Insight, analysis & opinion from Joe Paduda
Vince Kuraitis’ Health Wonk Review is just what you need to cure what ails ya!
A great snapshot of the best of the blogosphere is up and ready for your reading pleasure!
Don’t miss Julie Ferguson’s piece on the dangers of the nursing night shift – namely a significantly higher risk of premature death…
Well, that’s a relief. In a welcome display of bipartisanship, Congress passed and the President signed into law a six-year renewal of TRIA. Here’s how AIA described the key elements and changes to the program:
Under the six-year extension in the bill, starting in 2016, there will be phased-in increases to the program’s trigger (raising it from $100 million to $200 million in annual aggregate insured losses) and the insurer co-share (raising it from 15 percent to 20 percent). In addition, the bill phases in an increase in the aggregate amount of insured terrorism losses required to be borne by the private sector from the current $27.5 billion to $37.5 billion. Any use of taxpayer dollars to fund those losses would be recouped post-event.
I interviewed AIA Associate General Counsel and work comp expert Bruce Wood via email to get his take on the news.
MCM – What does this mean for workers’ comp?
Bruce – The extension of TRIA eliminates the uncertainty hovering over workers’ compensation insurers in providing coverage where the ultimate risk of loss is unascertainable because of the inability to exclude terrorism losses from workers’ compensation.
MCM – Some have criticized TRIA as unnecessary; can you speak to that?
Bruce – Some critics of TRIA have said not to worry, that employers would simply be written through residual markets. But, it is insurers who backstop the losses in residual markets. In a state with a state fund serving also as the market of last resort, the backstop is either the state’s taxpayers or the state guaranty fund. And, who backstops the guaranty funds? The same insurers.
The ultimate irony for those who have criticized an extension of TRIA because it puts the government at risk is that without TRIA, the government is at even greater risk, as all losses would end up being socialized.
MCM – What about large, self-insured employers?
Extending TRIA also is beneficial to employers self-insuring, because they will be able to secure sufficient excess coverage to remain self-insured. After 9-11, we saw some migration from the self-insurance market to the insured residual market because self-insured employers were unable to secure adequate excess coverage. These included here is Washington, high-profile risks such as the Washington Post and the Kennedy Center for the Performing Arts.
What does this mean for you?
Six years of certainty – at least about this exposure.
New health plans will go out of business. Long-time players will find themselves losing share and priced out of markets. Some Co-ops will be too aggressive and underprice coverage, and those that push it too far will be gone.
Others will focus on narrow networks, use their financial wherewithal to build systems and staff expertise, manage medical aggressively and carefully, build strong relationships with selected providers and deliver service that delights their members.
“Our whole strategy has been to invest heavily in medical management because at the end of the day, we can’t make money the way we used to, which is to conservatively underwrite this population…. Financial people [at large carriers often] don’t understand the difference that real care management can make. Conservative underwriting is how carriers have made big profits in the past.”[emphasis added] That’s a quote (subscription required) from the CEO of a New Mexico Co-op health plan, and I could not agree more.
The health insurance business is no longer one where success is driven by risk selection; it is now driven by medical management. Yet many legacy health plans have yet to fully embrace the new market dynamic, relying far too much on benefit design, variations of old-school underwriting and risk selection. Sure, they THINK they’re adapting and changing, but they aren’t moving fast or far enough.
Those who don’t understand what’s happening will blame “Obamacare”, not understanding that the Affordable Care Act is having precisely the effect it should; generating competition on a level playing field, rewarding innovation and aggressiveness, penalizing complacency and traditional approaches.
What does it mean for you?
It’s working.
It’s a delicious irony; academics at one of the nation’s top universities, averaging a cool $200k income, some of whom championed parts of health reform and PPACA, are whining about deductibles of $250, $20 copays for office visits, and out-of-pocket maximums of $1500 for individuals.
Oh, the tragedy!
Yes, part of the cost increase may be due to ACA requirements for dependent and preventive care coverage, the elimination of lifetime maximums, and a higher tax burden due to the Cadillac tax.
But these Cambridgians are merely experiencing higher insurance costs and more out-of-pocket costs – what the rest of us have dealt with for years.
