cost of drug-related morbidity, including poor adherence (not taking medication as prescribed by doctors) and suboptimal prescribing, drug administration, and diagnosis, is estimated to be as much as $289 billion annually, about 13% of total health care expenditures. The barriers to medication adherence are many: cost, side effects, the difficulty of managing multiple prescriptions, patients’ understanding of their disease, forgetfulness, cultural and belief systems, imperfect drug regimens, patients’ ability to navigate the health care system,


cognitive impairments, and are reduced sense of urgency due to asymptomatic conditions.

Prescription drug spending is affected when new drugs enter the market and when existing medications lose patent protection. New drugs can increase overall drug spending if they are used in place of older, less expensive medications; if they supplement rather than replace existing drugs treatments; or if they treat a condition not previously treated with drug therapy. New drugs can reduce drug spending if they come into the market at a lower price than existing drug therapies; this can occur when a new drug enters a therapeutic category with one or two dominant brand competitors. New drug use is affected by the number of new drugs (new molecular entities) approved by the US Food and Drug Administration.

Employers are the principal source of health insurance in the United States, providing coverage for 176 million (58%) of Americans in 2008, according to Kaiser. Sixty percent of employers offered health insurance to their employees in 2009, and 65% of employees in those firms are covered by their employer’s health plan. Other employees may have obtained coverage through a spouse. Nearly all (98%) of covered workers in employer-sponsored plans had a prescription drug benefit in 2009. For individuals, according

to a survey by America’s Health Insurance Plans, the vast majority of policies purchased by individuals (rather than employer or other group coverage) had drug benefits.

Department of Health and Human Services data show that as of February, 2010, approximately 41.8 million (90%) of the 46.5 eligible Medicare beneficiaries had drug coverage. The total number of beneficiaries in a Medicare Part D plans was 27.7 million (60%), including 17.7 million beneficiaries (38%) in stand-alone prescription drug plans and 9.9 million (21%) in Medicare Advantage drug plans. Another 14.2 million beneficiaries (31%) had coverage from either employer or union retiree plans including FEHB and TRICARE (8.3 million, or 18%) and drug coverage from the VA and other sources (5.9 million, or 13%). About 4.7 million Medicare beneficiaries (10%) had no drug coverage.

Medicaid is the joint federal-state program that pays for medical assistance to 60 million low-income individuals and is the major source of outpatient pharmacy services to the nonelderly low-income population. Although prescription drugs is an optional service, all state Medicaid programs cover prescription drugs for most beneficiary groups, although there are important differences in state policies with regard to copayments, preferred drugs, and the number of


prescriptions that can be filled. Since January 1, 2006, states have been required to make payments to Medicare (known as the “clawback”) to help finance Medicare drug coverage for those who are dually eligible for both Medicare and Medicaid.

According to the Kaiser Foundation, the new PPACA provides for a significant expansion of coverage to the uninsured through a Medicaid expansion, an individual requirement to obtain health insurance, and subsidies to help low and middle income individuals buy coverage through newly established Health Benefit Exchanges. PPACA provides that prescription drugs are one of the “essential health benefits” that must be included in health plans in the Exchanges and in the benchmark benefit package or benchmark-equivalent for newly eligible adults under Medicaid.

Also, it provides for a $250 rebate to Medicare Part D beneficiaries with out-of-pocket spending in the Medicare Part D coverage gap in 2010, a 50% discount for brand name drugs for beneficiaries in the coverage gap that started this year, a phasing-in of coverage in the gap for generic and brand name drugs which will reduce

the beneficiary coinsurance rate from 100% in 2010 to 25% in 2020, a reduction between 2014 and 2019 in the threshold that qualifies enrollees for catastrophic coverage, and elimination of the tax deduction for employers who receive Medicare Part D retiree drug subsidy payments, starting in 2013.

The HHS projects US prescription drug spending to increase to $457.8 billion in 2019, almost doubling over the next several years. In the coming years, implementation of various provisions of PPACA will affect prescription drug coverage, utilization, prices, and regulation. Coverage and utilization of prescription drugs will be expanded by PPACA’s health insurance mandate and premium and cost-sharing subsidies; the designation of prescription drugs as an essential health benefit to be covered by private health plans through the new health benefit Exchanges and by Medicaid for newly eligible adults; and Medicare’s prescription drug rebate, cost-sharing, and catastrophic threshold changes, according to the Kaiser Foundation.

Prices charged to government programs will be affected by changes to Medicaid rebate requirements and expansions to the Section


340B program. Prescription drug regulation will be affected by the new process for licensure of bio-similar versions of brand name biological products and by drug labeling requirements. These and other PPACA changes will ultimately impact national spending for prescription drugs in ways yet to be seen.

Another option is to include a discount pharmacy card for customers. There are many of these available through various sponsors; including pharmaceutical companies such as AstraZeneca, pharmacy benefit managers (PBMs) like CVS Caremark, plan administrators like Careington International, and other sources. Customers can enroll through websites, over the phone, or at pharmacy counters based on the business model for the card. Typically, in this arrangement, the customer gets a discount at the point of sale (and via mail order in some cases) and is able to save on both brand name and generic medications without worrying about over using or worrying about a maximum utilization of their pharmacy card. Discounts can range from 5% up to 40% depending on the store and the medication. Often, PBMs will share available some small revenue for eligible prescriptions with the sponsor to help offset the cost of marketing to consumers.

Discount pharmacy cards can be used by anyone at almost any pharmacy nationwide, and the savings are immediate. The cards have broad application for uninsured and underinsured individuals, and the cards can be used as a stand- alone service or embedded as a value added component in a health plan, limited medical benefit plan, or discount medical plan with other services. However, you cannot use a discount pharmacy card in conjunction with a co-pay; no double dipping just to save extra money.

Pharmacies make money when they dispense

medications, so the more medications available to sell, the more profit is generated for the manufacturer, the pharmacy, and the sponsor. And, since PBMs have tracked utilization for years with electronic adjudication of claims, you can find out how much has been saved and what drugs are being dispensed. Although HIPAA regulations will not allow personal customer information to be disclosed, at least information is available on the types and amounts of drugs being dispensed. Plus, the customer saves money. Everybody wins.

So, when someone says “Give me drugs,” let’s hope it’s for the right reason. Profitability, patient care and advocacy, and prescriptions—a great antidote for what ails you.

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BioMark Roberts’ professional sales background includes almost 30 years of sales and marketing in the tax, insurance, and investment markets. Currently his key focus is developing relationships with clients at Careington International (www.careington.com). Mark also is a licensed life, health and accident insurance agent in all 50 states and DC. Additionally, Mark has been writing a health care blog for the past 3 years, found at www.yourbesthealthcare.blogspot.com , which is a topical weblog about various health care issues. He has been noted recently as the Medical Reporter for an online news service with over 110,000 subscribers at www.thecypresstimes.com , and he has been pleased to regularly contribute articles to magazines for both medical and dental topics both in the US and the UK. You can contact Mark at [email protected] or 800.441.0380.


