Category: Health plans

Taking a whack at tobacco use

published date
January 22nd, 2007 by

Inside the latest BCBS of MA newsletter for employers (which has the catchy title IAI, for “Important Administrative Information”) are several significant announcements, including information about the new state health insurance mandate, formulary changes, and a progress report on BCBS’s crackdown on rogue bariatric surgery programs. But the most interesting announcement was entitled, “Tobacco Premium Contribution Offerings.”

BCBS is offering employers the opportunity to make smokers pay a higher contribution toward their premium. The rationale for the new program is phrased in a passive manner, as though no one at BCBS wants to be blamed for coming up with the idea:

It has come to our attention that you have an interest in offering premium contribution differentials to tobacco users at your worksite.

Regardless, BCBS offers to help design and implement the program in a way that “in most cases” is “cost neutral” to employers. A key question for employers will be how to verify that its employees (and presumably their family members) don’t use tobacco. BCBS implies that they have many verification options, although the only one mentioned is having employees sign an affidavit. Presumably the other options are more invasive, such as urine or blood tests.

Smokers who are actively trying to quit are placed in the same category as non-smokers. They have to demonstrate their participation in a smoking cessation program (another affidavit is suggested here.)

It will be interesting to see where this leads. I remember a few years ago, when efforts to ban smoking got underway, opponents of the bans used a variety of scare tactics –suggesting for example that hamburgers would be banned next—to generate opposition. At the time I thought they were overdoing it. After all, smoking has direct negative effects on people nearby because of secondhand smoke. Eating and other activities are different.

Over time I’ve seen that the opponents were on to something. The movement to ban trans fats is a good example, and I have to say I’m not as opposed to such bans as I used to be.

I expect we’ll see similar expansion in the workplace related to health coverage. (It’s already being tried elsewhere to some extent.) Any matter seen as personal choice –diet, exercise, drinking– will be fair game. If those parameters gain traction, there could be expansion into other areas. For example, diabetics could be required to check their glucose levels a certain number of times a day or face higher contributions.

It’s not as far-fetched as it sounds, especially as employers and health plans make personal health records available and apply pay for performance logic to patients as well as providers. The verification could be done more directly than affidavits, too. For example, the employer could monitor the number of blood glucose tests uploaded to the PHR and keep track of the number of prescription refills while they’re at it.

BCBS of MA pitches the program as a way to help employees improve their health. But there’s another rationale, too. Employers that single out and punish workers who are at risk of poor health or who smoke may discourage such workers from applying in the first place. For instance they may hope to benefit by reductions in absenteeism. Walmart, for one, has clearly been thinking this way.

Universal health insurance wouldn’t help that much anyway

published date
January 19th, 2007 by

A page one Wall Street Journal article (Health-Insurance Gap Surges as Political Issue), charts the ascent of the uninsured as a political issue. With one in six Americans lacking health insurance, it’s a juicy topic. Despite all the rhetoric, it’s unlikely we’ll see much happen at the federal level. The voices of change are too fractured and it’s unclear that there’s room for consensus.

The picture is different at the state level: Massachusetts has enacted legislation requiring residents to have health insurance. California and others are following suit.

But just for a minute, assume we did achieve universal insurance coverage. There would still be plenty of problems; costs might be even higher. A common argument is that costs would go down as uninsured patients head to less costly primary care physicians rather than emergency rooms for routine treatment. That would be great if true, but there’s evidence that insured patients use the emergency room more than uninsured patients. That could be because the uninsured tend to avoid treatment unless they’re in dire straits. Once the same patient has insurance he or she may want to test it out.

Employers complain now that the prevalence of uninsured patients drives up their premiums, but it could get worse if greater availability of insurance leads to the need for larger and larger subsidies.

Insurance mandates make sense in Massachusetts. The proportion of uninsured is relatively low, and a good number of the uninsured are healthy, young adults who could afford to pay. The cost of living is high; we need knowledge-based businesses that offer high pay and high benefits. I’m less sanguine about efforts in states like CA where the gap to close is much bigger and lower paying industries like agriculture are a substantial portion of the economy.

