Blog Archive

2013
Spousal Carve Out Still An Option

2012
Need to provide medical coverage to everyone over 30 hours? Maybe not.

Why Are Your Highest Paid Employees Paying the Least Amount for Their Benefits?

Turn Health Care Into A Competitive Advantage - Not a strategic threat

Hope Is Not A Strategy

Feds Can’t Force Medicaid Expansion – Good or Bad News for Employers?

The way of business: Adapt or Die

Dealing with the Effects of PPACA

Surprising Popularity of an Unlikely Benefit

Health Care Reform: Let's Not Wait and See

Dependent Audit Case Studies, after PPACA

Fact or Fiction? Health Care Reform Eliminates the Need for Dependent Eligibility Verification

Who can say if PPACA changed benefits for the better?

A Quiet Revolution

Verifying Working Spouse Policies

Why do 45% of those who turn to the individual market not buy?

Will Spousal Surcharges and Exclusions stick around after 2014?

Increasing the Adoption Rate of an HDHP

It may be accessible, but is it useful?

Median vs. Mean in Health Care Expenditures

The Indexing Implications of the 2012 Federal Poverty Level Guidelines

All Dependent Eligibility Audits Are Not Created Equal

Client Quote

The C-Suite Engaging HR

Insights on the Uninsured in the Workplace

Health Care Wisdom for Your Business

Research, articles and commentary on Health Care Reform and intersecting aspects of business benefits from ContinuousHealth. ContinuousHealth specializes in technology solutions for insurance needs, sold through an exclusive network of brokers and consultants.

Spousal Carve Out Still An Option

You might remember reading our May 2012 newsletter on whether or not spousal carve out would be allowed after 2014.  At the time, we were unsure how spousal carve outs would be affected and our debate was centered around two main points: The PPACA requirement that coverage must be offered to all employees and their dependents and the fact that legislative intent does not mandate how the final law is interpreted. Now that we now the PPACA definition of “dependent” specifically excludes spouses, disallowing or charging extra for spouses who have access elsewhere is a good way to make sure employers can continue to offer compensation by way of rich benefits right now.

There are several different options for employers looking to save benefit dollars by implementing some type of spousal carve out.
·    Spousal surcharge – employees are charged a fee each pay period when they choose to enroll a spouse that has access to group coverage from their own employer
·   Spousal Exclusion with a monetary limit – spouses can enroll in coverage only if their own employer sponsored coverage is more expensive
·    Spousal Exclusion – spouses can enroll in coverage if they are unemployed or they do not have access to group coverage from their own employer

As you may expect (and have probably already noticed) more and more employers are choosing to implement one of the options above.  Once an employer decides which type of spousal carve out will best fit their needs, the next question becomes “how do we ensure compliance?” Without a full documentation verification (including a Spousal Affidavit signed by the Spouses Employer AND page one and two of a redacted Tax Return), studies suggest that only 44% of employees will “tell the truth” and comply with the new policy.

Over our five year history of verifying dependent eligibility for employers, we have dozens of working spouse verifications under our belt—we may have even verified a plan for one of your clients. Here, you’ll find three client case studies outlining some best practices and significant learnings. 

Client A: Spousal Surcharge

Operational Goal:

To implement new spousal surcharge as cost saving option in the wake of health care reform.

Business Challenge

As a brand new auto-manufacturing plant, Client A had a benefit program that was appropriately rich for its industry but significantly better than the majority of other employers in the region. Client A wanted to set the stage as a caring and responsible company in the way it treats its employees without becoming the default insurer for the area.

Implementation:

Client A determined that it would offer coverage to working spouses with a spousal surcharge. Spouses with access elsewhere who enroll in Client A’s coverage must pay $46 per pay period, which served to push spouses toward their own coverage while still offering the option to be on the client’s plan if the spouse’s employer plan was more expensive.

Spouses can have coverage withouta surcharge if…

·         they are not employed.
·         they are also employed by Client A
·         they don’t have access to medical benefits at their employer.

Verification:

ContinuousHealth’s DA2dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software.
A spousal affidavit included in each audit packet required sign off from the employee, the spouse and the spouse’s employer. That reduces the likelihood of confusion or fraud, since the spouse’s employer is answering questions about current coverage rather than the spouse. ContinuousHealth also suggested requiring the second page of the tax return to generate more accurate representation of spouse unemployment/employment status.

Results:

As a fully-insured plan, cost savings are greatest when ineligible dependents resulted in tier changes.
        21.8% of those who were in EE+ Spouse tier changed to EE Only
        14% of those in EE+ Children changed to EE Only
        5.3% of those in Family moved to EE Only

       With those tier changes, Client A saw extended savings of $635,000, in addition to any increased plan dollars from the spousal surcharge. After the success of the project, the client decided to integrate the ContinuousHealth software to verify both dependent eligibility and spousal exclusion in-house. This ensured HIPAA-compliance and streamlined the enrollment process.



Client B: Spousal Exclusion with Monetary Limit

Operational Goal:

To implement a spousal exclusion in order to continue to offer an affordable and rich benefits plan.

Business Challenge:

As a well-respected leader in the grain industry, Client B is very focused on providing just business practices, including having a compliant plan, and on treating employees well.

Implementation:

Client B’s consultant walked the client through best options and they decided to offer coverage for working spouses if the employer’s coverage was more expensive than being on Client B’s plan. This would apply only to traditional major medical coverage, which also serves to encourage adoption of the new consumer plan.

Spouses can have coverage if…

·         they don’t have access to major medical at their employer.
·      they have access, but the least expensive single plan offered costs the spouse more than $190 per month.
·         they are also employed by Client B.
·         they are unemployed.
·         they are on secondary coverage and are enrolled in their own employer’s coverage with no contributions to an HSA.

Verification:

ContinuousHealth’s DA2 dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s signature and proprietary technology notes all results.

Results:

The audit identified 9.2% of dependents on group plan as ineligible for coverage, a first year savings of $658, 000. That represents 3.8% of Client B’s total annual budget for health care. Spousal verification identified that 11.3% of spouses are only eligible for secondary coverage and about 8% are only eligible for dental and vision, based on the response of the spouses’ employers.
Rather than burdening Human Resources with the project after the initial verification ended, Client B decided to continue using ContinuousHealth to verify dependent eligibility and spousal exclusion. Ongoing costs are minimal compared to an initial project, and the transition to ongoing was seamless.



Client C: Spousal Exclusion with Employer Premium Percentage Limit

Operational Goal:

To find a third party solution for current spousal exclusion practices.

Business Challenge:

The Architecture and Planning company had tried to do a dependent verification last year with a well-known audit company, but Client C had been displeased

Implementation:

Client C had a policy in place that offered coverage for working spouses only if the employer portion of spouse’s premium was low.
Spouses can have coverage if…

        they are not employed.
        they don’t have access to group coverage at their employer.
   they have access, but the spouse’s employer’s group plan requires that the spouse contribute more than 50% of total annual premium.

Verification:

ContinuousHealth’s DA2 dependent verification. Client C was interested in feedback about ContinuousHealth’s responsiveness and educate/assist approach, something it had not found in the last firm. The process would identify ineligible dependents while streamlining the current working spouse verification. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s sign off.

Results:

The audit identified 7.70% of dependents on the group plan as ineligible for coverage. Despite the recent verification with the other audit company, 4.4% of the dependents were self-identified as ineligible once the plan requirements were outlined to them with the offer of amnesty. Employees opted out 8.4% of the spouses on the plan after reviewing the spousal carve out requirement, even though these were known requirements that had been in effect for over one year.
After the success of the project, Client C decided to continue using ContinuousHealth to verify both dependent eligibility and spousal exclusion on an ongoing basis.

If you’re working to implement a working spouse policy for one of your clients, let us know if we can help. We would love to talk through the options with you and help you serve your client through that transition.

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

6/14/2013 10:27:27 AM

Need to provide medical coverage to everyone over 30 hours? Maybe not.


Who is a full-time employee? The answer might be worth millions of dollars.


On August 31, regulators issued long awaited guidance for employers on who must be treated as a full-time employee under the employer responsibility provisions of the Affordable Care Act. With over 700 employers on our CHROME Compass Platform, we are able to provide an initial assessment of the impact of this guidance on employers in various industries. The bottom line? At first blush, it appears that these regulations continue the trend of being "employer friendly". The mandated expansion of coverage to all employees above 30 hours a week has been the single largest budget issue for employers. This is especially true in multi-site retail, hospitality, staffing, and non-union manufacturing. The Look Back\Stability Safe Harbor outlined in the latest regulations potentially provides a means for employers to mitigate the costly effects of expanding coverage through at least the end of 2014. Like so many other things in the ACA however, navigating the most successful strategies to accomplish a particular outcome may be more complex than they appear.  In the same way that we have proven "Play or Pay" analysis to be an overly simplistic and largely unhelpful approach, a simplistic view of this latest regulation may leave employers with a strategy that is sub optimized (or even inconsistent) with their human resources and compensation strategies for segments of their population. Our Certified CHROME Compass Consultants are uniquely positioned to help their clients and prospects take advantage of the nuances created by this latest regulation. Let's take a brief look at several of the issues and definitions that create potential opportunity for many Employers for whom expanding coverage creates a budgetary challenge.
The regulation introduces several new definitions which will necessarily cause employers to thoughtfully reconsider their eligibility guidelines. In a nutshell, the regulations allow the employer to establish a Standard Measurement Period during which they will evaluate whether or not the Variable Hour Employee worked, on average, more than 30 hours a week. The Standard Measurement Period can be not less than three months or not greater than 12 months. If it is determined during the Standard Measurement Period that the employee worked more than 30 hours a week they must be eligible for medical benefits (or the employer is subject to a penalty). Furthermore, they must be offered benefits for the entire length of a Stability Period that is at least six months but not less than the total length of the Standard Measurement Period regardless of the average number of hours they work during this subsequent period. If they don't work more than an average of 30 hours a week during the Standard Measurement Period, then they can be excluded for coverage during the length of the associated Stability Period without the Employer being subject to a penalty – even if the employee enrolls in subsidized coverage in the Public Exchange during this period. Confused yet? Additionally, the employer has the ability to insert an Administrative Period that may neither reduce nor lengthen the Standard Measurement Period or the Stability Period. This Administrative Period can be up to 90 days.  The rules are slightly different for ongoing employees and newly hired employees after January 1, 2014.

Now that we have this guidance, what should an employer do? As we have continued to say since the passage of Health Care Reform, there is no single right or wrong answer. Rather, there are a number of viable strategies to implementing this provision, which need to be evaluated in light of the actual makeup of the employer's workforce and their human resources and budget objectives. Of particular interest to human resources executives will be the desire to balance between administrative simplicity and cost optimization. At least one of our CHROME Clients has already observed that they are likely to adopt a simplistic approach primarily driven by the fact that their existing benefits administration technology is not capable of tracking these issues.  But is the simplest answer the most correct answer? In what we feel is a departure from the apparently "one-size-fits-all" spirit and intent of the Affordable Care Act, this latest regulation allows the employer to use Measurement Periods and Stability Periods that differ either in length or in their starting and ending dates for different categories of employees. While the allowed categories are limited, it is interesting that one of the categories allows an employer to have different rules for employees of different entities or employees that are located in different states. Based upon our initial analysis with several existing CHROME Compass employers, we believe this provision creates some "opportunity" for employers to customize their eligibility guidelines to more specifically meet their human resources and cost objectives. The degree of customization will necessarily increase administrative complexity but the trade-off may be well worth the effort.  We have been making the observation for quite some time that Health Care Reform will place new requirements on employers’ benefits administration platforms, this regulation appears to highlight some of those new requirements.

What actions do employers need to take now? First of all, not all employers have a "Fair Access Index" exposure. Said another way, many employers are already offering coverage to all employees who work more than 30 hours a week. Over half (54.8%) of the employers on the CHROME Compass platform offer acceptable coverage to all of their employees above 30 hours. But for employers who don't, this regulation suggests some immediate analysis, and perhaps some changes in 2013, may be warranted.
The analysis begins by applying a dynamic computer model to hour and wage data for all likely variable hourly and seasonal employees over a 24 month period. Because ongoing employees and new hires can be treated differently, the model must perform analysis that segregates the current employee population by hire date. The dynamic model then illustrates the impact of different length measurement periods and stability periods for each population.  Because of the ability to analyze the employee data in separate categories, consultants also need  the ability to analyze the information to determine whether different periods by employee category might be worth the increased administrative complexity. Depending on the outcome of the analysis, it may be prudent for the employer to make some tactical changes in the way they classify employees in 2013, in order to better reinforce the position they would like to take of the Variable Hour Employees on January 1, 2014.

One of the critical definitions outlined in the regulation is for Variable Hour Employees. "For the purposes of this notice, a new employee is a variable hour employee if, based on the facts and circumstances at the start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week.  A new employee who is expected to work initially at least 30 hours per week may be a variable hour employee if, based on the facts and circumstances at the start date, the period of employment at more than 30 hours per week is reasonably expected to be of limited duration and it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week over the initial measurement ."  How does the employer currently refer to job classes that are likely to fit into the Variable Hour Employee definition? Does their current treatment reinforce the employer taking the desired position with regard to the facts and circumstances and the reasonable expectation that these employees will not work over 30 hours over the course of the initial measurement? How will typical employee turnover affect this analysis? What changes need to be made to recruitment materials, employee handbooks, and management training?