Connecting Employee Health to Voluntary Discount Dental PlansBy Nicole Ropiza

tudies and word-of-mouth in recent years have brought much needed attention to the connection between dental care and a person’s overall health.

According to the Academy of General Dentistry, more than 90 percent of all systematic diseases have oral health symptoms. Poor or lacking dental health may have negative effects on a range of diseases and conditions, including diabetes, osteoporosis, heart attack, stroke, pregnancy and pre-term birth weights.

In addition, a report in Dental Health Magazine from February 2011 goes on to read, “People with gum disease are almost twice as likely to suffer from coronary artery disease as those without gum disease, according to the American

Academy of Periodontology.”

For those who religiously keep up with their dental hygiene ; brushing twice daily, flossing daily and scheduling semi-annual dental checkups, the preventive care and daily dental hygiene habits can help them avoid some major out-of-pocket dental expenses tomorrow.

Proper dental care can also help keep employees at work. Considering that lost work due to dental problems equates to 164 million hours of employee productivity each year, according to the U.S. Department of Labor’s Bureau of Labor Statistics.

But sometimes, dental health is not as simple as just brushing, flossing, chewing sugarless gum

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and so on. You might need a cavity filling or root canal and our children might need braces. And, sometimes our mouth is a major investment not covered by employer-sponsored insurance plans. Meanwhile, the cost of dental care procedures is rising faster than you can say “commission.”

According to a 2010 report from Pew Center on the States, the total annual spending for dental care is expected to increase 58 percent, from $101.9 billion to $161.4 billion, through 2018. Coincidentally, a 2009 poll by Harris Interactive and Health Day found that 50 percent of uninsured Americans skipped necessary dental care visits due to financial burdens.

The fast increase in dental costs and lack of dental coverage has prompted some workers to get creative with their dental care budgets. A few money saving dental care solutions that have hit the newscycle in recent years include: visiting local university dental schools for dental care at a fraction of the cost; heading overseas for a dental vacation and discount dental work in countries like Costa Rica and Tijuana; and negotiating with dentists to find a discount wherever possible.

Employees More Conscious of Employer Dental Benefits

Other media reports in recent years, including the New York Times, “How to manage dental costs, with or without insurance” and BankRate.com, “Dental insurance or discount plan,” have brought attention to the struggle against high dental expenses and the growing gap between employers and dental benefits.

These days, the reality is that many employer-offered health care plans do not include dental coverage or offer it as a supplementary benefit. According to the U.S. Department of Labor’s Bureau of Labor Statistics, only 48 percent of

workers have access to employer-offered dental plans, compared to the 74 percent of workers with access to similar medical coverage. As many companies do not offer dental coverage and are considering insurance cuts in response to a questionable economy and newfound financial strategies, dental benefits are beginning to play a major role in employers attracting and retaining workers. Dental is the third most requested benefit after major medical insurance and retirement benefits, according to a report by LIMRA. And nearly 80 percent of workers participate in benefit programs if dental care is part of the program.

Giving employees an option and resources for dental plans is an investment for companies. Employees with dental benefits are more likely to take part in preventive dental care, contributing to their overall health and well-being. According to a recent survey by The Long Group, 83 percent of employees with an employer contributory dental plan visited the dentist twice or more a year.

Brush Up On Voluntary Discount Dental Plans

Some companies find employer-paid dental programs too expensive and not necessary to their employees overall health and well-being.

And while employers discuss how best to respond to cost challenges and the anticipated effects of health care reform, voluntary dental plans are becoming an alternative for companies to share with their employees and save on health care costs. But, let’s say for instance “Company A” offers a mom of three a full-time job with a healthy base salary, halfway decent medical insurance, a 401k program to participate in and no dental insurance. The mom considers the offer and


reviews another opportunity with “Company B,” which will provide everything that “Company A” will, as well as voluntary discount dental plans. The mom weighs her options while considering one of her sons is going to need braces soon and she’s anticipating a cavity filling or two this year. She decides to go with “Company B,” knowing that she will take advantage of the voluntary discount dental plans for her family and save money in the long-run versus paying out more of her salary. She also knows that she’ll be more productive at work without having to worry about how she is going to afford her son’s orthodontist bill, which can cost up to $7,000 without any benefits. With voluntary discount dental plans, employees and families typically pay an annual membership fee that gives them access to discount dental dentists have agreed to offer at dental care services at discounted rates. Major providers, such as Aetna and Cigna, offer plans where savings can range from 10 to 60 percent on routine exams, x-rays and costly dental procedures.

Voluntary discount dental plans are not dental insurance. Employees and families typically pay an annual membership fee starting at $79.95 per year for individual employee and $129.95 per year for families. Plans also activate within three business days, without paperwork hassles or health restrictions.

Plans do not have annual limits and can be used as often as needed, which offers employees a choice and affordable alternative to dental insurance while they choose the plan that best fits their needs. Some plans can also be used for procedures such as cosmetic dentistry, and may include discounts on vision and prescription

drugs.

As a solution for employees and employers, voluntary discount dental plans can help companies cut costs while providing workers with an option to manage necessary dental expenses. It also gives brokers an alternative to provide clients who want to cut dental benefits as a whole.

And the next time the sensitive topic of no help with employee dental care comes up for your client, they could say, “We do not provide employer-paid dental plans, however, you can join a voluntary discount dental plan with access to significant savings on dental care procedures for you and your family. And you have the flexibility of choosing an affordable plan without annual limits.”

BioNicole Ropiza is the broker/affiliate and group manager at DentalPlans.com. The leading online source for discount dental plans, DentalPlans.com connects individual, family and group members to significant savings on dental care procedures such as cleanings, braces, root canals and crowns. The company offers more than 30 of the leading regional and national discount dental plans with more than 100,000 participating dentist listings in combined networks across the country. For more information and to find a discount dental plan that fits your family’s needs, visit www.DentalPlans.com.

For more information about a turnkey sales solution for insurance brokers to fill the growing need for affordable dental care, visit www.DentalPlans.com or call 1-888-632-5353 choose option 5 for brokers and 6 for groups or email [email protected].


Health Reform and the CLASS Act:Threat or Opportunity?By Todd Grove

March 23, 2011 was the one year anniversary of President Obama signing into law the health care reform bill, which includes the Community Living Assistance Services and Supports (CLASS) provisions. Many of the details of the CLASS provisions are not yet defined and will be developed through regulation, but as with all other aspects of this industry altering legislation, nothing will ever be the same – both for the consumers of health care and the brokers who service them.

Most brokers I speak with are very concerned about most of the health care reform in its present form. Some of the major concerns I hear fall into the

following buckets:

• Reduction in income. Most health brokers believe that their income will be adversely affected.

• Client Relationships may be threatened. Loyalty is becoming a very rare trait amongst even our most well entrenched clients and that could be shaken even further by an upheaval in policy design/pricing.

