Health Business Group President David Williams and I met by phone this week to talk private exchanges. David asked questions that are on everyone’s mind – or should be – with the launch of exchange open enrollment this week. 

All the attention exchanges have been getting lately comes hand-in-hand with confusion and misconception.

Ever heard of “BushCare,” for example? While the move to private Medicare exchange has been hailed by many as a result of Obamacare, the legislation that paved the way for us to start the nation’s first private Medicare exchange was enacted by President George W. Bush in 2003. That law made the first wave of private exchanges possible and enabled the mass personalization of Medicare benefits for their users.

Click here to listen in on David William’s Health Business Blog as we hash out:

  • Why the notion of exchanges stirs up so much angst
  • Some common misconceptions about exchanges
  • The different types of private insurance exchanges – for active employees, part-timers/seasonal workers and early retirees, and Medicare-eligible retirees
  • The relationship between private and public exchanges
  • The analogy between exchanges for retiree health benefits and 401ks for pension benefits
David E Williams

David Williams – President of the Health Business Group, strategy consultant in technology enabled health care services, pharma, biotech, and medical devices. MBA (Harvard), BA (Wesleyan)

Care episode … bill … outrage – It’s a new pattern emerging in the health care industry that is going to go into overdrive next year as millions more Americans get health insurance.

Case-in-point, here are two recent eye-opening stories on outrageous hospital bills:

These come on the heels of a recent report on wild swings in hospital charges, not to mention Steven Brill’s chargemaster exposé earlier this year. My last blog post on transparency  also came at a time when disparities in care costs for non-care-related reasons, like geography, were in the headlines.

Peeling back the layers of health care pricing certainly gives health care consumers reason to question costs. But it also has some big implications for employer-sponsored health care – especially given the trend toward account-based health plans in the workplace.

Outrageous health care pricing presents a special hurdle for employers in their quest to optimize health benefits for their employees and retirees.

Skin in the game is an important part of the consumerism concept – as employees use more of their own dollars to pay for health care, they tend to economize – leading to cost-savings for them, for their employer and for the health care system.

However, it’s hard to expect consumers to rationalize their health care usage when out of pocket costs can be so irrational and vary so wildly.

So while the trend toward account-based health plans increases, expect to see more of the care episode–bill–outrage pattern as more employees are hit with a larger share of costs through account-based plans.

This sightline is going to be important to rationalizing costs and care because economizing on care can cut both ways: If it’s not done effectively – for example medications are not taken as often as prescribed or chronic conditions are not managed closely – it could end up harming an individual’s health status and  requiring more extensive intervention down the road.

And when such individuals are part of an employer’s overall health benefit population, employers are bound to end up paying more in rising health benefit costs down the road, too.

Offering cost-cutting measures alone doesn’t work without consumerism tools, such as up-front transparent access to the costs of care (i.e., before the bill arrives) and the ability to do apples-to-apples comparisons on health services and products that help employees be responsible health care consumers.

Jeanne Denz, director of Global Benefits for General Mills, said it well at an employee health care conference in New York this March. She shared General Mills’ highly effective health benefits program – one that offers employees innovations and convenience in managing their health along with increasing transparency to the costs of their care. Part of General Mills’ organizational philosophy is that, as it asks employees to take a more active role in managing their care, it should also provide employees with better tools for managing their health and their health care costs.

Exchanges can play a pivotal role in helping support health care consumerism for employees. Exchanges can also help employers optimize their health benefits and give them visibility into how those benefits are working, over time.

Towers Watson has found that consumerism tools are among a host of high-performing health benefit components that have allowed employers to get a handle on costs. These components include self-funding health benefits, high-quality wellness programs, care management for chronic conditions, incentives for positive health behaviors, offering Medicare-eligible retirees plan choice through our Medicare exchange (and other populations as exchanges become viable options for them), and more. Towers Watson’s clients who have performed best on managing health costs have implemented these types of programs.

Health exchanges have a ready-made environment for offering robust data-analysis tools and advice centers. In addition to helping employees and retirees become intelligent purchasers of health care benefits, the most effective exchanges will allow employers to continue to manage employee wellness by providing high-performing health plan features such as coordinated care, chronic disease management, narrow networks and so on, to maximize the value of their health care spend and ensure that they have a healthy and productive workforce.

