Abuse of alcohol and drugs in the workplace is a reality that employers cannot afford to overlook. According to a 2008 study by the Substance Abuse and Mental Health Services Administration, more than 70 percent of the admitted drug and alcohol abusers in the country are employed, and a majority of those are full-time employees.

The costs to an employer can come in different forms. A study by the National Institute on Drug Abuse found that drug-using employees are 2.5 times more likely to have absences of eight days or more, three times more likely to be late for work and five times more likely to file a workers’ compensation claim.

“Alcohol and drug abuse on the job can cost employers money in many ways. Some of the ways are easily visible, such as higher health care premiums. Other ways are more covert, such as absenteeism, accidents and theft,” says Jan Nedin, MBA, MSEd, RCC, a senior account manager at LifeSolutions, UPMC Insurance Services Division.

Smart Business spoke with Nedin about how to address alcohol and drug abuse at your organization.

What’s the first step to proactively approaching this problem?

Employers must develop a substance abuse policy. It should include:

  • A requirement that all employees report to work and remain free of alcohol, mood-altering drugs and other intoxicants.

  • Acknowledgement that the company recognizes alcoholism and drug abuse as illnesses that are major potential problems regarding health, safety, security and productivity.

  • A statement indicating that behavior and performance problems related to alcohol and drug abuse should be identified early and dealt with constructively via professional evaluation and treatment.

  • A clear statement that chemically influenced behavior and/or performance will not be tolerated and could result in discharge.

How can an employee assistance program (EAP) help?

An EAP is a confidential consultation, assessment and referral service available to employees and supervisors to deal with recognition and treatment of substance abuse problems, as well as other personal problems that may be affecting an employee’s performance. It is an extremely valuable tool in dealing effectively with these problems.

What roles do supervisors play?

Supervisors need to know the company policies and procedures, monitor employees’ performance and behavior, and document performance problems. It is not a supervisor’s job to diagnose drug or alcohol problems — that should be left to the professionals. An EAP consultant can train supervisors on when to refer drug abuse and alcohol matters to the EAP for assessment.

What else is important to remember?

Design appropriate health plan coverage. Efforts to help the employee will be much more challenging unless health plan coverage is in place that allows employees to get treatment as needed.

Consider pre-employment and random drug screening. This is not the answer, but rather a tool that must be utilized wisely and cautiously. Pre-employment screening can weed out undesirable applicants so you have less of this problem to deal with after hiring.

If unionized, involve the union. When unions are present, they must be involved for the program to be effective.

Secure good legal counsel. Be sure to have policies and procedures reviewed and approved by a good labor relations attorney prior to implementation.

Don’t make it a witch hunt. Turning a program into a concentrated search for substance abusers may be counterproductive. Place your emphasis on recognizing and helping those who exhibit problems.

Do not concentrate solely on drugs. Alcohol, which is also a drug, can be just as serious a problem, if not more so, and all should be equally addressed.

LifeSolutions is part of the integrated partner companies of the UPMC Insurance Services Division, which offer a full range of insurance programs and products. The partner companies include UPMC Health Plan, UPMC WorkPartners, UPMC for You (Medical Assistance), Askesis Development Group, Community Care Behavioral Health and E-Benefits.

Jan Nedin, MBA, MSEd, RCC, is a senior account manager at LifeSolutions, a UPMC Insurance Services Division. Reach her at (412) 454-8488 or nedinjs2@upmc.edu.

Insights Health Care is brought to you by UPMC Health Plan

Published in Pittsburgh

Improve performance, optimize efficiency and deliver value. That’s what employers are always under pressure to do. What many employers do not realize is that an integrated approach to safety and health can play a major role in creating healthier, high-performing workforces.

“Employers can have a major influence on the health and care behaviors of employees,” says Dr. Michael Parkinson, senior medical director for health and productivity at UPMC Health Plan. “Employers have a major role to play in both improving health and reducing health-related costs.”

Smart Business spoke with Parkinson about how to best improve employee health and productivity and reduce health costs.