• Value proposition could be diminished. As a consolidation of plans occurs, understanding the differences between one broker and another may become more difficult.


All of these are the perceived threats of health care reform which will roll out over the course of the next two years.

Another school of thought lies around the opportunities the reform act presents, and we will focus here on the CLASS Act as a particularly effective way for health brokers to combat all three of the concerns mentioned above.

A Bit of Background

Why does health care reform include any provisions for long-term care? After all, no major medical plan; not even Medicare, presently cover LTC costs at all.

Let’s look at why long-term care cost are so alarming and need to be addressed now with all employers and their staff:

• According to the Technical Report 1-01, Scripps Gerontology Center, February 2001, of every 100 people over 65 years of age, 43% will need long term care

• 40% of those receiving long term care are working adults between the ages of 18 and 64. (GAO/HEHS-95-109 long term Care Issues, p. 7).

• Reported by the U.S Department of Health and Human Services, when you reach age 65, you have a 40% lifetime chance of entering a nursing home, and a 10% risk that you will stay there at least five years

“The average length of stay in a nursing home (current resident) is 892 days” (The National Nursing Home Survey).

In some parts of the country it can cost over $100,000 a year. If we assume that nursing home costs will continue to reflect recent trends, by the year 2021, the average rate will have risen to about $480 a day,

or $175,200 annually.

As a result of these alarming statistics, Senator Ted Kennedy made it his mission to include some benefit, albeit small and controversial, in the final health reform legislation.

The CLASS provisions create a voluntary government program under which participants will pay a monthly premium, will be covered on a guaranteed-issue basis, and will be eligible for modest benefits for their long-term care needs after five years of paying premiums. While it has been characterized as a long-term care program, it is primarily designed as a program to provide

assistance to the working disabled. It’s important to note that benefits will be paid by premiums collected from voluntary participants and not by the taxpayers.

What are the details of the coverage that would be provided?

Most of the terms of the new CLASS program that passed as part of the Patient Protection and Affordable Care Act will be developed by the Department of Health and Human Services over the next few years. Certain terms are set in statute, including the following:

Enrollees will:

• Pay a monthly premium, through payroll deduction, that has yet to be determined, but most recentestimates indicate that the average


premium will be $180-$240/month; that premium could be increased yearly to ensure that the CLASS fund is actuarially sound.

• Be covered on a guaranteed-issue basis;

• Be eligible for benefits for their long-term care needs after paying premiums for the first 60 months of coverage (i.e., a 5-year waiting period) and have worked at least three of those five years;

• Receive a lifetime cash benefit after meeting benefit eligibility criteria, based on the degree of impairment, which is expected to average about $75/day or more than $27,000 per year and is payable as long as the claimant remains disabled.

Enrollees will be offered coverage through their employers and will be automatically covered unless they opt out. They can opt back in at a later time. Self-employed people or those whose employers do not offer the benefit will also be able to join the CLASS program through a government payment mechanism.

Bad math

This part of health care reform is one of the most controversial – in large part because it creates so many unanswered questions. What are the premiums, how are they set and where do they go once collected are but a few of the more pressing queries. . Douglas Holtz-Eakin, who was the director of the Congressional Budget Office from 2003 to 2005, wrote concerning this issue;

“Consider, the fate of the $70 billion in premiums expected to be raised in the first 10 years for the legislation’s new long-term health care insurance program. This money is counted as deficit reduction, but the benefits it is intended to finance are assumed not to materialize in the first 10 years, so they appear nowhere in the

cost of the legislation.”

“Removing the unrealistic annual Medicare savings ($463 billion) and the stolen annual revenues from Social Security and long-term care insurance ($123 billion), and adding in the annual spending that so far is not accounted for ($114 billion) quickly generates additional deficits of $562 billion in the first 10 years. And the nation would be on the hook for two more entitlement programs rapidly expanding as far as the eye can see.”

Why should Benefit Brokers Care?

To begin, they have to starting caring now. CLASS is not “voluntary.” Every worker is involuntarily and automatically opted into the program. Each employee or self-employed person must willfully opt out to avoid the program’s large “premiums” that will otherwise accrue by default.

Secondly CLASS is not “insurance” by its true definition. Insurance is for healthy people who want to prepare responsibly for the relatively small possibility they may become disabled or chronically ill. CLASS is in essence a “pre-payment” of care subsidized by the insurable


for the benefit of the uninsurable.

CLASS will suffer significant adverse selection. People most likely to use the benefits will be far more likely to participate than people who are privately insurable otherwise.

As a result of all these problems and concerns, why would an employer offer CLASS when a voluntary offering of true long-term care insurance would make so much more sense for the vast majority of his/her employees?

The answer: not many. Unfortunately, most benefit brokers are woefully uneducated on both CLASS and the multi-life offerings in the market. Therefore, they will not be able to position private sector options well when the employers start calling. But with education comes opportunity. Employers need guidance. Brokers need clients. LTC insurance specialists bridge the gap and can accomplish the goals each party has throughout this turbulent period.

The best defense…

The average broker in America today still sells—and will continue to sell—one or two LTC policies a year. Why? That can be explained in one word: focus. As the importance of LTC insurance has grown, so has the complexity of the policies. In addition, most brokers who provide financial products are having enough of a challenge keeping up with the changes in state health insurance regulations, rate increases, health reform related to major medical plans updates and so on to concentrate on the complex and emotional sale of LTC insurance. The client doesn’t want to talk about it, the advisor doesn’t know enough about the coverage and the underwriting guidelines change as frequently as the policies they are associated with.

So, how can the important subject of long-term care planning be addressed professionally and ethically with the millions of at-risk, actively working baby boomers? The only sensible and effective approach is through what I call strategic partnering.

Most agents who have been successful at providing LTC insurance have focused solely on this complex product and the emotionally charged sales process that accompanies it. They are never a threat or a competitor to benefit brokers because LTCi is all they provide.

Years ago, direct mail and seminars were an effective way to generate significant LTC insurance leads. 15 years ago, the average age of a LTCi purchaser was 68. Today: 58. Today, virtually no one buys LTCi through the mail. Now, carriers – with the help of government


incentives(non-ERISA classification, tax breaks, exec carve out options) – have repositioned LTCi and sales at the worksite are sharply on the rise.

As a result, how we reach and market to the future owners of policies must change to mirror buying patterns of our prospects.

The CLASS Act is exactly what has been needed to crystallize attention by employers, LTCi specialists and benefit brokers on this voluntary benefit.

The LTC insurance specialist needs access to boomers where they work. The advisors need to fulfill fiduciary responsibility and inform their corporate clients of the severe limitations of CLASS. These are two great disciplines that perfectly support one another. The key is bringing them together in a way that benefits all parties involved.

The importance of LTC insurance will continue to grow, as will the options on how to design and underwrite coverage. Therefore, it is in the best interests of all parties—benefit brokers, LTC insurance specialists and their clients—to develop trusting and mutually beneficial partnerships. This model will in large part transform the marketing of LTC insurance throughout the years ahead.