I’d like to see insurance for routine care done away with. Instead, allow a more efficient market to develop where people pay directly and doctors don’t spend so much trying to collect payment from third parties. Walmart, Walgreen, CVS and others are starting down this path. Physician practices could begin to do the same. If we hope to have affordable care, this is a more promising path than spreading insurance around to everyone.

Giving consumer-directed health care a bad name

published date
January 16th, 2007 by

Consumer-directed health care has the potential to hold down costs and improve quality by delivering price signals more directly to patients. The theory is that when patients consider the cost implications of their medical care choices, they will shop more intelligently, just as they do for groceries and gas. In the end, that should benefit employers by holding down premiums.

There are plenty of practical challenges to achieving these benefits, but the overall idea is worth a try. Unfortunately, according to a new report from it appears that many employers are using the shift to high-deductible plans as an opportunity to take their cost savings up front, at the expense of their employees and the whole concept of consumer-directed care.

A typical consumer-directed health plan includes a high-deductible PPO plan coupled with a Health Savings Account (HSA). The HSA allows consumers to use pre-tax money to pay for health care. If the employer funds the HSA it’s a good deal for the employee. But it seems the tendency is to fund the high-deductible PPO (which is much cheaper than comprehensive coverage) and pocket most or all of the savings.

According to Tom Cochrane, VP of Partner Relations at Vimo, “Unfortunately, the Vimo report shows that fewer than one out of every three consumers eligible to open an HSA has done so –a shocking statistic because the accounts are such clear winners for consumers… HSAs can even be used to save for retirement.” In addition, the report indicates that the typical HSA balance is only enough to cover about half the deductible. [I spoke to Tom just to make sure Vimo wasn’t inadvertently overstating the case by excluding employer-financed Health Reimbursement Arrangements (HRAs) from the equation. He assured me Vimo wasn’t making that mistake.]

So it’s pretty much bad news all around. Employers are using “consumer-directed health plan” as a euphemism for “benefit reduction.” To make things worse, employees whose employers aren’t funding their HSAs also haven’t been setting up their own accounts. That means they’re missing out on a major tax benefit in addition to getting a pay cut. I’ve mentioned this phenomenon before, but it’s the first time I’ve seen decent statistics.

Don’t be surprised if all this leads to a backlash against the consumer-driven movement.

Vimo is in the business of providing comparison shopping information in health care. They want to be the equivalent of Lending Tree for health care, so are hoping to see the consumer directed movement flourish.

It will be a shame if consumer directed care doesn’t get a fair shot.

Small Business Health Plans

published date
December 21st, 2006 by

Jay Ragley of the National Federation of Independent Businesses makes a good case for Small Business Health Plans and other measures –such as a relaxation in mandated benefits– that would make it easier for smaller companies to provide health insurance.

You can read his editorial in South Carolina’s Greenville News.

A glimpse into the future of medical cost management

published date
November 1st, 2006 by

A glimpse into the future of medical cost management

Payers are starting to get serious about controlling drug costs. As described in yesterday’s Wall Street Journal, payers are using the widespread availability of generics to their advantage. Tactics include:

  • Forcing patients to switch to a generic drug within a class, e.g., from on-patent statin Lipitor to off-patent simvastatin. Or favoring drugs within a class that are soon to become generic, e.g., Ambien
  • Ending coverage for branded drugs that are similar to generic (or better yet, OTC) drugs they replaced, e.g., favoring Prilosec over Nexium as United has done
  • Allowing patients to pay the difference between covered and uncovered drugs, but not counting the difference paid toward the plan’s deductible, as South Carolina is doing for its state employees
  • Offering generics-only plans, as Medco has recently done

I expect these moves to have quite a dramatic impact. I think that in at least some areas of the country we will see some of these same principles echoed on the medical cost side. (The discussions about “efficiency”” already hint at this direction.) We may see:

  • Plans that cover only community hospitals and health centers
  • Coverage for nurse practitioners and physician assistants for routine care
  • Tighter restrictions on what procedures are performed and what medical devices are used
  • Requirements to go overseas for surgical procedures where feasible