What is the connection between employee health and company productivity?

Growing competitive and economic forces increasingly challenge employers and leaders of all organizations. A core asset of any organization is the health and productivity of its workforce, its ‘human capital.’ And as visible leaders, employers can influence their employees. It makes sense to provide an integrated, incentivized strategy to address the core drivers of poor health, excessive medical costs and lost productivity. Healthier employees are safer employees, and healthy, alert employees reinforce properly designed workplaces and safety policies.

By following an integrated and incentivized strategy that addresses the core drivers of poor health, excessive medical costs and lost productivity, employers not only improve the health and care behaviors of employees and their families but also add dollars to both their top and bottom line.

Total health management is increasingly being recognized as a business necessity, not a ‘nice to do.’

What’s the first step?

Building a culture of health, performance and productivity has been shown to be a critical determinant of the health and competitiveness of any business.

A comprehensive assessment of environmental drivers of health and productivity is an essential first step to determine an organization’s strengths and needs. The work environment is not just the traditional physical workplace, but also attitudes, behavior policies, compensation schedules and promotion opportunities.

Creating simple, reinforcing messages in corporate vision, compensation, and promotion and benefit alignment sends the message that employee and family health is core to the organization’s success.

How can healthy behaviors be improved?

Assisting employers to create the infrastructure to sustain health, wellness and productivity is a key responsibility of a health plan. A health plan can help sustain health and productivity through consultation, educational support, benefit alignment, and the creation of a wellness committee to initiate and sustain wellness efforts.

The recognition and rewarding of healthy employee champions is a key leadership message, along with making it known that the employer wants to assist employees and their families in achieving health goals.

By offering employees a health plan with appropriately designed and communicated incentives, employers have an evidence-based method to improve behavior change and increase employee engagement. Account-based, consumer-directed plans with additional targeted incentives for health improvement and care management decisions increase employee engagement and produce health care costs savings.

What results can an employer expect from an integrated and incentivized strategy?

The majority of the known causes of excessive health care and productivity costs — stress and mental health, absenteeism, short- and long-term disability, workers’ compensation, occupationally-related illness and injuries — can be addressed by an employer using a comprehensive and integrated strategy supported by targeted tactics, programs and practices.

By improving the health status of employees (and their families), by assisting them to get involved in their medical care decisions with their doctors and by directly targeting specific ineffective and inefficient medical practices and delivery modalities, both the employer and the employee can improve health and produce savings.

Dr. Michael Parkinson, MPH, FACPM, is the Senior Medical Director of Health and Productivity at UPMC Health Plan. Reach him at (412) 454-5643 or parkinsonmd@upmc.edu.

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When it comes to telemedicine and telehealth, the future is most definitely now. Advances in technology have spurred advances in telemedicine and carry with it the potential to increase access to care, improve quality and reduce costs.
“Telehealth solutions have the capacity to improve the quality of care, improve access to care and reduce the cost of delivering care,” says Dr. Stephen Perkins, vice president of Medical Affairs for UPMC Health Plan. “It has the potential to reduce costs for both physicians and patients.”   

Smart Business spoke with Perkins about telemedicine and telehealth and their potential to improve care and reduce costs.

What is the difference between telehealth and telemedicine?

Telehealth is a general term describing the delivery of health-related services and information by the use of telecommunication technology. It can include phone calls between physicians, videoconferencing or even robotic technology.

Telemedicine has a narrower definition: The specific use of medical information that is exchanged from one site to another via electronic communications for the health and education of a patient or a health care provider for the purpose of improving patient care. It includes consultative, diagnostic and treatment services.

Historically, hospitals and health systems in rural areas have been most closely connected with telemedicine, as travel times and a lack of specialty physicians has made telemedicine more attractive. However, the entire health care industry, urban and rural, national and even international, could benefit from its widespread use.

What are the most significant benefits from telehealth and telemedicine?

Certainly, the top benefit would be increased access both for patients and physicians.

