Turn off the email and thank your server

Labor Day is about the laborers – those whose work keeps us fed, clothed, protected, entertained, moved, housed, healthy.

It’s about taking a whole day to consider who they are, what they do, and how they are treated.

That includes us – we (you and me) are pretty much white collar middle- and upper-middle class folks; well-educated, fortunately-born, and generally well off. Sure, we are “workers”, and as such we need the time off – away from work email and texts.  So put that “I’ll be back to you on Tuesday” message on the phone and email when you leave work today, and don’t think about it until Tuesday morning.

I’d suggest that this weekend is also a great time to consider those who are, indeed, working while we are holiday-ing – and those who make stuff we use and provide services we take for granted.

Nurses (disclosure, our daughter is an ER nurse and will be working most of the weekend), waiters, cooks, police (even those enforcing traffic laws), marina and park staff, lifeguards and hotel staff all deserve our thanks and our appreciation.  As do the maintenance workers, groundskeepers, mechanics, drivers, laborers, skilled workers and construction workers that make life here pretty pleasant compared to a lot of the world.

As my lovely bride says, “we are all in this together.”  

Share the love.

Friday catch-up

The last couple weeks of the “real” summer are flashing by…things have been a little slow out there but a few items of note crossed my virtual desk this week.

Workers’ comp

From Insurance Thought Leadership comes a piece about M&A activity in P&C insurance claims.  While the article emphasizes the “supply chain” for auto, the author also believes work comp vendors are ripe for consolidation.  That’s a bit like calling the race after the horses have crossed the line, nonetheless author Stephen Applebaum’s views are worthy of consideration.

Just occurred to me that three very good and highly experienced work comp medical directors have departed/will depart their current employers over the next few weeks.  Rob Bonner, MD of the Hartford; David Dietz, MD of Liberty; and Luis Vilella, MD of the North Dakota State Fund are all free agents, or soon will be.

That’s a lot of talent.

Health cost inflation

The latest data indicate health cost inflation remains really, really low.  Like 3 percent. There’s plenty of opining on which factors are affecting the decrease in the rate of increase, but rather than apportion blame/credit, let’s just bask in the warm glow for a bit.

Health plans

While profits aren’t at an all-time high, early indications are the biggest health plans – which cover 56% of Americans with health insurance – are doing pretty well, with a good chunk of their growth coming from self-insured employers.  From Mark Farrah’s report on Q1 2014 results on the top 7 health plans;  “[the] uptick in ASO suggests more employers are opting for self-funded commercial plans to skirt some provisions of the ACA (Affordable Care Act). Increases in risk enrollment are mainly a result of continued growth in the Medicare and Medicaid segments.”

The data is supported by an insightful piece from Margot Sanger-Katz in the NYTimes’ Upshot blog.  Sanger-Katz notes employee insurance signups at Walmart are up significantly, a data point she uses to build a case for the ACA’s influence on employer signups.  Singer-Katz – “expanded employer insurance coverage illustrates how the Affordable Care Act is set up to build on the country’s existing insurance system rather than tear it down. The law doesn’t just create new public insurance programs. It also includes incentives designed to get more people enrolled in employer health coverage.” [emphasis added]

Ten days till the unofficial end of summer – relax like it’s your job!

Monday catch-up

Had a great few days of vacation last week; completely ignored work, spent a lot of time with many old friends, and learned for the millionth time how unbelievably lucky I am to be married to Deb.

Here’s a VERY brief summary of some of the happenings that happened while I was doing everything possible to ignore them.

Workers’ Comp

NO acquisitions were announced.  Maybe it’s because August is a big vacation month – not that the investment world ever takes vacations – but no deals were announced, or even rumored to be done last week.   Word is APAX/OneCall is still the front runner for Coventry Work Comp, more accurately that’s the consensus of the rumor mill.  There are a couple other interested parties, but for now IF a deal gets done it will likely be finalized in October.  

The big Florida Work Comp conference is happening this week and it’s likely to be bigger than ever.  Your trusty author isn’t there, but Bob Wilson, Mark Walls, Roberto Ceniceros and the other real experts will be keeping us posted on the goings-on.  There’s also WCI-FWCI TV; the conference broadcasts selected sessions and does an update each day on happenings.

In what will likely be the top topic on everyone’s mind, a Florida judge ruled that the state’s work comp law is unconstitutional; the Miami Herald reported ““The benefits in the act have been so decimated,” [Judge Jorge] Cueto wrote, “that it no longer provides a reasonable alternative” to filing suit in civil court.”

More details here from the Herald.