As we move closer to January 1, 2014, there will continue to be a series of regulations that we expect will be much like this one. They will provide much-needed clarification around the legislative mandates created by the Affordable Care Act. While these regulations may be complex, we believe they will also create opportunities for leading employers to pragmatically apply them to specifically meet their human resources and budget objectives. A consultant that has laid the groundwork in regards to the conceptual framework and issues brought on by ACA, supported by dynamic financial modeling, will be in the best position to guide their clients’ decision-making over these next 12 months. As always, ContinuousHealth is here to help. We are grateful for the opportunity to deploy our analytic tools across a wide variety of employer environments. Our Certified CHROME Compass Consultants continue to challenge us to provide the most relevant and useful planning platform available. We plan to continue to work tirelessly to be up to this challenge. 


This article was first featured in the September 19th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

9/20/2012 9:00:11 AM

Why Are Your Highest Paid Employees Paying the Least Amount for Their Benefits?



How ACA Turns the Current System on Its Ear


Today, everyone who has employer-provided insurance is receiving a federal tax subsidy. You don’t often think of employee benefits that way, but it’s true. Employers get to exclude their contributions as a business expense under IRC §105, §106, and §162. The employees get to deduct their portion of the premium from their wages pre-tax under IRC §125, reducing their FICA liability. Employers also see a matching benefit under FICA when employees deduct pretax, even not-for-profit employers, who typically don’t get the benefit of deducting benefits as a business expense because their marginal tax rate is zero.

This current system of federal tax subsidy towards employer provided insurance is a significant incentive for employers to allocate a portion of employee compensation in the form of benefits, especially contributions towards medical plans. Because of the current tax system, a dollar of compensation paid in the form of benefits is worth more than a dollar. It is worth more than a dollar for the employer and it is worth more than a dollar for the employee.

Most employers have a single contribution structure for all wage classes. This contribution strategy creates a regressive tax situation. The highest income individuals receive the greatest benefit, because they have the highest marginal tax rates. As a result, your highest paid employees are paying the least amount for their benefits.

    Let’s look at an actual employer on our CHROME Compass platform:


In this example the employee contribution for Employee Only coverage is $150 a month ($1,800 annually). A single employee at 100% of the Federal Poverty Line (roughly $11,000) , would pay $1,460 for that coverage after we account for the benefit of pre-tax deduction. A single employee at 600% of the Federal Poverty Line (roughly $67,000) would pay $1,316 after-tax for the same exact coverage. That’s a benefit of $144 – almost a full month’s contribution.
    
The effects are magnified when we look at family coverage. For the same employer plan, the Family coverage contribution is $480 a month ($5,760 annually). An employee with a spouse and two kids at 100% of the Federal Poverty Line (roughly $23,000) would pay $4,667 for that family coverage, after-tax. An employee with a spouse and two kids at 600% of the Federal Poverty Line (roughly $138,000) would pay $4,283 after-tax for the same exact coverage. That’s a benefit of $384.

Currently, individual health insurance does not receive tax favorable treatment; ACA created a system of tax favorability for the individual insurance market. It took this current system, which disproportionately favors higher income individuals, and flipped it on its ear. In 2014, when the largest of the provisions under Health Care Reform take place, there will be a new system of federal tax subsidy towards insurance. The new system will be available to those with household incomes below 400% of the Federal Poverty Line ($44,680 for a single and $92,200 for a family of four today) as long as they meet certain eligibility criteria.

Those eligible employees will receive subsidy in two forms. Premium Credits that will limit the amount they pay for their health insurance and Cost-Sharing Subsidies that will cover some of the out-of-pocket expenses not covered by the health insurance plan. This new system operates on a sliding scale with those at 100% of the Federal Poverty Line, the lowest wage individuals, receiving the greatest benefit.

So, the compelling question is, “so what?” If your clients are in this situation, do they care? Did they do this on purpose or, when presented with this data, are they interested in pursuing a different strategy. We have often said that health care reform presents the greatest opportunity in our lifetimes to get employers to think differently about how they allocate compensation toward benefits. For Certified CHROME Compass Brokers and Consultants, this outcome presents a tremendous opportunity to keep current clients loyal and attract new clients. While some competitors are just now figuring out how to run a rudimentary “play or pay” analysis, CHROME Certified Brokers and Consultants are helping their clients craft intentional strategies that are aligned with their corporate objectives and values.  The journey has just begun.


This article was first featured in the July 17th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

8/28/2012 9:28:00 AM

Turn Health Care Into A Competitive Advantage - Not a strategic threat


As many of you know, CHROME Compass is our proprietary modeling and planning platform providing a strategic framework for employers to understand and evaluate the impact that health care reform will have on their group health plans. In technology terms, it’s a crowd-sourced tool:  every consultant we work with, every ERISA attorney or benefits specialist we engage, introduces new and useful components to the tool. As a result, this predictive health care reform modeling tool is the best in the market. You know this, because many of you have had us analyze your clients’ plans. For those of you who have not yet gotten the chance to work with the CHROME Compass tool, continue reading for a case study that highlights the technology’s capabilities.

Current Direction

A certain de-identified company has 1,203 employees who work more than 30 hours per week, with current benefits eligibility beginning at 32 hours per week. They have 940 employees participating in their single plan, with 140 waiving coverage and 123 ineligible. They have a BCBS PPO plan that is fully insured and considered non-grandfathered. An initial review with the Compass tool revealed that their total plan cost is less than the national average while their employee contributions are higher, especially on family coverage.

Compass Heading

The CHROME Compass pointed the way to a three-year strategy to address plan savings and requirements of health care legislation. CHROME Compass recommended gradually adjusting the actuarial value of the plan to the mandated 60% by 2014, which would reduce possible adverse selection among employees eligible for subsidies. Compass also suggested offering excepted benefits as a way to enhance the overall compensation value despite a decrease in the major medical. They had already added voluntary benefits and employer-paid basic life in 2010, plus long-term disability for the higher paid in 2011. Strategies for “fair” employee access include creating coverage provisions for spouses who have access to other benefits, conducting full documentation verification for dependents added to the plan and moving to eligibility management integration with vendors to reduce theerror (and fiscal consequences) of manual eligibility management.

Results

·         Health care budget reduced by 33%/3 years
·         21% Employer/Employee combined savings

In this case, CHROME Compass points to a three
year plan that has potential to reduce the employee
benefits budget by 33% for the employer. Employer
and employee savings combined represent 21%
savings.

The Compass-optimized plan for 2014 would save this company over $1 million dollars compared to maintaining their current plan and nearly $3.5 million compared to terminating.

Competitive Advantage

ContinuousHealth and our CHROME Compass  are here to help turn health care into a competitive advantage for your clients rather than a strategic threat.

Contact us today for more information about this powerful tool:

    Jennifer Riley: (678) 335-0448 
    Rachael Foster: (678) 397-0071

or email: chrome@continuoushealth.com



This article was first featured in the July 17th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

8/23/2012 10:00:06 AM

Hope Is Not A Strategy


It appears as though last month’s SCOTUS decision has not quieted the talk about how we shouldn’t plan for the implementation of PPACA. How are your clients responding to the latest “strategy”? Read on for our thoughts.

 Stay out of the hypothetical and move forward with the tactical


An article in the Sunday issue of the New York Times caused me to reflect on my childhood. Now, I know I’m dating myself, but my earliest education about the legislative process can be traced to Schoolhouse Rock, those catchy ditties interspersed between Saturday cartoons.

I'm just a bill.
Yes, I'm only a bill.
And I'm sitting here on Capitol Hill.
Well, it's a long, long journey
To the capital city.
It's a long, long wait
While I'm sitting in committee,
But I know I'll be a law someday.
At least I hope and pray that I will,
But today I am still just a bill.

The title of the article was, “New Health Law Battle: Insurance Exchanges”. It appears as though last month’s SCOTUS decision has not quieted the talk about how we shouldn’t plan for the implementation of PPACA, because the major reforms planned for 2014 aren’t likely to happen. The current legal challenge will be whether individuals buying coverage on the federal exchanges will be eligible for subsidies. It appears as though the drafters of the legislation made another goof (remember the omission of the severability clause) by explicitly stating that subsidies will be provided to residents of a state to help defray the cost of health plans offered “through an exchange established by the state.”

The opponents of PPACA are articulating a strategy that goes like this: Republican governors should stonewall and not establish state-based exchanges, because, while it is true that PPACA calls for a federal exchange, the drafters did not outline a provision for subsidies on this exchange. Without subsidies, there are no triggers for employer penalties. Without employer penalties, employers won’t have to offer acceptable and affordablecoverage to all employees over 30 hours a week, and therefore the “job-killing” aspects of PPACA will be avoided. Conclusion? Employers don’t have to prepare for the implementation of PPACA, because it will never happen.

Hypothetical Strategies

This is where my modified civics lesson comes in: a bill becomes a law. Regulators interpret lawsto write regulations, which can either be enforced or ignored. Executive orders can trump all.

The media likes to spend a lot of time talking about what could happen in the never-ending battle over health care reform. As consultants on the front line of helping real-world employers design benefits plans that are affordable, sustainable and attractive enough to meet human resources objectives of a specific firm, you can’t spend too much time on the hypothetical. You need to focus on the most likely scenarios and position your clients appropriately.

As my Dad likes to say (and he wasn’t the first), “Hope is not a strategy.”

Real Solutions

With over 600 employers on our CHROME Compass platform, we see that the overwhelming employer trend is to deal with health care inflation through cost-shifting, while simultaneously attempting to curb consumption through consumer-directed plan designs. (Some critics would say these strategies are redundant.) Offer rates aren’t declining, but take up rates are – especially by low-wage individuals. This trend is creating adverse selection among low-wage populations. Employers with large low-wage populations are challenged to avoid this adverse selection either by limiting eligibility (a strategy made illegal by PPACA) or by lowering employee contributions to “buy” more employees into their plans. Depending upon their starting point, however, the latter strategy consumes even more of the already scarce compensation dollars.

These employers need creative new strategies, not the “hope” offered by the latest scenario of how PPACA will be overturned or never implemented. To not move forward is to maintain the status quo, and the status quo is a continued erosion of the employer-sponsored health insurance system that will put increasing pressure on employers, employees and their consultants. There will be no winners in this game.

Fortunately for us at ContinuousHealth, many of you are aggressively attacking the status quo through optimization strategies. You’re implementing several cost reduction programs (e.g. dependent eligibility audits) and making changes to the overall benefit plan design, including decreased emphasis on major medical and increased emphasis on excepted benefits (like the CH Complete Card) to control medical costs while driving increased employee satisfaction. We will continue to work with you to design new products and services that support your tactical endeavors.

Helping your clients focus on business while pundits focus on political wrangling may be the most challenging task of all.

Eric Helman
678.397.0070


This article was first featured in the July 10th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.



8/21/2012 9:29:00 AM

Feds Can’t Force Medicaid Expansion – Good or Bad News for Employers?

As many of you know, we try our best to be apolitical when it comes to interpretation of various legal and regulatory updates. There are plenty of other outlets for that. We are focused on the impact on employers and their employees. So when the most significant new development created by the SCOTUS decision centers around Medicaid expansion, we immediately analyzed the potential impact on employers.  Let’s walk through the ruling and the potential outcomes and what it means to you and your clients.

While I was personally surprised with the SCOTUS outcome (and impressed by the nuanced maneuvering around the Commerce Clause issue), I want to focus on the “new” stuff we must now consider because of the ruling. Specifically, will states opt in to the expanded definition of Medicaid? And if they don’t, how will employers in those states be impacted?
In a bit of a surprise, the majority opinion, authored by Chief Justice Roberts, found the Medicaid expansion to be constitutional in part and unconstitutional in part. The opinion upheld Congress’s right to stipulate the conditions under which federal funds are used by states; however, the opinion also found the threat of a state losing all of its existing Medicaid funding if it elected not to participate in the expansion to be unduly coercive. Consequently, the decision maintains the expansion of Medicaid provided for under PPACA as optional to all states, by prohibiting the Secretary of Health and Human Services from discontinuing funds for existing Medicaid programs for those states that choose not to participate in the expansion.

So, what does this mean?

Well, this means that the twenty-six states that brought suit gained a partial victory: they won’t lose any existing funding if they choose not to participate in the expansion. Elected officials for many states have already issued statements regarding the ruling. The governor of Washington, one of the 26 plaintiffs that brought suit, has indicated that her state most likely will participate.

This, however, does not necessarily mean that all twenty-six will choose to participate. Lieutenant Governor Tate Reeves has expressed serious doubt about Mississippi’s likelihood of opting to expand Medicaid. "An expanded Medicaid program would add almost 400,000 new enrollees and cost the state an estimated $1.7 billion over the next ten years. Mississippi taxpayers simply cannot afford that cost, so our state is not inclined to drastically expand Medicaid.” Nebraska Governor Dave Heineman also expressed concerns about the impact the Medicaid expansion would have on other state programs, calling the expansion “unfunded.” As of the date of this newsletter, other participating states, such as Idaho, have not yet released statements regarding the decision. Just yesterday, Rick Scott from Florida said they won’t expand while certain Republican members of the legislature said they would. I guess we are in store for some more wrangling over the next several months.

