Exchange health insurance premiums in 2015 – the real story

Shockingly, there’s a good deal of confusion out there regarding what will happen with health insurance premiums in 2015, more specifically what’s going to happen in the Exchanges.

Let’s leave aside (for now) the possibility that we’ll have another enrollment mess like we experienced last fall (CMS officials are likely still twitching over that disaster…).  Instead, here’s what we know now.

  1. Health insurers are pretty much guessing what the P&L on their Exchange business will be; there’s just not enough data, many didn’t fully enroll until late spring, and individual health plans’ enrollment is too small to be statistically valid (in many cases).
  2. So, they are pretty much guessing what their rates for 2015 should be.
  3. Some very big players – notably United Healthcare – didn’t participate in Exchanges last year, but will be this fall.  In some instances, their rates are very competitive, in others not so much.
  4. The number of insurers participating and the number of plans they are offering in most exchanges is either level or increasing slightly.
  5. A quick check of rates (thank you Kaiser Family Foundation) in a number of markets indicates prices for the benchmark Silver plans are decreasing by about 1 percent on average.
  6. As Bob Laszewski pointed out in a recent blog post, many of the insurers that were the benchmark Silver plans in 2014 will not be benchmark plans in 2015 – either their prices went up or in some cases they may actually have decreased – either way they no longer qualify to be the benchmark plan (the second cheapest Silver plan).
  7. Bob’s point – and it is certainly valid – is that the federal reinsurance program essentially protects Exchange insurers from significant losses.  No wonder the number of plans participating is increasing.
  8. With that said, from a pure pricing standpoint, 2015 consumer insurance prices declined in a number of markets, and in those where they did increase it was in the single digits.

We won’t know if that will continue for a couple of years, when the federal reinsurance program expires.  The hope is market dynamics, competition among insurers, increased experience with narrow networks, ACOs, and other cost saving mechanisms is able to drive down costs and the federal program is no longer needed.

What does this mean for you?

Consumers love low rates.  Health plans that figure out how to keep them low are going to win big.

Friday catch-up

The first week of September marks the start of the busy season in health care, insurance, and workers comp.  This week certainly maintained that tradition.

here’s what I noticed this week.

Health care costs

The news this week was pretty good - current health care cost trends are significantly lower than earlier projections, although predictions for future increases remain higher than we’d like.  That said, recall past predictions weren’t that accurate.

While we don’t KNOW what the impact of ACA, recovering employment, and health care system chances will be, we can look to Medicare – which isn’t affected much by the economy.  Jonathan Cohn’s take: “the slowdown in Medicare spending (which has little to do with the economy or changes to private insurance) is a powerful indicator that health care really is becoming a more efficient enterprise.” [emphasis added]

Another perspective is from the Washington Examiner - you can tell their bias as they lead with “President Obama’s health care law” – which PPACA decidedly wasn’t. Disregarding the Examiners’ disregard for accurate reporting, they cite a CMS actuary study which indicates government spending on health care will increase from 41% of the total to 48% in 2023.  That is accurate – however recall that CMS’ past projections for Medicare and medicaid growth have been shown to be too high.

 Health reform implementation

One of the concerns about PPACA was the employer mandate would encourage smaller employers to move workers to part-time status.  Early indications are there isn’t much of a shift – if any – to part-time work due to PPACA.  Rather the slow recovery of the economy seems to be the key factor.

A great piece by Incidental Economist Austin Frakt (a long time Health Wonk Review contributor!) in WaPo’s Upshot blog finds that the more competition in local markets, the lower the insurance premiums are.  Specifically, Austin notes the absence of United Healthcare from markets led to premiums that were 5.4% higher than they would have been with UHC participating.

Another take is that premiums in less competitive states were higher than in those with more health plans participating in the markets.

Pennsylvania is joining the ranks of the sane states that are expanding Medicaid, and in so doing will avoid:

*   $37.8 billion in lost federal spending over the next decade

*   $10.6 billion in lost hospital reimbursements over the next decade

*   380,000 low- and moderate- income people would not gain coverage in 2016

Workers’ comp

The BIG news just came out today – a study by McClatchy found rampant misclassification of workers as independent contractors receiving money from the 2009 stimulus. This is a damning indictment of governmental oversight, and one that demands our attention.