What’s missing from the mass media’s reportage is any real understanding of two underlying concerns, concerns that are real, important, and significant.
First, requiring cost sharing does cause some reduction in necessary care. There’s no question about that. As reported in the NYT article; “Consumer cost-sharing is a blunt instrument,” Professor Rosenthal [of the Harvard School of Public Health] said. “It will save money, but we have strong evidence that when faced with high out-of-pocket costs, consumers make choices that do not appear to be in their best interests in terms of health.”
This is a valid concern, and one not getting near enough attention. Deductibles and copays have far outlived their utility; they discourage seeking needed and unnecessary care. And, once the member blows thru their out-of-pocket maximum, they don’t do anything to reduce unnecessary utilization. As a relatively few people incur most health care costs, we need a far smarter approach than these crude cost dis-incentives.
Second, costs are high in large part because employees’ health care choices are very broad. Again, the NYT: “Harvard employees want access to everything,” said Dr. Barbara J. McNeil, the head of the health care policy department at Harvard Medical School and a member of the benefits committee. “They don’t want to be restricted in what institutions they can get care from.”
And therein lies the rub. Smaller, narrow expert networks deliver better outcomes for lower cost.
What does this mean for you?
I’d expect much better approaches will emerge soon. Especially now that the real world has invaded the Halls of Academe.
The first week back from a couple of pretty slow weeks is always hectic – here’s a brief recap of what happened while we all were working.
The big news in the comp world is Congress passed the TRIA extension. The President will certainly sign it, and we all can relax just a bit. The six-year extension, which passed with overwhelming support in both Houses, includes a higher deductible and lower Federal cost-share in each of the next five years. The result will be more risk especially for smaller insurers who have less ability to cover potential claims from a major incident.
That said, the 9/11 attacks were just about the worst-case scenario, and the industry was able to absorb the financial hit without too much difficulty.
actually, that wasn’t the biggest news.
That was yet another announcement that the employment market is accelerating ; a quarter-million MORE jobs were added last month, lowering the unemployment rate to 5.6 percent. That bodes well for the insurance industry; the recent evidence that wages are improving is more good news. Consumers’ energy costs down are dramatically, effectively increasing the average person’s annual wages by about $1000.
Expect consumer spending to increase; if moves to reduce the cost of housing bear fruit, that will help the construction and durable goods industries as well.
Here’s hoping our politicians don’t screw this up…
Thanks to Rob McCarthy for the heads-up on an op-ed piece by Ezekiel Emanuel recommending we skip that annual physical – they cost billions but there’s little evidence they have a positive impact on health or cost. Here’s the conundrum; from a societal perspective Dr Emanuel’s prescription makes sense, but as individuals we make decisions based on our own perceptions of risk and value...
A devastating piece about what it’s really like to be poor is making the viral rounds. If you have ever blamed someone for being poor, having “too many kids” by “too many fathers”, for not using Medicaid or a free clinic, for smoking or not doing anything else you think they shouldn’t do, and not doing the things they should, read it. The whole thing. As one who is guilty far too often of these judgments, it was a virtual ice bucket in the face.
I’ve decided to split my predictions into work comp stuff (where I do most of my work) and health care stuff not directly related to work comp. Here’s my health care predictions…
1. Health care cost inflation will remain low. After five years of growth at or below 4 percent, health care costs remain relatively stable at 17.4 percent of GDP. It is possible that health care costs for 2014 will come in below that benchmark due to increasing productivity and stable health care costs. In the interest of setting a metric, I’ll predict costs remain at 17.4% of GDP…
2. ACA will be less of a story. The healthcare.gov website appears to be working well – at least on the front (enrollment/consumer) end. Work on the back end (communications with internal governmental programs and agencies, financial links, and ties to health plans) continues but seems to be proceeding apace. We’ll base evaluation on the volume of news stories this year vs 2014.
3. Employer take-up of health insurance will remain stable; if it drops it won’t do so by more than a percentage point. Despite the hysteria from ACA opponents claiming employers would drop insurance en masse, it hasn’t happened. And it won’t.
4. Expect 11 million plus enrolled via the Exchanges this year (federal and state). Initial enrollment in late 2013 was strong in key states, and the outreach efforts are paying off.