But back to the point - how will this affect employers?

In states that elect to expand Medicaid eligibility, all individuals with household incomes below 138% of the federal poverty line (FPL) are eligible to receive coverage through Medicaid. When they enroll in this coverage, employers are not penalized.

In states that elect not to expand eligibility, all individuals between 100% and 138% FPL would be eligible for premium tax credits and out-of-pocket subsidies at the Exchange if the employer’s coverage is deemed unacceptable or unaffordable. If an individual receives a tax credit, their applicable employer will be subject to the $3,000 tack-hammer penalty.

So, by not expanding Medicaid eligibility, a state may be increasing the potential liability for their employers. This will especially be true for businesses with lower wage part-time employees such as retail and hospitality.

How will this affect you?

States now find themselves in a tenuous situation where, if they choose not to expand eligibility, the lowest income working adults will not have access to affordable insurance, and employers in that state will potentially be subject to higher penalty. For the first 3 years, the eligibility expansion is 100% federally funded, tapering off to 90% by 2020; however, the federal funding is for coverage only and does not extend to increased administrative costs. The administrative burden of handling the new potentially eligible Medicaid recipients can prove costly, as expressed above by Mississippi Lieutenant Governor Tate Reeves.

In short, while the Supreme Court’s decision provided some clarity around the fate of PPACA, it also raises many questions and increases the likelihood of future changes. We anticipate that most states will develop projections to examine the impact of both expanding and opting out, as either decision carries significant impact. Based on those decisions (*Opportunity Alert*), employers will look to their brokers for guidance and strategy. As you would expect, we have already modified our CHROME Compass platform to model the various scenarios and the impact on employers.  Over the next couple of months we’ll discuss strategy and outcomes in more detail.





This article was first featured in the July 3rd edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.



8/16/2012 9:38:00 AM

The way of business: Adapt or Die

A few months ago, the Wall Street Journal published an article detailing the potential consequences of health care reform. Over the past three years, there’s been a slowdown in spending here, and economists initially thought this may show the effects of health care reform as a cost savings. The Centers for Medicare and Medicaid Services just released a study showing that the legislation would, in fact, probably cause an increase in health spending starting in 2014. After that initial peak, the study predicted the rate would drop but still grow at a higher rate than we’ve seen recently. The thing is, we don’t really agree. Read on to see if you think we’re right.

The actual numbers make the reasons for the drop clearer: current spending has averaged about 4% annual growth for the past three years and is predicted to continue for the next two. In 2014, spending is expected to jump to 7.4% annual growth due to the market flood of participants gaining coverage through government-subsidized insurance plans or Medicaid. Health care cost increases would then level off in 2015 to about 6.2% for the next several years.
The increased spending is attributed to an escalation in routine doctors’ visits, prescriptions, and administrative costs. The article does point out that only 0.1% of the growth would be attributed to new portions of the law, and that most of the issue comes from the increased number of people in the market, particularly aging baby boomers.

The thing is, we don’t really agree.
Businesses have always found a way to circumvent any classic logarithmic equation that would result in increased costs.

Currently, benefits are intrinsically linked to compensation, so, to maintain competitive advantage in hiring, companies must offer competitive benefits. But if health spending goes up, then benefits will change in the private sector. The article even hints at this, though it fails to connect to the future effects—it points out that the reduced spending we’re seeing right now is partially because “employers have trimmed insurance since the U.S. first fell into a recession.”
That is the way of business. Adapt or die.

More aging baby boomers on the plan? Try a working spouse policy—either spousal carve out or surcharge would offset some increased costs. Or a dependent verification, which ensures that the employer isn’t paying for the extra costs of ex-spouses or any other ineligible dependents.
Escalation in doctors’ visits? Implement high deductible plans. They turn employees into consumers, giving them awareness of the costs associated with unnecessary visits. Or include telemedicine as an additional offering, driving down urgent care and emergency visits at the same time.

You see our point. Businesses are adaptable, and they will find a way to not have a 7.3% increase. In fact, you’re probably walking your clients and prospects through some cost saving options right now.
What we can all agree on, though, is that the government probably won’t move so fast.




This article was first featured in the June 26th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.




8/14/2012 9:35:00 AM

Dealing with the Effects of PPACA


We think it’s pretty important to stay on the forefront of the research, and we like it even more when the research parallels what we’re finding in our day to day work with your clients. Last week, the International Foundation of Employee Benefit Plans (IFEBP) released results from the third survey in a series dealing with the effects of PPACA on single employer plans. The responding 968 employers were asked questions about the actions they’ve already taken and anticipate taking in the next two years as a result of PPACA. We reviewed the results and would like to share some of our insights.

Eliminating Coverage


A key finding was that only 1% of respondents stated they will definitely not provide coverage to all full-time employees in 2014, with 95.3% at least somewhat likely to continue to offer coverage. This is a dramatic shift from the 30-50% of employers likely to drop coverage reported in the June 2011 McKinsey Quarterly and more consistent with what we’ve seen from the over 600 employers on our CHROME Compass platform.

Doing the footwork


Curiously, employers have shifted their view on offering benefits coverage but many have not conducted an analysis on the impact of health care reform on their organization. The findings in the survey are somewhat conflicting with a reported 47.2% of respondents stating they “have conducted an analysis on how health care reform legislation will impact their health care plan costs,” but only 24.9% of respondents stating they “have modeled the impact of reform on our organization.”

Regardless, even in a best case scenario, slightly more than half of all employers have done nothing to anticipate the impact of health care reform. 

Nearly 70% of respondents expect increased benefits costs in 2012 due to health care reform, and even more interestingly, “those reporting their organizations had analyzed costs are slightly less likely to predict a cost increase”. In other words, slightly more than two thirds of employers surveyed are expecting a cost increase, but those expecting an increase are more likely to have not conducted a cost analysis. Perhaps this is because, in our experience, if employers do the math at a very granular level, they gain insights about health care reform that might actually allow them to lower their health benefits costs. Employers who have not done the analysis are influenced by the political debate instead of the facts as they apply to their particular situation.

Anticipating the Costs


Also consistent with what we have seen, respondents are already making changes to deal with increased costs, either thru increased contributions or plan design changes, and if they haven’t, they are planning to do so in the next two years.

The most popular strategy currently in use is increasing participant premium contributions (23.1% of employers). In the next two years, the most popular strategy employers plan on using is increasing contributions for dependent coverages (20.1%).

Despite the popularity, or perhaps because of it, we do issue a caveat on that strategy alone: PPACA has provided employers with new benchmarks as to what is considered “affordable” contributions. With somewhere between only 24% and 47% of employers having conducted an analysis, some of these employers may be making shifts blind to the impact it will have on their plans in 2014. While their decision to increase contributions may be the correct strategy, if they have not conducted the analysis, they might not fully appreciate the implications in light of the affordability benchmarks of PPACA.

Extending coverage to adult children (up to age 26) was identified as the top cost driver by 38.7% of respondents, more than any other one driver. Three major carriers recently stated that, regardless of the Supreme Court’s decision, they will continue to allow coverage for adult children, putting pressure on employers to continue to offer this popular and costly benefit to their employees.

Employers are also taking other measures to contain costs such as plan audits or analyses, with the most popular tactic being dependent-eligibility audits. Of the employers surveyed, 18.7% had already conducted a dependent audit and 14.7% are planning on conducting one in the next two years. These findings are consistent with the growth in dependent audits we have seen at ContinuousHealth:  100% growth year over year in initial audits, and nearly 200% growth in ongoing audits since PPACA. As we mentioned a few weeks ago, contrary to the pervasive belief that PPACA has decreased the need for dependent audits, we’ve seen average rate of ineligibles grow from 6.5% to 7.99%. Survey results seem to indicate that employers see this continued need as well.

Proactive, not Reactive


Based upon the current law, the major changes established in health care reform will take place in 2014, but employers have to make changes to their benefit plans now as a response to continuing price increases in excess of inflation. For most employers, there are still two open enrollments left before the bulk of the changes become effective. This survey highlights the fact that the majority of employers are making tactical decisions about their benefit plans without informed analysis regarding the single greatest external event to affect employee benefits in our lifetimes.

As Mark Bertolini (CEO of Aetna) said recently in a Wall Street Journal interview, PPACA has provided a catalyst to change the conversation around employee benefits. While not all employers will specifically change their strategies based upon healthcare reform, feedback from our clients leads us to believe enough employers will make adjustments. These adjustments are likely to influence the overall marketplace.  We believe the employers who “sit this one out” will be at a disadvantage as they attempt to align their investment in employee benefits with their recruitment and retention programs.


This article was first featured in the June 19th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.



8/9/2012 9:29:00 AM

Surprising Popularity of an Unlikely Benefit

We have to be honest with you. It’s time to come clean.

Despite all the research on the employee satisfaction with pet discount programs… Despite all the positive feedback we received about it…we were still hesitant to offer the CH Complete Card with PetAssure.
We were attracted to the other options instead: to the telemedicine and its logical reward for employers; the travel assist and its appealing offerings; and the fitness club discounts in this age of wellness programs. But pet health care? This seemed frivolous.

Today, let us tell you about how we were wrong, and our experience with this unlikely benefit’s surprising popularity.

Honesty.

It’s been nearly a year since we first rolled out our CH Complete Card with its telemedicine, health club markdowns, and either travel assistance or pet care discounts. The motivations to offer the other non-insurance benefits on the Card were obvious—telemedicine, for example, is proven to decrease both physician visits and non-emergency ER visits by up to 65%. But why pet care discounts? Do employers and employees really recognize pet care as a compensation perk?

Honestly, we weren’t certain of that answer when we were first assembling this product.Despite all the research on employee satisfaction with pet discount programs and despite all the positive feedback we received about it, we were hesitant to offer the CH Complete Card with PetAssure. In fact, we built the Card with an interchangeable option, so that clients can utilize either PetAssure or travel assistance in conjunction with telemedicine and fitness club discounts.

To reference what we’re reading, though, sometimes, in order to see true value, you have to move away from traditional quantitative marketing tools and toward anthropological observation of real employee behavior.

What convinced us

While pet health care discounts may not always appeal to us (or to some C-suite), our consultants have seen it become an instant hit with employees. Sometimes what executives want is not exactly what employees want. These initial client HR teams understood what we failed to immediately recognize: pet health care discounts generate high employee satisfaction at a very low cost.

Plus, any of our lingering doubts were easily put to rest by the quantitative data, which is substantial enough to break down even the strongest C-level argument against it. One of our consultant partners, as you may remember from an earlier newsletter, used the CH Complete Card to drive his client’s conversion to a high deductible plan—using the Card, the enrollment for the HDHP had tripled its enrollment for the previous year and reduced overall health care costs by one percent (even after adding the new employer-paid Card).

A few months after we began offering the CH Complete Card with PetAssure, the Wall Street Journal ran an article titled, “The Dog Maxed Out My Credit Card.” The article highlighted the rise of pet health care costs (rising 47% over ten years for dogs and 73% over ten years for cats… nearly the same rate as human health care costs), as well as some of the new options that individuals have to get pet insurance or discount programs in order to cover those rising costs. Noted in the article was PetAssure, the very program that we had previously debated including in our Card!

Then, a few weeks ago, Employee Benefit Adviser ran a feature of pet discount programs and how they are being utilized by brokers as an additional voluntary offering. Again, it was PetAssure. We don’t offer PetAssure as a standalone option, and, by now, the product had proven itself to us, but it was gratifying to see it highlighted here again: one consultant in the article went so far as to say, “From the producer's standpoint, once you’re in the door, you can talk about anything. [PetAssure] may be the best door opener that we've ever had."

That WSJ article notes, “When asked how much they’d spend to save their pet’s life, 70% of owners said, ‘any amount,’ according to a 2006 survey of VPI policyholders.” What both EBA and the Journal outlined was the conclusion we had already reached: employees want this offering, and they will view this with high satisfaction as a form of compensation on par with other quality voluntary benefits.

Serving you

Since we offer innovative solutions for group benefits, we built the CH Complete Card after looking at it from every angle. The payoff for employers is big, since the Card is an inexpensive new benefit that drives cost savings, but the incentive for employees is big, too. It’s big enough to offset some of the reductions in employers’ major medical programs. It’s big enough to effectively drive engagement of consumer plans, as many of you, our consultant partners, are doing. It’s big enough to get your foot in the door when you’re prospecting for a new client. Big. The reward for our consultants is even more obvious—employee satisfaction equals client satisfaction, and the Card’s low-cost features ease the implementation of other benefit plan strategies.

According to the American Pet Products Association’s 2009-10 National Pet Owners Survey, 62 percent of U.S. households own a pet, which equates to 71.4 million homes. The survey indicated that $12.79 billion is spent annually on veterinary care alone.

So when we tell you we offer a product that bundles telemedicine, fitness club discounts, and pet health care discounts… will you please not laugh? We understand: we laughed once, too. But a Card that offers reductions in claims cost along with features that guarantee high satisfaction levels for employees with minimal cost to the employer—well, that is no laughing matter.

And if you are still laughing, at least check out the travel assistance option instead.



This article was first featured in the June 12th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.



8/7/2012 9:27:00 AM

Health Care Reform: Let's Not Wait and See


A March Wall Street Journal Article, “Health-Care Law’s Many Unknown Side Effects,” quotes Paul Keckley, the head of the Deloitte Center for Health Solutions, as saying, “If my competitor drops benefits, I’d want to be out the door just behind them.”