The move forward into health care’s future is bound to get bumpy and noisy, but that’s not all bad. The bumps and noise may be what’s needed to help bring the rest of the system in line with the new health care consumer’s need for access to data, decision support and fair pricing.

When Towers Watson acquired Extend Health last year, there were many unknowns in the health care world: the Supreme Court decision on the Affordable Care Act was still ahead of us, as were the fall elections of 2012. Were we concerned about uncertainty for our companies and those we work with? Of course – but the combination of Extend Health, the nation’s leading Medicare exchange, and Towers Watson, a global leader in professional services, gave us the vision to chart a path into an uncertain future.

OneExchange is the culmination of that vision. It begins a new chapter in our company’s history at the same time that our nation takes a huge turn in its own health care history. Forged in the early winds of the pending reform storm, OneExchange is a single destination that offers many solutions.

As they were a year ago, many employers are looking at ACA’s potential impact on their health care benefits and asking: “What’s the right path?

In answer to this question, I can say two things:

  1. It’s complicated. You knew that – But did you know that’s a good thing? There are more options now than you, your employees and your retirees have ever had in the past. Some will work better for certain populations than others, but there’s a way to figure that out.
  2. You don’t have to do this all at once. You don’t have to pull the trigger on a massive set of health benefit changes right now. You can get there one step at a time.

With OneExchange, Towers Watson is using the Extend Health platform to deliver an exchange model that transcends a one-size-fits-all approach. It’s agile in the variation in delivers and nimble in its response to the evolving health care marketplace.

ACA changes things on many levels for employers. The parameters are neither simple nor clear, and the answer will not only be different for each company, it could be different within each company.

Figuring out the impact and how to respond strategically to it means taking into account many factors: how many employees, the hours they work, how much they earn, what benefits they get now, what competitors offer and more.

To increase the difficulty of solving this equation, key market-defining elements like final regs on essential health benefits and the costs of new health plans being designed for 2014 – all mission-critical to driving choice and value for employees on any exchange – are yet to be announced.

Not until these unknowns fill in over the course of 2013 will the value of an exchange become fully known.

Before making health benefits changes, employers should be able to look at scenarios modeled on known conditions. They need knowledgeable advice and insight that lets them make the right decisions at the right time.

That’s why OneExchange’s solutions will be triggered as these market-defining elements come into play. Not before. This will enable employers to leverage the seismic shift that’s just around the corner.

OneExchange gives employers a command central for analyzing and strategizing their health care benefits decisions now – and the advice and solutions they need to chart their course to tomorrow.

Rather than being a year of big, sudden change, we believe that 2013 will be the year that large employers take a good look but not a big leap.

At stake for employers is the trust of their workforce – the ability to recruit and retain employees – as well as sheer operational productivity and their reputation in the eyes of the public – all factors with bottom line impacts.

Fast forward a few years and corporate officers looking back on these next few years will want to be able to say, “We weathered the changes, came out whole and are in a better place. As important – so are our people.” By charting a course via OneExchange, we believe leaders of major employers today will also be able to say, “We did the right thing.”

For regular commentary on developments and trends in health care, technology and insurance, follow @brycewatch and @ExtendHealth on Twitter and check out www.extendhealth.com.

February 21, 2013

This epic piece is a MUST READ for anyone who makes health care purchasing decisions on an individual or organizational scale or influences the health care and insurance industries in any way. It’s a great example of how transparency can slice through the fog and shine a light on things that don’t add up and that must be addressed in order to move health care forward in our nation.

Health & Family

Corrections Appended: February 26, 2013

1. Routine Care, Unforgettable Bills
When Sean Recchi, a 42-year-old from Lancaster, Ohio, was told last March that he had non-Hodgkin’s lymphoma, his wife Stephanie knew she had to get him to MD Anderson Cancer Center in Houston. Stephanie’s father had been treated there 10 years earlier, and she and her family credited the doctors and nurses at MD Anderson with extending his life by at least eight years.

Because Stephanie and her husband had recently started their own small technology business, they were unable to buy comprehensive health insurance. For $469 a month, or about 20% of their income, they had been able to get only a policy that covered just $2,000 per day of any hospital costs. “We don’t take that kind of discount insurance,” said the woman at MD Anderson when Stephanie called to make an appointment for Sean.