Persons who live in remote areas have not always had access to the latest medical advances. With telemedicine, there is the capacity for specialists to evaluate a patient’s condition from afar. Homebound patients could have their conditions monitored and reduce the number of trips they need to make to a physician’s office.

With telemonitoring technology, a physician can oversee the progress of a patient and help the patient avoid problems. Telehealth technology breaks down many barriers to access to care.

What technologies are used in telehealth?

Many different technologies can be used. Among them are: videoconferencing, the Internet, store-and-forward imaging, streaming media, terrestrial communications and wireless communications.

What are some examples of telehealth?

Telehealth can mean e-visits, whereby patients do not have to come into their physician’s office for a routine problem, but correspond via Internet and may even get a prescription for their condition, if needed. This way, routine matters do not tie up a physician’s time, and patients do not need to miss work or arrange for day care in order to get medical advice for minor matters.

In some instances when someone has a chronic condition requiring consistent monitoring, or they are homebound with a stroke, a telestroke program allows them to be seen by a specialist.   

Are there barriers to telehealth becoming more widespread?

Telemedicine implementation can be expensive and time consuming, which may make it difficult for health system executives to see the value, especially since not all patients will use the services.

In addition, with telehealth’s ability to transcend state boundaries, there may be issues regarding licensing and certification. Policies regarding telehealth licensing vary greatly between states.

How will this impact health care costs?

While the initial cost of the technology may be high, the overall impact should be to reduce costs. If monitoring a condition becomes easier because of telehealth access to patients, that should improve preventive care and reduce the number of emergencies, which will help to hold down costs. If telehealth advances can bring specialist care to places where it has never been before, that, too, should mean more effective treatments and, ultimately, lower costs.

Dr. Stephen Perkins is a vice president of Medical Affairs at UPMC Health Plan. Reach him at (412) 454-7682 or perkinss@upmc.edu.

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The advantages of an electronic health record (EHR) for individuals are readily apparent to many physicians. According to the most recent survey by the Centers for Disease Control, 75 percent of physicians who have adopted EHR say the technology has led to better care.

But, for any number of reasons, that message has not quite gotten through to the general population. Privacy and security concerns are the major reasons cited by the public for its unease, and the main factors keeping many people from embracing the concept, even as the nation becomes more “digitized” in other areas.

“The general public doesn’t know much about electronic health records, and so there is some unease about the concept,” says Dr. Stephen Perkins, vice president of Medical Affairs for UPMC Health Plan. “It will take an educational effort to get more people to see what the positive impact of EHRs can be.”

Smart Business spoke with Perkins about the advantages of EHRs and the impact it can have on health care.

What are electronic health records?

EHRs are an electronic record of information that reflects all of the health care that was delivered to a specific patient in various locales over the years. The information can include patient demographics, progress notes, medications, vital signs, medical history, immunizations, laboratory data and radiology reports. Ideally, an EHR gives a physician a streamlined look at a patient’s complete health record and should make the delivery of health care more efficient and effective.

Why is there resistance to EHRs?

In a Harris Interactive survey taken in 2012, only about one quarter of the respondents said they wanted their records to be transferred from paper to an electronic version, and 85 percent of respondents expressed some kind of concern about EHRs. The survey also revealed that only 40 percent of people think that EHRs would help doctors deliver better, more efficient care, which is actually a slight decrease from previous years.

The reasons for the resistance include a fear of records being stolen by computer hackers, the potential for misuse of the personal information stored, and even the fact that physicians might not be able to access a patient’s record during a power or computer outage.

Even some physicians see a downside to EHRs. In a recent study by the American Medical Association, some physicians complained that EHRs increase their data entry responsibilities and requires them to perform added, time-consuming tasks.

What are the advantages of EHRs?

With EHRs, the chance of medical errors should be reduced because the accuracy and clarity of medical records is improved. When a vast amount of patient information is available in one place, it also should reduce test duplication, in turn reducing treatment delays and helping patients be better informed to make better decisions.

Other advantages of EHRs range from conservation of storage space to the fact that EHRs make patient information accessible from remote sites to many people at the same time. EHRs can make communication between health care providers easier and better, and the information is less likely to be lost or destroyed.