Would your clients agree? Where do they stand with changes that health care reform will bring? Are they planning to make changes once you let them know what other companies are doing, post factum? Are they approaching health reform by watching their competitors? Monkey see, monkey do?

We’ve been stewing ever since we read that March article, which closed with a completely unhelpful warning:
“Beware the facile, confident prediction about what the health-care law will yield. Nobody really knows.”
That line goes against everything we believe about competitive strategy. The health care law has significantly altered the structures and incentives which influence employer benefit plans. The primary tools of reform – where people get their coverage and how much money the federal government subsidizes – are going to be with us for the long haul. As one of your clients recently commented, “I cannot be 100% certain where the cost of cotton is going to be in twelve months either, but it doesn’t keep me from critically looking at different cost models and determining how our strategy should change.” 

The macro trends which have affected employer plans over the past 10 years (excessive inflation, changing tax policy, and changing importance of alternative markets) were with us before health care reform and will be with us regardless of the outcome of the election. Doug Elmendorf of the Congressional Budget Office stated, as he testified before Congress in March 2011, “Many of the effects of the legislation may not be felt for several years, because it will take time for workers and employers to recognize and to adapt to the new incentives.”

Our argument is that leading employers will not be the last to know. If they are, they will no longer be leading employers. We believe that health care reform provides the single greatest opportunity in our lifetime for businesses to rethink how they allocate compensation toward benefits. Leading brokers and consultants are talking to their clients (and prospects) about how they can turn benefits into a competitive advantage, instead of a competitive threat. Cost containment and risk management strategies are still important, but understanding the underlying strategic levers that have been highlighted in the latest reforms provides “real” differentiation. 

So do what we’re doing: counter the “facile, confident predictions” with the arduous but profound work of scenario-based modeling. Get strategic plans in place for each of your clients, because our argument is true for you, too: leading consultants will not be the last to respond to health care reform, and if they are, they will no longer be leading consultants.

Eric Helman



This article was first featured in the June 5th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services






8/2/2012 9:20:00 AM

Dependent Audit Case Studies, after PPACA

Client A is a small company in transportation and manufacturing.  Anticipating the changes required after 9/23, Client Amodified its policy into a non-grandfathered plan with extended child eligibility to 26 at their 9/1/2010 plan renewal, in advance of the PPACA requirement.  At the time of verification, the company had been following the Age 26 rule for four months.  As a small company that had already implemented the health care reform changes, leadership expected to see low ineligible dependent numbers.  Instead, the Dependent Eligibility Verification found that 14.5% of dependents on the plan were ineligible.

Client B is a large retail chain with mostly white collar employees in a low-income tax bracket.  Its plan renewal was 2/1/11, and under its Ongoing Verification procedures, the company began verifying for the new health care reform categories in mid-January.  Client B implemented a grandfathered policy with an Adult Child Exclusion policy:  if an adult child was eligible for coverage under his or her own employer’s policy, that dependent was not eligible for the policy of Client B.  Open Enrollment numbers showed a 20% increase of enrollees to the policy, which fit with its expectations for the 2011 year. 

The big surprise, though, was the upswing of ineligibles:  during the original verification, between October 2009 and January 2010, the ContinuousHealth Dependent Eligibility Verification Audit found that 1,851, or 16.56%, of Client B’s 11,175 dependents enrolled were ineligible; during the first four months following the implementation of PPACA regulations, the ContinuousHealth ongoing dependent eligibility verification audit found 549, or 30.57%, of the 1,796 newly enrolled dependents to be ineligible for the new policy. This number was nearly double the findings of the original project, when the eligibility criteria were more stringent. Throughout the whole 2011 year, ineligible numbers came down, but were still considerably higher than the findings of the initial project, as between January and December 2011, ContinuousHealth identified that 26.84% of dependents did not meet the requirements to verify their eligibility for the plan. With the change in plan requirements under PPACA, Client B regularly found an increased rate of ineligibility by between ten and fourteen percent.

Client C is a major automotive manufacturing company with a non-grandfathered plan and a February plan renewal.  The company began verifying for new categories in mid-February.  Prior to health care reform provisions, the Dependent Eligibility Verification Audit identified 10.55% of enrolled dependents as ineligible. 

After enacting the Age 26 requirement and removing a residential requirement for stepchildren, the Ongoing Dependent Eligibility Verification found that 27.91% of new enrollees were ineligible during the first four months of PPACA.  For the 2011 year, Continuoushealth identified 24.1% of dependents on the plan were ineligible for coverage, a slight drop from the first few months.  Overall, Client C has found an increase of more than double the rate of ineligibles since PPACA.

Client D is a large hospital management system with 15 localized hospitals.  The management system did a Dependent Eligibility Verification Audit in 2010, prior to implementing health care reform at their July 1, 2011 plan renewal, with 13 of its 15 hospitals. The two hospitals who did not participate initially were both located in Massachusetts and were excluded because they were covered under “RomneyCare,” a set of provisions that representatives of President Obama have cited as a model for PPACA[1]and which have been called an “ObamaCare preview.”[2]

After the leadership team reviewed the results from the initial verification, the two hospitals in Massachusetts decided to undergo a ContinuousHealth Dependent Eligibility Verification Audit as well. The results were comparable with their non-Massachusetts counterparts:  the original verification found 10.1% ineligibles for hospitals that were not yet subject to PPACA; one Massachusetts hospital discovered that 6.34% of dependents were ineligible and the other found 9.64% of dependents were ineligible under the current plan guidelines.[3]

After the first plan renewal for the entire system under PPACA (7/1/2011), leadership requested that all hospitals undergo another dependent eligibility review.  The hospitals all had similar plan eligibility, all non-grandfathered with no spousal exclusions or surcharges. During that post-PPACA review in fall of 2011, ContinuousHealth identified 21.01% of the active dependents on the plan were unable to satisfy eligibility requirements. Specifically, the two hospitals in Massachusetts each found 10.29% and 16.19% ineligible during the second review. All hospitals saw an increase in ineligible dependents. The post-PPACA verification savings for Client D totaled more than $5 million in claims cost reduction. 

Client E is a national restaurant chain with hourly and salaried employees throughout the US. At the time of review, Client E had been following PPACA guidelines for 12 months. The Human Resources team systematically requested documentation for any new enrollees, but the client had not done full documentation verification. ContinuousHealth identified 6.08% of the plan participants were ineligible for coverage under the non-grandfathered plan guidelines. Ineligible dependents were primarily over the age of 18 years old and may have been added on the plan as “spouses” or “adult children,” though they were, in fact, unable to verify their eligibility as such.

 






Client A
Client B
Client C
Client D
Client E
Industry
Transportation / Manufacturing
National Retail Chain
Automotive Manufacturing
Hospital Management System - 15 hospitals
National Restaurant Chain
# Dependents
350
11,000+
3,500
17,000+
1,300
Grandfathered or Non-Grandfathered
Non-grandfathered
Grandfathered: 
Adult Children eligible for own employers’ plans were ineligible
Non-grandfathered
Non-Grandfathered;
2 Hospitals under “RomneyCare”
Non-Grandfathered
First Plan Renewal
9/1/2011, but implemented on 9/1/2010;
Age 26 compliant for 4 months at verification start
2/1/2011;
started verifying for HCR in mid-January
2/2011;
started verifying for HCR in mid-February
7/1/2011
1/1/2011
Results
14.5% of dependents were ineligible, far higher than leadership expected
·  20% increase in Open Enrollment numbers

·  Original project in 2009-2010 found 16.56% of 11,175 dependents were ineligible

·  First 4 months of PPACA showed that 30.57% of the 1,796 newly enrolled were ineligible

·  2011 showed that 26.84% of the 2,724 newly enrolled were ineligible
·  Original DEVA found 10.55% of enrolled were ineligible

·  Post-HCR DEVA found 27.91% of new enrollees were ineligible

·  2011 showed 24.1% of the 1,229 newly enrolled were ineligible

·  Initial project:  10.1% ineligibles

·  2 “Romneycare” hospitals excluded from initial verification did a DEVA after seeing other 13 hospitals’ results

·  Results were comparable: RomneyCare project:  6.34% ineligibles in one and 9.64% in the other

·  Post-PPACA found 21.01% ineligible overall
·  Identified 6.08% of active dependents were ineligible
Financial Exposure Reduction
Over $184,960
·  Original project:  $4,995,000
·  First 4 months of PPACA: $1,482,300
·  2011 verification: $1,462,000 (with a decrease in claims cost)
·  Original project:  $1,114,345

·  First 4 months of PPACA: $1,500,442

·  2011: $929,144
Total savings:  $4,165,246
Total savings:  $262,833


[1]Carol E. Lee, “White House Again Jabs Romney on Health Law,” Washington Wire, Wall Street Journal, http://blogs.wsj.com/washwire/2011/05/13/white-house-again-jabs-romney-on-health-law, (May 17, 2011).
[2]“National Health Preview:  RomneyCare’s bad outcomes keep coming,” Wall Street Journal, http://online.wsj.com/article/SB10001424052748703864204576313370527615288.html?KEYWORDS=national+health+preview+romneycare, (May 10, 2011).
[3]The hospitals from the original verification were also not doing document checks, while the two Massachusetts hospitals believed their employee document records were up to date, checking student status as well as IRS dependency, per their SPD.

7/31/2012 9:15:00 AM

Fact or Fiction? Health Care Reform Eliminates the Need for Dependent Eligibility Verification

Last week, I was on the phone with one of our broker partners from the Midwest and he made a comment along the lines of “with health care reform, a lot of the appeal of dependent eligibility verification projects was taken away.” Well, at the risk of being argumentative, I shared with him the results of our post health care reform study* that showed, rather convincingly, that dependent verification projects are more valuable than ever.

Since that study was produced, our total number of audits conducted has grown to over 1,100. We have completed twice as many audits this year as last and the number of clients signing up for our Ongoing Dependent Eligibility Verification Services has risen above 70%. Moreover, we are now executing projects where the client has already conducted an internal audit (or used another firm) and are seeing significant savings. Dependent eligibility audits remain one of the only ways to take 3-5% out of health care expenses without any changes to the plan or contribution strategy. Brokers across the country are using this “weapon” as a way to win new business.
I think you owe it to yourself to do a top to bottom evaluation of your current book to be sure you have gotten them to seriously consider doing a project. And, if you are prospecting during this summer season, incorporate dependent eligibility verification into each sales presentation. Read on to review a reprise of our article on how the rate of ineligible dependents has increased from 6.5% to 7.99% with the passage of healthcare reform. 

*Report originally published on the Employee Benefit Advisor blog and November’s print issue of Employee Benefit Advisor magazine.

Rate of Ineligible Dependents Increases to 7.99% with health care reform


One of the first changes brought on by health care reform was the mandatory extension of health plan eligibility to adult children up to age 26 without regard to student status or other dependency upon the employee. Many experts predicted that the rate of ineligible dependents would decrease after this provision took effect and lower the effectiveness of Dependent Verification Projects.

Based upon a study my firm did in the fall comparing similar populations before and after the implementation of this provision, we can now conclusively state that the experts were wrong. The rate of ineligible dependents in the health plans analyzed in this study post health care reform has actually increased by approximately 1.5 percentage points.

Expectations prior to health care reform


When health care reform passed, many experts analyzed the data coming from dependent eligibility verification projects in order to predict the effect of health care reform on the efficacy of these projects. Using our data as an example, prior to health care reform in a sample set of over 113,000 dependents verified, 48% of the ineligible dependents were under age 20, 23% of the ineligible dependents were between the ages of 20 and 26 (the typical ages of full-time students), and 29% of the ineligible dependents were over age 26. Further investigation showed that half (11.5%) of ineligible dependents in the 20-26 age range were ineligible because they failed the “relationship” test. These wouldn’t be eligible for coverage regardless of their age.

It seemed reasonable to assume that with the dependent age limit increased to 26, about half of those who had been previously identified as ineligible dependents would now pass eligibility verification. The other half would still fail the relationship test and remain ineligible. Our own data led me to agree with the experts’ expectation of health care reform—that the average rate of ineligible dependents post health care reform would drop from 6.5% to 5.75% (a reduction of 11.5%).

That reduction, while significant, would have only partially mitigated the strong business case for an employer to conduct a dependent eligibility audit. There would be some employers, though, who anticipated falling at the lower end of the 5-12% average range of ineligible dependents. This 11.5% reduction may have been enough to discourage them from the project.

The real effects of health care reform


The fact is, our research since the passage of PPACA has proven that the opposite is true.  Using a statistically significant sample of recent audits conducted by ContinuousHealth, we’ve found that the average percentage of ineligible dependents has actually increased to 7.99% after implementation of the Affordable Care Act. 
A 19% increase!
Additionally, we’ve seen a shift in the ages of ineligible dependents. Our sample set had 10% fewer ineligibles under the age of 20 and about the same number of ineligibles between the age of 20 and 26. Ineligible dependents over the age of 26 grew by 11%.

What conclusions can we draw from increased ineligible numbers?


Certainly there were other factors in place during the time period studied.

Part of this shift could be a result of the continued softness in the employment environment. This affects the percentage of dual-earner households and contributes to the rate at which employees might attempt to have non-spouses or other adults added to their plan who lack access to coverage due to unemployment.

