Alan Guzzino

Tuesday, 21 December 2004 09:37

Consumerizing health care

The health care cost explosion has reached crisis proportions. Small businesses have struggled in recent years with providing any health insurance coverage - let alone a plan that offers multiple options - due to rapidly rising costs.

The Kaiser Family Foundation's 2004 Annual Employer Health Benefits Survey revealed that the number of small employers (companies with three to 199 workers) offering health coverage declined from 68 percent to 63 percent over the last three years, leaving an additional 5 million workers without health insurance.

The causes are well-documented: rapidly rising prices -- and usage -- of prescription drugs, skyrocketing hospital costs, the growing popularity of "elective" health care and thousands of health insurance mandates at the state and federal levels that inhibit the health system's ability to keep quality coverage affordable.

But in this battle, consumers -- not the government or employers or insurers or health care providers -- are emerging as the most promising players to contain costs.

Until recently, consumers had little reason to learn about and understand the true costs of their care. Employers have tended to absorb the vast majority -- in some cases 100 percent -- of their employees' health insurance premiums and a large share of claims expenses.

For most consumers today, economic realities remain hidden and useful information is hard to come by. But when people are spending their own money - and are given good information to help them do it wisely -- they will be much better at controlling spending for themselves and, by extension, for the nation as a whole.

Humana's response to rising health costs

At Humana, where we've confronted the problem as a large employer ourselves, we're developing solutions with encouraging early results.

In July 2001, Humana offered its Louisville employees a new package of health plan options. Here is a look at the experience.

* Over the next year -- through June 2002 -- Humana saved $2.1 million from its anticipated health benefits costs.

* Two-thirds of that savings, or $1.4 million, came directly because of changes in consumer behavior. Employees chose levels of coverage consistent with their individual needs, and they used health care judiciously - for example, by selecting generic prescription drugs over brand-name products.

* Instead of a projected 19 percent rise in medical claims costs, the increase was less than 5 percent.

* Even more striking, the percentage of Humana's total health benefits costs shouldered by employees went down, from 21 percent to 19 percent, with the company paying 81 percent of the total instead of 79 percent as in the year before.

We're now offering the package of options to 250,000 employees and their families nationwide. Its customers enjoy average health cost trends in the single digits, nearly half what is being experienced nationally.

The program combines traditional health benefit products with consumer-choice products in an actuarially balanced environment that preserves the sharing of insurance risk, while still offering employees the chance to personalize their benefit choices to their own life stage and risk tolerance.

Through September of this year, clients experienced an average annual net increase of only 5.6 percent in their year-over-year health care claims costs.

Health care costs today and tomorrow

While consumers hold the most power to effectively control health-cost increases, the health care system's other stakeholders have important roles, too.

* Insurers must engage consumers so they understand the true costs of their health care and make an effort to keep costs in check. They must also provide catastrophic coverage as a financial safety net for major illnesses and injuries.

* Political leaders must create a legislative environment that removes unnecessary state-mandated benefits and produces consumer-friendly information about cost and quality.

* Doctors and other health care providers must help patients become knowledgeable consumers by explaining treatment options and associated costs, and by encouraging the exchange of information through technology.

* Most important, consumers must become truly informed, investigate treatment alternatives and ask questions about the true cost of medical services.

Alan Guzzino is the president of Humana's Atlanta, North Carolina and South Carolina market health plan operations and is responsible for the management, strategic planning and growth of those markets. Guzzino, an eight-year veteran of Humana, serves on the board of the Georgia Association of Health Plans. Reach him at aguzzino@humana.com.

Friday, 22 April 2005 09:51

Broad vision

If you're a small business owner, it's a good bet you have direct involvement in the purchase of health coverage for your employees.

You're also probably spending more time than ever trying to figure out how to offer competitive health benefits without doing significant damage to your bottom line. And, if you're like some of your competitors or peers, you're faced with an even tougher decision -- can you continue to offer health benefits at all next year?