Are there any disadvantages to EHRs?

Disadvantages would include the initial expense, the unwillingness of employees to adapt to the new technology and the need for additional maintenance. The cost of starting an EHR system can be excessive, especially during a time when health care organizations are extremely concerned about higher prices. But it also can be argued that EHRs will ultimately reduce costs and improve quality by helping providers and patients be better informed, by eliminating costly and unnecessary duplicate tests and by helping to better coordinate care.

How can resistance be overcome?

Basically, patients need to be educated to the fact that EHRs will not replace their personal physician. EHRs just help their physician do a better job. Nothing can replace the critical thinking ability of a physician. What a well-designed EHR system can do is collect and disseminate information and assist in decision-making.

Dr. Stephen Perkins is a vice president of Medical Affairs at UPMC Health Plan. Reach him at (412) 454-7682 or perkinss@upmc.edu.

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The modern employee assistance program (EAP) is an employer-sponsored benefit designed to support the achievement of employer health and productivity goals. EAPs also have evolved to become a strategic partner to maximize the human capital of an organization.

“An EAP’s main goal is to resolve problems before they interfere with work attendance or productivity. And, in performing that task, EAPs have a positive impact on a company’s bottom line,” says Sandra Caffo, a senior director at LifeSolutions, an affiliated company of UPMC WorkPartners.

Smart Business spoke with Caffo about how EAPs work and their ROI.

What is the potential payoff of using an EAP?

A study found that for every dollar spent in a typical EAP, there was a return of $5.17 to $6.47 in increased work productivity. The study also showed that 80 percent of costs from lost productivity were associated with presenteeism, which is when an employee is at work, but is not productive, largely because of personal problems.

EAPs employ behavioral health experts who can provide short-term coaching and counseling that focuses on problem resolution. The goal with all EAP services is to resolve problems before they interfere with work attendance or productivity. Because of that, EAPs can help supervisors understand how to manage those valued workers whose productivity suddenly and mysteriously plummets.

How do EAPs enhance value?

Supervisors may be able to spot a troubled employee and express concern, but typically they are not equipped to work out a plan of action to address the problem. Many supervisors would argue — correctly — that this isn’t part of their job description. That’s where an EAP can help. It can provide consultation to both the manager and the employee to develop a plan of action.

EAP consultants are able to guide leaders at all levels to shift their focus to management strategies that will make a difference in an employee’s job performance. With an EAP management consultant, leaders learn how to coach employees toward improved performance while holding them accountable for negative patterns of behavior.

Because EAPs are able to provide services that consider all of the occupational and non-occupational factors that affect job performance, they are able to increase the value of an organization’s investment in its workforce. They achieve this in several ways:

  • By increasing employee engagement and improving productivity, morale and workplace harmony.  
  • By focusing on building the capacity of employees and their dependents to successfully respond to life’s personal and work-related challenges.
  • Through EAP coaching and consultation, which helps leadership, managers and supervisors increase their skills to effectively address difficult employee situations. It can tailor programs and initiatives for key workforce groups to meet specific needs.

How does an EAP mitigate business risks?  

Supervisor consultation helps to build action plans and handle new or complicated employee situations, from incompatible employees to workforce reductions.

On-site trainings focus on staff development and skill building in areas such as stress management, customer service and multi-generational teams.

EAP intervention also can help when an organization has a traumatic incident like an accident or death to support those managing the situation and those affected by it.

A federal occupational health study of more than 60,000 workers using EAP services over a three-year period found statistically significant improvement from pre- to post-EAP intervention for six measures related to work productivity. These include: employees’ emotional problems, employees’ physical health, the interference of physical or emotional issues on work and social relationships, perceived health status, job attendance and/or tardiness, and global assessment of functioning. In short, the benefits of EAPs are measurable, and they can be used to select an effective EAP, gauge its performance and determine the ROI.