The publicity surrounding eligibility changes has been less than precise, even two years later. There is more potential that employees will attempt to enroll dependents that do not meet eligibility criteria. A person the employee calls “family” needs coverage (perhaps due to the softness of the market), and the employee therefore thinks he can cover them on “family” coverage.

With all of that, verification methods have been eradicated for most companies. For 70% or more of employers prior to health care reform, the only dependent verification procedure was full-time student status checks conducted annually or biannually by the health care plan administrator. PPACA’s changes eliminated the only stopgap against ineligible dependents.

A necessary response


Regardless of the root causes for this increase in ineligible dependent rate, I think the call to action is clear.

For years, we’ve seen that unless employers are making arrangements to verify dependent eligibility with a thorough process that includes both eligibility education and document verification, there are going to be ineligible dependents on every group plan, gratuitously driving up the cost of health care.

In fact, I’d say that the need is greater than ever to make sure ineligible dependents aren’t covered. The changes brought on by health care reform allow even more dependents to be eligible, so covering an ineligible dependent has a more significant exposure risk than ever.  With the prohibition on rescissions in PPACA, the financial exposure lands on the employer for ineligible dependents, since employers must prove employee fraud before exposure for high claims could be passed on.

I want your clients to be protected from the financial and compliance exposure of ineligible dependents, especially since that rate increased by 1.5% since implementing the provision. On top of all that, I’ll remind you again that dependent verification is a cost saving solution that regularly reduce plan expenses by 3-5% with no change in carriers or plan design. Our return on investment guarantee makes it a no-lose situation.  I think you owe it to yourself to do a top to bottom evaluation of your current book to be sure you have gotten them to seriously consider doing a project. And, if you are prospecting during this summer season, incorporate dependent eligibility verification into each sales presentation.

As you face a mid-market renewal season, propose a Dependent Verification Project with ContinuousHealth. It’ll be worth it.
If you’d like a copy of the original article or the case studies detailing report specifics, email directions@continuoushealth.com.




This article was first featured in the May 29th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services


7/26/2012 9:12:00 AM

Who can say if PPACA changed benefits for the better?

Employer-sponsored health insurance market has been eroding subtly and gradually over the past decade. Most employers have noticed the downward spiral in their plans, but they’ve been unable to effectively identify or counteract the issues. Changes to the health insurance market have been (and will continue to be) inevitable, regardless of the decision on health care reform. But many of your clients are now modeling one to three year strategies for their plans, using predictive modeling tools like our CHROME Compass.  These tools that were created as a response to health care reform, but they are also revolutionizing the way that employers see compensation.

Health care reform has changed the way everyone thinks about benefits programs… regardless of the decision.  Hear us out, and let us know if you agree.

While many in the employee benefits business are taking a “wait and see” attitude toward the Supreme Court deliberations and inevitable announcement in late June, others are taking a fresh look at their benefits program in light of the new opportunities and incentives created by health care reform. Is this a waste of time or are they gaining valuable insights leading to strategies that may increase their competitive advantages in their total employee rewards program? Won’t the game change entirely if health care reform is overturned?

Employer-sponsored health insurance was eroding long before health care reform


The rising cost of health insurance over the last ten years has significantly changed where people receive their coverage, how much they pay for it, and how much protection the benefit provides. Let’s start with a brief look at where people are receiving their coverage and how this has changed over the past decade. 

From 1999 to 2010, according to information from the U.S. Census, the number of people in the U.S. grew 10.6%. Surprisingly, the number of individuals who accessed health insurance at their employer dropped by 4.7%. Now, before you jump to a conclusion about changing demographics and the aging population, consider that when we look at the same data for the non-elderly (<65) population, we see an overall growth rate of 10.8% but a reduction in employer-sponsored health insurance of 5.7%. While the overall growth rate is within .2%, the reduction in the number of non-elderly individuals who accessed health insurance at their employer is greater by 1%.

Older people are staying on their employer plans longer. This is surprising, especially in light of the significant migration in benefits away from retiree health programs during this same time period.  Unfortunately, the corollary is that younger employees must be leaving their employers’ plans at a disproportionately high rate, accelerating the impact of rising health care costs on employer plans.

The second conclusion you might want to explore is whether the most recent recession and the reduction in employment is a major contributor to this erosion. Here again, the data says otherwise. Using the same period from 1999 to 2010, the Bureau of Labor Statistics reports the number of employed Americans actually grew from 133.5 million to 138.9 million (4.1%). While this obviously did not keep pace with population growth, it was still positive growth and does not explain the sharp reduction in employer-sponsored coverage over this time period.   

So, if people are leaving employer-based coverage, where are they going?

The answer, in terms of percentage growth from highest to lowest, is Medicaid (+78%), military (+51%), uninsured (+32%) and Medicare (+20%).

And remember, this is without health care reform. 

The erosion of the employer sponsored health insurance market has been both subtle and gradual. For this reason, most employers have been unable to effectively identify or counteract this downward spiral in their plans. Changes to the health insurance market have been (and will continue to be) inevitable as long as the growth in cost outpaces overall growth rates.

Enter health care reform.


In the words of Doug Elmendorf from the Congressional Budget Office, “Many of the effects of the legislation may not be felt for several years, because it will take time for workers and employers to recognize and to adapt to the new incentives.” Employers who were drawn to model the impact of the dramatic reform changes are not only better prepared for health care reform, but they have also gained insights into the erosion they have been experiencing over the past ten years. 

Health care reform changes the mandated eligibility requirements in three of the five health insurance markets (Medicare, employer and individual) while at the same time significantly changing the tax structure in all three of these markets. Among other things, health care reform attempts to reduce the number of uninsured people in this country by offering new opportunities and incentives which affect three existing markets. Health care reform mandates expanded eligibility for both Medicaid and the employer markets. The individual market, too, is significantly reformed with the elimination of medical underwriting and, for the first time ever, significant tax subsidies for individual premiums are equal to or greater than those available in the employer market. 

By analyzing the potential impacts of these accelerated market shifts brought on by health care reform, employers are gaining valuable insights into what has been happening to their plans for the past 10 years. Whether health care reform is overturned or not, these employers are leveraging these insights to plot new strategies that are more proactive and intentional – transforming them from victims of health care inflation to strategic players in the allocation of employee compensation.

The light switch


Over 600 employers are now using our proprietary CHROME Compass planning platform to conduct the detailed analysis required to truly understand the intricate interdependencies of alternative insurance markets and tax policy changed by health care reform. In light of the upcoming Supreme Court decision, we asked many of these customers what insights they are gaining from the detailed modeling around health care reform and what value they see in it if heath care reform is overturned by the high court.

The most common responses we received across our diverse group of clients were:

We had never really looked at where all the dollars were going, especially in the area of favorable tax treatment.

We had been feeling the erosion of our benefit plan over the years, but, with this, it was like someone flicked on the light switch and we saw where we are in an entirely new light.

We now know how to ask ourselves, “Is this where we want to be? If not, how do we begin to work ourselves into a new place?”

These employers were only moved to review their benefits program because of the legislation. Once these tools made them aware of the possibilities in overall compensation strategy, though, their benefits programs will never be the same. The light switch is on.







This article was first featured in the May 22nd edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

7/24/2012 2:19:00 PM

A Quiet Revolution

The New York Times published an article Sunday about the slowing of health care inflation over the past two years. Health care costs are down 4% (adjusted for inflation: 3.1%), over the past two years. The reporter interviewed a handful of experts, from Harvard economists to the president of the Commonwealth Fund to the former head of Medicare and Medicaid. All of them said the same thing, best summed up by one expert in particular: ““The most honest thing to say is that, one, the reduction in use is greater than the recession predicts; two, we don’t understand why yet; and, three, you’d be foolhardy to say that we can understand it.”

Well, you can call us foolhardy, because our extensive work with a large number of clients has resulted in a confidence that we understand why health care inflation has slowed over the past few years. Let’s talk this through.

The preamble

Not to be picky, but before going any further, we have to make a comment about the routine (and incorrect) use of the term “health care inflation.” While we are not economists, most of us took a few econ classes in undergrad, and we learned enough to know that “inflation” is a general increase in prices as a result of too much money chasing too few goods. What passes for inflation as it relates to health care is actually increased consumption – in both quantity and through the consumption of higher priced treatments. In fact, many health care prices are actually moderating on a unit cost basis, owing to competitive pressures and patent expirations. People can’t fix what they don’t understand, and using incorrect terminology doesn’t help. We expect better from The New York Times, and we bet you do, too. OK, now that we’ve cleared that up…

After years of health care costs increasing as a percentage of the gross domestic product, 2009 and 2010 showed a significant slowing down of the health care cost curve. In fact, the total national health care spending growth of less than 4% per year is the slowest annual pace in more than fifty years. If it continues to hold steady at 17.9% of the GDP, there is hope for long term fiscal health for both national and household income, but in order to capture that slowing and replicate it year over year, we have to know why it’s happening.

And, according to the New York Times article, experts have no idea why this is happening.

Is it the recession?


Keeping with the zeitgeist of the time, the article first points the blame at the recession. The slowdown did occur during the same time as employer-based insurance options dipped for many Americans due to job loss. The recession may have made Americans more aware of health costs, who cut back on non-urgent care while money was tight. Gail Wilensky, speaker of our “foolhardy” quote, headed Medicare and Medicaid under President George Bush and believes the dip was caused by decreased income and decreased wealth during the recession. She fails to mention, however, that the COBRA subsidy program under ARRA artificially suppressed the number of “uninsured” you would typically expect when jobs are cut. And the fact these people stayed insured should have resulted in less of a drop in consumption than typically found in recessions.
The experts in the article all agreed that mitigation caused by recession would not be surprising or unexpected.

No, it’s not the recession (at least not entirely)


But a lot of the data points to a cause beyond the recession. States that weren’t hit too badly by the recession had some of the most rapid abatement in health care inflation. And some of the slowed spending occurred in market segments that shouldn’t have been recession-sensitive, like those on Medicaid and Medicare.

“The recession just doesn’t account for the numbers we’re seeing,” said David Cutler, a Harvard health economist and former adviser to President Obama. “I think there’s much more going on. If you asked me, ‘How confident are you that this is not just the recession?’ I’d say 75 percent.”

Well, then, is it health care reform?


The president of the Commonwealth Fund, Karen Davis, makes the case that health care reform is the cause: “A lot of the big gains have come from keeping people out of the hospital and the emergency rooms.”

No, it’s not health care reform (at least not entirely)


While a reduction in those big price-tag claims would account for the decreased spending, it’s unlikely that health reform has drastically reduced hospital and emergency room visits at this stage.

As we discussed last week, the high risk pool, PPACA’s interim solution to improve access to health coverage, has low engagement rates, and the uninsured rate has remained steady through 2010. Even for the 18-25 year old age range, the uninsured rate has declined from 28% to about 24% and has now leveled off over 2011.

Additionally, many economists believe costs may go up as tax incentives and new programs come into effect.

Is it… consumerism?

The Times article starts to hint at this option, but it fails to establish a conclusion. The author discusses the growth of high-deductible plans, cited as growth from 3% in 2006 to 13% in 2011, and how those plans impact the way that people think about health care. The author notes, “A broad, bipartisan range of academics, hospital administrators and policy experts has started to wonder if what had seemed impossible might be happening — if doctors and patients have begun to change their behavior in ways that bend the so-called cost curve.”

But we believe there’s no need to wonder. This behavioral change is well documented, from a recent Reuters article about the growth of consumer-direction coverage to the RAND study that shows high deductible plans may reduce spending by as much as 14%.


Our foolhardy proposition

Consumerism, we believe, is the key to the mitigation of health care inflation. As we pointed out earlier, in all other aspects of economics, inflation is a rise in cost of goods, but as it pertains to health care, inflation is a rise in use and engagement. Therefore, increased health care costs are increased use of the goods. Consumerism has everything to do with slowing health care spending.

In all segments, people are becoming more aware of the cost of health care. Insurance plans are becoming less rich, and people are more price-sensitive. That applies even in the Medicare world, as retiree health plans start to disappear.

As patients become consumers, they pay more attention to the market and to the costs of services. A September RAND study shows that patients with consumer-directed health plans not only reduce their costs through initiating health care less frequently, but also by reducing costs after they’ve begun care, sometimes through electing less expensive treatments or medications.

The past few years have seen a dramatic growth in the consumer-directed plans and the awareness of health care costs. With that, people are becoming more aware of their own consumption. Reduced consumption equals mitigated health care inflation.

We like the way Dr. Drew Altman, the president and CEO of the Kaiser Family Foundation, sums up the rise in consumer-directed plans: “Well you know, I think we've been so focused on health reform in Washington, what we have missed is there is a quiet revolution happening in health insurance out in the country.”

So how are you engaging in the quiet revolution? Are you helping your clients implement high deductible plans? And if so, have your clients seen a decline in health care spending? Is it just a coincidence that the “minimum” level of an acceptable employer-provided plan mirrors a high deductible health plan (without HSA contribution)?








This article was first featured in the May 7th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services

7/19/2012 1:29:00 PM

Verifying Working Spouse Policies

Recently, we’ve gotten several questions from consultant partners about the best ways to implement and verify their clients’ spousal exclusions and surcharges. Disallowing or charging extra for spouses who have access elsewhere is a good way to make sure employers can continue to offer compensation by way of rich benefits right now.