It's no surprise that small business owners surveyed by the National Federation for Independent Business put the cost of health insurance at the top of their list of most critical problems. The Kaiser Family Foundation reports the number of small employers (companies with three to 199 employees) offering health coverage declined from 68 percent to 63 percent over the last three years. That means an additional 5 million workers are without health insurance.

Your company doesn't have to be part of that growing number. By applying some simple strategies, you can not only continue offering health benefits to your employees, you can do so in a way that's less disruptive to the financial health of your company.

Choice
When it comes to health coverage, one size does not fit all. Employees have different needs. Some want comprehensive coverage and are willing to pay for it. Others would rather pay less each month in exchange for a higher deductible before traditional PPO coverage kicks in. If you're funding full coverage for these employees, it may be more coverage than they need or want.

Some insurers will let small employers offer two, three or more health plans side-by-side. That way, employees choose the level of coverage that's right for them. You don't pay for more than your workers need, and more of your employees may elect health coverage -- all of which can help keep health benefits affordable.

Consumer engagement
Consumers are emerging as the most promising players to contain health care costs. For most consumers, economic realities remain hidden.

Many believe the total cost of a visit to the doctor's office is their $20 co-pay. But when people are spending a meaningful share of their own money and are given good information to do it wisely, they will be much better at controlling spending for themselves and for your company.

Consider plans that give consumers responsibility, such as those with a front-end spending account. As consumers spend the account on health care services, they have good reason to investigate the true costs of care and an incentive to make cost-conscious decisions.

Tax advantages
Employers can use tax-advantaged spending accounts to help manage the cost of health benefits. Health Savings Accounts (HSAs) allow employees to save money for medical expenses and invest the account on a tax-deferred basis, with the employer, employee or both contributing to the account.

HSAs are typically paired with a high-deductible health plan, offering premium savings, and HSAs are portable, so employees can take the account with them from job to job.

In a Health Reimbursement Arrangement (HRA), the employer contributes to a health care account on a pre-tax basis, and employees use the money to pay for qualified medical expenses. Employers can realize premium savings by combining the HRA with a high-deductible health plan, and employers need not fund the entire account at once, which helps cash flow. One challenge can be the administrative work in setting up the account, so look for an insurer that offers the HRA and health plan in one easy-to-administer package.

Lastly, employees can save pre-tax money for health expenses in a Flexible Spending Account (FSA). The downside of an FSA is that the account does not roll over from year-to-year, meaning employees must"use it or lose it.

Value-added extras
Does your health plan offer clinical programs to help employees with chronic conditions? How about information and tools, such as online calculators to forecast out-of-pocket costs for health care services?

Does your health plan provide educational materials to help you explain to your employees the realities of today's health care environment? Forward-thinking health plans build such features into a comprehensive package.

Something else your employees will appreciate is a debit card to access spending account dollars. Swipe the card at the pharmacy or doctor's office to pay co-payments or other charges for health care services. No need to fill out lengthy forms to request reimbursement.

Having such a card can encourage more employees to take advantage of spending accounts such as HSAs, HRAs or FSAs. Some insurers combine the debit card with an insurance ID card.

No one should minimize the challenge when it comes to health benefits, but with some careful planning and sound strategies, manageable health benefits might be closer than you think.

Alan Guzzino is the president of Humana's Atlanta, North Carolina and South Carolina market health plan operations and is responsible for the management, strategic planning and growth of those markets. Guzzino, an eight-year veteran of Humana, currently serves on the board of the Georgia Association of Health Plans. Reach him at aguzzino@humana.com.

Wednesday, 23 February 2005 08:32

Getting smarter about health benefits

Enrolling employees in health benefits plans can be a challenge. So when it comes time to do so, business leaders need a process that is fast, simple and hassle-free.

Luckily, today's health care isn't as primitive as it was in the past. There is a bevy of advanced, accurate tools employers can use to educate employees about benefits choices and their own health care. Any of these can help employers through one of the most stressful but important business functions they have to address.