UPMC WorkPartners is part of the UPMC Insurance Services Division, which also includes: UPMC Health Plan, UPMC for Life, UPMC for You, UPMC for You Advantage, UPMC for Kids, Community Care Behavioral Health, EBenefit Solutions and Askesis Development Group.

Sandra Caffo is a senior director at LifeSolutions, an affiliated company of UPMC WorkPartners. Reach her at (412) 647-9480 or caffosm@upmc.edu.

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Population health management is becoming an increasingly popular concept for health care organizations. Population health management — defined as an approach to health that aims to improve the health of an entire population — goes far beyond the concept of only treating patients in need of immediate care.

“Population health management helps health care delivery organizations better manage all aspects of health, from wellness to complex care,” says Dr. Marc Manley, vice president of Population Health Management for UPMC Health Plan. “Population health management has the ability to deliver better health outcomes at a lower cost.”

Smart Business spoke with Manley about population health management and how it will affect health care results and costs.

Why is population health management getting more attention now?

Population health management is gaining more attention because the fee-for-service model is going away. Hospitals, health care systems and physicians understand that they are living in a world that increasingly rewards those who meet quality objectives for their entire population, not just those who present themselves for care.

Population health management also shows the promise of delivering better health at a lower cost by creating an integrated system of care, rather than forcing consumers to figure out how to make their own way through the current health care system.

Aren’t many factors that influence the health of a population beyond the scope of any care organization?

There are many factors that influence the health of a region: environmental factors, economic factors, the social structure, etc. But many health care organizations are already involved in community efforts to improve health. In a lot of ways, population health management complements these organized efforts by addressing factors that impact an entire population. Population health management also puts added emphasis on reducing health care delivery inequities.

How does population health management impact providers?  

Most clinicians already recognize the limitations of traditional care in keeping people healthy, and they’re looking for ways to be more effective. But preparing for population health management requires a significant change for providers.

Providers will no longer be rewarded for doing more, but rather for producing quality outcomes more efficiently. Providers need to assess the health of their entire population across the entire spectrum of health — that includes those who are well, and who can stay well by getting appropriate preventive services. Those who have health risks need help changing their health behaviors in order not to develop the diseases for which they are at risk. For those with chronic conditions, providers can prevent further complications by closing care gaps and working on health behaviors.

Technology will have a key role in population health management, as it can help to assess and stratify patients and target interventions to the right people.

What are the objectives of population health management?

Population health management strives to keep a patient population as healthy as possible, thereby minimizing the need for costly interventions such as emergency department visits, hospitalizations, imaging tests and procedures. In addition to being less costly, it redefines health care as being more than just reactive sick care. By considering the needs of an entire population, population health management systematically addresses the preventive and chronic care needs of every patient.  

What is essential to make this work?

First of all, it will require those of us involved with health care to think in new ways and be willing to try new things. It will also require new financial arrangements in health care that reward positive health outcomes, not more services. And there must be a strong technology foundation, including Web-based tools for patients and providers, and data systems that support analytics across a wide spectrum of inpatient, outpatient, post-acute and community services.

Dr. Marc Manley, M.P.H., is a vice president, Population Health Management, UPMC Insurance Services Division, at UPMC Health Plan. Reach him at (412) 454-0892 or manleym@upmc.edu.

SAVE THE DATE: Thursday, Nov. 7, UPMC WorkPartners will present a webinar on “Wellness and Risk Control.” Register here.

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Preventable hospital readmissions cost the U.S. health care system an estimated $25 billion every year, according to a study by PricewaterhouseCooper’s Health Research Institute. A logical first step toward containing health care costs would be in controlling the expenses related to these readmissions.

“The patient-centered medical home is becoming a very effective tool for reducing preventable hospital readmissions,” says Dr. Stephen Perkins, vice president for Medical Affairs at UPMC Health Plan. “The care and attention that patients are provided in the medical home model is compatible with improved quality of care, well-coordinated care and readmission prevention. Coordinating care for patients with complex conditions is essential.”

Smart Business spoke with Perkins about how the patient-centered medical home (PCMH) can be effective in reducing preventable hospital readmissions.

