A 2013 survey of 2,000 U.S. health care consumers found that 83 percent are entirely unfamiliar with private exchanges, according to Accenture, a global management consulting company.

A Kaiser Health poll conducted at the same time found that almost half of respondents didn’t understand that public exchanges are a provision of the Affordable Care Act (ACA).

A year later, those numbers might have moved somewhat, but the confusion and caution about the health care exchange concept is still causing slow initial enrollment for both.

“I haven’t seen a massive uptake on the private exchanges yet,” says Mark Haegele, director of sales and account management at HealthLink. “But I have started to see, for the first time, a few employers say, ‘I’m no longer offering insurance, and you can just go on the public exchange.’”

However, the wait-and-see approach may change soon. By 2017, private exchanges are expected to catch up to public exchanges, with one in five Americans purchasing benefits from a health insurance exchange, Accenture projects.

Smart Business spoke with Haegele about how the two exchange types differ.

How are private exchanges different from the public ones?

The public exchanges, which are mandated by the ACA, allow certain unemployed individuals, individuals with employer-sponsored plans and some small companies to purchase health insurance. The exchanges are sponsored by the government, either state or federal, and cover medical and prescription drugs with four levels of coverage. The individual consumers and small employer groups pay for the coverage, with some eligible to receive government subsidies.

Private exchanges are available to employees of companies who decide to participate. Right now, only a few organizations are offering private exchanges, such as Aon Hewitt, Towers Watson and Gallagher Benefit Services, Inc. The employer sponsors the coverage, but a private exchange has a broad range of coverage from medical and prescription drugs to dental, vision and voluntary benefits. Like a traditional health plan, usually the employer and employee each pay for part of the coverage.

What’s the attraction to private exchanges? Do they help employers control health costs?

Private exchanges are a way for employers to easily establish a defined contribution-type health plan. They can say, ‘I spent $1 million last year on health care for my employees. I’m willing to spend $1 million plus 3 percent next year, but that’s it.’ Then, every person gets an allocation and can choose within the available plans.

Private exchanges create predictability. You’re buying a more budget-friendly solution, that helps employers be one more step removed from insurance, versus managing your own health plan. In fact, it may end up being a stepping-stone to the public exchanges. Once employees get used to exchange-type health plans, some employers may decide to stop health coverage altogether, having them go on the public exchange.

An exchange doesn’t inherently do anything to control health care costs. It’s not a silver bullet. The claims are still the claims. The health status is still the health status. And the insurance companies still have to price each plan with their underwriters. You can build in prevention measures to keep costs down, but that’s like any health plan.

What else should employers know about private exchanges?

So far, private exchanges are structured as a single carrier solution. For example, if Aon Hewitt’s private exchange has Anthem, UnitedHealthcare and Cigna, a 500-life employer can go to the exchange and pick one of those three carriers. Then, health plan members have a menu of plan offerings under that single carrier.

Typically, the majority of employer-sponsored health plans have two or three options. Under the exchange model, you might have upward of 10 choices, as well as ancillary coverages. There are still plenty of choices, but it’s not like each health plan member can decide between UnitedHealthcare, Anthem and Cigna. It basically puts different carriers’ defined contribution plans in a room together, making it easier for employers to choose one.

Mark Haegele is the director of sales and account management at HealthLink. Reach him at (314) 753-2100 or mark.haegele@healthlink.com.

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Published in St. Louis

Emergency room overutilization is a prevailing problem for most employers. For example, looking at HealthLink’s book of business, almost invariably more than 65 percent of ER visits are for non-emergency reasons. They fall into the categories of disease and virus or symptom, such as headaches, gastroenteritis, sinusitis and influenza.

“The cost of an average ER visit ranges from $1,300 to $1,500, but the average urgent care or client visit ranges anywhere from $120 to $500,” says Mark Haegele, director of sales and account management at HealthLink.
“If you move any of those visits from the ER to other care settings, you’re saving roughly $1,000 per visit,” he says. “And hundreds of visits add up to hundreds of thousands of dollars.”