The How-to’s of Partnering with LTCi Specialists

Broker partnering is a challenging process – much more art than science. It must start with the realization by the broker that they need to work collaboratively to support their clients in the brave new world of health care reform. Once that fact has been accepted, the first step is to locate a professional and ethical long-term

care insurance specialist.

The best method for finding a specialist to work with is obviously word of mouth/professional networking. However, locating them can also start with a Google search in your area. One organization that is national with trained worksite specialist is LTCFP. Another, ACSIA, can also be identified on the web.

When searching, designations can be helpful as well. The two most common are CLTC and LTCP. Of the two, CLTC is commonly accepted as the industry standard.

Attend NAIFA and NAHU meetings. Many of the leading LTC specialists are involved on a local level in these organizations.

Questions to ask when interviewing specialists

• How long have you been in the field? Look for at least 5 years. If they were previously affiliated with a captive or career shop, that is a benefit because they received significant training and support.

• What businesses/organizations have you worked with? Experience at the worksite using simplified underwriting and a 60 day enrollment period are important.

• What carriers do you work with? Pick an agent who has appointments with many large, reputable carriers like Prudential, Mutual of Omaha and Transamerica. Captive agents are not effective in the worksite due to the fact that “one size does NOT fit all” in this marketplace. Ask if the specialist is compensated identically carrier to carrier. This obviously avoids conflict of interest.


• What other benefit brokers do you partner with? You might as well find out about what your competition is up to.

• Maximizing the relationship: Keeping it Productive – and Profitable Here are a few tips to help set appropriate expectations and develop long-term, mutually beneficial relationships that proactively address the issue of LTC planning with your client base:

• Commit to addressing LTC – with all clients. The most common reason why benefit broker/ltc specialist partnerships fail is lack of focus. Both parties get excited and a few introductions are made, then things fade to black. This is avoided by creating a marketing plan that both the benefit broker and the specialist document and sign off on. The most important element is consistency. Speaking with clients every week about LTC and a voluntary offering or carve out is essential. This proactive approach repositions the broker in the mind of the employer and he/she is seen as a valuable resource on health care reform – and the welfare of the employees.

• Don’t get greedy. Any specialist worth his/her salt will provide all of the following on each worksite enrollment: vet carriers, implementation calls with carrier, worksite case preparation, proposal development and presentation, enrollment presentation, application processing, bill preparation and reconciliation, policy delivery and ongoing customer service on active cases. As a result, the broker will earn a small percentage of the commission, but generate significantly more income off of LTCi than at any time in the past. The adage “A small

percentage of a lot beats 100% of nothing” truly applies in this scenario.

Re-Brand your image in community. The brokers who truly leverage their relationship with LTCi specialists take a proactive approach to addressing this benefit – and the concerns most employees have surrounding it. That is completely different from the majority of benefit brokers and as a result, provides real opportunity to differentiate their services in a highly competitive market. Incorporate CLASS into many discussions, include some aspect of it in advertising/marketing pieces.

LTC Education at the worksite will cut stress, improve productivity – and solidify your relationship with clients who are confused about this issue.

CLASS Act forces an acceptance of long-term care planning. Those brokers who view this as an opportunity by partnering with LTCi specialists will “ride the wave” of government mandated health reform and be viewed as a resource rather than a “bearer of bad news”.

BioTodd Grove, LTCP, CLTC is a founding partner of LTC Financial Partners and has specialized in this field for 20 years. Some of the publications he has contributed to are

the New York Times, Senior Market advisor, National Underwriter Magazine, and the Portland Press Herald. He is a member of the Estate Planning Council of Maine and Past President of the Maine Employee Benefits Council. He can be reached in Portland at 207-772-5793 or [email protected]


The Costs of Doing BusinessReducing Administrative Burdens in a StateHealth Exchange

By Bob Barry

he health insurance industry is loaded with back-office costs from marketing to plan and rate maintenance to enrollment paperwork. The introduction of exchanges will soon add administrative

burdens of its own to both state governments and health insurance carriers. Exchanges will not only need to be integrated into the operations of health plans but they will also need to be managed.

Determining the best way to integrate the capabilities and processes of insurance providers within the operations of the exchanges will determine the most efficient way to fulfil customers’ needs.

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Carriers want to automate the transfer of information to and from the exchange. They do not want to compile and send a spreadsheet to the exchange for plan and rate information. Carriers also do not want to manage their plans and rates on their own systems and then a second time on the state health insurance exchange.

Carriers already have systems that maintain products and rates, store membership information and handle financial services. The more that state health insurance exchanges can interface directly with carrier systems, the less administrative functions and duplication of effort will need to occur. States would also benefit from streamlining the communication process with carriers.

One of the key purposes behind the exchange is to centralize and lessen the administrative costs associated with distributing individual and small group health insurance. Plan and rate maintenance, enrollment, and financial services are three areas where the state health insurance exchange runs the risks of adding to carriers’ administrative burden. To streamline this process and reduce administrative costs for both the state and the carrier, states should make every effort to allow for the automated transfer of information to and from the exchange.

States should focus on providing a health insurance exchange solution that is sustainable and affordable over time. In order to achieve sustainability, administration costs need to be minimized by eliminating duplication of efforts. One critical way to minimize administration costs is by using technology to automate and streamline time-intensive processes.

Plan and Rate Administration Tools

Plan and rate administration tools allow carriers

and / or the state administrator to maintain products, rates, and rating algorithms easily and directly on the web-based health insurance exchange site. These tools provide two key benefits to states. First, the product and administration tool will allow carriers that may not have the ability to integrate directly with the exchange to maintain their products and rates on the web portal. Having such a tool would simplify the process of maintaining products and rates for both the carrier and the state.

Secondly, states need a way to review carrier products and rates prior to their release on the health insurance exchange. In addition, states would be able to perform modeling, allowing them to better understand the impact of new rates.

Application Administration Tools

Another function that can further assist the states in building a sustainable and affordable health insurance exchange is to utilize an application administration tool. The tool allows a state business user to modify the application rather than a technical developer. Business users could make changes to the style, branding, and images used on the application. In addition, the business user can


add/remove fields, add business rules, and adjust error messages. This functionality allows the health insurance exchange administrator to quickly create and modify any application that is a part of the exchange. It is likely that state health insurance exchanges will include separate enrollment applications for individuals, employers, and employees. The exchange will also likely require a navigator to complete an application to become qualified to assist the consumer in the plan selection process. By enabling a business user to make application changes directly in the web-based exchange versus involving a developer, states will incur less administrative costs related to maintaining the multiple applications.

eBilling and Premium Collection

Offering consumers and employers the convenience of online bill presentment and payment will improve customer satisfaction, while minimizing paperwork and processing time. eBilling and premium collection functionality exists today and can be leveraged in state health insurance exchanges. However, there are complexities unique to state exchanges that states

need to consider during the planning process, including the coordination of premium subsidies in the individual benefit exchange and the multi-carrier list bill in the small group (SHOP) health insurance exchange. Most likely, much of the financial services will fall on the exchange with the financial information being passed to the carrier once subsidies, individual, and group payment has been collected.