The questions we’ve been asked are good ones. How do you best implement a working spouse policy?  What about those spouses who have access, but there are no employer dollars going toward the premium? Or those with some employer dollars, but a plan that is still so much more expensive as to be unaffordable? How do you care for potentially key employees while still identifying the savings on the plan?

You’ve also asked questions about how to best verify spouses. Once the basic requirements are outlined, how do you verify spousal access to other coverage? Will that become an undue burden on the HR team?

Over our four year history of verifying dependent eligibility for employers, we have dozens of working spouse verifications under our belt—we may have even verified a plan for one of your clients. Here, you’ll find three client case studies outlining some best practices and significant learnings. Let’s review.

Client A: Spousal Surcharge

Operational Goal:

To implement new spousal surcharge as cost saving option in the wake of health care reform.

Business Challenge:

As a brand new auto-manufacturing plant, Client A had a benefit program that was appropriately rich for its industry but significantly better than the majority of other employers in the region. Client A wanted to set the stage as a caring and responsible company in the way it treats its employees without becoming the default insurer for the area.

Implementation:

Client A determined that it would offer coverage to working spouses with a spousal surcharge. Spouses with access elsewhere who enroll in Client A’s coverage must pay $46 per pay period, which served to push spouses toward their own coverage while still offering the option to be on the client’s plan if the spouse’s employer plan was more expensive.
Spouses can have coverage withouta surcharge if...
  • they are not employed.
  • they are also employed by Client A
  • they don’t have access to medical benefits at their employer.

Verification:

ContinuousHealth’s DA2dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software.
A spousal affidavit included in each audit packet required sign off from the employee, the spouse and the spouse’s employer. That reduces the likelihood of confusion or fraud, since the spouse’s employer is answering questions about current coverage rather than the spouse. ContinuousHealth also suggested requiring the second page of the tax return to generate more accurate representation of spouse unemployment/employment status.

Results:

As a fully-insured plan, cost savings are greatest when ineligible dependents resulted in tier changes.
  • 21.8% of those who were in EE+Spouse tier changed to EE Only
  • 14% of those in EE+Children changed to EE Only
  • 5.3% of those in Family  moved to EE Only
With those tier changes, Client A saw extended savings of $635,000, in addition to any increased plan dollars from the spousal surcharge. After the success of the project, the client decided to integrate the ContinuousHealth software to verify both dependent eligibility and spousal exclusion in-house. This ensured HIPAA-compliance and streamlined the enrollment process.

Client B: Spousal Exclusion with Monetary Limit

Operational Goal:

To implement a spousal exclusion in order to continue to offer an affordable and rich benefits plan.

Business Challenge

As a well-respected leader in the grain industry, Client B is very focused on providing just business practices, including having a compliant plan, and on treating employees well.

Implementation:

Client B’s consultant walked the client through best options and they decided to offer coverage for working spouses if the employer’s coverage was more expensive than being on Client B’s plan. This would apply only to traditional major medical coverage, which also serves to encourage adoption of the new consumer plan.
Spouses can have coverage if...
  • they don’t have access to major medical at their employer.
  • they have access, but the least expensive single plan offered costs the spouse more than $190 per month.
  • they are also employed by Client B.
  • they are unemployed.
  • they are on secondary coverage and are enrolled in their own employer’s coverage with no contributions to an HSA.

Verification:

ContinuousHealth’s DA2 dependent verification. The audit identifies ineligible dependents as well as informing on spousal coverage using proprietary software. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s signature and proprietary technology notes all results.

Results:

The audit identified 9.2% of dependents on group plan as ineligible for coverage, a first year savings of $658, 000. That represents 3.8% of Client B’s total annual budget for health care. Spousal verification identified that 11.3% of spouses are only eligible for secondary coverage and about 8% are only eligible for dental and vision, based on the response of the spouses’ employers.
Rather than burdening Human Resources with the project after the initial verification ended, Client B decided to continue using ContinuousHealth to verify dependent eligibility and spousal exclusion. Ongoing costs are minimal compared to an initial project, and the transition to ongoing was seamless.





Client C: Spousal Exclusion with Employer Premium Percentage Limit

Operational Goal:

To find a third party solution for current spousal exclusion practices.

Business Challenge:

The Architecture and Planning company had tried to do a dependent verification last year with a well-known audit company, but Client C had been displeased

Implementation:

Client C had a policy in place that offered coverage for working spouses only if the employer portion of spouse’s premium was low.

Spouses can have coverage if...
  • they are not employed.
  • they don’t have access to group coverage at their employer.
  • they have access, but the spouse’s employer’s group plan requires that the spouse contribute more than 50% of total annual premium.

Verification:

ContinuousHealth’s DA2 dependent verification. Client C was interested in feedback about ContinuousHealth’s responsiveness and educate/assist approach, something it had not found in the last firm. The process would identify ineligible dependents while streamlining the current working spouse verification. A spousal affidavit included in each audit packet requires the employee, the spouse and the spouse’s employer’s sign off.

Results:

The audit identified 7.70% of dependents on the group plan as ineligible for coverage. Despite the recent verification with the other audit company, 4.4% of the dependents were self-identified as ineligible once the plan requirements were outlined to them with the offer of amnesty. Employees opted out 8.4% of the spouses on the plan after reviewing the spousal carve out requirement, even though these were known requirements that had been in effect for over one year.

After the success of the project, Client C decided to continue using ContinuousHealth to verify both dependent eligibility and spousal exclusion on an ongoing basis.



If you’re working to implement a working spouse policy for one of your clients, let us know if we can help. We would love to talk through the options with you and help you serve your client through that transition.






This article was first featured in the May 15th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.


7/17/2012 1:37:00 PM

Why do 45% of those who turn to the individual market not buy?

In April, the Commonwealth Fund released the details of their survey which found 25% of working-age adults experienced a gap in coverage in 2011.  The report detailed that 45% of those who go to the individual market during a gap fail to engage a plan. On top of all that, the report concluded that the Affordable Care Act will be the answer to these issues in their entirety.  But how realistic is that conclusion, and what do these numbers really mean? 

According to the Commonwealth Fund survey report, “Gaps in Health Insurance:  Why So Many Americans Experience Breaks in Coverage and How the Affordable Care Act Will Help,” nearly half of working-age adults who experience a gap in coverage and turn to the individual market don’t end up purchasing coverage on that market. In the past, much has been made about the difficulty most individuals have in getting coverage in the individual market. People are denied access because of pre-existing health conditions. This survey points to a different cause. What is it?
The short answer?  PRICE.  People have no idea how much health care (or health insurance) really costs.  In the individual market, the true cost is no longer obscured by employer-subsidies… and when people are exposed to the real cost, sticker shock abounds.

The two main issues

So what will happen when health care reform comes into full effect in 2014? Currently, there are two main problems that cause people to refrain from purchasing in the individual market.

For some, it is access.  They are denied coverage because of a preexisting condition, or their condition is excluded from coverage when the plan is written on the individual market. That group makes up, according to this survey, about 19%. 

PPACA promises to solve the problem for the first 19%.  In 2014, no one will be denied coverage because of a preexisting condition or have a plan written for them that excludes their condition. But those measures will require everyone’s cost of health insurance to go up: someone has to pay for those benefits, after all.

For the majority of the rest, it’s affordability.  Of the remaining 81% who do not engage coverage on the individual market, 73% didn’t buy because of price.  Cost is the most often cited reason for not purchasing coverage.

So solving the problem for the 19% will drive up the costs for the other 73%, a group who is already price-sensitive. The United States Court of Appeals for the Eleventh Circuit has noted that guaranteed-issue provisions may result in a 27–30% increase for the individual market. It’s also guaranteed that at least some of the access-averted 19% would then become price-conscious and remain uninsured.  What is the greatest good for the greatest number of people? By fixing the minority issue, we may make the majority issue even worse.

The high risk pool

Before the prohibition on medical underwriting goes into effect in 2014, PPACA created an interim solution to improve access in the individual market. The preexisting condition insurance plans (PCIPs) provision went into effect immediately (it actually started in July 2010, after the legislation passed March 2010), and they offer transitional coverage for high risk participants who have chronic health problems. Initial estimates predicted that total enrollment in the federal high-risk pool program would grow from roughly 400,000 in 2011 to about 600,000 or 700,000 in 2013.

It was clear early on that the program had lower participation than expected. Despite the offering that basically allowed anyone coverage, provided they had a preexisting condition and had been without coverage for six months or more, to date there are only around 50,000 covered by PCIPs. That’s 0.1% of the total uninsured, and only about 10% of the initial engagement estimates.

The Affordable Care Act initially mandated that the PCIPs offer premiums on par with state market rates, and they’re allowed to offer rates based on age by up to a 4:1 ratio. Even so, the most likely culprit deterring people from the high risk pool were the high cost of premiums and expensive out-of-pocket costs. The funding for the pools is low, as well, funded with numbers that would only cover about 9% of the estimated high risk individuals. Even after dropping coverage costs and increasing the marketing efforts to make sure people are aware of this option, engagement remains low.  The Commonwealth Fund report sums it up well: “While awareness of the PCIP program is widespread, enrollment is low.”

The game changer

The health care reform legislation does have one ingredient that changes everything.  The Affordable Care Act has a solution for both the issue of access and that of affordability.

The biggest advantage that employer-provided group insurance has that the individual market lacks right now is tax credits. PPACA creates tax credits for individuals in the form of subsidies.  Once this new system of tax credits comes into play in 2014, it has the potential to solve both problems, since all will have access, and the individual tax credits could make individual health care more affordable for those price-sensitive seventy-three percenters.

What else?

There are other fine points associated with the failure to buy on the individual market.

Current tax incentives for group coverage make employers want to offer more insurance coverage than is sometimes necessary, so people are often over-insured. As they come to the individual market, they’re looking for options that they’re accustomed to but unable to find.

People are also not well educated about their benefits, so as they enter the individual market, the options are overwhelming. “The individual market for most Americans is neither affordable nor easy to navigate” (Commonwealth Fund Report). In the study, 60% of those attempting to navigate the individual market found it difficult to compare benefits between plans. Individuals who buy less insurance consume less health care, but people need education about which options are important for them.

The future of the individual market

It remains to be seen how all of these factors will play out for the uninsured, once 2014 arrives. Forty-six states have engaged federal grant money for research and creation of state-based exchanges (click the link for an interesting map about it). All major carriers have begun mapping out a plan for their private exchanges. Over the past 10 years, the number of individuals on employer-sponsored plans has dropped by 5.3% while the overall non-elderly population has grown by 10.8%.

Without healthcare reform, the individual market has already been growing as a result of the shifting marketplace. PPACA will only accelerate this shift. What role will the individual market play over the next few years, and how will this influence the decisions you help your clients make about their benefits plans?








This article was first featured in the May 1st edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

7/12/2012 1:28:00 PM

Will Spousal Surcharges and Exclusions stick around after 2014?

You probably have clients who have researched implementing a spousal surcharge or exclusion. You may have some who have already done so for the 2011 or 2012 plan year. Spousal carve outs have grown exponentially over the past few years as an important way to offset rising health care costs. It’s likely that we’ll see them continue to grow in popularity… unless PPACA is interpreted as making them illegal. 

A debate arose in our office recently. Because we care about our partners, we have strong opinions about health care topics and how the PPACA legislation will play out for your clients. This time, the debate was about spousal exclusions and surcharges, and whether or not they’ll last after 2014. Our dependent audit team has seen a sharp escalation in the number of verifications for spousal exclusions and surcharges, which piqued the interest of our CHROME Compass consultants.

Spousal “carve out” is one way that employers are addressing the rising costs of health care coverage, and the trend is well documented, both in trade publications and the general media. In the fall, the Society for Human Resource Management featured an article on the renewed interest in the “working spouse” provision. The CNN Money blog had a post about it this time last year as provision on 2012 plans that employees should get used to seeing. Entrepreneur magazine outlined spousal exclusion as a good option to keep the rest of the benefits plan robust.

Most commentators note that excluding or mandating a surcharge for working spouses with other access is not going to be good for every company. As you know from working with your clients, each employer is different, and plan specifications must be carefully crafted to best serve the company’s needs. Companies need to have a plan for verifying working spouses before implementing the provision. Articles rightly advise that employers need to question if savings will counter additional administrative burden or business disruption.

So, while many are discussing the rising popularity and what types of companies could benefit from it, few people seem to be talking about the potential legality of spousal carve out or how long the provision will be permitted to last after 2014. That was the subject of our office debate this week.

Some members of our team believe that an explicit interpretation of PPACA disallows spousal exclusion. PPACA requires that coverage is offered to employees and their dependents… regardless of access elsewhere. The intent of the law appears to end spousal exclusion entirely, and when the health care reform law comes into full effect in 2014, spousal exclusions may be penalized or eliminated. Additionally, while working spouse provisions are ERISA-compliant and legal under most federal laws, they may not be compliant with state marital discrimination laws.

