Stop Loss Insurance is a product that protects companies who forgo typical commercial insurance plans in favor of a self-funded plan. Stop loss coverage limits the liability a company has when losses in its self-funded plan exceed certain limits. A critical difference between stop loss coverage for employers and employee benefit insurance is that stop loss does not cover the participants of the health plan, but only the employer.
Recently, the National Association of Insurance Commissioner’s consumer representative Timothy Jost spoke out and said that he believes the NAIC should amend their stop-loss coverage rule to ban smaller employers from using this type of insurance, along with raising the minimum attachment points when stop loss coverage would kick in. His reasoning is based on the fact that self-insured programs are exempt from certain requirements, and as a result, the “un-regulated” plans can take advantage of their participants when it comes time for determining benefits. The NAIC believes that raising the stop loss minimum will therefore encourage small employers to adopt commercial plans, which have more regulation. The NAIC is wrong. Here’s a list or reasons why stop loss insurance is not as bad as the NAIC would like to think:
1. People in self-funded plans report being no less satisfied with their coverage than do people in fully insured plans. This comes straight from the Department of Labor and Health & Human Services, two influential organizations whose interests are in protecting the rights and benefits of individuals. The NAIC is concerned with self-funded plans taking advantage of their plan participants, and yet there isn’t any indication that a problem exists.
2. Recent studies show that self-funded plans offered by small and medium sized firms covered the same proportion of expenses as fully insured plans do, but with less costs and oftentimes, a wider array of benefits. Is it really a bad thing that companies are providing the same coverage to their employees for less money? The Deloitte Analytical Consulting Group found from the Department of Labor report that average fully insured premiums increased by $808 while average self-funding plans climbed by only $248, a vast difference.
3. Reducing risk is not a bad thing. If insurance companies are willing to sell stop loss insurance to small self-funded plans, then why is that a bad thing?
4. Restricting self-funding results in higher health care costs. The restriction or reduction of self-funded programs will result in higher health costs to employees because it reduces competition among payers. Less competition is bad for plan participant’s wallets.
5. Self-insured employers are responsible for paying claims before seeking reimbursements from stop loss carriers. A company is responsible for paying the full amount of medical bills before they seek reimbursement from stop-loss carriers. Additionally, there is no direct connection between the company and the plan participants, and stop loss coverage only covers the employers’ side of payment.
6. While the NAIC may argue that it’s too easy to purchase stop loss coverage for companies that self-fund, finding reasonable stop loss coverage is not always that simple, and is governed by market conditions. If it were too expensive, then companies would not be able to buy it and would find commercial programs more to their liking.
Stop Loss Coverage is in fact a very viable way for self-funded plans to continue to thrive and prosper as the healthcare climate continues to change. Restricting this coverage, or any other coverage for that matter, reduces the ability for companies to offer competitive healthcare coverage to their employees, which is the detriment to all parties involved.
The Supreme Court has finished listening to arguments about the future of the Affordable Care Act. Their rulings are due out in June. What the Supreme Court is deciding on is whether Congress has overstepped their authority in prescribing the “individual mandate” for insurance. What is the “individual mandate?” It’s an integral part of the Affordable Care Act where all adults would have to have health insurance by 2014, or be forced to pay a penalty. The litigants in this case believe that Congress overstepped its constitutional bounds for controlling interstate commerce, offering the federal government too much power to force Americans to make a specific purchase, which in this case, would be on healthcare.
Opponents of the ACA believe this law intrudes on the private lives of Americans by requiring individuals to buy insurance. They say this leads to a slippery slope of what Congress can or can’t force individuals to purchase, clashing with American’s Constitutional rights. Even though the purpose of the mandate may have some nobility, the question is whether the Federal government should be the ones creating this kind of mandate, or whether solving the problem should be left to other means.
In addition to determining the fate of the individual mandate, the issue of severability will be addressed by the Court. They have to decide if the individual mandate can be struck down, while maintaining other parts of the law intact. While the Obama administration would not be opposed to this outcome, many of the results they hope to achieve will be lessened by the eradication of the individual mandate.
Only time will tell what the Supreme Court will decide, but with many believing that the individual mandate will be unconstitutional, there will be much work ahead for the Affordable Care Act to truly make an impact.
If the ACA is ruled unconstitutional, there may be other ways for the government to offer the same effects that the ACA hopes to accomplish. Here is a list of some of the options that could be a win-win for both sides of the Supreme Court decision.
1. Offer a tax credit rather than penalizing individuals who don’t have insurance. This would incentivize people who do have insurance to have it and would make it affordable for more of the population.