Technology can reduce administrative efforts and therefore reduce costs. By integrating technology into every aspect of the exchange, insurance carriers can manage rates and plans in one solution and automatically push the updates to all channels.

Self-service tools and straight-through connectivity are key sales tools that aid in reducing administrative costs while engaging potential and current enrollees. Giving more control to customers not only improves their satisfaction, but when paired with full integration to back-end systems, it also reduces a health plans’ administrative burden. Virtually instantaneous case installation, fewer errors, and reduced resource requirements are just some of the benefits that an integrated sales technology solution offers.

BioBob Barry’s 28 years of experience in the health and life insurance industry give him great insight into the challenges of the industry. At Connecture, Bob is responsible

for identifying market needs that InsureAdvantage solutions can serve. His ongoing client interaction, industry experience and expertise ensures that current and future health plan business needs are met in the InsureAdvantage suite.


Meaningful Thoughts Beyond “Meaningful Use”

By Kevin Shrake

Healthcare reform issues have frequently dominated the headlines over the past year.

There are many new changes yet to roll out depending on the final regulations of the bill still being debated by our legislators. One major change has been in full swing and has captured the attention of healthcare organizations across the country. The need for an electronic health record (EHR) is obvious and ties to issues of privacy, efficiency, medical errors

and duplication of tests to name a few. The healthcare industry has clearly lagged behind when you acknowledge the fact that we have had ATM cards for several decades that allow us to perform banking transactions all over the world. Although the federal government is not always the leading edge innovator of change, in the case of the electronic health record, they have actually led the pack as evidenced by the system that has existed in their Veteran’s Administration (VA) network for many years. Recognizing the value of such a system, the government developed an incentive program as


part of the American Recovery and Reinvestment Act (ARRA) of 2009. Under this act, provisions were developed for a program known as the Health Information Technology for Economic and Clinical Health (HITECH) Act. The final rules of this program were released in July of 2010 and offers financial incentives under Medicare and Medicaid to hospitals and eligible professionals who demonstrate “meaningful use” certified EHR technology. Although clearly an important step, health care leaders must look beyond meaningful use to implement a solution that will fit seamlessly into the process of patient care and provide value rather than turmoil.

“Meaningful Use”

There has been an enormous amount of attention placed on these two words and information is available from a variety of sources. A prudent approach is to go right to the source and gain information regarding rules and regulations from the Centers for Medicare and Medicaid Services (CMS). www.cms.gov

Demonstrating meaningful use is the key to receiving the incentive payments but it is not the driver of the key objectives of the program which relate to achieving health and efficiency goals. The recovery act specifies three main components of meaningful use:

• The use of a certified EHR in a meaningful manner (e.g.: e-Prescribing);

• The use of certified EHR technology for electronic exchange of health information to improve quality of care; and

• The use of certified EHR technology to submit clinical quality and other measures.

Once established, providers must demonstrate meaningful use of their installed system for 3 months prior to becoming eligible for any financial incentives. For hospitals there are a total of 24 meaningful use

objectives. There are 14 core objectives that are required and a remaining 5 that may be chosen from the list of 10 menu set objectives. Facilities that are on the leading edge of this change process may become eligible for the financial incentives beginning in mid 2011.

The Real Objectives

Although the government is providing financial objectives to incentivize providers to develop an EHR solution, the real objectives of the program are as follows:

• To improve the quality, safety and efficiency of care while reducing disparities;

• To engage patients and families in their care;

• To promote public and population health;

• To improve care coordination; and

• To promote the privacy and security of EHR’s

In practical terms those goals relate to such things as reducing medication errors due to the inability to read a physician’s handwriting, or eliminating duplication of tests because the results of previous tests do not easily follow the patient as they seek care in multiple locations. Health care leaders must meet the criteria to qualify for the incentive payments but then clearly focus on how an EHR can improve quality and lower costs in their organizations.

The Change Process

Health care executives must realize that implementing an EHR requires understanding of the change process as well as a commitment to a “total solution” and not just software implementation. The acceptance of this major change by the end users; physicians, nurses and other clinical professionals is critical to the process. Physicians want to know, how easy will it be for me


to locate information, make rounds on my patients, order medications and establish routine order sets, etc. Nurses have their own issues related to availability of computer terminals, ease of documenting nurse’s notes and accessing test results. Intimate involvement of the key stake holders in the evaluation and implementation process is a major factor in success or frustration.

One Size Does not Fit All

Clearly there are differences in capabilities and resources in a 25 bed critical access hospital and a 700 bed medical center. The former often has very little on site information technology (IT) personnel and support unless they are part of a larger health system. Larger institutions often have a full complement of IT support and have different needs when it comes to EHR implementation. For this reason, when evaluating vendors, health care executives should look for a total solution which has a menu of options to choose from that can be customized to the specific needs of the client. This could range from a total outsourced solution for smaller hospitals to working in a support capacity utilizing existing resources in a larger facility.

Choosing the Best Option

There are a number of qualified companies with viable EHR solutions to pick from. When choosing a vendor it is important to consider these meaningful thoughts beyond meaningful use.

• The software must be certified;

• The vendor must have an efficient process of meeting meaningful use criteria;

• System costs should be structured to minimize total costs while taking advantage of positive adjustments in Medicare Cost Reports (for critical access hospitals) or enhancing payments to larger facilities;

• Total costs of the implementation should be calculated. Is this an all inclusive package deal for a defined period of time, or will there be ongoing maintenance and upgrade costs? Beware of a low acquisition cost followed by expensive upgrades;• Are financing options available that meet your needs? and;


• How will your system be supported and maintained and how will it interface with existing systems?

Avoiding the “CEO Nightmare”

As we enter the age of EHR we are moving into a scenario of dependence on technology that we have not experienced to this point. The typical issues that a CEO worries about have historically related to things such as patient safety, quality measures, financial performance, medical staff relations and employee satisfaction. The CEO did not have to be concerned about how orders would be processed or patient documentation achieved because it was accomplished via people and paper. This might be a good system based on “up time” but as described earlier it does not offer the safety, efficiencies and portability of data advantages that an EHR provides. The most critical issue that CEOs should ask is, “how will our EHR system be maintained and supported and by who?” Making sure that you have a clear, professional, cost effective answer to that question will avoid the CEO nightmare of frustrated physicians and staff complaining about not being able to care for their patients.

We are entering a major era of change in the

healthcare industry as it relates to implementation of EHR. It is important to meet meaningful use criteria and qualify for financial incentives offered by the federal government as soon as possible. It is equally important however to engage in a process that takes in account the change process with the users as well as the need for a total solution that that is cost effective and meets your ongoing system support needs. Healthcare leaders that recognize these key elements will provide the best environment for serving their patients while enhancing the satisfaction of their clinicians.