Why is the PCMH concept effective in reducing preventable hospital readmissions?

The PCMH stresses that a personal physician and a personal physician’s staff should proactively and holistically coordinate their patients’ care. Because the model encourages patients to become more engaged in their own care, patients are more prepared before, during and after their hospitalization to understand their condition. This leads to less confusion about their care plan and a better understanding of their self-care once they are sent home from the hospital.

What elements of PCMH make it especially suited to reduce preventable hospital readmissions?

One potential component of a PCMH is the use of practice-based care managers. These care managers — who are often nurses or social workers — can coordinate health services with other providers, manage a patient’s health conditions, connect the patient with community resources, assist patients with managing prescriptions, and help members focus on lifestyle changes including lowering or maintaining weight, decreasing stress, smoking cessation, and identifying safety and fall risks in the home.

Practice-based care managers help serve as the bridge between members and their physicians — before, during and after office visits — as they function as part of the physician’s team, coordinating and assisting in the development of a care plan for members. They support their physician practices and meet with members face-to-face to address knowledge gaps and provide self-management tools.

These care managers also assist physicians in the delivery of continuous, accessible and high-quality patient-oriented population management by identifying stresses placed on patients and caregivers upon discharge from the hospital. They coordinate health services with other providers, and work with patients before and after hospital stays to make sure each patient understands his or her condition and care regimen. Practice-based care managers make direct contact with patients, identify barriers to care and educate patients.

Essentially, the use of practice-based care managers is a way of changing the workflow in the medical community. Historically, the medical community has approached health care in a reactive way; that is, they react to a patient presenting for care, rather than anticipating care needs. Likewise, patients react by seeking episodic care. In order to control costs and improve quality, this paradigm must change to allow the practice team to understand management of their patient population, and yet focus on the specific to identify the needs of individual patients.

What are the benefits to patients in a medical home situation?

Patients receive more coordinated services in a medical home system, which results in less confusion about their care plan. This usually leads to better compliance with the recommended treatment. In addition, they share in the decision-making with the physician and care team. The physician and patient are on a much more parallel track, understanding the patient’s goals, which causes greater patient satisfaction.

Dr. Stephen Perkins is a vice president, Medical Affairs, at UPMC Health Plan. Reach him at (412) 454-7682 or perkinss@upmc.edu.

Save the date: Tuesday, Oct. 22, webinar “The Physician’s Role in a Changing Health Care System,” from 11 a.m. to noon. To register, visit the “Webinars” page, or email Lauren Formato at formatol@upmc.edu.

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Historically, defined benefit plans have held a dominant position in the health care market since they were first introduced in the middle of the 20th century. Because the contributions were tax-deductible for employers and pre-tax for the employees, it was a popular way to increase employee benefits without raising wages.

But over the years, the rising cost of health care has caused employers to re-examine how much they pay for insuring their employees and caused them to think more about defined contribution plans.

“With a defined contribution plan, an employer can decide exactly how much they want to contribute to an employee’s health insurance and have a certainty about the cost,” says John Mills, senior director, Consumer Products, Product & Consumer Innovation at UPMC Health Plan. “And a defined contribution plan can be offered by a company of any size.”

Smart Business spoke with Mills about defined contribution plans and their increasing popularity with employers.

What is a defined contribution plan?

Technically speaking, a defined contribution plan is not any specific kind of health plan. Instead, it is a concept that can be applied to different approaches that employers can use to manage health care for employees.

With a defined contribution plan, a company gives each employee a fixed dollar amount that the employees can use to purchase health insurance and dental and vision benefits.Some employers will allow employees to put any money not spent on these benefits into a flexible spending account or to take as a cash benefit.

Why are these plans becoming so popular?

Certainly, the rising cost of health insurance is a major factor in the increased popularity of defined contribution plans. Any plan that can place some kind of limit on health care expenses, or provide some certainty about how much money will be paid, will get close scrutiny by those companies concerned about the bottom line.