2. Offer government based subsidies to insurance companies. This would allow for insurance companies to reduce the monthly deductibles, making policies more affordable for individuals and families.
3. Educate people on the importance of enrollment of health insurance through promotional tools and media, and inform them of the costly outcome of being without insurance when an accident or medical issue strikes.
Health and Human Services’ Secretary Kathleen Sebelius announced on February 17, 2012 that HHS would initiate a process to delay the compliance deadline for using the ICD-10 diagnosis and procedure codes, which has been met with mixed reviews and criticisms. The shift in dates was primarily decided upon because the switch date of October 1, 2013 would burden physicians with exorbitant costs to update its coding system, ranging from $83,000 to $2.7 million, depending on the size of the practice. Additionally, there is worry on the logistical and administrative burdens of deploying the conversion, which needs extensive time and money to train workers on how to read and implement these codes.
But the delay itself will prove more costly to the physicians and hospitals that have already put in a significant amount of funds into preparing for the conversion. Some leaders are unhappy with the delay since they would have to re-launch new training programs for its staff based on the compliance date, extend or cancel current contracts, as well as doing certain things twice.
So what exactly is ICD-10 and why do we need to move to this standard? ICD-10 is developed by the World Health Organization and has 68,000 diagnostic codes, which is five times more than the current ICD-9 coding system. The system has been already adopted by all industrialized nations but the United States, according to the American Health Information Management Association. The ICD-10 coding system will allow for refined health management, allowing a plethora of more specific codes for the ever-growing lists of diagnostic and procedure codes. This new system is poised to help payers save millions of dollars due to improper coding when using the dated ICD-9 coding system.
There has been no estimate on how long the delay will be, but most proponents are advocating no more than a year, citing that any more than that would be “catastrophic” as far as costs, not to mention that ICD-11 is impending. Here’s a list of reasons why ICD-10 should not be delayed more than a year:
The switch date has already been postponed for two years from October 1, 2011 to October 1, 2013. We are the last of the industrialized nations to implement ICD-10 and need this conversion before we can leapfrog to ICD-11.
The ICD-10 delay will take away from the new jobs and upgraded systems that a large amount of the healthcare industry has already implemented for this conversion process. This is like we are slapping the hand of the hospitals and administrators who have been proactive to stay current.
Since 5010 has already been implemented with the ability to accept ICD-10 codes, it’s reasonable to begin using this capability now. Payers can begin testing these procedures now to ensure that once the compliance date is met, it is free of bugs and errors.
ICD-10 is being implemented to help Payers save millions that are lost on improper coding, inaccurate claims, rejections, and delays. Delaying this process will costs payers money and maintains inefficiency.
The delay is inevitable, so how can we use this time to improve these processes to make sure we ensure the most efficient and accurate transition? Payers should instill the importance of accurate ICD-10 coding to help improve the quality of reporting and accuracy of coding, as well as provide feedback to ensure that the processes are smooth and logistically sound. Additionally, we can use this time to accurately train and educate coders on the intricacies of the ICD-10 coding system. While it may not be ideal, the delay can offer some added benefits to ensure that hospitals, physicians, and payers are better equipped on the compliance date.
As we have noted on many previous occasions, in order to make real change happen in the healthcare industry, we need less, not more government intervention in order for programs to really succeed and make a difference in the lives of employers and employees. We need to continue the use of self-funding (or self-insurance; the terms are used interchangeably for our purposes here) as a mechanism for employers to get their employees the coverage they need.
Self-Insurance is growing, and is emerging as an option, not only for large corporations, but smaller organizations too. According to the Kaiser foundation, approximately 60% of all workers covered by private health insurance in 2011 are in self-funded plans. This percentage is up from just under 50% in 2000. It is an increasingly sensible route for employers to provide healthcare benefits to their employees, while forgoing the typical route of paying premiums to insurance companies. Part of the growth has been driven by smaller employers. This is because small companies are discovering the benefits of greater flexibility in these self-funded plans in comparison to traditional, fully-insured plans, at a cost that is sometimes significantly lower. Self-funded plans are allowing companies to save as much as 40% on their overall cost, while still allowing for custom-design of their plans.
There are many reasons why employers choose the self-insurance option. The following are typical:
- According to a Deloitte study of self-funded plans, premium growth from 2005-2010 has been 35% in fully insured plans, but only 26% for self-funded plans. For 2009-2010, the average premium dollar growth was $808 in fully-insured plans compared to $248 for self-funded plans.
- The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a 'one-size-fits-all' insurance policy.