BioKevin Shrake is an experienced Health Care CEO . He is a Fellow in the American College of Healthcare Executives as well as an accomplished author

and public speaker. He currently serves as the Executive Vice President and Chief Operating Officer of M*D Resources, Inc. based in Fresno, California.


UNIONS CHEAT MEMBERSOUT OF HEALTH AND

WEALTHBy Lisa Holland


et’s start by saying that we are pro-member, pro-health and pro-wealth! Now that we’ve gone on record stating that we are not bias towards Unions, let’s talk about the health of America. It’s not good.

It’s getting worse and union members aren’t any healthier than the general population, yet they have some of the best health benefits in the nation! So, what’s wrong with this picture? Just look at the recent CDC stats on obesity…it’s appalling.

America spends more on healthcare and is one of the sickest nations in the world. You can draw your own conclusion on that fact but it’s now obvious that the amount of money in terms of benefits that are available to an individual or union member makes no difference in their health status. It’s the member that makes the difference in their personal health. If we accept these facts as correct then union members are paying huge amounts of cash to doctors, hospitals and administrators. Why not pay union members to be healthy? Yes, that’s right. It’s the concept inherent in a Consumer Directed Health Plan with an HSA. But Unions have been loath to listen to the facts. We say it’s time for the Unions to stop cheating their members out of health and wealth. Here’s how:

The facts speak for themselves that CDHP changes an individual’s healthcare behavior. McKinsey’s research and recent findings continue to show that 25% or more of members in a CDHP change their actual health behavior for the better. They stop smoking and lose weight. First year medical trend reduction is in the range of 14-17%. Health spend continues to decline as members maintain their better health status year after year. This demonstrates how improved health behaviors and lifestyle changes can impact healthcare affordability. Where does the saved money go? In a CDHP model it goes to the member’s HSA account. Cash, tax free… accumulating tax free for the use of members and their families for future medical care and retirement. Who can argue with a plan that makes members healthier and wealthier? The transfer of wealth to union members might possibly be the largest transfer in history and will eclipse any rate of pay increase that most Americans may see in the next 20 years.

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Union leaders continue to perceive CDHP as a “take away” rather then a benefit and continue to ignore the hard facts that members on a CDHP are not only getting healthier but wealthier.

Unions have special leverage with their management and are in a position to seek this wealth transfer to their members. This is not a wealth transfer from management but from the medical establishment as a reward for just being healthy. We think it’s a no-brainer for Unions to go to management and seek a CDHP/HSA plan that pay first dollar for preventive care, then ask management to fund the first two year deductibles essentially giving members a “ZERO” deductible plan. Stay healthy and get wealthy! It’s a win/win/win situation for members, union leaders and management.

Here are the facts: 80% of members in any health plan never spend on average more than $800 a year on healthcare and that includes families. Most members will have their deductible accumulated within a year or two. For every

dollar “shifted” from a member’s paycheck to their own HSA account they will save about 42 cents in taxes while management saves about 8 cents in taxes. For example, a contribution from management of $2,000 a year saves enough taxes ($840) to pay for 80% of all workers’ healthcare in any one year. Re-routing tax dollars for the benefit of union members seems to be a good idea too.

New point-of-service adjudication and payment technology now makes the implemention of a CDHP with HSA a hassle free experience for members, since members no longer get reams of bills at home nor have to deal with a debit card. Just walk in, get treated and walk out. It’s Simple. Imagine a system that enriches the union member with tax savings, tax free dollars, a “zero” deductible plan, paid preventive healthcare, additional money for retirement, no more bills at home and that actually can make the member more healthy while at the same time saving management money that makes the Union leaders look like heroes. The time has come for


Unions to take a real close look into the world of CDHP.

About Simplicity Health Plans

Cleveland, Ohio - Simplicity Health Plans is the best implementation of a CDHP/HSA. It aligns the interests of the Employer, Employee and the Provider to provide a turn-key, fully integrated Consumer Directed Health Plan. It also delivers a low cost, scalable solution to control claim costs. The Plan fuses unparalleled technology, point of service adjudication, real-time data, and first of its kind anti-fraud controls. Services include an ERISA compliant health plan, HSA administration and banking, medical claims administration, TPA functions, pharmacy, dental & vision, COBRA, stop loss reinsurance, real-time Utilization Review and Case Management, Health Coaching, Comparison Shopper, Health & Wellness programs, and a host of on-line tools for Providers, Employers and Members.

BioLisa M. Holland, RN, MBA has been in the healthcare care industry for over 18 years and held senior level positions within major healthcare organization

in the US. Lisa is an accomplished business development professional. Lisa’s professional objective is to promote appropriate utilization of healthcare services/solutions that empower healthcare consumerism.

Gregory J. Hummer, M.D., has spent the last 18 years developing and perfecting Simplicity Health Plans to solve the vexing complexities, out-of-control costs, burdens and inefficiencies that are associated with healthcare coverage in America today. Dr. Hummer is chairman and CEO of Simplicity Health Plans.


t is a common belief today, that if a claims administrator begins to send electronic payments (EFT) to healthcare providers it will lower their fulfillment costs. When, in fact,

this is not the case. The problem is that, unless a claims administrator produces an 835 that providers will accept, the administrator must still print an EOB, so the provider can reconcile to their EFT payments. Since EFTs use trace numbers and printed provider EOBs generally using check numbers marked “void”, it creates difficulties for providers to reconcile the EFT deposit to the paper EOB. This in turn can cause an increase in either the number of customer service calls or the provider resubmitting the claims. Additionally, because the cost of an EFT is only pennies less than the cost of clearing a check, there is little savings to be gained by the administrator!

Moreover, if an administrator is moderately successful in obtaining 50% of its benefit dollars transmitted via EFT with provider adoption in accepting 835s,

this rarely represents more than five to ten percent of EOBs produced for providers. This is due to the fact that only the larger provider organizations can accept both an EFT & 835 making them the administrator’s largest payees. This means that the administrator must still bear the additional expense of producing provider payments over 90% of the time.

The truth is that EFTs help providers increase their cash flow, but save very few dollars for the claims administers. The most effective way for administers to truly save on fulfillment costs (e.g. print, postage, and banking fees) is to dramatically reduce the number of provider EOBs processed while migrating toward electronic delivery options that can reliably deliver reimbursements to a broad base of providers.

The first step in this process is to begin consolidating all payments electronically across all self-funded employer groups weekly for each individual provider in a “non-comingling and ERISA-compliant”

By Bill Davis

I

What is the Biggest Myth about Electronic Fund Transfers?


manner. The savings in this consolidation process is dramatic, because the typical claims administrator approves different employer group’s payments on different days, and each of these groups generally pays the same providers with one check/per claim. On average, an administrator can achieve a consolidation rate of four or more claims on one provider EOB with one check, rather than generating four different checks being mailed out on four different days. By adopting this strategy with other treasury processes it will dramatically reduce the reconciliation costs and bank fees for the administrator, or its clients, as well the number of pages to print and postage if a provider is unwilling to accept electronic delivery. This innovative process alone will reduce an administrator’s EOB print and postage expenses by over 60%, plus saving over 75% on banking fees on provider payments!