5. More ACOs will close down or suspend operations, while others will grow and expand. Net is we will see more lives covered via ACO-type models. For those of us old enough to remember the halcyon days of HMOs this is hardly surprising. The number of HMOs reached 640+ in the late eighties before market forces led to consolidation via merger/acquisition, failure of some, and expansion of the successful ones into new markets. This is how it works – a decreasing number of ACOs is not an indication that the model doesn’t work.
6. More hospitals will close as the reduction in Medicare and private pay reimbursement hits those unable to adapt. While there will be pain in affected local communities, this is inevitable as a sixth of our economy goes thru restructuring. It happened in the oil industry in Pennsylvania in the 1940s, shipbuilding in the 1960s, textiles, clothing, clothing, furniture, automobiles…
7. More doctors will work for very large multi-specialty groups and health systems. Currently about three-fifths of physicians are employed; expect that to bump up by a couple percent.
8. Care extenders will get more care authority. This is going to be contentious, at times nasty, politically charged. It is also inevitable. PTs can do a lot of things orthopods currently do; nurse practitioners are already delivering a lot of primary care, and nurse midwives are increasing their scope of practice in many areas.
9. Specialty drugs will continue their meteoric rise in cost and prevalence. I know, an easy one, but absolutely worthy of note as they will become an even larger portion of medical spend, forcing payers and policymakers to make some very hard decisions about coverage.
10. Ebola will disappear from American mass media. If it’s not here, we don’t care, and it won’t be here. Yet another example of the American public and American media’s obsession with really bad things only when they directly affect us.
Once again I’ll head out on a limb with saw firmly in hand…
1. Aetna will NOT be able to sell the Coventry work comp services division. I’ll double down on last year’s prediction: even if the giant health plan wants to dump work comp, the network – which is where all the profit is – isn’t sellable. The rest of the operation isn’t worth much; the bill review business continues to deteriorate (and CWCS is looking for a replacement BR application) , competitors are picking off key staff, and customers continue to switch out services and network states.
2. Work comp premiums will grow nicely, driven by continued improvement in employment and gradually increasing wages coupled with increases in premium rates in key states (we’re talking about you, California).
3. Additional research will be published showing just how costly, ill-advised, and expensive physician dispensing of drugs to workers’ comp patients is. Following on the excellent work done by CWCI and Accident Fund/Johns Hopkins, we can expect to learn more about the damage done to patients, employers, insurers, and taxpayers by docs looking to Hoover dollars out of employers’ pocketbooks.
4. Expect more mergers and acquisitions; there will be several $250 million+ transactions in the work comp services space, with more deals won by private equity firms. Of late, most transactions have been “strategics” where one company buys another; the financials of these have been such that private equity firms couldn’t match the prices paid.
I’d expect that will change somewhat in 2015 as “platform” companies come on the market.
5. A bill renewing TRIA will be passed; the new GOP majorities want to show they can “govern” and this has bipartisan support.
6. Liberty Mutual will continue to de-emphasize workers’ comp. The company’s continued focus on personal lines and property and liability coverage stands in stark contrast to the changes in work comp. The sale of Summit, management shifts, and the financial structuring of legacy work comp claims portend more change to come. Recent financial results show the wisdom of this strategy…
7. After a pretty busy 2014, regulators will be even more active on the medical management front. Work comp regulators in several more states will adopt drug formularies and/or allow payers/PBMs to more tightly restrict the use of Scheduled drugs via evidence-based medical guidelines and utilization review. While the former is easy, the latter is better, as it enables payers and PBMs to more precisely focus their clinical management on the individual patient.
Expect more restrictions on physician dispensing and compounding, increased adoption of medical guidelines and UR, along with incremental changes in several key states (California we hope) to “fix” past reform efforts.
8. There will be at least two new work comp medical management companies with significant mindshare by the end of 2015. These firms, pretty much unknown today, are going to be broadly known amongst decision-makers within the year. While they will not generate much revenue this year, they will be attracting a lot of attention.