Liberty Mutual produced an excellent study that appears to indicate back pain patients who got MRIs early on had worse outcomes than those who did not have MRIs.  Their conclusion:

The impact of non adherent [not consistent with medical treatment guidelines] MRI includes a wide variety of expensive and potentially unnecessary services, and occurs relatively soon post-MRI. Study results provide evidence to promote provider and patient conversations to help patients choose care that is based on evidence, free from harm, less costly, and truly necessary.

Kudos to Liberty for conducting this research.

Remember – no emails, no business after 5 today – unplug!


Physician dispensing in workers’ comp is killing your financials

The cost of physician dispensing is far above the outrageous premiums the dispensers charge.  The real cost includes:

  • longer disability duration
  • higher medical expense – over and above the excess cost of drugs
  • higher indemnity expense
  • more and longer use of opioids

Lost in the conversation, ignored in legislation, and pooh-poohed by dispensers and their enablers, the research – real research by real scientists, not anecdotal BS by dispensers – proves dispensing is having cost implications far and above the cost of the drugs.

In addition to the ground-breaking work done by Alex Swedlow et al at CWCI, the folks at Accident Fund (kudos to Jeffrey Austin White) teamed up with Johns Hopkins to analyze the impact of dispensing on their claims.

The results – which will be discussed next week in an IAIABC-sponsored webinar – are striking.

Slots for the webinar are still available – it will be held next Wednesday, September 10 from 1-2 Central Time.

Kudos to IAIABC for their leadership on this.



What’s your Plan B?

The pending acquisition of Coventry Workers’ Comp Services by APAX will consolidate a very big chunk of the work comp managed care services market.  The potential impact bears careful consideration.

I’ve taken the liberty of quoting below from a piece I wrote back in April of this year, long before this was on the horizon. I believe it is even more relevant today, as payers consider how the aggregation of market power under ACOG (APAX-Coventry-OneCall-Genex) may affect them. 

Without further ado…

Coventry Work Comp was built by combining the “old” OUCH network with Healthcare Compare, followed by an acquisition of Concentra’s WC services division, which had acquired NHR, which had acquired MetraComp, plus the acquisition of a few other bits and pieces.  Along the way, the company became the dominant work comp PPO.  A few years ago, it was the “must have” network for workers’ comp payers as it was the largest, had the best discounts, and had the most coverage in the most states. While other vendors may have had better networks in one or a couple of states, Coventry’s was the best (defined as largest number of providers and deepest discounts) and broadest.

Coventry’s management (since departed) used this market leader position very effectively.  They forced (yes, that’s the right term) payers to use their network – and other services – by raising their fees for payers who carved out specific states where another network was stronger.  In addition, they discounted other services (notably PBM) if the payer bought their network and bill review services.

This put payers in a tough position.  Try as they might to seek out the best-in-class network, PBM, or bill review offerings, insurers would have to pay a LOT more for Coventry’s network if they didn’t buy everything.

For Coventry’s erstwhile competitors, the playing field was anything but level.  If they built a great network in a state or two, one that far exceeded the depth, effectiveness, and discounts of Coventry, they’d often find the big buyers would tell them they’d won their business, only to learn a bit later that the deal had been undone and Coventry was going to keep it, having told the buyer that their fees were going to go up – often way up – if the state/s were awarded to the competitor.

Things got even more one-sided after Coventry bought Concentra’s work comp services business.

Coventry actually raised their prices, telling customers that the larger network delivered more value, and therefore a higher price was warranted.  Never mind that the larger network would deliver more revenue just by virtue of including more providers; Coventry management very successfully leveraged their all-but-monopolistic status to increase prices and beat out competitors.

According to several colleagues who worked with Coventry at the time (remember this was a few years ago), Coventry knew they had the leverage, weren’t afraid to use it, and was only too happy to let their customers know it.  Even more troubling, customer service and responsiveness got steadily worse.  Managed care execs used words like “arrogant”, “uncooperative”, and “dictatorial” when describing their interactions; many were very surprised, if not shocked, by the tone and tenor of discussions and negotiations.

Which brings us to the current state of the market; it is highly likely a very few vendors will hold leverage akin to that enjoyed by Coventry back in the late 2000′s.  Managed care execs at insurers, TPAs, and large employers are apprehensive/concerned that this may well mark a return to the “bad old days.”

Tomorrow, ACOG will own the largest PPO, one of the largest bill review enterprises, the largest imaging, PT, DME/HHC network, case management vendor, and lots of other stuff. They will undoubtedly promote the benefits of one-stop shopping, data integration, leakage prevention, and consolidated IT interfaces, and streamlined vendor relations and billing, all of which, to the extent they are valid, are excellent selling points.