Smart Business spoke with Haegele about turning member information into intelligence, in order to control plan costs.

What’s the first step to creating a strategy to decrease ER utilization?

It’s important to look at your health plan membership data to find patterns. Then you can focus on a communication strategy and specific messaging to change behavior. It helps if your health care plan is partially self-funded or self-funded because you typically have access to more data.

To determine what actions to take to control ER utilization and cost, first look at the number of visits your group has in 12 months, comparing that year-over-year. Even if you’re not seeing an increase, there will be opportunities for cost containment.

Also, find out if you have a frequent flier issue. Are people going to the ER three or more times in a given year? Are some going five or more times? Determine what days of the week people are visiting the ER. If there’s a spike on weekends, educate members on how to access other care settings on Saturday or Sunday. You can look at where the emergency care is taking place. Is it isolated to a particular community or split across a region of the country? Finally, break the visits down by disease, virus and symptom versus injuries and poisonings. If someone breaks an arm, for example, he or she is going to go — and should go — to the emergency room.

Once you’ve examined the data, what’s next?

Once the data is gathered, and you’ve discovered some of the challenges, set up metrics. If your average number of ER visits have been consistently at X per 1,000, or X per year if your membership has been consistent, then the question becomes can you eliminate 30 or 40 percent of the visits for disease, virus or symptoms? That’s your target for the following year.

How can employers educate and influence health plan members?

You need to come up with a multi-faceted communication strategy. Create one piece of communication that goes to all members, such as a flier on the proper use of the ER. But you also should reach out to certain groups differently, such as frequent fliers.

Use the information about what hospitals members are visiting to generate a directory of urgent cares and clients in and around the same zip code. Nearly 80 percent of adults ages 18 to 64 visited the ER in 2011 due to lack of access to another provider, according to Amerigroup. Another way to influence members is to ensure they know the number for the health plan’s 24-hour informational nurse line, which most plans have.

The more you share specific costs in your communications, the better people will respond. Include a grid that specifically shows the cost to the employer and member for all different care settings.

Another idea is to communicate a list of non-emergency diseases or symptoms that create overutilization. This gives people food for thought. And put it in plain English. Don’t say gastroenteritis; say stomach pain. Don’t say urinary tract infection; say kidney pain. However, be careful how you coach this; you don’t want to tell people not to go to the ER. It’s more about awareness and education.

What about raising co-pays?

Yes, higher co-pays get people out of the ER, but raising the cost has become too abused — and it often gets shifted from the employer to members. Before you start digging into the member’s pocket, give them the opportunity to do the right thing on their own.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or mark.haegele@healthlink.com.

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Published in Chicago

Although some aspects of the Affordable Care Act remain uncertain, the act overall is driving the health care market to figure out ways to control costs and allow employers to continue to offer health plans, says Mark Haegele, director of sales and account management at HealthLink.

As a result, managed care companies are increasingly utilizing three tools —reference-based pricing, Domestic Centers of Excellence and narrow networks.

“Some of these concepts are still new, so an employer might tackle one thing at a time,” Haegele says. “Maybe you start with narrow networks, and then move into reference-based pricing or Domestic Centers of Excellence.”

Smart Business spoke to Haegele about how each strategy can drive down costs and the overutilization of health plans.

How does reference-based pricing work?

Within a managed care network, you identify facilities, procedures and/or services that have low costs and high quality, and then establish a plan design that drives plan members to them. If, for example, you’ve identified that

Provider A performs knee replacements for $5,000, then members who go to that provider have their costs covered at 100 percent. If a member goes to another more expensive provider, he or she is responsible for the difference. This schedule could cover a whole host of surgeries and procedures.

Reference-based pricing, which is cutting edge in both contracting and plan design, can have a major impact on costs.

What are Domestic Centers of Excellence?