Once the administrator has incorporated this consolidation process, which is under their control to implement, providers may be contacted aggressively to begin accepting alternative payment methods of delivery.

Alternative delivery options include:

Stored Value Virtual Card: The fastest payment delivery option for the provider is the stored value virtual card. Under this payment option a provider receives a fax image of the provider’s consolidated EOB for posting and a virtual card number for instant payment by entering this number in its card processing terminal. This is the easiest and safest delivery method because the providers do not have to give the administrator their bank account information, and they have the paper EOB to back up the payment. The administrator is charged nothing in this case, thereby completely eliminating its print and postage costs.

Provider Direct: Many claims administrators have relationships with local providers who do not have the 835 capabilities to support EFT transactions. Provider Direct takes the consolidated provider

EOB and creates a PDF image of the document with the EFT trace number on the document. Once the EFT has been created, an e-mail to the provider directs the provider to the location of the EOB

What is the Biggest Myth about Electronic Fund Transfers?


PDF. In this way, the provider receives its EOB and can reconcile it to the EFT payment by comparing the trace number from its bank to the trace number on the document. Generally, a fee per transaction is charged to the administrator, but the fee is far less than the administrator’s consolidated print and postage costs. Provider Direct does require the provider to give the administrator its bank account information.

Vendor Direct: Although many providers have clearinghouses and lockboxes, most of these vendors have been unwilling to support individual 835s and individual EFT payments from the administrators due to their or their client’s inability to reconcile these individual EFT transactions to individual 835s. With weekly consolidated EOBs, however, these vendors are now more willing to take these transactions and process them on their client’s behalf. The fees paid by the administrators range from free to a per claim fee. However, all fees are again far less than what the administrator would incur paying their print vendor.

Summary

In summary, EFTs alone do not lower the administrator’s fulfillment costs unless coupled with an 835, and only the largest providers process both. Therefore, the administrator is forced to produce 90% to 95% paper EOBs thus incurring additional costs. The only solution for administrators to reduce fulfillment costs is by consolidating payments more efficiently while utilizing alternative electronic delivery methods that are more acceptable to a broader base of providers.

Mr. Davis is the founder and CEO of ECHO Health, Inc. located in Cleveland, OH. With over 30 years of industry experience, he is recognized as a visionary and a pioneer in the application of technology in the medical payment space. Prior to creating ECHO Health, Mr. Davis was the CEO of Secure Solutions, where he developed anti-counterfeit processes for MasterCard International. Mr. Davis holds five U.S Patents and is a graduate from Ohio University.

Bio


Worker’s Compensation Cost Escalation:Technology to Roundup the Usual Suspects

elf-funded workers’ compensation programs across the country are struggling to roundup the usual suspects that contribute to high program costs—

namely medical and indemnity expenses, claims administration costs, litigation, and compliance with reporting requirements. Whether self-insured workers’ compensation programs perform these functions in-house or utilize a third-party service provider, they must control and oversee these processes in order to impact costs and outcomes.

Traditionally, self-funded workers’ compensation programs have been hampered by legacy systems that lacked contemporary automation capabilities and resulted in inefficient operations. These systems were highly resistant to change, inter-connection with other systems and access by external third parties, such as claims specialists, loss-control experts, and attorneys.

Recognizing that today’s claims process must be flexible and extend beyond an organization’s

SBy Ritza Vaughn


four walls, program managers are beginning to leverage modern infrastructure to better support proven best practices. In fact, browser-based technology has become a means to automate operations, accelerate transactions, tightly manage quality and performance, and mine business intelligence to continually improve program results.

Advanced Claims Automation Since claims cost the property and casualty industry approximately $40 billion just to administer, it is a core insurance process that would significantly benefit from technological automation. In fact, it’s estimated that claim organizations spend as much as $11 – 14 billion in overpayment, waste, and inefficiency—or what the industry generally refers to as “claims leakage.” This leakage is primarily due to manual, paper-based operations and disparate information systems that result in less than optimal claims outcomes and poor customer service.

Browser-based claims technology helps organizations to achieve process transformation—moving from inefficient and disjointed operations to a more automated and integrated workflow. The following claims functions are now incorporated into a browser-based platform that exponentially increases the speed, efficiency and cost effectiveness with which claims are processed:

• Online reporting of injuries. Prompt and accurate reporting of injuries is critical to achieving best-possible outcomes. With the Internet, injuries are now reported at anytime—24 hours a day, 7 days a week. Supervisors and managers who need to be notified of injuries can receive automated, immediate alerts on the same 24/7 basis. In

addition, the development of “intelligent” online forms has made the reporting process easier. These smart forms use drop-down lists, auto-population of fields, and threads of logic to navigate users quickly through the electronic claims submission process. Due to its intuitive, user-friendly design, online reporting is often faster—not to mention less expensive—than a typical phone transaction.

• A paperless paradigm. Today, the vision of paperless claims processing is finally being realized. In its rudimentary stage, self-funded programs may have scanned documents but continued to use paper to exchange information via fax and mail. To engage in a truly paperless paradigm, however, organizations are now avoiding the generation of paper documents, relying on electronic submission and exchange of information. In this data-driven environment, information is input once and made available to all parties via the browser-based infrastructure, which spans the entire enterprise and beyond, so third-party partners can also participate in a paperless claims process.

• Consistent, quality claims handling. In the past, consistent claims handling was problematic; similar claims were often handled with widely divergent approaches and results. For example, with some complex injuries, the same case given to two different adjusters could produce a 100 percent variance in results. With business rules and workflow management, self-funded programs can consistently apply policies, procedures, and best practices throughout their organization to ensure quality results. Business rules also help to guide junior adjusters through an organization’s unique claims-handling process, essentially allowing them to receive training and handholding as they go.


• Business rules enable straight-through processing. Ideally, claims organizations want to apply adjuster resources where they are needed most. By leveraging a sophisticated business rules engine, self-funded programs can increase their rate of straight-through processing. This means relatively simple and straightforward claims are settled with little or no human intervention. Claims adjusters are then free to focus their time and attention on more complex injury claims that require their expertise and personalized service.

• The adjusters’ automation toolkit. Adjusters can utilize automation tools—such as automated forms, diary systems, scheduling tools, electronic communication, and prioritization of tasks—to help facilitate routine administrative functions, saving as much as 20 percent in adjuster time and resources. With these capabilities, adjusters

can focus on tasks that directly impact costs and outcomes. For example, letter-writing and form-generation templates automatically produce documents with fields auto-populated from the claims database. Adjusters review, edit and send the documents, which saves time and automatically creates documentation within the claim.