Stephanie was then…

View original post 24,638 more words

OneExchange combines the strengths of Extend Health’s exchange platform with Towers Watson’s expertise in health benefit design and strategy.

As part of employers’ health care reform (or ACA) implementations, OneExchange will let employers leverage a single exchange with solutions for some or all of their active and retired employee populations: full-time, part-time, early retirees and Medicare-eligible retirees.

Read the press release.

Keep up with developments on Twitter at @brycewatch and @ExtendHealth and at www.extendhealth.com and www.towerswatson.com.

The genesis of the Medicare exchange market offers some good insights about what things could look like after the seismic shift that’s coming to the rest of the insurance market in 2014.

The law changes. In 2003, the Bush administration enacted the Medicare Prescription Drug, Improvement and Modernization Act (MMA), creating a thriving market for guaranteed-issue medical and prescription drug plans that could finally be compared head-to-head.

Companies and insurers engage. In 2005, one of the Big Three auto manufacturers challenged Extend Health to get better rates on Medicare plans than it could: In the close radius of the company’s headquarters, it had good enough sway, but having to rent networks in retiree destinations from Florida to Nevada meant its group plan was less efficient than the burgeoning individual Medicare market.

Extend Health built a network of national and regional carriers that offered retirees the same or better individual Medicare coverage at the same or better cost than their former group plan. And at the same time, made the company’s costs predictable and sustainable – no longer driving double-digit rate increases for that employer.

Now Extend Health powers retiree coverage at all of the Big Three and many other auto industry employers along with companies in every sector.

Health care consumers reap the benefits. Six years before MMA was passed, almost half of all retirees from large companies had access to health coverage through their former employers [see EBRI study, Figure 2], but that number took a nosedive due to the skyrocketing costs of offering health care. Six years after MMA was enacted, the number finally leveled off and may even be starting to trend back upward, thanks at least in part to the path offered by private Medicare exchanges.

Take-aways

In today’s fragmented market, individual consumers without an employer to negotiate on their behalf pay the most for health insurance. However, in a guaranteed-issue coverage world (like Medicare today) insurers sharpen their pencils to reach individual consumers through an exchange because it effectively becomes a “super-pool” consisting of everyone within a defined geographic area – providing a critical mass of consumers larger than that of any single employer.

What we’ve seen in the development of the Medicare market gives us reason to believe that a truly agnostic exchange – not a closed single-carrier environment or one that simply switches employers from defined benefit to defined contribution funding – is the practical meeting ground for consumers, employers, insurers and the storm of health care reform changes to come in the next year.

Employers have a lot of big decisions to make about health benefits in 2014. But despite headlines filled with state and federal exchange readiness count-downs, for large employers, many of those decisions don’t have to shake the foundations of their health benefit strategies right away. As employers get ready for the coming seismic shift in health care, their top concern is going to be doing the right thing to meet the needs of their workforces and businesses.

And the right thing is not easy to figure out:

  • It depends on regs and health plan options that haven’t been fully defined yet.
  • It depends on which employee population they’re looking at, both active and retired.
  • It depends not just on the calendar day that exchanges flip the on-switch but more importantly on when certain health care reform changes begin to mature.

I anticipate that, come 2014, employers’ adoption of exchanges for some employee populations could look something like the hockey stick trajectory seen in the 1980s with history of corporate 401(k) adoption: Soon after the law changed in 1978, a handful of employers began a move to the new model, but three years down the road, about half of employers were already offering or thinking of offering a 401(k) and the numbers increased by  leaps and bounds in the years after that.

In my next blog post, I’ll be talking more about employers’ needs this year, considerations for how to do the right thing and resources they can turn to for solutions.

Read more

For regular commentary on developments and trends in health care, technology and insurance, follow @brycewatch and @ExtendHealth on Twitter and check out www.extendhealth.com.

Click to listen in to a discussion I had with Dan Gorenstein and others on state exchanges

On December 6th, New Jersey Governor Chris Christie vetoed a bill that would have created a health insurance exchange for his state under President Barack Obama’s signature healthcare reform law. Leading up to the states’ December 14 deadline to declare whether they would run their own exchange, many have interpreted state decisions to operate their own exchanges – or not to – along political lines.

