Archives for 2008

Health benefit cost growth predicted to ease slightly in 2009 as employers shift cost

Mercer
September 4, 2008
After three years of double-digit growth in the first half of the decade, annual health benefit cost increases slowed to about 6 percent in 2005 and have stayed there ever since.
Mercer’s complete survey results won’t be released until later in the year, but for the 1,317 employer health plan sponsors that have responded so far, the total cost to renew their current health plans — if they were to make no changes — would grow by nearly 8 percent on average. Small employers (those with 10-499 employees) would see an even higher increase, of about 10 percent. However, the majority of respondents say they will take action to lower their actual cost increases.
“It’s a relief to see cost growth trending down, even slightly,” said Blaine Bos, a senior Mercer health and benefits consultant based in Minneapolis. “But this is not an unqualified success story. While some employers are holding down cost growth with innovative methods of improving health care quality and efficiency, more typically employers struggling with increases they can’t handle resort to the tried and true method of shifting cost to employees.”
Well over half (59 percent) of employers taking action to reduce their 2009 cost increase will raise deductibles, copayments, coinsurance or employee out-of-pocket spending limits. Employee cost-sharing has risen sharply over the past five years.
http://www.mercer.com/summary.htm?idContent=1319885

Is it good news that employers’ health benefit cost growth is easing slightly? No. If you look at the full picture, it’s terrible news. Health care costs are continuing to increase at an unsustainable rate, but employers are dumping the problem onto the backs of their employees by “the tried and true method of shifting cost to employees.”
Products available in the individual insurance market are no longer providing adequate protection because of increases in deductibles, copayments and coinsurance that trade off affordable premiums for unaffordable access to health care – the very definition of underinsurance.
Employers are now seeking relief from the costs of their health benefit programs by following the lead of the individual market and converting their programs into underinsurance plans.
Reform proposals that would expand competition of plans in the individual market won’t work because most of the plans will be underinsurance products if the premiums are to be competitive. Reform proposals that would expand on employer-sponsored coverage won’t work if that sector becomes saturated with similar underinsurance plans.
If we regulate the markets to prevent the sale of underinsurance products, then the increase in health care costs will continue to make premiums unaffordable for either employers or individuals.
If we really do want everyone to have affordable access to all necessary health care, we have no option but to establish a universal risk pool that is equitably funded, and then to take advantage of our own monopsony to provide us with greater value in our health care purchasing. We are already at that point, and there is nowhere else to turn.

Mercer
September 4, 2008

After three years of double-digit growth in the first half of the decade, annual health benefit cost increases slowed to about 6 percent in 2005 and have stayed there ever since.

Mercer’s complete survey results won’t be released until later in the year, but for the 1,317 employer health plan sponsors that have responded so far, the total cost to renew their current health plans — if they were to make no changes — would grow by nearly 8 percent on average. Small employers (those with 10-499 employees) would see an even higher increase, of about 10 percent. However, the majority of respondents say they will take action to lower their actual cost increases.

“It’s a relief to see cost growth trending down, even slightly,” said Blaine Bos, a senior Mercer health and benefits consultant based in Minneapolis. “But this is not an unqualified success story. While some employers are holding down cost growth with innovative methods of improving health care quality and efficiency, more typically employers struggling with increases they can’t handle resort to the tried and true method of shifting cost to employees.”

Well over half (59 percent) of employers taking action to reduce their 2009 cost increase will raise deductibles, copayments, coinsurance or employee out-of-pocket spending limits. Employee cost-sharing has risen sharply over the past five years.

http://www.mercer.com/summary.htm?idContent=1319885

Comment:

By Don McCanne, MD

Is it good news that employers’ health benefit cost growth is easing slightly? No. If you look at the full picture, it’s terrible news. Health care costs are continuing to increase at an unsustainable rate, but employers are dumping the problem onto the backs of their employees by “the tried and true method of shifting cost to employees.”