- The employer maintains control over the health plan reserves, enabling maximization of interest income - income that would be otherwise generated by an insurance carrier through the investment of premium dollars.
- The employer does not have to pre-pay for coverage, thereby providing for better cash flow.
- The employer is not subject to conflicting state health insurance regulations/benefit mandates, as self-insured health plans are regulated under federal law (ERISA).
- The employer is not subject to state health insurance premium taxes, which are generally 2-3 percent of the premium's dollar value.
- The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employees.
While over the years, there have been criticisms of self-funding, it has come primarily from state legislators and insurance regulators who feel that these plans should fall more under their control. As mentioned above, self-funded plans are subject primarily to federal law. There is no evidence to support the notion that more governmental control is needed. Healthaxis believes that self-funding needs to be better understood by everyone, employers and regulators alike. Anything that disrupts the effective use of self-insurance is bad for corporations and the employees that work there.
On January 16, 2009, the Department of Health and Human Services required that ICD-9 codes be replaced by ICD-10 codes by October 13, 2013. ICD-9 codes are used to report diagnoses and inpatient procedures and help classify patient sickness and death information.
This conversion has become a necessity because ICD-9 code sets have become outdated and maxed out, as they do not acknowledge the new advances in technology and knowledge, and the more complex body systems are running out of coding options. Furthermore, this code overload has resulted in new codes assigned to other body systems which have made the coding more complicated and disconnected to their classification type.
The new ICD-10 Clinical Modification codes offer 68,000 variations whereas the ICD-9 offered 14,000 variations. ICD-10 also expands the coding to identify the body system, root operation, body part, approach, and device used in a specific procedure. These precise codes should offer fewer rejected claims, improved quality and care management, better benchmarking data, as well as improved health reporting.
While this conversion will allow a more specific coding ability for physicians to diagnose their patients and help increase efficiency, the conversion will also require significant planning, training, system and software upgrades, as well as many other investments to ensure its success.
Originally, this conversion was supposed to take place on October 11, 2011, but the American Medical Association, along with a hundred physician state and specialty societies, expressed worry that it would not be feasible to complete a transition in such a short amount of time. Therefore, the new date of the ICD-10 conversion will be October 1, 2013.
Healthaxis, like all companies which provide comprehensive systems for claims benefits administration, is preparing for the upcoming implementations of the ICD-10 coding structure, as well as the new HIPAA 5010 standard. These will be challenging times, but the outcomes will ultimately be worth the effort. Healthaxis continues to be on the forefront of adapting to new technology and policies to help ensure that it is offering its customers the latest and most efficient ways of conducting business.
How many times has paper based information been lost unexpectedly with no record of when or where it was received? Payers and administrators have a lot of responsibility when it comes to keeping up with the overwhelming number of documents that come in their doors. Payers can now find new methods to eliminate the paper workflow to help improve efficiency and reduce costs. From book readers to iPads, the world is going paperless, and so is healthcare.
With the increasing volume of correspondence, miscellaneous documents, and non-standard processes, healthcare administrators need more efficient systems to combat the otherwise paper intensive method of processing and filing. Companies can strive to improve productivity on processes that are heavily reliant on the movement of paper documents, as well as offer better customer service to their customers, and comply with records management mandates more effectively through the use of information technology.
By combating “paperflow,” payers can help to reduce, if not eliminate altogether factors such as personnel time for paper distribution, postage costs, process flow lag time, lost paper documents, and storage space. So what products are available for payers to help streamline their processes?
For over eight years now, Healthaxis has been leading the pack of creating paperless workflows through its Microsoft- based DocTrax software platform. DocTrax has been successfully used in a variety of situations to improve productivity and management of previously paper intensive business processes. The software automates paper flows for documents such as contracts, enrollment forms certifications, tax forms, claim attachments, and tracks every queue that the document has gone through. The powerful software helps companies improve and track turnaround time for all processes, which is a win-win for all parties.
DocTrax is fully customizable, so companies can integrate the system into their current environment and add features that are important for the company. For more information about DocTrax and other products that Healthaxis provides, check out www.healthaxis.com
Accountable Care Organizations (ACO) are getting more and more attention, especially as we progress closer to 2012 when most of the provisions for ACOs go into effect. An ACO is an association that consists of a group of doctors and hospitals that have decided to come together with the intended purpose that through collaboration, transparency, and cooperation, they can provide the best care for their patients. In ACOs, doctors are accountable for improving the health of their patients. It’s a team effort, not an individual effort. In these practices, doctors are rewarded for meeting targets that improve outcomes and lower costs. Their benchmarks are based on regional standards of care, so that local factors impacting health can be taken into account. The idea originated out of the need to create a system that would help to ensure that all patients receive the best health care possible. In order to realize this necessary change, there had to be a shared responsibility by all involved parties.