One method business leaders should consider employing is online health benefits enrollment. Executives who already use this method have found that it provides the resources needed to help employees find the best available health plan for their individual needs and family budgets.

So what are these high-tech, high-touch tools, and how can business owners integrate them into their traditional corporate HR functions? Here are several tips to keep in mind when considering -- and introducing -- these tools to your company.

* The online enrollment experience should act as a resource, allowing employees to view all medical plan options and providing details on out-of-pocket expenses and paycheck deductions based on the employee's future health care expenditures.

* Employees should be provided with guidance toward plans that have the lowest potential overall cost based on the member's use of health care services. A comparison of costs and benefits of the current health plan versus the new plan options is particularly helpful to the employee.

* Online benefit enrollment and health plan selection tools educate employees about how much medical care they've used in the past and how much they're likely to use in the future. Most employees don't take the time to step back and analyze how often they take advantage of their health care benefits and which ones they use.

* Informed employees are much more likely to make better health care purchasing decisions for themselves and their families, and ultimately help reduce health benefits costs for themselves and their employers. Again, few employees recognize the true cost of health care benefits. They see deductibles and co-payments and don't realize what health care really costs.

* Many health insurers' online enrollment tools can now tell employees exactly where their health care dollars go, and, in some cases, provide cost estimates on medical and surgical procedures and the employee's share of the charges.

* Another increasingly popular feature of these online enrollment technologies is the ability for employees to check the balances of their health care flexible spending accounts, including the newly introduced, tax-free health spending accounts and health reimbursement arrangements.

These new e-tools create a user-friendly enrollment experience for employers, while providing employees with tools that are available year-round -- at work or at home -- to help them become better-informed health care consumers. And, a better-informed health care consumer can help your business maintain a stronger bottom line.

Alan Guzzino is the president of Humana's Atlanta, North Carolina and South Carolina market health plan operations and is responsible for the management, strategic planning and growth of those markets. Guzzino, an eight-year veteran of Humana, serves on the board of the Georgia Association of Health Plans. Reach him at aguzzino@humana.com.

Tuesday, 22 March 2005 09:49

Transforming health care

Consumers set the agenda, influencing the prices of products and services they pay for in every sector of the U.S. economy -- with the exception of health care.

However, that inequity in America's economy is changing with the emergence of health care consumerism. As health insurers engage, educate and empower consumers with tools, choices and technology, consumers can make more informed health benefits decisions for themselves and their families. In response, insurers are offering a growing array of consumer-directed health benefit plans to businesses and individuals.

Former Speaker of the House of Representatives Newt Gingrich recently addressed the "transformation of health care" as a keynote speaker at the Atlanta Association of Health Underwriters (AAHU) Benefits Forum 2005.

The former House speaker focuses on health issues in the private sector as founder of the Center for Health Transformation in Washington, D.C. The center is a collaboration of public and private sector leaders dedicated to the creation of a 21st century intelligent health system in which knowledge saves money and lives.

Gingrich's vision promotes the individual's right to know health care cost and quality, and asserts that better quality leads to lower overall costs. Gingrich doesn't want to change our current health care system; he wants to transform it by correcting the way people behave.

In his new book, Winning the Future, Gingrich articulates his argument for transforming health care in America.

"Virtually every political story about health focuses on 'reforms' for our problems: the rising cost of health care, the challenge of the uninsured, the state and federal budget crises, the high cost of drugs, litigation, nursing shortages, doctor unhappiness ... The truth is that the current health system cannot be reformed because its approach is profoundly wrong in three specific areas," he writes.

"First, it emphasizes acute care rather than wellness, early detection and prevention. Second, it focuses on third-party payments, an area in which the individual has little responsibility, little knowledge and no control. And third, it relies on paper (i.e. paper medical records and paper prescriptions), rather than information technology ... We need to transform our health care system based on an entirely new set of principles."

Here are other insights, ideas and perspectives on the state of health care in America that Gingrich shared recently with the AAHU Benefits Forum 2005.