I talk about state exchanges with Dan Gorenstien in his Marketplace piece, “States must make health care decisions,” and with Alex Wayne in his Bloomberg.com article, “Insurers Face Jumbled Market With Health Exchange Rules.” But the decisions we are seeing now are much less political, than practical. Here’s why.

First, health insurance exchanges are the law of the land based on last summer’s Supreme Court decision on the constitutionality of the Patient Protection and Affordable Care Act (PPACA or ACA) and cemented by President Obama’s re-election. There will be no repeal of Obamacare. That political window has now closed.

Second, under ACA, a state can choose to have the federal government run its health insurance exchange either on an interim basis or indefinitely. So residents of New Jersey, Tennessee and other states that are leaving it to the Feds will have access to individual health plans on January 1, 2014 through a health insurance exchange. They will be covered.

Here’s why the move is practical. I know from running the nation’s largest private Medicare exchange for the last eight years that building an effective exchange does not happen overnight. It is time consuming and costly, with many moving parts.

There is the underlying technology and the crucial relationships with the health insurers that will offer plans in the exchange. There is the initial consumer outreach, education and support while consumers are evaluating and choosing plans and enrolling. There are the complex eligibility requirements that some individuals must meet to receive federal subsidies. Lastly, there is the reality that the newly insured will move between company, Medicaid and individual coverage at frequencies never before seen or managed.

Not knowing the details of what it will take to build and run an exchange or how much it will cost, Christie, Haslam and others feel it’s best to let the federal government run it for now. And they can revisit the decision in the future.

This makes practical sense. The states that will run their own exchanges from day one have been working on them for more than a year. For example, California was the first state to declare that it would run its own and appears to be further along than any other.

For New Jersey and others, at this time, it is the right move. That could change next year as more information about the success of the first state exchanges becomes known to the governor and state legislative leaders.

Governor Christie is right: This is a practical – not political – move.

Read more

For regular commentary on developments and trends in health care, technology and insurance, follow @brycewatch and @ExtendHealth on Twitter and check out www.extendhealth.com.


Businessweek

See my closing comments in Devin Leonard’s story “Obamacare: For State Republicans, It’s Decision Time” in Bloomberg Businessweek’s Politics & Policy section

In today’s Bloomberg Businessweek’s Politics & Policy section, Devin Leonard writes on several Republican-headed states that are making some tough decisions on their states’ exchanges right now.

After health care reform was upheld by SCOTUS this summer, many states decided to wait until the election, leaving themselves precious little time to prepare for announcing whether they would run their states’ own exchanges if Obama won.

So as I point out at the end of Leonard’s story – Obamacare: For State Republicans, It’s Decision Time – give it a minute.

The afterglow of the elections will fade away along with the pre-election rhetoric on repeal and replace. Even though states that were on the health care reform offensive will be starting behind the curve – they’ll get there.

You have to ask, does the Governor Perry really want the Federal government running the Texas exchange? “Not for long,” is the most likely answer.

Look to states on the Federal exchange to start setting up bridge strategies to take their exchanges over. Many decisions will be based on their own state-specific circumstances.

States will also be getting a second cut at rebuilding their Medicaid IT infrastructure through its expansion. They’ll get to upgrade legacy systems developed in the Vietnam era, some of which are running on COBOL. There have already been some signposts that officials of states not initially signing on to the Medicaid expansion may be campaigning for it to relieve the pressure they’re now under, like in the Dallas–Fort Worth area.

Once we get past the optics of saying they’re against Obamacare, I believe that even Republican-led states will get there. There’s nothing like a new year to put a different spin on things.

In 2013, I expect that states currently holding out on running their own exchanges will take a fresh look and consider starting a legislative process to build, own and control their own.

Read more

For regular commentary on developments and trends in health care, technology and insurance, follow @brycewatch and @ExtendHealth on Twitter and check out www.extendhealth.com.

The Rubber Meets the Road

November 20, 2012

Exchanges are the new vehicle for health care reform changes coming down the road, and the on-ramp is coming right up

With elections and this past summer’s SCOTUS decision behind us, the major events that could have altered the macro course of the Patient Protection and Affordable Care Act (PPACA or ACA) are behind us.