9. Outcomes-based networks will continue to produce much heat and little real activity. After predicting for years that small, expert-physician networks will gain significant share, I’m throwing in the virtual towel. There’s just too much money being made by managed care firms, insurers, and TPAs on today’s percentage-of-savings, huge generalist network/bill review business model. Yes, there will be press releases and articles and speeches; No, there won’t be more than a very few real implementations.
10. Medical marijuana will be a non-event. Amidst all the discussion of medical marijuana among workers’ comp professionals, there’s very few (as in no) documented instances of prescribing/dispensing of marijuana for comp claimants. Yes, there will likely be a few breathless reports about specific claims, but just a few. And yes, there may also be a few instances of individuals under the influence of medical marijuana incurring work comp claims, but these will be few indeed.
There you have it – here’s hoping I’m more prescient this year than I was last.
Anne Searcy MD passed away recently.
Dr Searcy had held various key roles in California’s work comp system; Medical Director, practitioner, regulator, program administrator.
By all accounts, Dr Searcy was a terrific physician, committed to the care of her patients she treated and the ones she touched in her myriad roles. A close friend described her as a “wonderful woman, a real giant and decent person. Definitely one of the good ones.”
A presentation she gave back in 2011 provides a bit of insight into her approach to medical care for workers’ comp claimants, one that is measured, careful, and focused on quality of care.
I never had the opportunity to get to know Dr Searcy outside of a couple of brief encounters. My loss.
Her passing reminds us all that there are many people striving every day to do the right thing for the right reasons. They aren’t looking to make millions on the back of the work comp system selling too many drugs or doing too many surgeries; over-charging for services or undercounting employees. They just figure out what needs to be done and go about doing it.
Before jumping into my predictions for 2015, I thought it would be helpful to review my previous prognostications. Here’s how I did, color-coded for your grading ease:
1. Overall, the work comp insurance market will be steady.
Yep; rates were up just slightly, coverage availability is fine, and there are no crises. Then again, this wasn’t a very risky “prediction”.
2. More consolidation in the TPA market is on the horizon.
True again; York acquired Bickmore, American Claims Services, MCMC and CareWorks. Sedgwick bought Absentys and VeriClaim. However, GB, Broadspire, ACE stood pat.
What’s notable about these transactions is most do NOT involve buying another TPA, but rather complementary services. Non-core services may be more profitable and offer more growth potential over the near term…
3. Medical trend – on a paid, not incurred basis – will increase by at least a couple of points.
Trend on an incurred accident year basis was up 3 points; this is not paid as I’m having a heckuva time finding paid data. Anyone? Till then, I’ll leave this as a TBD.
4. Deal activity for mid-sized to large transactions in the work comp services sector will taper off.
Well...not correct. Xerox-ISG, PMSI-Progressive Medical, APAX-Genex, Onex’ purchase of York, Hellman Friedman’s sale of Sedgwick to KKR…
5. At least one – and likely more – insurers will discover the real impact of opioids on their claims costs, and the impact will affect their reserves, rating, and/or financial stability.
If they did, they haven’t published it, so that’s a no.
6. Aetna will not sell its work comp business.
True. And I don’t think it will.
7. Someone is going to buy Stratacare.
True again. I thought it might be Mitchell, but KKR was the winning bidder.
8. Frequency will level off – somewhat.
This is a “no” as well – lost time claim frequency declined slightly – by about 2 points according to NCCI.
9. Guidelines are going to get a lot more attention – and more regulatory support.
Most certainly – and most welcome. A quick scan identified new or updated guidelines in multiple states: opioid guidelines from Oregon and California; various treatments and body parts addressed by Colorado; non-acute pain in NY; scheduled drugs in OK; chronic pain, TBI, and CPRS in Montana and I’m sure there are lots more.
10. The train wreck that is senior management at the North Dakota State Fund will continue to demonstrate the perils of politically-driven leadership.
Alas, yes. With the resignation of well-regarded Medical Director Dr. Luis Vilella this summer after too much meddling by his nominal superiors, the ongoing leadership deficit has damaged the state fund’s IT, management, and now medical functions.
So, six correct, three wrong, and one TBD.
Ouch.
Is up and available for your downloading pleasure here.
Among the highlights are the following…
The report contains a host of statistics, data, and insights from the respondents, along with perspective gained from doing the survey for over a decade.
Happy reading!