With this model, you identify high-quality providers across the country to be the hub for a certain procedure type. For example, all transplants might go to the Mayo Clinic, while all knee, hip and shoulder replacements go to Mercy Springfield Missouri. The health plan promises to pay 100 percent for the procedure and the travel for the member and a caregiver, as opposed to just giving a deductible and coinsurance.

The value isn’t just with price points, but also aligning incentives. Providers are willing to offer preferred pricing based on the exclusivity and volume, and employers achieve savings on unit cost. In addition, unlike the traditional fee-for-service model, providers objectively review for appropriateness first. The contract includes a performance component to eliminate waste. So, Mercy, which performs 30 percent fewer back surgeries than the national average, keeps members from getting inappropriate surgeries.

Originally only used by large employers, this model has become more prevalent. Smaller employers can piggyback on either large employers or a managed care network that develops this for its entire block of business with specialized contracts.

How do narrow networks lower health costs?

Depending on your geography and population, you may be able to partner with your managed care network to customize your network. In a rural or smaller market, this may mean exclusively driving the members to one facility. In turn, typically the hospital will provide a better managed care contract.

You may get pushback from members who prefer one facility to another. The employer must convey that this is about looking at cost and quality to find the right facility, which then has an impact on premiums.
Narrow networks have been around for a while, but now managed care companies are starting to wire together narrow networks across a region to create a sub-network.

Can these strategies be used in conjunction with any type of health plan?

Although there is some overlap, you can use a combination of strategies, depending on your readiness for change. The difference is more of a degree of granularity — Domestic Centers of Excellence and reference-based pricing are broken down by procedures, while narrow networks are more geographic-centric.

Self-funded health insurance plans may use any of these tools. Fully insured carriers are now implementing narrow networks and referenced-based pricing. With the health exchanges, narrow networks should become more common as carriers look for ways to keep costs down.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or mark.haegele@healthlink.com.

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Published in Chicago

The bulk of the Affordable Care Act (ACA) will be implemented on Jan. 1, 2014. Even though large employers don’t necessarily need to go through the chess game of whether or not to offer insurance — pay or play — a number of new initiatives still come online.

The community rating rules, which limit how insurance carriers can classify small employer groups, the individual mandate and $8 billion insurer tax all will shape health care and premiums in the coming year.

“You’ve got to keep your eyes open, and continue to see what’s going on,” says Mark Haegele, director of sales and account management at HealthLink.

Smart Business spoke with Haegele about how to develop a year-end checklist of responsibilities related to health care reform.

What is the first thing an employer must do?

The ACA is not going away, so you must determine how the law applies to your business.

Let’s say you are contemplating offering in 2015 minimum essential coverage plans, ‘skinny plans,’ that just cover preventive care. Employers with 50 or more full-time equivalent employees may want to consider making this move in 2014, even though the employer-shared responsibility provision, or employer mandate, isn’t in effect. This prevents employees from getting subsidies and going through the new health care exchanges, or marketplaces, and then losing these funds in 2015 when you move over to a lower-level plan.

Consider any future health care changes, and how they will impact your employees for the next couple of years. You don’t want to aggravate staff and cause retention problems.

What’s important to know about your insurance?

Many people expect to see sharp spikes in health insurances costs and premiums after Jan. 1, 2014, which could be unsustainable. The $8 billion insurer tax, which likely will be passed onto employers in the form of premiums, is being calculated as a 4 to 6 percent increase. The community rating rules could drive premiums up by more than 60 percent if your insurance group is a young, healthy population. Out-of-pocket maximums have been limited to no higher than $6,350 for self-coverage and $12,700 for family coverage for most insurance.

The upcoming January 2014 health insurance renewals are the last to come into compliance before many large employers face fines. Consider where you are, and the steps it will take to come into compliance before your 2015 renewal.

Business executives need to analyze the costs and benefits of remaining with their current insurance plan or moving to self-funding, which has more freedom from regulations. Take the time to examine this regularly. No one is sure how the insurance market will react to ACA measures.