The health care providers, insurers and those closely tied to getting health care benefits into the hands of consumers – particularly employers – now face a series of milestones, not all clearly defined, through  Jan 1, 2014 – when 30 million previously uninsured Americans could begin new health care coverage – and beyond.

Just how these different interests– consumers, insurers, providers and the law – converge is where the rubber meets the road.

Circle these dates on your calendar

  • Dec 14, 2012 – States can declare whether they will run their own state health care exchange, let the Feds run it for them or partner with the Feds.
  • 2013 –Medicare payroll tax increases for higher-wage employees. Employee pre-tax contributions to health flexible spending accounts get capped at $2,500.
  • Feb 15, 2013 – States must declare if they would prefer to partner with the Feds
  • March 1, 2013 – Employers must notify employees of exchange-based coverage options
  • Fall 2013 – State and private health benefit exchanges will be operational for people to begin signing up for new Jan 1, 2014 health plan start-dates.
  • 2014 – The mother lode of rules comes online: individual mandate, play-or-pay mandate, premium and cost-sharing subsidies, Medicaid eligibility expanded in some states and additional group health plan mandates.
  • 2016 – Sales of health insurance across state borders permitted if neighboring states agree.
  • 2017 – States can choose to open exchanges to large employers.
  • 2018 – Cadillac tax kicks in.

Pieces of the regulatory puzzle that have to be filled in

  • Just out today – Proposed rules on essential health benefits, guaranteed issue and employment-based wellness programs were published by Health and Human Services.
  • Full-time vs. part-time – More specifics distinguishing full-timers and part-timers will be clarified for the purpose of applying penalties for not offering health benefits.
  • Premium tax credit – How this will be calculated by the IRS.

Stay tuned for a shift in focus in these areas

  • Fix-it – Look for a PPACA-fix bill to be proposed in early 2013. There are some provisions that will need to be adjusted, where costs or incentives don’t necessarily promote the best behaviors.
    • Look for adjustments in how health savings accounts and health reimbursement accounts are capped and taxed.
    • Expect health insurers to be more vocal on the Feds minimizing the health care premium tax and on states taking up ACA’s Medicaid expansion.
    • At issue in the Senate will be the Independent Payment Advisory Board (IPAB) and the medical device tax among other negotiations.
  • Providers take on new gravitas in the cost arena – Accountable care organizations will be going full-steam ahead. Over 80% of the ACOs created to date have been created by hospital and doctor groups, which could signal a shift in control away from the health insurance carriers to providers. The jury is still out on whether ACOs will lower total health care costs, but hospitals are certainly now incented to hold down preventable readmissions and hospital acquired conditions.
  • Entitlement reform – Medicare will continue to evolve according to the plan laid out in the ACA and will be a big part of talks during grand bargain negotiations in 2013. With both sides of the political spectrum far apart on reform, this will be interesting.

Stay tuned for a shift in focus in these areas

As these timeline, rule and structural developments start coming online, there will be a lot to keep track of and many calculations to make. I pay close attention to these and will write on new trends in the health care and insurance space as they break.

Read more

For regular commentary on developments and trends in health care, technology and insurance, follow @brycewatch and @ExtendHealth on Twitter and check out www.extendhealth.com.

Recently I spoke with Marianne McGee of Healthcare Info Security about security considerations for health care exchanges.These range from regulatory requirements, technology best practices, the interests of employers who use exchanges to deliver a health insurance solution to their workers, retired or present, and most importantly the experience of the health care consumer.

Hear the podcast: Insurance Exchanges: Security Issues: Authentication a Key Factor, One Pioneer Says

All these requirements and interests are critical, and with the right focus, they can all be accomplished in a way that creates a premium experience for the ultimate user of the exchange – the consumer.

In this podcast, I speak with Marianne about

  • Technological considerations, including the trifold data security standards of the technology, banking and health care industries, which we have implemented on the Extend Health exchange.
  • User experience considerations, particularly the importance of designing robust consumer authentication that secures consumers’ accounts and personal health information.
  • Thoughts on the challenges that lie ahead for the state exchanges now developing their platforms and consumer interfaces.

For regular commentary on developments and trends in health care, technology and insurance, follow @brycewatch and @ExtendHealth on Twitter and check out www.extendhealth.com.