Products available in the individual insurance market are no longer providing adequate protection because of increases in deductibles, copayments and coinsurance that trade off affordable premiums for unaffordable access to health care – the very definition of underinsurance.

Employers are now seeking relief from the costs of their health benefit programs by following the lead of the individual market and converting their programs into underinsurance plans.

Reform proposals that would expand competition of plans in the individual market won’t work because most of the plans will be underinsurance products if the premiums are to be competitive. Reform proposals that would expand on employer-sponsored coverage won’t work if that sector becomes saturated with similar underinsurance plans.

If we regulate the markets to prevent the sale of underinsurance products, then the increase in health care costs will continue to make premiums unaffordable for either employers or individuals.

If we really do want everyone to have affordable access to all necessary health care, we have no option but to establish a universal risk pool that is equitably funded, and then to take advantage of our own monopsony to provide us with greater value in our health care purchasing. We are already at that point, and there is nowhere else to turn.

MetLife V. Glenn: The Court Addresses A Conflict Over Conflicts In ERISA Benefit Administration

by Timothy Stoltzfus Jost
Health Affairs
September 3, 2008
In its June 2008 decision in MetLife v. Glenn, the Supreme Court held that federal courts reviewing claim denials by Employee Retirement Income Security Act (ERISA) employee benefit plan administrators should take into account the fact that plan administrators (insurers or self-insured plans) face a conflict of interest because they pay claims out of their own pockets and arguably stand to profit by denying claims.
As a practical matter, the cost of health benefits to employers and their value to employees are first determined when the employer settles on a benefit, cost-sharing, and premium package for a benefit year. But it is also determined daily as plan administrators (either insurers, self-insured plans, or third-party administrators) make benefit determinations. Although plan coverage is sometimes clear, claims adjudication often involves application of vague terms such as “medically necessary” or “experimental” care to specific situations. Approximately 1.9 million claims are denied by employee benefit plans each year. Each denial potentially decreases the cost of coverage–immediately for self-insured and prospectively for insured employers (which usually pay an experience-rated premium). But denials also potentially decrease the value of coverage to the individual employee.
Claim determinations are ultimately reviewable in the federal courts. The courts’ approach to reviewing these determinations could, therefore, affect the cost of employee benefits. If, on the one hand, courts routinely overturn claim denials, the cost of coverage will increase, not just because plans will lose more appeals, but also because plans will have to litigate more appeals of adverse determinations as members see their chances of appeal improve. Moreover, plans will likely approve more claims initially instead of risking litigation. An increase in the cost of coverage may in turn lead to more employers’ abandoning coverage. On the other hand, if courts routinely defer to plan determinations, upholding most, plans will in all likelihood be more aggressive and confident in denying claims. This could make coverage more affordable but also put employees at risk.
Interpreting an earlier ERISA decision, the Court articulated the question as to what extent courts should defer to the decision of the plan administrator when the administrator faces a conflict of interest because it is essentially paying the claim out of its own pocket and stands to profit if the claim is denied. The Court decided that this conflict must be taken into account as a “factor” in judicial review. This paper analyzes the Court’s decision, the background of the decision, and its potential effect on American health policy.
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.5.w430