If I were them, I’d encourage customers to see the benefit of using ACOG, specifically using my dominant position to reward payers who bought all my services, and dis-incent payers thinking about using my competitors.  But that’s just me…

This isn’t bad or good, it is the nature of business.  And this approach worked very, very well a few years back – primarily because only one major customer - Broadspire – was ready and able to tell Coventry “no thanks” when informed about the price increase.

The rest, well, they had no other plan.

What does this mean for you?

You may want to think about a Plan B.  Just in case. 


The Apax-Coventry deal – implications aplenty

While it may be a bit premature, I’d suggest it is never too soon to being thinking thru the potential implications of a deal of this magnitude.  

Let’s do a very quick review of market changes, then jump into some detail on the network issue – we will look at other aspects in future posts.

The workers compensation medical management market is going through a period of rapid consolidation across all segments.  There are now five large PBMs; three years ago there were eight (plus two much smaller ones).  Bill review application companies now number four (mcmc, Medata, Mitchell, Xerox); four years ago there were eight.  (this does not include CorVel, it does not sell access to its application) There are now two PT firms; last year there were three.  The sector that has changed the most is IMEs; EXAM is now the biggest player, with its competitors far behind in terms of revenue and market share.  Similar consolidation has occurred in DME/HHC, transportation/translation, and other segments, and this will continue.

The work comp PPO landscape looks markedly different.

Coventry is still the big kahuna, but the gap between CWCS and competitors has narrowed considerably.  The expansion of other PPOS has been a major reason; Procura, Magnacare, Anthem, Prime, Rockport, MultiPlan are all bigger and have more share than they did a few years ago.  Other Blues plans have expanded into the comp network business (or expanded their existing WC PPO).

Simultaneously, Coventry’s PPO has weakened.  It has been increasingly difficult to get meaningful discounts from health systems and facilities, long the biggest driver of Coventry’s success.  That’s due to the consolidation of the provider marketplace and a lack of emphasis on WC on the part of Aetna (and pre-Aetna) provider contract negotiators.

For workers comp payers, big PPOs are the big “savings” driver, yet the biggest of the PPOs is losing its ability to deliver “savings” while its competitors are getting more competitive.

Way back in the day, Coventry used its leverage with the Federal Mail Handlers’ Program along with PPO HMO and Medicaid lives to negotiate discounts with providers – discount arrangements that included workers comp.  Recall total work comp spend is just about 1 percent of total US medical spend; governmental programs (Medicare and Medicaid) alone  are over a third of US health care costs.

While sources indicate Aetna has committed (not sure that is the right word, and may be too strong) to support the PPO re-contracting process for two years, this is one of those times where actions speak louder than words.  As noted yesterday, Aetna just inked a network deal with a relatively small health system in northern California which does NOT include work comp – but does cover medicaid, medicare, group, individual, and other health insurance.

More significantly, Geisinger and Aetna signed a major agreement earlier this summer that also excluded workers comp. Geisinger is the dominant health system in central PA; a very-well-regarded operation with a great reputation and outstanding quality (disclosure, I did a brief consulting stint there some years ago).

And this means…what?

By far the biggest contributor to CWCS’ value is the PPO.  It generates (or perhaps more accurately generated) at least $200 million in cash flow and provided Coventry with the leverage to get payers to use its PBM, case management, bill review and other services.  Clearly, that cash flow is, if not already significantly reduced, at some considerable risk.

That factor alone is why ALL the financial buyers I spoke with (several of the largest private equity (PE) firms) did not pursue the deal - they were very concerned about the long-term viability of Coventry’s PPO.  While the historical numbers looked good, none were convinced the PPO would continue to deliver those results going forward.

Without the market leverage and total commitment of Aetna, it is difficult to see how Coventry can maintain its lead over other work comp PPOs; its negotiating leverage with providers will be based on work comp, and work comp only.

APAX will pay something like $1.5 billion for Coventry’s work comp division.  I’m very sure it will have a very good communications plan, a well-developed strategy, and some talented and experienced people focused on this.  That’s all well and good, but – as other WC PPOs know very well – without the market leverage of a major national health plan, the real negotiating power will be on the other side of the table.

Aetna’s sale of Coventry – the deal is done

While it may not be closed, the deal is done.

Multiple sources indicated APAX is scheduled to close the purchase of Coventry Workers’ Comp a month from now.  The long-rumored sale will close October 1 – if everything goes according to plan.