New Healthcare Law
Accountable Care Organizations are included in the Patient Protection and Affordable Care Act and even though the new rules take up only a few pages, they are one of the most highly discussed facets of the new health care bill and accordingly are a hot topic for debate. Along with bringing a new approach to delivering medical care, there will be new payment models under Medicare and most likely private insurance as well. What seems lost in the discussion is that ACOs cannot be particularly small, and managing populations of members and dealing with the administrative requirements of doing so requires sophisticated systems, not just for healthcare delivery, but for administration.
Affect on TPAs and Insurance Payers
Third Party Administrators and Insurance Payers will have a role in the administration and delivery objectives of ACOs. Right now, ACOs are focused on organizing, contracting and determining how these new provider groups will work. But someone has to handle the administration and payment processes for these groups, and that’s where we see forward looking administrative organizations going. Payers will see an increased need for transparency as institutions and systems begin to merge and may find that some administrative duties will soon either be shared or reduced. In addition, new payment and reimbursement models will need new administrative systems capabilities.
Healthaxis is looking at the specific needs of ACOs and their administrative partners to understand how we adopt our systems and solutions to meet this new model. We know that our history of core benefits administration is a key building block, and we are making use of the flexible nature of our systems technology to build new and more advanced capabilities that will be able to meet the needs of a changing landscape. We’ve been meeting with industry leaders to understand the Payer’s role in administration, and we expect to be one of the leaders in systems development for this potentially large segment of the healthcare market.
Sometimes a quick joke illustrates an important point better than anything else. Here's one I heard that is particularly salient on the issue of controlling corporate medical costs.
A woman brought a very limp duck to her vet. As she laid her pet on the table, the vet pulled out his stethoscope and put it to the bird's chest. After a moment or two, the vet shook his head and sadly said, "I'm sorry, your duck, Cuddles, has passed away."
Distraught, the woman cried, "Are you sure?"
"Yes," the vet said, "you're duck is dead."
"How can you be so sure," she said. "You haven't done any tests or anything. He might just be in a coma."
The vet excused himself, and left the room. A minute or so later, he returned with a Labrador retrieiver. As the duck owner looked on in amazement, the dog stood on its hind legs, put its paws on the examining table, and sniffed the duck. He then looked at the vet, and with sad eyes, shook his head.
The vet left the room again, but soon returned with a cat. The cat jumped on the table and likewise sniffed the bird from head to foot. Quietly, he sat back on his haunches, meowed softly and then jumped down and left the room.
The vet looked at the woman and said, "I'm sorry, but as I told you before, this duck is definitely, 100% certifiably, dead.
The vet turned to his computer, punched a few keys and printed a bill. Handing it to the woman, he said, "That will be $150.00."
The woman, now in greater shock than before, said "150.00? Just to tell me that my duck died?" The vet shrugged his shoulders and said, "I'm sorry, if you had just taken my word for it, the bill would have only been $20, but with the lab report and the cat scan, it's now $150.00"
Understanding utilization, and it's impact on medical costs, is important. In fact, it's possibly more important than the discounts your plan may be getting from its network arrangements. If your administrator isn't providing you with tools to keep down unnecessary medical costs, or to control those costs that are necessary, it won't matter how good the discounts are, your organization will be spending money it shouldn't.
Companies should have programs in place to educate their employees on the appropriate use of the healthcare system. They should be encouraging people to question their doctors about the tests they perform, the procedures they recommend, and the drugs they prescribe. The company should encourage its employees to make use of their employee assistance programs, nurse lines, wellness portals; all the tools the organization has to help them understand their medical conditions and the appropriate steps to ensure they are properly cared for. It's hard to convince people that it's ok to ask the person in the white coat - why, or how much, or is there a less costly alternative, but it's absolutely necessary.
Your benefits administrator should be talking to you about how to manage utilization. You should be asking them about the tools you need and the communication processes that work. You should also be asking them whether their benefits administration systems and web portals are designed to seamlessly interact with and promote the kind of education you want your employees to have. If they don't have the answers you expect, it may be time to look for a new administrator.
If you're a benefits administrator, and your system vendor doesn't have the web portals and the level of automation you need to properly serve your clients, you should call Healthaxis.