Health reform roll-out

The latest PPACA Chicken Little story is that Exchange enrollment is falling off dramatically as newly-insureds drop out.  According to the Investor’s Business Daily, the attrition rate is around 30 percent…

Except that’s completely wrong.

IBD’s piece distorted the figures by using the initial enrollment data as a baseline – NOT the initial PAID enrollment figure. A chunk of those who originally signed up didn’t pay, so they never had coverage to begin with. Comparing the total number of those who signed up (regardless of whether they paid or not) to those who stopped paying is apples to oranges - unless IBD’s intention was to mislead.

In fact, the decline in paid enrollment pretty much parallels what health plans normally see in an individual health block – a couple percent a month.  That’s due to enrollees getting jobs, going on to Medicare, getting married, dying, losing their jobs – normal life events.

IBD – and their fellow ideologues – either don’t understand the basics of the health insurance business, or choose to ignore facts and figures that don’t fit with their ideology.  Either way, it makes one wonder how credible the rest of their reporting and opining is.

Methinks “IBD” stands for “Ideologues Being Deceitful”…


Friday catch-up

The dog days of August are upon us, and I’m going to be on vacation for most of next week, so there won’t be much activity at the Intergalactic HQ of Health Strategy Associates – or here for that matter.

Let’s get caught up on what happened this week.

Workers Comp

First, from the arcane world of Pennsylvania billing comes this note – a recent Supreme Court case, Selective Insurance v Physical Therapy Institute resulted in a ruling favorable to Selective – and other payers in PA.  Allegedly PTI – a Medicare Part A provider – was providing billing services for Medicare Part B PT providers; as PTI was not the provider, the court found the insurer did not have to pay PTI for the services.

Thanks to Linda Schmac of Premier Comp for the heads up. Ms Schmac suggests payers may want to ask their PA patients to sign an affidavit from providers other than PTI to maintain this protection.

In the possibly-even-more-esoteric world of work comp pharmacy, the good folks in North Carolina passed legislation restricting physician dispensing to workers’ comp claimants.  Pricing has to be based on a non-repackaged drug, docs are prohibited from dispensing more than a five-day supply of Schedule II and III drugs.  Kudos to Industrial Commission Chair Andrew Heath and his staff for shepherding this bill thru.

Finally, we’ve just finished collecting the data for the Eleventh Annual Survey of Pharmacy Benefit Management in Workers’ Comp; I’ll do a quick post on highlights Monday.  If you want to peruse past editions, click here.

Health care inflation

Has stayed remarkably low over the last few years.  Now comes a solid analysis that indicates most of that “reduction in the rate of inflation” is due to economic factors.  In an article published in Health Affairs, the authors found that about 70% of the decrease was due to those economic factors associated with the slowdown; whether PPACA implementation will help keep rates down going forward is not yet known. That said, it looks like PPACA could only be responsible for about 30% of the decrease.

Don’t jump to conclusions – the impact of reform won’t be known for several more years. 

Health reform implementation

Those who think the problems with the Federal Exchange are behind us may want to wait just a bit before declaring victory.  Re-enrollment will require verification of income and other bits of data aggregation, assembly, and verification; word is some of these processes are not yet ready for prime time.  Here’s hoping they are before prime time arrives – in two months…

From “The National Memo comes a report on a recent Gallup finding that the uninsured rate is down 4 percentage points in the 21 states that have both “expanded Medicaid and set up their own state exchanges; in the 29 that have taken one or neither of these steps, it has fallen only 2.2 percent.” Given the Federal Exchanges’ problems, this isn’t surprising. 

Notably, “9 of the 10 states that have experienced the largest reductions in their uninsured rates are governed by Democrats (with the exception being New Mexico, where Republican Susana Martinez is governor).” GOP governors happen to run the ten states with the lowest reductions in uninsured rates. 

A big chunk of this is due to not expanding Medicaid; another study indicates:

  • 6.7 million residents are projected to remain uninsured in 2016 as a result
  • Non-expansion states are giving up $423.6 billion in federal Medicaid funds over ten years.
  • Hospitals in the 24 non-expansion states are going to lose out on $167.8 billion “in Medicaid funding that was originally intended to offset major cuts to their Medicare and Medicaid reimbursement.”

As I’ve noted, those hospitals are going to have to make up that revenue shortfall from somewhere…

Medicare Solvency

The Medicare Trustees’ Report is out – just in time for that beach reading!  NASI has produced their much-more-readable review, which finds that there’s currently enough funding to cover all hospital expenses till 2030 – that’s four years more than last year’s assessment.