In this important decision the Court affirmed the obvious. Employer-sponsored plans and their administrators, whether private insurers or self-insured plans, have a conflict of interest when making benefit decisions. Denial of claims benefit the employers and/or insurers, and approval of claims benefit the employees. On this, the justices were in unanimous agreement.
Much of the criticism of private insurance has been directed toward the flagrant, egregious abuses in the individual insurance market. Far more is wasted on administrative services that are designed to weight the conflict of interest heavily in favor of the insurer at the cost of patient-beneficiary. Those who support reform based on private insurance acknowledge that the individual plans would have to be replaced with options that more closely resemble employer-sponsored plans. Is that wise from a health policy perspective?
An important implication of this Supreme Court decision is that costs for employer-sponsored plans will likely increase. Legal costs may rise because of an increase in challenges to claims decisions, which may cause an increase in benefit costs because of employer/insurer decisions to avoid the effort and legal costs of challenging claims for non-beneficial and non-contract services.
Would a single payer national health program eliminate the conflict of interest between the payer of benefits (the government) and the recipient of benefits (the patient)? Of course not. But, as a society, this conflict should work to our benefit.
Our own public program would have a mission to finance all necessary care for all of us. At the same time, it would have a responsibility as stewards of our tax funds to not waste money on non-beneficial services and products. Although disputes would be inevitable in marginal circumstances, the decisions would be based on balancing the needs of the patient with efficiency in the use of our public funds.
Employers would no longer have to face the awkward decisions of saving money by denying care for their employees.
In contrast, private insurers welcome the opportunity to reduce their overhead by denying care to patients. That might be good business, but it’s terrible health policy.

by Timothy Stoltzfus Jost
Health Affairs
September 3, 2008

In its June 2008 decision in MetLife v. Glenn, the Supreme Court held that federal courts reviewing claim denials by Employee Retirement Income Security Act (ERISA) employee benefit plan administrators should take into account the fact that plan administrators (insurers or self-insured plans) face a conflict of interest because they pay claims out of their own pockets and arguably stand to profit by denying claims.

As a practical matter, the cost of health benefits to employers and their value to employees are first determined when the employer settles on a benefit, cost-sharing, and premium package for a benefit year. But it is also determined daily as plan administrators (either insurers, self-insured plans, or third-party administrators) make benefit determinations. Although plan coverage is sometimes clear, claims adjudication often involves application of vague terms such as “medically necessary” or “experimental” care to specific situations. Approximately 1.9 million claims are denied by employee benefit plans each year. Each denial potentially decreases the cost of coverage–immediately for self-insured and prospectively for insured employers (which usually pay an experience-rated premium). But denials also potentially decrease the value of coverage to the individual employee.

Claim determinations are ultimately reviewable in the federal courts. The courts’ approach to reviewing these determinations could, therefore, affect the cost of employee benefits. If, on the one hand, courts routinely overturn claim denials, the cost of coverage will increase, not just because plans will lose more appeals, but also because plans will have to litigate more appeals of adverse determinations as members see their chances of appeal improve. Moreover, plans will likely approve more claims initially instead of risking litigation. An increase in the cost of coverage may in turn lead to more employers’ abandoning coverage. On the other hand, if courts routinely defer to plan determinations, upholding most, plans will in all likelihood be more aggressive and confident in denying claims. This could make coverage more affordable but also put employees at risk.

Interpreting an earlier ERISA decision, the Court articulated the question as to what extent courts should defer to the decision of the plan administrator when the administrator faces a conflict of interest because it is essentially paying the claim out of its own pocket and stands to profit if the claim is denied. The Court decided that this conflict must be taken into account as a “factor” in judicial review. This paper analyzes the Court’s decision, the background of the decision, and its potential effect on American health policy.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.5.w430

Comment:

By Don McCanne, MD

In this important decision the Court affirmed the obvious. Employer-sponsored plans and their administrators, whether private insurers or self-insured plans, have a conflict of interest when making benefit decisions. Denial of claims benefit the employers and/or insurers, and approval of claims benefit the employees. On this, the justices were in unanimous agreement.

Much of the criticism of private insurance has been directed toward the flagrant, egregious abuses in the individual insurance market. Far more is wasted on administrative services that are designed to weight the conflict of interest heavily in favor of the insurer at the cost of patient-beneficiary. Those who support reform based on private insurance acknowledge that the individual plans would have to be replaced with options that more closely resemble employer-sponsored plans. Is that wise from a health policy perspective?

