MANAGING HIGH-COST CLAIMANTS
Develop health plan flexibility regardless of results of upcoming election
If Republican presidential candidate Donald Trump is elected in November, the Obama Administration’s healthcare reform is targeted for quick repeal. If Democratic presidential candidate Hillary Clinton wins, expect Obamacare expansion on the fast track early in the new administration.
In the meantime, what should employers and their agent and broker advisers do to cope with increasing costs and a need for more health plan flexibility? Some employers are already on track to continue to redesign their benefit programs in 2017 using existing laws, and experts say that driven employers are likely to respond faster to these issues than political leaders.
Costs continue to drive the need for innovation. In July the American Health Policy Institute, a Washington-based think tank established to examine the impact of health policy on large employers, published the results of a survey of 26 large employers about their health insurance claims data. The survey indicated that costs continue to increase, driven by a small but expensive group of high-cost claimants.
The claimant trends point to some potential remedies. Specifically, the survey revealed:
- About 1.2% of employees are high-cost claimants.
- The average high-cost claimant costs $122,382 a year.
- High-cost claimant spending accounts for 31% of total spending.
- High-cost claimants cost about 29 times the cost of average claimants.
- About 53% of costs are from chronic conditions and 47% from acute conditions.
“Employers, for their part, are increasingly developing innovative approaches to high-cost claimants and are in a unique position to establish programs that address this group,” according to the survey report. “These new approaches, coupled with the slowness of our political system to respond to cost challenges, make it probable that employers will be nimbler and faster in developing innovative programs to address high-cost claimants.”
The report cites several approaches, including better data mining to target chronic conditions, wellness programs with clinical direction, predictive biometric screenings, and care management programs that focus on the costs of certain conditions and medical procedures.
The report also noted that employers can encourage health plan participants to be more active with management of their own healthcare spending. “Lack of employee engagement is a frequent concern of chief human resource officers and their teams. Instead of simply providing enrollment materials and directing them to a website for self-enrollment, employers could offer individual education sessions to explain plan options in detail.”
Wellness initiatives also could influence high costs “if tailored correctly to the employee population and tied to specific clinical outcomes in a measurable way,” the report says.
But any measures need to be implemented with the political environment in mind. “Due to the unpredictability of American politics, it is more likely that key innovations will be coming from the employer side, but both sides need to look at these problems. Regardless of who becomes the next president or which party claims Congress, employer strategies need to be robust enough to be effective yet nimble enough to withstand regulatory scrutiny.”
Despite the political disputes over healthcare reform, many employers are working with their agents and brokers and continuing to use the existing law to respond to their business challenges.
In April, Teresa Franklin, director of rewards and employee benefits at Hallmark Cards, Inc., in Kansas City, Missouri, testified before the House of Representatives Committee on Education and the Workforce Subcommittee on Health, Employment, Labor and Pensions.
Representing the industry lobbying and legislative research organization, the American Benefits Council, she testified about healthcare innovation within the legal framework of healthcare reform and the long-standing Employee Retirement Income Security Act (ERISA).
She cited the ERISA federal preemption for eliminating regulatory conflict and the tax exclusions for employer-sponsored health coverage for providing an incentive for
Also citing a Willis Towers Watson trends survey, Franklin noted that four out of five employers are planning changes in their benefits programs to address increasing costs. Among the proposed changes are on-site or near-site health centers, wellness and disease management programs, telemedicine, and other remote access to health advice and private exchanges.
Regardless of who becomes the next president or which party claims Congress, employer strategies need to be robust enough to be effective yet nimble
“Although private exchanges can take many forms, they have generated significant interest and increasing engagement from employers,” she told Congress. “Employers today can choose from any number of combinations of health plan tools. The strength of the system is that employers can evaluate what works best from a business perspective and align their benefits offerings with their needs, as well as the needs of its particular workforce.”
Hallmark, Franklin noted in her testimony, implemented an Aon-administered private exchange in 2015 as a successor to a more traditional self-funded health plan that was the key health benefit plan for many years.
The private exchange plan, she said, allows employees to use employer-paid premium dollars to choose from among “a collection of high-value, fully-insured major medical plans and carriers.”
The plan has been well received, she said. “It has provided increased choices for employees and simplified plan design across carriers and has provided our employees with state-of-the-art decision-making tools.”
Hallmark provides a base pretax premium for all employees, and the exchange allows employees to allocate the premium to various levels of coverage. The company also maintains a separate set of wellness initiatives, including an on-site health services and incentives program.
Franklin advised legislators to continue the present ERISA preemption and tax code incentives for health benefits, and urged them to consider repeal of the 40% Cadillac Tax for high-cost plans, a bipartisan movement that may be on a reform agenda after the election.
In July, Starbucks Coffee Company in Seattle, already an industry leader in providing health benefits to part-time employees, announced a plan to expand its benefits for all U.S. employees. The company will shift workers to an online delivery platform for a private exchange administered by Aon.
Employees will be able to choose from as many as six regional and national health plans and five coverage levels based on their family budgets and choice of insurer. The company will continue to pay 70% of the premium and 100% of preventive care.
“Providing industry-leading benefits for eligible full- and part-time partners is a cornerstone of who we are as a company,” said Ron Crawford, Starbucks vice president of global benefits, in the program announcement. “Much like a travel site, our partners will be able to navigate an easy-to-use online platform to choose between more insurance carriers and coverage levels at more competitive prices to help them find the right plan for their own needs.”
Along with more options and cost savings, partners will have access to Healthcare Advocates, a team of individuals dedicated to working directly with partners year-round to help them choose and get the most out of their healthcare plans.
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.