• Quality control through online audits. Claim departments have traditionally audited operations to ensure best practices are regularly performed. Since audits are time-consuming, they’re typically performed on a retrospective sampling of 10 - 20 percent of claims. With browser-based technology, online auditing enables greater transparency. Many organizations now perform real-time, concurrent reviews of 100 percent of their claims, enabling them to ensure a higher level of claims-handling performance. Audit findings then allow claim


managers to fine-tune operations, achieve a tighter lifecycle and ensure cost-containment at key junctures of the claims process. Some entities have extended this function to also audit external service providers, such as medical providers and attorneys.

Technology to Manage Medical Costs

Double-digit medical inflation has affected workers’ compensation programs nationwide. In fact, medical expenses now account for approximately 60 percent of the costs of an average claim. To control these costs, self-funded programs are returning to tried-and-true medical management, but with a slightly new twist – leveraging a browser-based infrastructure to streamline and automate operations, as well as to provide the data analysis capabilities to improve outcomes:

• Quality providers. The most critical component to effective medical management is utilizing an appropriate network of physicians who understand workers’ compensation requirements, return-to-work (RTW) objectives, and the importance of leveraging modified duty. Today’s latest data analysis tools can help organizations profile physicians to pinpoint providers who have the lowest overall claims costs and best outcomes. As employees are injured at work, technology helps direct these patients to quality providers in pre-established networks, ensuring the best delivery of care and the greatest level of provider discounts.

• Nurse case management. Nurse case managers should immediately be notified of urgent claims, so they can accompany injured employees to an initial medical visit; begin communication about RTW expectations and transitional work assignments; and help direct care to the extent allowed in the jurisdiction. Many of today’s nurse case managers are mobile or work from home. The latest browser-

based technology allows them to access claims and medical information securely, at anytime from anywhere—as well as to communicate and collaborate with claims management staff to enable optimal outcomes.

• Medical bill review. Medical bills must be reviewed to ensure costs are billed in accordance with fee schedules, as well as provider discounts for additional savings. Bill review technology can update fees and discounts in real-time, ensuring the highest level of savings. In the past, medical bills and reports were housed separately from claims, creating silos of information that hampered efficiency. Today, medical bills and reports can be scanned and stored in one location, and linked at the claims level to ensure the most complete claims and medical cost picture.

Litigation Management

Today, not only is the number of litigated cases growing, but average settlements are also rising. Generally, lawyer involvement drives up the cost of claims, but it does not increase the actual benefits paid to injured workers. As a result, it is in the interest of all parties to reduce litigation and lawyer involvement.


• Rules to alert litigation specialists. The best defense to claims litigation is to enable highly qualified and experienced claims professionals to get involved early in a case to minimize the likelihood of litigation through up-front management. Business rules and alerts enable claims litigation specialists to ensure proper procedures are followed to evaluate claims and identify problems early on, so preventive measures can be taken.

• Hyperlinks to share data with attorneys. When litigation must occur, communication and sharing of information with attorneys must be seamless. A browser-based platform provides hyperlink technology. A link can be sent via email, allowing attorneys to directly access claims information. These hyperlinks are secure and access rights are defined by the sender. For instance, a claims adjuster can email a hyperlink to the defense attorney. By clicking on the link, the attorney can connect to claim notes and can add information as well.

• Analysis of litigation results. A browser-based platform also enables program managers to document and track judgments for plaintiff and defense counsels in order to identify trends and enable healthy competition among firms. For example, program managers may realize plaintiff

counsel is targeting their employees, or certain defense firms may have a higher win rate.

Analysis for Safety & Injury Prevention

Safety and injury prevention is another critical component to optimizing workers’ compensation program performance. The key to success is identifying where losses are occurring and why, and to formulate a strategy to reduce and mitigate these incidents. To do this effectively, organizations require a 360-degree view of their risks and exposures.

In the past, there was no way to effectively collect and analyze loss information at an enterprise level; instead risks were reported and monitored by department. Many organizations utilized paper-based spreadsheets with data manually entered. These reports were time-consuming and labor-intensive to generate. They often relied on poor data, and since reports were not dynamic, if information changed, someone had to update the corresponding files. In many cases, reports were delivered too late to effectively affect change.

Today, browser-based technology compiles all claims and loss information in one location and shares it with appropriate stakeholders. The resulting real-time business intelligence provides self-funded programs with the data to monitor claims activity and to recommend effective loss-control initiatives for high-cost and high-risk areas:

By regularly receiving and distributing reports, program managers systematically build awareness of program performance against defined goals and objectives. Business units and frontline managers can view departmental losses and compel respective divisions to follow policies and procedures to help reduce injuries. In this way, people at every level of


an organization contribute to program success. Supervisors use reports to identify departments with significant losses, and work with these departments to reduce frequency and severity of injuries. If a department has a high number of back-related claims, the department can respond with injury-prevention training or by providing safety equipment.

According to many industry experts, organizations that utilize advanced data analysis capabilities gain a greater awareness of risks and can save as much as three to 10 percent on their “total cost of risk” or TCOR – the costs to monitor the effectiveness of their risk management programs.

Continued Compliance with New Reporting Requirements

Finally, self-funded programs must ensure continued adherence with mandatory reporting requirements. Starting January 1, 2011, many self-insured entities started to report claims involving Medicare beneficiaries to the Centers for Medicare and Medicaid Services (CMS).

Section 111 of the Medicare, Medicaid and SCHIP Extension Action of 2007 (MMSEA) has added these new reporting requirements, and meeting these requirements will be a huge undertaking. If claims are not reported appropriately, organizations may be fined $1,000 a day per claim. Self-funded entities must invest time, money and resources to understand the CMS guidelines, which are more than 200 pages in length. Many self-funded programs do not have prior experience with mandatory reporting procedures. Some lack the right data management and IT capabilities. Others do not want to rely on a reporting vendor to perform reporting on their behalf.

Whatever the situation, self-funded programs can utilize browser-based claims technology to self-report and thereby comply with MMSEA reporting requirements.

Rounding up the Usual Suspects

Workers’ compensation has been in a state of flux, but the usual suspects in terms of cost escalation remain the same. The critical new piece is utilizing technology to tightly manage and even improve program performance. Browser-based claims and risk management technology manages timely reporting of injuries, optimizes medical cost containment, and ensures best practices are consistently applied.

Program managers should realize that a modern browser-based architecture has the ability to boost claims-handling efficiency and staff productivity. With a sophisticated IT infrastructure in place, self-funded program managers will be better equipped to put the usual suspects under lock and key. Many early adopters have already reaped the benefits: browser-based technology makes it easier for them to automate increasingly complex claims transactions, which involve multiple parties, multiple systems and various regulatory requirements.

Ritza Vaughn is the global product director of claims. In this role, she leads the strategic direction of Aon eSolutions claims product. She also leads

product planning and oversees the execution of the development lifecycle. She can be reached at [email protected].

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