An important implication of this Supreme Court decision is that costs for employer-sponsored plans will likely increase. Legal costs may rise because of an increase in challenges to claims decisions, which may cause an increase in benefit costs because of employer/insurer decisions to avoid the effort and legal costs of challenging claims for non-beneficial and non-contract services.

Would a single payer national health program eliminate the conflict of interest between the payer of benefits (the government) and the recipient of benefits (the patient)? Of course not. But, as a society, this conflict should work to our benefit.

Our own public program would have a mission to finance all necessary care for all of us. At the same time, it would have a responsibility as stewards of our tax funds to not waste money on non-beneficial services and products. Although disputes would be inevitable in marginal circumstances, the decisions would be based on balancing the needs of the patient with efficiency in the use of our public funds.

Employers would no longer have to face the awkward decisions of saving money by denying care for their employees.

In contrast, private insurers welcome the opportunity to reduce their overhead by denying care to patients. That might be good business, but it’s terrible health policy.

MetLife V. Glenn: The Court Addresses A Conflict Over Conflicts In ERISA Benefit Administration

by Timothy Stoltzfus Jost
Health Affairs
September 3, 2008

In its June 2008 decision in MetLife v. Glenn, the Supreme Court held that federal courts reviewing claim denials by Employee Retirement Income Security Act (ERISA) employee benefit plan administrators should take into account the fact that plan administrators (insurers or self-insured plans) face a conflict of interest because they pay claims out of their own pockets and arguably stand to profit by denying claims.

As a practical matter, the cost of health benefits to employers and their value to employees are first determined when the employer settles on a benefit, cost-sharing, and premium package for a benefit year. But it is also determined daily as plan administrators (either insurers, self-insured plans, or third-party administrators) make benefit determinations. Although plan coverage is sometimes clear, claims adjudication often involves application of vague terms such as “medically necessary” or “experimental” care to specific situations. Approximately 1.9 million claims are denied by employee benefit plans each year. Each denial potentially decreases the cost of coverage–immediately for self-insured and prospectively for insured employers (which usually pay an experience-rated premium). But denials also potentially decrease the value of coverage to the individual employee.

Claim determinations are ultimately reviewable in the federal courts. The courts’ approach to reviewing these determinations could, therefore, affect the cost of employee benefits. If, on the one hand, courts routinely overturn claim denials, the cost of coverage will increase, not just because plans will lose more appeals, but also because plans will have to litigate more appeals of adverse determinations as members see their chances of appeal improve. Moreover, plans will likely approve more claims initially instead of risking litigation. An increase in the cost of coverage may in turn lead to more employers’ abandoning coverage. On the other hand, if courts routinely defer to plan determinations, upholding most, plans will in all likelihood be more aggressive and confident in denying claims. This could make coverage more affordable but also put employees at risk.

Interpreting an earlier ERISA decision, the Court articulated the question as to what extent courts should defer to the decision of the plan administrator when the administrator faces a conflict of interest because it is essentially paying the claim out of its own pocket and stands to profit if the claim is denied. The Court decided that this conflict must be taken into account as a “factor” in judicial review. This paper analyzes the Court’s decision, the background of the decision, and its potential effect on American health policy.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.5.w430

Comment:

By Don McCanne, MD

In this important decision the Court affirmed the obvious. Employer-sponsored plans and their administrators, whether private insurers or self-insured plans, have a conflict of interest when making benefit decisions. Denial of claims benefit the employers and/or insurers, and approval of claims benefit the employees. On this, the justices were in unanimous agreement.

Much of the criticism of private insurance has been directed toward the flagrant, egregious abuses in the individual insurance market. Far more is wasted on administrative services that are designed to weight the conflict of interest heavily in favor of the insurer at the cost of patient-beneficiary. Those who support reform based on private insurance acknowledge that the individual plans would have to be replaced with options that more closely resemble employer-sponsored plans. Is that wise from a health policy perspective?