Good news to be sure.  Now if we can just keep those providers from shifting costs to work comp patients…



Frequency, high finance, and the future of work comp managed care

NCCI’s recently-released report that indemnity claim frequency dropped another two points last year is just the latest indication that the market for traditional managed care services is shrinking.  

Fewer claims = fewer services needed = fewer bills; less need for UR, case management, and related services.

Sure, severity is increasing, so there may be more utilization for a subset of claims, but this is not likely to offset the structural decline in frequency that looks to be baked in to workers’ comp – frequency is down over 50% over the last two-and-a-half decades.  And yes, cost-shifting from providers scrambling to deal with tighter controls from private payers and reduced reimbursement from governmental payers will increase providers’ efforts to get more revenue from work comp payers.

Meanwhile the supplier market is consolidating, and managed care vendors are scrambling to capture enough of the shrinking market to survive the coming shakeout. If APAX/Genex/OCCM buys Coventry – which looks increasingly likely - they will control the largest network, case management company, PT vendor, DME/HHC vendor, and imaging network; one of the largest (albeit fading) bill review entities, a big PBM, and a ton of other services  - MSA, UR, peer review, IME.

Some may think the FTC may find this dominant position a bit too much and not allow the transaction.  I disagree; no one in DC cares about workers’ comp, there are many other networks out there, many other bill review entities and specialty managed care providers, and this is an election year and the focus certainly isn’t on a relatively small industry.

The implications are rather significant.  Leverage is all-important – and I don’t mean the financial leverage but the customer leverage.  With all these services, it would be surprising indeed if AGOC (APAX Genex OCCM Coventry) didn’t encourage payers to buy everything from them in return for discounts on some/most/all services, enhanced reporting, integration services and technology and/or some other incentives.  Some buyers, already hard-pressed by reductions in staff, low IT budgets, and increasing demands for more “savings” and higher network penetration might find it hard to resist such a pitch.

The pitch would be compelling – more cost reductions and less hassle at discounted fees.

The trade-off would be ceding effective control over medical costs to a third party, one with arguably different incentives and motivations.

That alone will give many pause, as well it should.

For those who say I have a dog in this fight, you are correct.  I work with several entities that directly or indirectly compete with these entities, and that is by choice.

More to the point, I also work with several very large payers on various aspects of medical management, and my opinion is control over medical management MUST reside with the payer. 

What does this mean for you?

Workers’ comp is a medical business.  Three-fifths of claims costs are medical, and that’s going to be two-thirds very soon.  It makes no sense to outsource two-thirds of your costs to a third party.

Monday catch-up

Summer is in full swing, which means the A/C is running at full blast in Florida and Texas, while those of us in upstate NY are gloating…I know, you will be soon when we’re subzero and you’re at 70…

Things are supposed to slow down somewhat – they haven’t yet. Here’s what happened last week while I was working on a couple projects last week.

P&C results

The P&C industry is doing well – very well. For the second straight year it will show an underwriting profit, and the combined is still almost three points below 100. Rating agency Fitch thinks things will deteriorate somewhat as the cost of weather-related cats increases; that and lower investment performance (as the equity markets cool off) will lead to lower return on surplus as well.  Still and all, things are looking pretty good – for the P&C industry.  That said, P&C financials are not exactly good; historical return on equity is really low and the cyclical nature of the industry is legend.

Work comp

One of my favorite states, Montana, is suffering from dramatic increases in already-high workers comps cost, driven in large part by drugs; pharmaceutical costs account for 16 percent of total medical compared to 11 percent nationally. Their top drug, accounting for almost 15 percent of total spend – Oxycontin.  That is about twice what it is nationally.

One more time folks – Oxycontin has almost NO PLACE IN WORKERS’ COMP.

Hopefully the state’s new medical guidelines will help reduce this.  Kudos to State Medical Director for Carla Huitt MD for highlighting the issue.

There’s a news brief from NCCI re claim frequency - they report that it continued its decline last year, with indemnity claims dropping 2 percent.

The Coventry work comp auction is proceeding, albeit without many of the big private equity firms. I’ve heard they are concerned about:

  • the PPO network, specifically Aetna’s unwillingness to help re-contract providers. As this is the crown jewel, the lack of a fail-safe strategy to preserve the network greatly reduces the deal’s appeal.
  • the lack of tech and other support for BR 4.0, the bill review platform.  With the layoff of much of the application support staff and chronic under-funding for BR 4.0, the new owners need to either private label someone else’s app or get out of bill review altogether.  Not good.
  • the mediocre-at-best-performance of the other businesses (case management, UR, PBM, etc)
  • the need to recruit a “name” exec to lead the company (nothing against current management, they’ve been handed an impossible task by mother Aetna)

I’d expect Apax/One Call to be the winning bidder – if there is one.  If that happens, the mega-humongous OCCM/Apax will have even more market power.  Methinks payers are going to be most worried about that.