But defined contribution plans also touch on areas that are becoming more important to both employers and employees than was possible under managed care. These include:



  • The consumer’s desire to have more choice and involvement in health care.





  • Concern about quality.





  • Increased information.





  • More freedom for providers.



What are some common characteristics of defined contribution plans?

The most common characteristic is choice. Defined contribution plans are intended to give members greater flexibility in benefit decisions. The choices include: plan choices, care choices and the ability to opt out.

Other common characteristics include increased cost sharing between the employer and the member, as well as greater knowledge and engagement in management of health care by members.

What do employers like about defined contribution plans?

One popular feature is that there is no limit on the amount of money an employer can contribute to an employee’s defined contribution health plan. Also, there is no minimum contribution requirement. That allows the employer to set the amount that makes the most sense for the company.

Employers also can give employees different contribution amounts based on classes of employees. The combination of cost management and decreased employer involvement makes defined contribution plans very attractive.

What other factors are driving the growing popularity of defined contribution plans?

Rising costs of premiums are a factor, as is the desire of providers to regain control over decisions concerning patient care. At minimum, they want a greater ability to advise patients who will make the final decision.

Concerns about quality are another factor. There is evidence that defined contribution plans will enhance the quality of care and also increase the amount of information available on the quality of health care, which makes them popular when there is such a focus on quality. And, small businesses find that with defined contribution plans they can have a feasible way to provide some kind of health insurance for their employees.

John Mills is a senior director, Consumer Products, Product & Consumer Innovation, at UPMC Health Plan. Reach him at (412) 454-8821 or millsjk@upmc.edu.

For more information about defined contribution plans available through UPMC Health Plan.


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Published in Pittsburgh

Holding the line on health care costs has long been an ongoing concern of insurers, employers and consumers. In recent years the use of value-based networks for providers has become more popular. These networks are also sometimes referred to as narrow, tiered or high-performing networks.

Essentially, value-based networks encourage members to utilize the more efficient providers — meaning hospitals or physicians — by either narrowing networks, or by lowering copayments or deductibles for providers in different tiers in the network.

“Value-based networks are a variation on the long-established practice of having one level of benefits for in-network providers and another level for those out of network,” says Andrea Gioia, executive director for Product Innovation at UPMC Health Plan. “The difference is, with a value-based network the member can choose the providers he or she prefers based on the criteria that are most important to him or her.”

Smart Business spoke with Gioia about how value-based networks can make sense for employers who are looking to reduce health care costs.

How does a value-based network system work?

A value-based network system is an attempt by insurers and employers to contain costs by offering health benefits plans that offer employees a real choice. Depending on the provider they choose, the employee may be able to pay lower copayments or have a lower deductible.

More financial responsibility falls on the member in terms of decision-making and, as a result, this should encourage initiatives that will provide better information about the cost and quality of health care in order to make more informed decisions.

The health insurer makes the determination about which tier hospitals or physicians will be on. This could be based on the rates the insurer is charged, as well as the quality and efficiency of care being offered. With a value-based network system, when an insurer saves money by getting lower rates from certain hospitals, those savings are passed along to the member in the form of lower out-of-pocket costs such as a lower copayment or a lower deductible.

Quality is determined through claims-based methods, external certification and health information technology.

Why are value-based network systems becoming more available?

A lot of factors are at work, including the fact that there is a demand for more consumer-driven options. Certainly, employers as well as employees are increasingly interested in finding ways to contain health care costs and hold down the cost of premiums. Value-based networks can deliver in both areas.

What could be the consequences of value-based networks?

Ideally, a value-based network system should engage its members in the process. Members have more incentive than ever to be involved in choosing providers and treatment because they are exposed to higher out-of-pocket expenses.

In addition, this could spur competition between providers to cut costs and raise quality standards in order to avoid landing on the higher-priced tiers. Estimates have indicated that tiered products, on average, are priced 10 to 15 percent lower than non-tiered and HMO products.

Health insurers tend to support value-based networks because it gives consumers skin in the game. The consumer will have a financial interest in health care decisions beyond the cost of a premium.