An important implication of this Supreme Court decision is that costs for employer-sponsored plans will likely increase. Legal costs may rise because of an increase in challenges to claims decisions, which may cause an increase in benefit costs because of employer/insurer decisions to avoid the effort and legal costs of challenging claims for non-beneficial and non-contract services.

Would a single payer national health program eliminate the conflict of interest between the payer of benefits (the government) and the recipient of benefits (the patient)? Of course not. But, as a society, this conflict should work to our benefit.

Our own public program would have a mission to finance all necessary care for all of us. At the same time, it would have a responsibility as stewards of our tax funds to not waste money on non-beneficial services and products. Although disputes would be inevitable in marginal circumstances, the decisions would be based on balancing the needs of the patient with efficiency in the use of our public funds.

Employers would no longer have to face the awkward decisions of saving money by denying care for their employees.

In contrast, private insurers welcome the opportunity to reduce their overhead by denying care to patients. That might be good business, but it’s terrible health policy.

Calif. Nurses Laud Passage of Single-Payer, SB 840, Seen as National Model for Guaranteed Healthcare for All

MarketWatch
September 1, 2008
The California Nurses Association/National Nurses Organizing Committee today hailed the California Legislature’s passage of a single-payer, expanded Medicare for all, style bill that would guarantee quality health care for all Californians — and called it a model for the national healthcare reform debate that is sure to emerge in 2009.
SB 840, authored by State Senator Sheila Kuehl, passed its final legislative hurdle with a vote in the State Senate today and is headed to the desk of Gov. Arnold Schwarzenegger who vetoed an earlier version of the bill two years ago.
“But a lot has changed since then, including the further implosion of our healthcare safety net, and the Governor’s own professed support for universal healthcare,” said CNA/NNOC co-president Malinda Markowitz, RN. Nurses will remind Schwarzenegger of that pledge, she said.
http://www.marketwatch.com/news/story/calif-nurses-laud-passage-single-payer/story.aspx?guid=%7B203DC8E2-395B-4836-99E8-2B1C81FFF4F2%7D&dist=hppr
Senate Bill No. 840:
http://info.sen.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_840_bill_20080811_amended_asm_v95.pdf

And…

Governor Schwarzenegger’s Health Care Plan

Assembly Bill X1 1, the Health Care Security and Cost Reduction Act:
Requires that all Californians take responsibility for their health coverage (individual mandate).
Guarantees that no Californian will be turned away from buying insurance based on their age or medical history (guarantee issue).
Spreads responsibility across individuals, government, hospitals and employers (shared responsibility).
Makes coverage more affordable for individuals and families through tax credits and subsidies.
Helps keep hospitals and emergency rooms open by increasing Medi-Cal reimbursement rates.
Allows individuals to choose their health coverage and keep their current insurance.
http://www.fixourhealthcare.ca.gov/plan

Two years ago California’s Governor Arnold Schwarzenegger vetoed a prior version of this single payer bill stating, “I must veto SB 840 because I cannot support a government-run health care system.”
He then initiated an intensive effort to create legislation that would provide coverage for all Californians, but crafted to comply with his policy principles listed above. His efforts fell short and resulted in AB X1 1 – legislation that would better be characterized as a take-it-or-leave-it package of incremental reforms. There were many beneficial reforms in the package that have broad support, but there were many other severe deficiencies that provoked considerable opposition. The legislative battle was very painful for all of us who believe that everyone should have affordable access to all necessary health care. The bill essentially died in the Senate Health Committee when supporters could muster only one vote in favor of it.
In passing SB 840 once again, the California State Legislature is giving Gov. Schwarzenegger another opportunity to sign legislation that actually would provide health care for everyone through a model that would use our health care dollars much more efficiently. It will be a test to see if his goal of ensuring health care for all Californians is more important to him than his personal anti-government ideology. Let’s hope that he leaves his intellectual exercises on ideology in his cigar tent as he comes out and signs a bill that benefits the health of the people.