* The current structure is a triangulated system of conflict, fraud and frustration, mired in inefficiency and complexity.

* A direct buyer-seller system is much healthier. It encourages health care providers to focus on quality, efficiency and satisfying the patient rather than the insurance company.

* As technology creates the availability of online, real-time medical information databases, physicians and patients will use that information to improve their care and their lives.

* At the same time, as health care costs continue to climb, employers will demand that employees pay more for their own care. As a result, the appeal of tax-free health savings accounts will grow.

Gingrich's plan for transforming American health care has three core principles.

* Focus on wellness, early detection, prevention and maximum quality of life -- the individual carries a substantial part of the responsibility for his or her own health care.

* Provide easy access to information about cost, quality, wellness, prevention and choice through an information technology system available online.

* Keep the system centered on the individual, who has the financial incentives and information to make smart health care purchasing decisions.

Gingrich believes we can dramatically improve the country's flawed health care system by improving the people who use the system. The system will cost less, he maintains, because healthy behavior will result in lower costs.

Alan Guzzino is the president of Humana's Atlanta, North Carolina and South Carolina market health plan operations and is responsible for the management, strategic planning and growth of those markets. Guzzino, an eight-year veteran of Humana, serves on the board of the Georgia Association of Health Plans. Reach him at aguzzino@humana.com.

Tuesday, 30 November 2004 06:54

Affording benefits

If you're a small business owner, it's a good bet you have direct involvement in the purchase of health coverage for your employees.

You're also probably spending more time than ever trying to figure out how to offer competitive health benefits without doing significant damage to your bottom line. And you're faced with an even tougher decision -- can I continue to offer health benefits at all next year? Costs are clearly out of control.

Small business owners surveyed by the National Federation for Independent Business put the cost of health insurance at the top of their list of most critical problems facing small business. And the Kaiser Family Foundation reports the number of small employers (companies with three to 199 employees) offering health coverage declined from 68 percent to 63 percent over the last three years.

That means an additional 5 million workers are without health insurance.

Your company doesn't have to be part of that growing number. By applying some simple strategies, you can not only continue offering health benefits to your employees, but can do so in a way that's less disruptive to the financial health of your company.

Here are some of the key components that can help you get the most from your health benefits budget.

* Choice. One size does not fit all. Employees have different needs. Some want comprehensive coverage and are willing to pay for it. Others would rather pay less in exchange for a higher deductible before traditional PPO coverage kicks in. If you're funding full coverage for these employees, it may be more than they need or want.

Some insurers will let small employers offer two, three or more health plans side-by-side. That way, employees choose the level of coverage that's right for them. You don't pay for more than your workers need, and more of your employees may elect coverage -- which can help keep health benefits affordable.

* Consumer engagement. Consumers are the most promising players to contain health care costs. Many believe the total cost of a visit to the doctor's office is their $20 co-pay. But when people are spending a meaningful share of their own money and are given information to do it wisely, they will be much better at controlling spending for themselves and for your company.

Consider plans that give consumers responsibility, such as those with a front-end spending account. As consumers spend the account on health care services, they have good reason to investigate the true costs of care and an incentive to make cost-conscious decisions.

* Tax advantages. Employers can use tax-advantaged spending accounts to help manage the cost of health benefits. Health Savings Accounts (HSAs) allow employees to save money for medical expenses and invest in the account on a tax-deferred basis, with the employer, employee or both contributing. HSAs are typically paired with a high-deductible health plan, offering premium savings, and are portable, so employees can take the account with them from job to job.

In a Health Reimbursement Arrangement (HRA), the employer contributes to a health care account on a pretax basis, and employees use the money to pay for qualified medical expenses. Employers can realize premium savings by combining the HRA with a high-deductible health plan, and employers need not fund the entire account at once, which helps cash flow.

One challenge can be the administrative work in setting up the account, so look for an insurer that offers the HRA and health plan in one easy-to-administer package.