Beyond strategic decisions, what concrete actions need to be completed?

You need to make sure you sent out the notice to your employees about the new health care marketplaces, or exchanges, required as of Oct. 1, 2013. It’s a good idea to include this with your orientation materials to ensure all new employees are notified.

In addition, a Summary of Benefits and Coverage, an easy-to-understand summary of health care benefits, must be given to eligible participants at least 30 days before your plan year begins. Your insurer, health reimbursement arrangement provider or third-party administrator usually provides this.

Verify your employee-waiting period meets new requirements. A group health plan cannot make new employees wait more than 90 days for health insurance coverage as of Jan. 1, 2014.

Even though the employer mandate was delayed, large, fully insured employers should use 2014 as a trial year. Set up your tracking procedures for employee hours, especially those who work part time, so you can spot any problems. Because of the delay, the government will likely be less tolerant of any mistakes in 2015.

Health care compliance will continue to be a major concern for businesses. You need to make time to understand how the ACA will impact your company, even if it takes outside expertise to manage all your obligations.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or mark.haegele@healthlink.com.

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Published in Chicago

Approximately 60 percent of the U.S. commercial population is self-funded today, and as health care premiums continue to rise under fully insured plans, self-funding looks to become even more attractive. However, many employers don’t realize how much self-funded health insurance has evolved with strategies and plans designed to help control costs.

“Self-funding does not look the same as it did just a few years ago,” says Mark Haegele, director of sales and account management at HealthLink.

Smart Business spoke with Haegele about how self-funding fits into health care today.

What’s driving the increase in self-funded health insurance?

Health insurance premiums are increasing at an unsustainable rate. Employees pay 89 percent more for family health care premiums, compared to a decade ago. In 2013, premiums only rose 4 percent, but that’s more than twice the rate of wages.

Self-funded premiums typically aren’t as costly. A recent Department of Labor report found that in 2011 fully insured premiums increased by $808, while self-funded premiums only increased by $248.

In response, 60 percent of companies self-insured their health benefit programs in 2011, up from 49 percent in 2000, according to a Kaiser/HRET survey. This increase can be partially attributed to more self-insured employers with fewer than 1,000 people in their health plan programs. In just two years, small and midsize employers that self-insure nearly doubled, according to PricewaterhouseCoopers data from 2010.

How has self-funded insurance changed?

Fifteen to 20 years ago, employers were afraid to trust self-funding, even though they knew it brought certain advantages, such as avoiding premium taxes, risk charges and state mandates. A self-funded environment gives employers more plan flexibility, depending on the disease prevalence or demographics of their population, as well as more access to data and lower fixed costs. But a piecemeal approach to health insurance that went against the insurance market culture was a foreign concept.

Today, there is less fear and higher adoption rates. At the same time, historical best practices still exist — avoiding taxes, risk charges and state mandates with lower fixed costs — as well as additional cost savings where self-funded plans avoid rules and regulations of the Patient Protection and Affordable Care Act.

What do self-funded plans look like today?

There is a market culture shift in the self-funded environment with more flexible plan designs. Member data is now transformed into actionable intelligence. Plans target specific high-dollar categories, such as high-dollar claimants, high-cost imaging, cancer and dialysis treatment, and pharmacy. With more transparency, employers can influence purchasing decisions by aligning incentives.

High-dollar categories like pharmacy are an area where vendor selection is key. Self-funded plans today have more administrator and vendor integration to better control these costs. A majority of employers spend around 16 percent of their total health care budget on pharmacy.

In addition, self-funded plans can be designed with custom networks, based on the cost of care. Through data analytics, plan sponsors can identify preferred facilities, procedures and/or services, and then use the plan design to cover a higher percentage of a preferred procedure or service.

Another strategy is using domestic centers of excellence. With this type of contract, providers offer preferred pricing due to exclusivity and volume. Employers can achieve savings on the unit cost. There’s also a performance component to eliminate waste — the provider gets a bonus for avoiding surgeries.