Another faction in our office points out that legislative intent does not necessary mandate how the final law is interpreted and how it will play out in reality. Legal contests don’t always make provisions like this go away, and, even if the legislative intent is clear, loopholes are guaranteed. To date, the mechanism for penalty if an employer excludes spouses with access to other coverage is yet undetermined. We first assumed that there may be a $2000 or $3000 penalty for exclusion, following the tradition of the other penalties built into PPACA. That is not yet outlined, so, if anything, it’s becoming more possible that this provision would fall under nondiscrimination testing.

Surcharges, as opposed to exclusions, seem to have a stronger argument under PPACA, although there still is not enough guidance to confidently answer either one. Studies show that $600-$1,200 in annual charges for spouses with access elsewhere, on top of premium costs, may incentivize spouses to engage their own employers’ plans. As a bonus, those who remain on the plan contribute increased premium revenue.

Our debate wasn’t officially resolved, but these are the questions we’re bringing to our partners and our clients. Where do you stand on these cost reduction strategies for your clients’ next plan year? If you’re recommending a spousal exclusion or surcharge, how are you verifying them?










This article was first featured in the April 24th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

7/10/2012 1:17:00 PM

Increasing the Adoption Rate of an HDHP

High deductible health plans can lower health risks, reduce total medical costs and increase employee engagement in benefits. Why, then, are they sometimes so hard to implement? Let’s take a look at one company’s successful conversion to a high deductible plan and see what tools they employed to facilitate the change.

Recent reports show that health care costs will “only” rise by 9.9% this year. After running our CHROME Compass analysis, a recent client realized that maintaining their same plan for the 2011 renewal would result in health care costs increases by 21%. Changing their carrier and keeping the same plan options would still cause the national food production company to see an 11% increase in health care costs. A high deductible health plan could offer significant savings, but this food production company had offered a high deductible health plan in 2010 and had achieved low conversion. Leadership knew that this plan could be better for both the company and their employees, but they were having a hard time making employees see the benefit.
After walking through the options with their consultant and one of our CHROME Navigator counselors, the company’s leadership team decided to modify their contribution strategy, changing carriers and offering three main plans for the 2011 year:



The first plan had a $250 deductible, the most expensive coverage option for the food production company. This was a plan they’d offered previously and, in 2010, it had the highest enrollment. For 2011, the company increased the employee contribution.

The second plan was a more middle-ground option, with a $500 deductible. Only about twenty percent of employees with coverage chose this plan in 2010, but the plan still had higher enrollment than the high deductible health plan at that time. Leadership increased employee premium costs slightly in 2011.
These changes facilitated employee movement toward the final plan, a high deductible health plan that that allowed the company to optimize their investments in employee benefits. In order to make the high deductible health plan a good value for employees, as well as the employer, the food production company reduced the deductible for the plan. They also increased the employer contribution to the high deductible plan for 2011, and introduced two new employer-paid benefits for employees who enrolled in the high deductible plan:  an accident plan and the ContinuousHealth Complete Card. 
The cornerstone benefit of the CH Complete Card is unlimited telemedicine access for employees (and their entire families) through a unique discount medical plan without a co-pay or consulting fee. With this inexpensive card, employees get faster access to critical assistance and increase their productivity, while the company was able to provide a much-needed benefit at a cost significantly less than traditional office visits. The card also offers a fitness discount and either travel assistance or pet health discounts, benefits that show high satisfaction levels for employees with minimal cost to the employer.

Because the CH Complete Card plan isn’t insurance, the card was a supplement to the high deductible plan that controlled costs and encouraged employee migration to the consumer option. This allowed the food production company to continue offering valuable benefits despite health care inflation.
By the end of enrollment, it was clear that the incentives made it hard for employees to want any other plan: enrollment for the $250 deductible plan decreased by 54%, and the $500 deductible went down by 16%. The high deductible health plan tripled its enrollment for 2011, and, even with the new employer-paid benefits, the strategy reduced overall health care costs by one percent.

The key for this employer’s conversion to the high deductible plan was making the plan as attractive as possible to their employees. The employees, most of whom had minimal understanding of their benefits, were interested in the tangible CH Complete Card offered with the high deductible plan, and since the CH Complete Card is a fairly new product, we wanted you to see one way that a consultant partner used it to benefit her client.

Let us know if you’re interested in more information or the statistics of this conversion.







This article was first featured in the April 17th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

7/5/2012 8:34:00 AM

It may be accessible, but is it useful?

The engagement of internet-accessible employee benefits tools continues to grow exponentially. Some firms have begun touting “web only” solutions as a viable alternative to more traditional approaches to employee engagement. As a leading provider of technology solutions for group benefit needs and with all the interest in online enrollment and HR administration tools, we thought it would be interesting to research how accessible web-based platforms really are for employees.  How much are your clients (and their employees) really using these platforms? Is the focus on web-based tools truly driving efficiency or is it also creating barriers for employees who have low levels of comfort with and access to technology? ContinuousHealth recently tracked employee and employer login data for our entire employee benefits technology suite of systems. Prior to pulling the data, we had certain predispositions about the results: As a technology company, we know that not everyone is comfortable working with software that they do not use regularly.  We refer to these types of systems as “single transaction platforms.” For these types of systems, we assumed employee web access would be fairly low, and employer access would be moderate to high. While we are proud of our systems, we realize many of our clients never walk through the technology, but those who do find it helpful and, in the words of one consultant, “slick.” But what is the real level of web access to our systems?  Who is really logging in, and how can we make our products better, knowing those results?

As we began to review the data across the several platforms we offer, using the employee and employer access from your clients’ projects, the results surprised us. First of all, let us be clear, ContinuousHealth has always been of the mindset that “all access” is achieved (like a brand marketing campaign) by using nearly every available medium and mode to reach employees. For both compliance and effectiveness reasons, HR applications can’t settle for 80% response rates. For us, web access has always been an “and” option as opposed to an “or” option. Having said that, let’s look at web access across a variety of platforms and needs.  

Employees and internet accessibility


We first took a look at employee access of our benefits administration platform, individual insurance coverage system and our dependent verification technology. Across all client platforms, we show fairly low levels of access by employees.

Only 17% of the employees going through dependent audits log into the website, and just 5% actually upload documents to the portal to move forward in completing the process. You may have heard of dependent audit companies that advertise a web-only verification. They state that “98% of people have access to the internet.” That may be true of companies with a predominantly white collar workforce, but we find that, even among that population, most people don’t have the ability to turn a hard copy document, such as a marriage certificate, into a soft copy document. Our employee login data shows that internet access is still not the best way to identify ineligible dependents with minimal business disruption - especially if you want to reach high penetration rates. By offering an all-access platform, we typically see response rates in the 97-98% range. Achieving this consistently with a web only solution is next to impossible without a high degree of HR involvement.

In our benefits administration and individual coverage technology, 39% of all system logins are employees logging in to enroll or complete surveys for assistance with individual medical insurance. This is a good bit higher than we predicted, and it’s an argument toward the need for online enrollment options. 3-5% of all errors in enrollment are caused by manual keying in of enrollment requests, and this can be reduced by allowing employees access to the system.  The fairly high number of employee logins shows that online enrollment is accessible and a highly utilized option, viable for moving most companies to either an online employee or enroller-assisted option.

Employers and internet accessibility


The data showed, though that most vital is employer accessibility to technology.

For our benefits administration and individual coverage technologies, we found that 46% of all logins were employers logging in. This includes assisting employees with the technology, reviewing enrollment, and viewing statistics. The number is much higher than expected.

Employers also have access to our dependent verification technology, a system that we pride ourselves in for our intentional user-friendly, “single transaction” technology. We recognize that employers may not be logging in every day, so the system shouldn’t be software that you must learn. Instead, it should be user-friendly enough that employers can understand the first time logging in. That said, although we built our system with ease of access in mind, we were still surprised to see how many of our employers, your clients, are accessing it—80% of the employers who are going through dependent audits with us have logged in to the website, either to review statistics or download reports.

The details


Substantial money invested in giving employees access to web applications for human resources administration will only pay out if employees really do utilize these systems. Employees should receive non-web based communications and resources in addition to any internet access. Any time you’re trying to get employees to do just one thing, in this case provide documents or manage benefits, you have to offer options beyond online accessibility.

Enroller-assisted online portals are good options, and crucial to the success of human resources technology is quality access for employers. As employers manage their employees, for large and small companies alike, it is vital that the employer feels connected to the data, and, thus, to their employees.

For your clients


Rest assured – options that are exclusively manual and paper-based are bad. There are too many employees with access to the web to be tied down to old ways of doing business. But when you evaluate new approaches, keep an eye on reaching everyone.  

You know better than we do what your clients need, but these are the important questions to ask, and important adoption data to know, as you consider the next steps as their advisor.




This article was first featured in the April 10th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

6/27/2012 8:31:23 AM

Median vs. Mean in Health Care Expenditures

During the Supreme Court's oral arguments back in March regarding the constitutionality of health care reform's “individual mandate," our interest was piqued by one exchange in particular, distinct from the many quotes that pundits and political commentators seized upon. The comment was relavent regardless of the final ruling, and we thought it worth reviewing today.

In response to Solicitor General Donald Verrilli, Supreme Court Justice Samuel Alito stated:
“You can correct me if these figures are wrong, but it appears to me that the CBO has estimated that the average premium for a single insurance policy in the non-group market would be roughly $5,800 in—in 2016. Respondents—the economists have supported—the Respondents estimate that a young, healthy individual targeted by the mandate on average consumes about $854 in health services each year.”
Justice Alito indicated the “average” health care expenditure as “about $854.” Most things we see in ACA are based on the average—penalties, actuarial value, etc. But, in the case of health care expenditures, this “average” isn’t as average as it seems.
For the purposes of health care expenditure, the median expense tends to be a more useful indicator, as the majority of health care expenses are incurred by a small minority of the population. Specifically, as you can see from the chart included here, in 2009, the top 5% of health care spenders accounted for almost 50% of all health care spending.

The average person’s health care expense would probably be closer to the median than the mean. Medical Expenditure Panel Survey (MEPS) data from 2009 for individuals age 18-44 indicated a median expense of $932 and a mean expense of $3,285. So, while Justice Alito stated the $854 dollars was an average (or mean) value, if he was talking about the group ages 18-44, it appears it was more likely a median value.

While the distinction between median and mean health care expenditures is important in understanding health care overall, it is of particular importance to plan sponsors. When determining plan design, plan sponsors should carefully consider how their population is affected both in aggregate and at the granular level. Certain plan design aspects affect the 5% high utilizers more heavily than the rest of the population. Should the overall compensation strategy around health insurance benefits be tailored to benefit the 5% or the 95%? Both could be viable strategies, but be sure, with your clients, that it is an intentional strategy.


This article was first featured in the April 3rd edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

6/25/2012 9:04:20 AM

The Indexing Implications of the 2012 Federal Poverty Level Guidelines

A little-discussed portion of PPACA is the indexing of the affordability measurement. Under PPACA, for an employer’s plan to be affordable, the employee cost of the single coverage cannot exceed 9.5% of an employee’s household income (AGHI). In the initial years following 2014, this percentage will be adjusted to reflect the excess of the rate of premium growth over income growth for the prior year as determined by the Secretary of Health and Human Services.

On January 26, 2012, the Department of Health and Human Services published the 2012 Federal Poverty Guidelines (FPL). At that time, the single guideline rose to $11,170, which is up 2.57% over the 2011 single guideline.  That’s a 464.1% growth in the rate of change.

This could have profound ramifications for the indexing of the 9.5% affordability threshold.

As you advise your clients on plan strategy, you may be able to look to the FPL growth as an indicator of income growth. The FPL is a simplified version of the federal poverty thresholds set by the Census Bureau and is used mainly for administrative purposes, such as determining financial eligibility for subsidies in the State Insurance Exchanges. The poverty thresholds set by the Census Bureau act as the starting point for the FPL calculation, with adjustments made based on the prior year’s Consumer Price Index for Urban Consumers (CPI-U).

On January 25, 2012 the Federal Reserve issued a release stating a long term goal of 2% inflation annually, “as measured by the annual change in the price index for personal consumption expenditures” (the CPI-U). In 2010 and 2011 the FPL increased 0% and 0.55% respectively. The recent increase of 2.57% more closely aligns with the Fed’s stated inflation goal.

Regardless, the cost of insurance is increasing at a faster rate than income. In the absence of indexing, more individuals would become eligible for subsidies on the exchange every year.  That, in turn, would cause stress on the viability of the exchanges. With the provision in place, as income growth increases more slowly than premium cost, the affordability percentage will adjust to reflect the excess.

The Supreme Court will issue rulings soon. Regardless of the outcome, it's vital that we understand the consequences and the details of this legislation, and how it may affect your clients. We will continue to work hard to lead the way through PPACA, including the indexing of the affordability measurement.

Jennifer Riley, PHR
CHROME Consultant
www.continuoushealth.com





This article was first featured in the March 27th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

6/19/2012 7:45:45 AM

All Dependent Eligibility Audits Are Not Created Equal

Response Rate is Crucial


As employers seek out money saving options in their health care plans, dependent eligibility verification audits have grown in popularity. Recent national studies show that 74% percent of employers plan to do a dependent audit in 2012, up from 69% in 2011. And there’s good reason to do so:  the 10-14 week process identifies bottom-line savings of 3-5% of annual health expenses without changes to carrier or plan design. 

More often than not, employers contract with third party companies in order to ensure that the audits run smoothly and securely, since verification is typically too time-consuming to do in-house. All dependent eligibility audits, however, are not created equal.  