Joe Boures has been promoted to CEO at Healthcare Solutions, replacing David George who stays on as Board Chair.  Under George, predecessor company Cypress Care acquired Procura to become Healthcare Solutions, then added PBM ScripNet and PBM/DME/HHC provider Modern Medical, making HCS one of only two companies to offer a full range of work comp managed care services. Joe is a friend and good man whose steady, thoughtful style will serve the company and its customers well. [disclosure - I have a very small equity position in HCS]

Also just heard that Acrometis has landed a new customer – MacRisk.

Implementing PPACA

For the states that opted out of expanding Medicaid, the proverbial chickens are headed home to roost – and they’re dropping loads of red ink on hospitals in the process.  That’s the news from Fitch,

Fitch has downgraded 10 entities [hospitals and health systems]. Of those, five are in states that have not participated in expanded Medicaid coverage. Several of those downgrades were driven by operating performance declines related to funding and reimbursement pressures, which may have been lessened by Medicaid expansion. Conversely, of the nine upgrades since Jan. 1, eight were hospitals in states that have expanded Medicaid. [emphasis added]

From Jonathan Cohn comes the news that states that decided to expand Medicaid have seen insurance coverage increase almost three times more than states that have foregone expansion.  As folks in these states are healthier to start with, the health disparity between the states will – depressingly – increase.

I’m really confused by House Speaker John Boehner’s decision to sue President Obama over alleged abuse of executive power; after all the caterwauling about immigration, Guantanamo, the border, drone strikes, recess appointments, and the Bowe Bergdahl trade, the best he can come up with is the delay in the employer mandate...

It doesn’t make sense.  Politically, there’s increasing evidence that voters are feeling better and better about PPACA, torpedoing what had been THE key talking point for GOP candidates this fall.  GOP senators and congresspeople have all but abandoned “Obamacare” as a talking point.  Bringing more attention to an issue that may redound to their opponents’ benefit is puzzling at best.

As evidence, I give you the news that political ads slamming “Obamacare” may well have resulted in higher enrollment in “blue” states.

Back to work now!



Up? Down? Sideways? What’s up with health care costs?

There’s been a good deal of confusion over health care cost trends for the first half of this year.  Initial reports indicated they were up dramatically; more recent intel paints a very different story.

So what’s the deal?

First, let’s not confuse “costs” with “insurance premiums”.  Unfortunately, many mass media outlets don’t understand that insurance premiums are not costs…which certainly contributes to the confusion. Overall, premium increases for large employers have been trending generally downward for years, with 2014′s 4.4% rise just a touch over 2013′s record-low 4.1% increase. A big part of that is from increased deductibles and employee cost-sharing; today employees pay over a third of the cost of their insurance, a big change from way back in the day when many employers covered the entire cost (yep, I’m old).

Second, let’s not confuse “price” with “cost”, as this report does.

Recall cost is the price per service times the volume of services – so the price matters, as does the utilization of health care.

Fortunately, some sources – the PWC annual report being one of the better ones, don’t conflate or confuse.  Their latest estimate is health care costs will go up 6.5% this year, while premiums will only rise 4.5%.

That makes sense – more coverage means more utilization especially among folks who just got insurance.  Early indications are the recently uninsured are less healthy than the general population, a finding that should surprise no one.  Many may have long-term but relatively low-severity chronic conditions, while some undoubtedly could not get or afford coverage.  These newly-insureds will seek care for their long-term conditions, and that care will be pretty expensive. Think of this as a one-time big bump in cost due to pent-up demand; I would not be surprised to see spikes in cost for surgery, orthopedics, cardiology, pulmonology, rheumatology, and other areas with high chronicity over the next couple of years, followed by a reduced inflation rate.

What does this mean for you?

Don’t get too wrapped up in any forecasts or reports of recent cost trends; wait a year before putting much stock in inflation rates and you’ll find you have a lot less back=tracking to do. 




Stop reading this

do your real work, and get out early to enjoy the holiday.

Not to worry, we’ll be carefully monitoring all things relevant to workers comp, medical management, and health policy while you’re doing the family thing, soaking up Vitamin D, and avoiding Hurricane Arthur.

See you Monday.