Can value-based networks impact quality?

When a provider’s tier is tied to quality, the potential is certainly there that a value-based network will not only encourage better value but also drive providers to perform better and more efficiently. As cost and quality information becomes more available to consumers of health care, the more likely it will be that consumers will base their health care decisions on this information. This has the potential to drive change in health care in a positive direction.

Andrea Gioia is an executive director, Product Innovation, at UPMC Health Plan. Reach her at (412) 454-8293 or gioiaam@upmc.edu.

Save the date: Join UPMC WorkPartners for an upcoming webinar, “Keys to a Successful Health Management Incentive Program,” at 10 a.m., June 27. To register, contact Lauren Formato at formatol@upmc.edu or (412) 454-8838.


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Published in National

In 2014, new entities will be part of the health insurance world — health insurance marketplaces.

Health insurance marketplaces are key components of the Patient Protection and Affordable Care Act (PPACA). They are designed to make buying health coverage simpler by providing easy-to-understand information that allows consumers to make apples-to-apples comparisons of a wide variety of products. Marketplaces are intended to make health coverage more affordable by promoting increased competition among health insurers under new market and product standards. In addition, certain consumers may be eligible for premium tax credits and cost-sharing reductions that will further reduce health insurance costs. Qualifying small employers also may be eligible for a tax credit.

“Health insurance marketplaces have the potential to increase consumerism in health insurance,” says Sheryl Kashuba, vice president, Health Policy and Government Relations, and chief legal officer for UPMC Health Plan. “However, employers need to understand how they will operate and who they will serve.”

Smart Business spoke with Kashuba about what employers need to know about health insurance marketplaces.

What is a public health insurance marketplace?

The public health insurance marketplace, sometimes referred to as an exchange, will comprise two new marketplaces where consumers and employers will be able to purchase health insurance. Coverage will be available to individuals via the Health Benefit Marketplace and to small businesses via the Small Business Health Options Program (SHOP) Marketplace.

In Pennsylvania, companies with 50 or fewer employees will be eligible to purchase on the SHOP in 2014 and 2015; in 2016 and beyond, employers with 100 or fewer employees may purchase on the SHOP.

In some states, the state itself will operate these public exchanges. In other states, including Pennsylvania, the federal government will operate federally facilitated marketplaces. In order to sell coverage on public exchanges, including on the federally facilitated marketplace, insurers must receive certification that their plans meet the requirements established by the PPACA for qualified health plans (QHP).

How does an insurer earn qualified health plan status?

A qualified health plan is a health insurance plan that has been certified by a marketplace as meeting certain standards; plans must receive QHP certification in order to be sold through a public marketplace. The certification standards include coverage of all essential health benefits, adherence to established limits on cost sharing such as deductibles, copayments and out-of-pocket maximum amounts, establishment of quality standards and a host of other requirements.

Who can purchase coverage through a public marketplace?

Most U.S. citizens and lawful residents will be eligible to purchase coverage on the health insurance marketplace. Any small employer meeting the employee limits established in its state may purchase coverage via the SHOP.

What is a private health insurance marketplace?

A private health insurance marketplace is run by a private sector entity, such as an insurer or broker. Private marketplaces may be designed to allow employers to control costs through defined contribution models and to allow employees expanded coverage options. These marketplaces also may offer a broad range of retail products, such as life insurance and even non-insurance products.

Must every employer purchase insurance from a marketplace?

No. While both the SHOP and private marketplaces will be designed to offer a variety of coverage options, some individuals and employers may prefer to continue to purchase coverage outside these new distribution channels. Employers will continue to have the option to do so. However, premium tax credits and cost-sharing reductions for individual market coverage and tax credits for qualifying small group plans will only be available through the public Health Benefit and SHOP marketplaces, respectively.

Sheryl Kashuba is vice president of Health Policy and Government Relations and chief legal officer at UPMC Health Plan. Reach her (412) 454-7706 or kashubasa@upmc.edu.

Insights Health Care is brought to you by UPMC Health Plan


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