As the Director of Operations for dependent audit at ContinuousHealth, I can tell you that horror stories abound. Clients often come to us saying that they attempted a project internally and overwhelmed their understaffed Human Resources department. Other clients say they used a third party and their Human Resources department was still bombarded because the communications weren’t clear. They cite experiences from other firms saying that employees were treated like criminals when they truly didn’t understand what constituted a dependent.

And, overwhelmingly, we hear about companies that drag verification on for months but still can’t get as much as 30% of the population to comply.

As Eric always says, “If the ship misses the harbor, rarely is it the harbor’s fault.” High response rates are a critical success factor for dependent audits. A dependent verification is not rocket science.* It should be based on a solid employee approach, one that educates and assists employees to complete, with multiple access points (mail, web, fax, phone and email) and hard-to-ignore communications. There needs to be consistent coordination between HR and a dedicated audit Account Manager, with the ability for the employer to track real time statistics. And above all, the external communication and contact with the employee must be such that response rates are driven into the 90% range.  The only thing that’s going to give your client credibility at the end of this is that the project was very, very thorough.

When we began doing these projects in 2008, at the request of one of our other advisor partners, we found 3 root causes of ineligibles:  lack of awareness of what constitutes a dependent (on family coverage; call this person “family”), timing (recently or not-so-recently divorced), and fraud.  We made a conscious decision to approach each employee as though his ineligible dependents are the result of a lack of awareness. This “Compassionate Compliance” approach has evolved into the leading method for high response/low disruption projects. In a project where the issue is a lack of awareness of the definition of a dependent, can you really trust the results if 10-20% of your population doesn’t respond?  The entire integrity of the project is compromised.  We’ve had clients who said that if fewer than 90% responded, they wouldn’t even drop the self-identified ineligibles. 

A dependent audit should not be an exercise in kicking undereducated or lazy people off the plan. If you do it right, you should be getting a 97% response rate consistently. We recently had a client finish the project in 8 weeks with a 99% response rate, another in 14 weeks with 100% (both had savings higher than a 3:1 return on investment). These results are feasible with the right audit company. 

It’s possible to design an audit where you find 20% ineligible, but we don’t think that’s the goal of most employers. When we initially designed our audit, we approached it with a marketing mindset: what does it take to get everyone to respond? Our job is to do the most thorough project we can, generating maximum compliance and minimal business disruption. We never want anyone to lose coverage because they were unaware of the verification.

Our company was one of the first to market with this product. We offer the industry’s leading response rate as well as the highest return on investment guarantee. If you’re like most of our consultant partners, you’re suggesting a dependent audit or ongoing eligibility maintenance to your clients this year.  There is a difference in the firm you choose and the approach they take. We would be honored if you would choose ContinuousHealth.

Kelly Hudson
Director of Operations
ContinuousHealth, LLC
http://www.continuoushealth.com




This article was first featured in the March 20th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

6/11/2012 10:15:37 AM

Client Quote


“For the first time ever, I understand what the future holds for health care, and it’s not what I thought. There might be other reasons that I won’t want to grow by 120 units next year, but now that I have this data, health care reform isn’t one of them.”

CEO of a major children’s apparel company, after undergoing a CHROME Compass analysis

6/5/2012 12:46:14 PM

The C-Suite Engaging HR

In the fall, our firm was approached by a national CEO organization to write an article for CEOs on confronting the rising costs of health care. This group had heard overwhelming feedback from their C-suite members wanting help reducing costs for their health care plans.

Health care reform is already having consequences beyond plan reorganization. PPACA is transforming the landscape of compensation, and, as a result, is inciting action in the leadership that had previously left health care to human resources. The C-suite, and particularly the CFO, brings unique abilities to the dialogue on benefits that can direct a company toward success. It is critical that management, both functional and executive, understands the implications of health care reform in 2014 and beyond.

Increased collaboration between Finance and Human Resources

The number one issue facing businesses today is ambiguity about the future around health care. Ambiguity in changing regulatory guidelines and rising costs causes executives to feel uncertainty about growing their businesses. Business Finance Magazine, in the recent article, “Bridging the CFO-HR Divide,” by Trent Beekman, notes that the average company diverts 1/3 of its finances towards human capital, including benefits. CFOs should be familiar with such a significant portion of company cost.

As health care costs rise year over year, CFOs are recognizing their fiscal responsibility to research the effects of PPACA on their companies. C-level executives (who may have traditionally only stepped in once a year to review rising plan rates) are engaging in the health care discussion. They’re finding that even after necessary cost shifting to employees, changing plans and reducing benefits, health care costs are higher than ever, and they want answers on how to combat this.

One of the answers is coming in the form of changing total compensation programs. Despite rising health care costs, benefits offering must remain competitive in order to retain high-value employees. Compensation strategy must be created with health care reform tax incentives and mandates in mind, and, to quote Beekman, “It will require an all-hands-on-deck mentality.”

Understanding the options

The implications of PPACA will be different for every company. PPACA is transforming the marketplace, both in benefits strategy and in employee opinion of benefits. There are myriad options to best set up a plan strategy for 2014 and beyond, while at the same time offering great coverage to retain top talent. For a company to stay competitive in the years to come, it is crucial that it fully comprehends these options at their deepest level. Finance executives may be more receptive than their HR counterparts to new benefit approaches that take advantage of new structures and incentives created by health care reform. The Business Finance Magazine article points out:

“Historically, CEOs and presidents have made all decisions on human capital expenditures [such as health care], and while they often consult HR as part of that process, more often than not, CFOs are kept out of the loop. Giving CFOs a greater presence and voice in the process could help ensure that such important decisions are more fully vetted.”

Benefits plans are like any other aspect of the business: someone needs to be steering the ship to make sure it goes the right direction. My dad always said, “If the boat misses the harbor, rarely is it the harbor’s fault.” Benefits planning requires more than just setting a budget at the beginning of the year and relying on a human resources team to determine the specifics. The C-Suite has plans for managing every other aspect of the business—a strategic road map is necessary for benefits, too.

Remaining at the forefront

Our company works with senior executives every day to help them optimize their investments in employee benefits. In doing so, we see that, across industries, regions and business sizes, business leaders don’t have the most basic working knowledge about the new structures and incentives embedded in health care reform. Everything else is inconsequential until executives truly understand the implications of health care reform.

As we have been saying for several months, we believe health care reform is the single greatest opportunity in our lifetime to get employers to think differently about how they allocate compensation to benefit programs. The entity (whether a consultant or a carrier) that helps the C-suite with a health care reform response plan will have an excellent opportunity to prescribe a package of products and services to better meet the employer's needs (and escape the potential “trap” of fighting over the scraps left behind after major medical decisions are made).

Now is the time for employers to recognize and implement changes that will set them apart from their competition. The Towers article points out that "savvy organizations need to act now to responsibly assess the business implications, model different scenarios and consider the impact of each reform option on their entire reward program." Leading employers will not be the last to figure out the implications of health care reform. If they are, they will no longer be leading employers.

The CHROME Compass is the leading platform to facilitate this response plan. Certified CHROME Consultants are in the lead position to take advantage of the opportunities created by health care reform. But, as my Dad always says, “Eventually, even the dummies will figure it out.” There is a window of opportunity here. Let’s not miss it!


Eric Helman
CEO and Founder
ContinuousHealth
www.continuoushealth.com


This article was first featured in the March 13th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)

Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

5/29/2012 8:52:10 AM

Insights on the Uninsured in the Workplace

PPACA is designed to encourage the 51 million uninsured to enter the marketplace in 2014. Since this population has been largely unexplored, the management consulting firm Oliver Wyman did a survey of the uninsured in September, in efforts to uncover their demographics, healthiness, attitudes and preferences towards health care. Because we focus on employers and their benefit plans, we thought it would be interesting to look at these survey results in light of the currently “Waived” and “Ineligible” populations within employer environments. Of course, the number one source of “Waived” is likely to be employees opting to participate in their spouse’s employer-based plan, but let’s explore what insights this survey provides about those who are truly “Opting Out.”

Engaging coverage


The survey finds that when asked to choose between buying insurance and paying a penalty, 76% of the uninsured would elect to purchase coverage. The study based their analysis on the presence of an individual mandate and the commensurate penalties, provisions which may change in June, and the authors chose to model the full penalties under the individual responsibility provision of health care reform, which don’t take effect until year three.

Accepting future adjustment of the numbers after the Supreme Court rules, this 76% election, about 39 million of the currently uninsured, says something about our opt-in rates for currently waived and currently ineligible employees. The study notes that while “uninsured Americans overwhelmingly see value in coverage, few really understand their options…” This is true of health care today, including employer-sponsored coverage. Education can equal participation. As employers determine the best route for their plans in 2014, it is vital that consultants can assist employers as they communicate options to employees, both opted in and waived, in a way that will align with the benefits strategy. 

State exchange:  innovation or limitation?


The study’s authors make some interesting assertions about how this rapidly expanded individual market may cause a boom in product innovation.  Their argument is based upon the fact that we will have 39 million new “customers” making individual purchase decisions based upon their individual preferences.  This is in opposition to the current environment, where the majority of health insurance is purchased through an employer who has taken a “one-size-fits-all” approach to benefits. 

The study goes on to test the sensitivity of uninsured consumers as to their willingness to spend more based upon differences in product design.  The study outlines options that could reduce health care costs which interest different segments of the individual market, including wellness options that are currently part of some plans, like maintaining a healthy body weight or quitting smoking.  It also polled this group’s interest on options that are not widely available, like receiving a majority of medical care at retail clinic in a pharmacy or retail store to reduce costs, or paying extra for 24-hour-a-day, seven-day-a-week access to doctors. The authors conclude that this “is a promising situation for a retail market intended to push health care toward better, cheaper coverage.”  

But, as the authors accurately state, “It remains to be seen whether any or all of these specific alternatives will ultimately be permitted in the exchanges.”  It is equally possible that this marketplace innovation will be inhibited by the regulatory controls on the distribution mechanism.  Said another way, the fact that these new individual products must be distributed through public health insurance exchanges may act as a limiting factor on the innovation which would otherwise occur in a marketplace less regulated.

Income and subsidies


Not surprisingly, the single most determining factor as to whether the uninsured would purchase insurance (even in the presence of an individual mandate) was the net cost of the insurance premiums after subsidies, relative to family income.  (See the chart here for a breakdown that the survey details.)  Based upon the way the premium subsidies are constructed, the study found that middle income consumers are less likely to purchase insurance than the lowest income group. 

The study authors again insert an opinion as to how the future of health care reform may roll out.  They assert that there will be “significant pressure to reduce subsidies.”  They note this:
This price sensitivity could work against ACA.  Health care costs are rising… faster than the Consumer Price Index and the tax revenue that ultimately pays for government programs.  It will be difficult for the federal government to increase subsidies at the same pace as medical trend – especially if the eligible uninsured numbers continue to grow through layoffs and continued unemployment.
Health care is becoming more expensive at a rate faster than people are generating the income to pay for it. As a result, even though the affordability measure is set to index, which this article fails to mention, there is a chance that it won’t keep pace with medical inflation unless medical inflation slows.  More and more individuals can be expected to push over the 9.5% affordability threshold and be eligible for subsidized exchange coverage. To keep the total cost to the government system of providing subsidies, the threshold would have to rise year-over-year to make sure more and more people don’t become eligible. Incidentally, a provision for this was added during the reconciliation process.

The Three Groups of Uninsured


What we found most interesting was the identification by the authors about three distinct segments within the uninsured population. The segments they note are “Struggling and Unengaged,” “Want to be Healthier,” and “Engaged to Save.” (The chart below gives a summary of the information included in the article.) They highlight that the former two are similar to segments found in the employer-sponsored market.

We wonder, however, about the presence of the “Engaged to Save” segment in the employer-sponsored market today, as non-participants. This group contains uninsured who are lower middle class, a bit younger than the other two segments. They are healthy but price-sensitive, willing to do nearly anything to reduce their health care costs.  These are individuals who may have waived coverage in the employer-sponsored market, a decision that was likely spurred by cost-consciousness and a lack of education on the benefits. This is the group that employers can key in to if the best version of their plan in 2014 requires participation.

The survey authors draw an interesting conclusion about the differences among the three segments of uninsured Americans, stating that some of them “might be willing to trade the traditional broad network of doctors for discounts on healthy groceries.”  For employers who need to keep their employees on coverage to best optimize their plans, this could have implications for increased employer-sponsored options in wellness programs and excepted benefits. 

Looking ahead


As 2014 approaches, and as the decision from the Supreme Court in June looms ahead, employers must begin considering how PPACA will affect their company’s benefits strategies.  It is vital that employers have a tactical strategy in place, rather than reacting in response to the changes after they are in place.  Surveys like these will allow consultants and employers to be aware of the changing demographic, especially as it relates to waived and currently ineligible employees.




This article was first featured in the March 6th edition of our e-newsletter, Directions. If you'd like to receive that weekly email, contact directions@continuoushealth.com. (Your email will never be shared, sold, or otherwise distributed, and you will receive only the type of content for which you sign up.)
Follow ContinuousHealth on LinkedIn or on Twitter @chealthupdate for interesting articles, industry insight, and a first look at new products and services.

5/24/2012 4:49:12 PM