Here are the details – at least as they’ve been relayed to me.

  • The sale includes all of Coventry’s work comp services division – PPO, bill review, Pharmacy Benefit Management, DME, IME, UR, case management, peer review, and the rest.
  • Aetna has “committed” to supporting the network for two years – don’t know what this means, how it will be measured, or what the guarantees are.
  • APAX is the purchaser.

A few related items worthy of consideration.

  • Coventry’s been working on an RFP for a new bill review system/strategic partner for some time.  No word on whether this will go forward or be mothballed, and I wouldn’t expect to hear anything until October.
  • Aetna recently announced they signed a 3 1/2 year contract with northern California’s Washington Hospital Healthcare System. The contract does NOT include workers’ comp – but does include every other payer type.
  • When the deal is done, APAX will own: the largest work comp PPO, imaging network, PT vendor, DME/Home health network, and case management provider; one of the largest PBMs; a major (but faltering) bill review operation; and a whole raft of ancillary businesses.

The implications of this transaction are rather dramatic. It puts control of many payers’ medical spend squarely in the hands of a private equity firm. (more on this here).

The news also refutes my (strongly-held) view that Aetna wouldn’t sell the business because it a) throws off so much free cash flow and b) can’t.  The latter is based on the premise that the network contracts will rapidly fall apart without Aetna’s combined medical spend as bargaining leverage.

Regarding the latter, we shall see.

What does this mean for you?

Opportunity for bill review firms and niche medical management providers.

A return to the days when Coventry owned the market.




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.

Good news is bad news – Medical cost inflation’s continued decline

Perhaps the biggest news to hit this summer is the decline in medical inflation.

Make no mistake, this is very, very important.

Important – as in huge decreases in the federal deficit.

Important – as in low-single-digit health premium increases.

Important – as in placing huge pressure on health care systems, hospitals, and other providers – because low premiums for employers equals less income for providers.

Here’s what the data shows.

Today, CBO projects the 2019 Medicare spend will be $95 billion less than it projected four years ago.  That’s equivalent to a fifth of the military budget.  Or the entire budget for welfare, Amtrak, and unemployment.

Over a decade, the reduction is about $700 billion.  According to a piece in the NYTimes (link above);

much of the recent reductions come from changes in behavior among doctors, nurses, hospitals and patients. Medicare beneficiaries are using fewer high-cost health care services than in the past — taking fewer brand-name drugs, for example, or spending less time in the hospital. The C.B.O.’s economists call these changes “technical changes,” and they dominate the downward revisions since 2010…[CBO analysts say] the economy is playing a negligible role in what’s happening in Medicare, meaning that they’re more confident that the practice of medicine really is changing. (emphasis added)

That’s all good, right?  The fiscal cliff is farther away, and not nearly so steep and scary as it was even a couple years ago.

Not so fast. One person’s savings is another one’s income.  In this case, that “other one” is the healthy care delivery system – doctors, pharmaceutical companies, hospitals, device companies, health systems.

Those stakeholders are adapting as fast as they can, and making great strides.  But a big part of that adaptation is revenue maximization – making darn sure they are getting as many dollars from every patient as possible.

What does this mean for you?

Pretty obvious, methinks…

Work comp claim reporting – why no data?

There’s very little publicly-accessible data about who reports work comp claims, via what channel.  We just finished up a brief project for a client interested in comparing their data to national benchmarks, and we found precious little data on the topic. It may be out there, but it sure is hard to find…

We know the sooner claims are reported the better; there’s some good research out there altho arguably the best – the Hartford study – is dated.  There is more info about the impact of delays in reporting on ultimate claim costs, which is certainly critical, but that’s “outcome” information.  What we don’t know is the “process” information – which helps payers understand where they stand and what they can and need to do to improve.

Payers need to know when and who and via what channel claims are reported, by type of payers, states, industries, employer sizes, class codes – if they want to set goals, figure out where to put their efforts, who to target.

In general, we learned that the vast majority of claims are reported by employers via phone.  Whilst many payers have web- or email-based reporting capabilities, these are rarely used.  Some have developed smartphone-based reporting, but with a couple exceptions (very large self-insured employers) very few claims come in via this channel.

What does this mean for you?

Should we do a Survey of Work Comp Claim Reporting?  I’m thinking this may be worthy of study; perhaps HSA should develop and conduct a quick study to gather some baseline intel on the current state of the industry.

If this makes sense to you, please say so in the comment section.






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!