Lastly, employees can save pretax money for health expenses in a Flexible Spending Account (FSA). The downside is that the account does not roll over from year to year, meaning employees must use it or lose it.

Purchasing health insurance can be complex, so it helps to have a trusted adviser. Seek out an independent insurance agent or broker, someone who knows the local market and can help you compare plans and features.

No one should minimize the challenge facing small businesses when it comes to health benefits, but with careful planning and sound strategies, manageable health benefits might be closer than you think.

Alan Guzzino is the president of Humana's Atlanta, North Carolina and South Carolina market health plan operations and is responsible for the management, strategic planning and growth of those markets. Guzzino, an eight-year veteran of Humana, serves on the board of the Georgia Association of Health Plans. Reach him at aguzzino@humana.com.

Monday, 24 January 2005 06:13

Looking ahead

For Atlanta companies, providing employees with access to affordable health care coverage remains a major business challenge in this new year. Nearly two-thirds of small employers surveyed by the National Federation of Independent Business in May 2004 cited the cost of health insurance as the most critical problem facing small business.

With health care costs continuing to rise at near double-digit levels every year, businesses are looking for new solutions to this age-old problem. One of the answers may be to put health benefits decision-making in the hands of those most affected -- the health care consumer.

One option is the introduction of Health Savings Accounts, new to the health care toolkit. There is no use it or lose it rule with HSA funds.

They can be rolled over from year to year, allowing consumers to build a tax-free nest egg for future health care needs. Consumers can use HSA funds to pay for their insurance plan's deductible, as well as qualified medical expenses their health plan may not cover, such as acupuncture.

How HSAs work

To qualify for an HSA, consumers must purchase a high-deductible health plan policy with annual deductibles of at least $1,000 for an individual or $2,000 for a family. This policy must be the consumer's only health insurance.

Here are a few other key elements of HSAs.

* Consumers can contribute funds to their HSA year after year, building on unspent money. Consumers can't make contributions to their HSA once they become enrolled in Medicare, but they can withdraw the accrued funds to pay for approved medical expenses and Medicare Part B premiums.

* Money contributed to the account can be deducted from tax returns, whether or not deductions are itemized.

* Employers can contribute pretax dollars to the HSA, just as they do for 401(k) plans.

* Earnings in an HSA grow tax-free, and consumers can dip into an HSA at any age -- again, tax-free -- to pay for medical expenses. Those expenses include deductibles and co-payments, as well as many charges that typically aren't covered by health insurance, such as over-the-counter drugs, vision care, dental care and long-term care insurance premiums.

* Money in an HSA doesn't have to be used for health care expenses, but consumers must pay income tax on earnings if funds are withdrawn for other purposes. A 10 percent penalty will be imposed on any nonqualified withdrawal before age 65. After 65, funds withdrawn from HSAs can be used to pay for certain insurance premiums, such as Medicare Part A & B, Medicare HMO and the employee's share of retiree medical insurance premiums.

* If consumers currently use a Flexible Spending Account, they can combine it with an HSA, but it can only be used for permitted coverage, such as dental care, vision care and long-term care. An FSA can be wrapped around an HSA for medical expenses covered under the plan only after the member satisfies the minimum deductible.

Considerations for employers

When designing health benefits, employers can include one spending account or combine spending options. For example, an employee can enroll in both a Health Savings Account and a Flexible Spending Account.

In designing a plan, employers should consider the amount of flexibility they need and whether they will fund an account entirely, share funding with the employee or offer an account with employee-only contributions.

Other considerations include:

* How pharmacy benefits fit in

* The impact of a fund on FICA savings

* The impact of spending accounts on employees ages 55 or older

* Whether the spending account supports employee retention

Alan Guzzino is the president of Humana's Atlanta, North Carolina and South Carolina market health plan operations and is responsible for the management, strategic planning and growth of those markets. Guzzino, an eight-year veteran of Humana, serves on the board of the Georgia Association of Health Plans. Reach him at aguzzino@humana.com.