With pay-for-performance, a budget is set with expected costs, and the health care providers and employer agree on how to measure performance, looking at readmission rates, member pharmacy compliance, minimum levels of care, etc. Then, providers receive a percentage of the savings realized, as an incentive.

Self-funded plans are even utilizing alternative delivery models, such as telemedicine, on-site or near-site clinics and concierge health services.

Self-funded insurance may not be what you thought, so take the time to see if today’s plans would work for your business.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or mark.haegele@healthlink.com.

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Published in Chicago

Starting next year, the Affordable Care Act requires individual and small group insurance plans to cover 10 “essential” health benefits. But, these minimum essential benefits go beyond the coverage that many individuals and small businesses purchase today, so plan costs may increase to meet the coverage requirements.

“Regardless of your funding type, whether you’re self-funded or not, your plan is required to provide the minimum essential benefits,” says Mark Haegele, director, sales and account management at HealthLink. “But something that wasn’t really contemplated is the difference by states based on price points from different providers.”

Smart Business spoke with Haegele about the minimum essential benefits and their impact on individuals and small employers.

What are minimum essential benefits?

Starting Jan. 1, 2014, all health insurance policies sold to individuals and small employers must cover a broad range of benefits, setting a standard for all plans and allowing for easy comparison. The 10 categories of coverage are:

  • Ambulatory services. 
  • Emergency services.
  • Hospitalization. 
  • Maternity/newborn care. 
  • Mental health/substance abuse. 
  • Prescription drugs. 
  • Rehabilitative and habilitative services and devices. 
  • Laboratory services.
  • Preventive and wellness/chronic disease management.
  • Pediatric services, including oral and vision.

Plans offered on the insurance marketplaces also must cover these benefits. 

In addition, plans will be separated into tiers, which helps consumers compare plans. Known as the metal levels, there are bronze, silver, gold and platinum plans. Essential health benefit plans must cover at least 60 percent of costs. The only exception is catastrophic plans that target people younger than 30 or otherwise unable to obtain affordable coverage.

How is this different from minimum essential coverage?

Although they sound the same, minimum essential coverage (MEC) only applies to large employers, those with more than 50 full-time equivalent employees. MEC relates to the employer mandate, ‘play or pay,’ that was pushed back to 2015, where employers must at least provide preventive and wellness care or face fines.

Small employers aren’t required to offer insurance. But if they do, the plans they buy must cover the 10 essential categories. 

Large employer group plans do not have to cover the essential health benefits, but there cannot be annual or lifetime dollar limits on the benefits within this set.

How might minimum essential benefits increase insurance premiums?

Plans may now have to cover new areas, such as pediatric vision care coverage as part of the medical benefit for children up to age 19, which could increase premium costs. Like other essential health benefits, there are no annual or lifetime dollar limits allowed. 

According to the U.S. Department of Health and Human Services, many individuals purchasing coverage don’t currently have coverage for maternity services (62 percent), substance abuse services (34 percent), mental health services (18 percent) and prescription drugs (9 percent).

However, the out-of-pocket costs paid by individuals will likely be lower, according to the American Academy of Actuaries.

How might costs vary by state?

If you live in a state with a lightly regulated insurance industry, the minimum essential benefit plans’ more comprehensive coverage will have a greater impact. That’s because insurers previously sold ‘bare bones’ plans that excluded the sick, keeping costs down. Independent estimates of premium impact in the individual market, according to America’s Health Insurance Plans, have large increases in Maine (33 percent), Indiana (20 percent) and Ohio (20 percent). Other states — Rhode Island (0.13 percent), Colorado (2.2 percent) and Wisconsin (6 percent) — will see less of an impact.

To further complicate matters, states can specify benefits within each of the essential categories, at least for 2014 and 2015.

Mark Haegele is director of sales and account management at HealthLink. Reach him at (314) 753-2100 or mark.haegele@healthlink.com.

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Published in Chicago