A few years ago, I was traveling with my colleague, Larry Thompson, now Senior Vice-President of Large Accounts at HealthNow, and we began talking about why companies have such a difficult time lowering healthcare costs. I thought the problem was primarily because CEO's didn't take the issue seriously enough. That may seem hard to believe, because CEO's are always insisting that the costs of health benefits are hurting their companies' bottom lines. But instead of taking charge of the situation themselves, they often delegate the issue to other executives or outside consultants and insurance brokers. Unfortunately, this delegation of responsibility is seldom accompanied by a commensurate delegation of authority that could effect real organizational change. The result is that the "benefits problem" is viewed as a cost issue to be dealt with, and approaches to lowering costs typically are either trying to achieve higher network discounts or cost shifting from the employer to the employee. The usual outcome is that it is either not enough, or it is unacceptable because employees don't like it. Ultimately, nothing really changes.
My view was, and still is, that to fix healthcare, we must first "fix" our approach to solving the problem. We must focus on changing the way we as leaders comprehend and manage the idea of healthcare. We must begin to see healthcare not as a benefits program with a bundle of disintegrated parts, but as a process that can be managed and improved upon with tangible financial results. In the end, it's about creating a fully integrated health and benefits administration system and combining that system with a new cultural identity that makes "health" the primary focus.
As Larry and I continued our conversation, I described an approach I had developed that was based on the SEI Capability Maturity Model. I called this approach the CorporateHEALTH Maturity Model (CHMM). The CHMM describes a collection of tiers of corporate health maturity. Each maturity level has a set of process areas and performance standards that determine the effectiveness of corporate response to healthcare process initiatives. The processes can be managed and refined to increasingly higher levels of capability so that the corporation can measure its progress toward a goal that achieves the highest level processes for improving health and lowering cost.
The five maturity levels are:
- Insurance for basic care,
- Insurance as a benefit,
- Health as a corporate objective,
- Health as a guiding principle,
- Health as a corporate value.
The elements of CHMM program management range across a total of twelve different but complementary categories. Examples of categories would be plan design, funding mechanisms, and communication.
Once Larry understood the idea, he and I quickly began outlining a framework that describes how organizational effectiveness for "Corporate Health," could be measured, and further, at any given level of maturity, what the next steps were for improving the process. The result was compelling.
Why do we need the CHMM? To me it's obvious. The healthcare system in America is broken. Costs are high, returns are low - and let's face it, no one really fully grasps the whole picture. It simply is too complicated. Where do we start? First, corporate leaders need to begin dealing with the issue of "Corporate Health" in a more business-like manner. They need to stop viewing it as "benefits cost." It's an operational problem, not a cost problem. Expensive consultants or reliance on government intervention are not the solution. The solution lies in using a systematic and integrated approach to problem solving, similar to the way other major operational issues are handled.
In future blogs, I'll write about the CHMM framework in more detail and offer some solutions for how companies can get started improving their Corporate Health processes.
Wellness programs are one of the most important aspects of implementing an effective benefits program for corporations. Connecting those programs to benefits plan design is a requirement if you want to ensure that your employees truly see the importance of engaging in healthy and life-changing behaviors. History has proven that purely voluntary programs have no meaningful participation, while programs offering incentives - like premium credits, reduced co-pays and co-insurance, or even cash rewards achieve much higher participation. In other words, if you want to maximize the chance that employees will engage your wellness initiatives and programs enthusiastically, tie their involvement to your plan design and make it profitable for them to do so.
Involving your benefits administrator in the program is key as well. What good is it to promise employees better benefits, if after their engagement, you don't deliver the rewards? But this can be a daunting task for an already overworked human resources team.
One key is to ensure that whoever supplies your benefits administration system, or core benefits administration platform can automatically adjust the plan design for each individual with only minimal effort on the part of your corporate staff. For instance, you may want your employees to be able to report via a web portal that they signed up for a softball team and are therefore able to receive a reward. Likewise, because you need to tie the rewards to behaviors that are ongoing, and to stop the reward if the employee stops complying with the requirements, you want the system to automatically stop calculating the benefit without any intervention from corporate staff.
Additionally, if you were working with one of the leading providers of health management solutions such as Viverae (http://www.viverae.com/), or a consumer care management system like WorldDoc (http://www.worlddoc.com/), you would want to be able to automatically link activities from their portals to a core benefits platform like Healthaxis and provide seamless integration and reporting.
In sum, we need to find ways to help our employees lead better healthier lives. The rewards to the business are ultimately immeasurable. However, we also need to be able to administer our programs with healthcare information technology systems that don't require an army to support our initiatives.