Big companies are taking a broad range of actions to cut spending on employee healthcare benefits. That means higher costs for workers, a push for more consumer engagement, and greater use of telemedicine.
Brian Marcotte
President and CEO of NBGH
Large employers are facing a balancing act next year, simultaneously shifting healthcare costs to their workers and ramping up healthcare consumer engagement efforts, according to a National Business Group on Health survey of 400 companies.
During a press briefing Wednesday that unveiled the survey, NBGH President and CEO Brian Marcotte said 2015 marks a healthcare cost-cutting turning point for employers and workers. "If there is any year the employee is going to focus on the healthcare packet, this is the year," he said of the benefits enrollment season leading up to Jan. 1.
A key finding of the survey is the expectation among large employers that they will be able to contain the growth of 2015 healthcare costs to 5%. Overall healthcare costs are forecast to rise 7%, but employers expect their internal cost-cutting measures will pare 2%off growth in their healthcare spending.
Workers should expect the cost of their 2015 employer-sponsored healthcare coverage to hike about 5%, Marcotte said.
Large employers are using a range of measures to trim the costs of providing health insurance to their workers, the NBGH survey found. In addition to relatively traditional cost-sharing measures such as deductibles and co-pays, employers are increasingly turning to consumer-directed health plans and consumer "decision-support tools" to drive down healthcare costs, Marcotte said in an interview after Wednesday's press briefing.
The NBGH survey found tangible evidence that large employers are banking on engaging with their employees to drive down the cost of healthcare benefits.
More than half of the companies surveyed—57%—reported that they were either launching or expanding consumer-driven health plans in 2015. About a third reported that they are set to offer a CDHP as their only benefit plan next year.
Key Player is the Consumer
Consumer engagement is a key issue for the entire healthcare industry, according to Marc Scher, a partner at Amsterdam-based KPMG. "Accountability for your health is a really big deal," he said. "The best way to keep costs down is to keep people healthy."
Two weeks ago, KPMG released a survey of North American CEOs that included 61 top executives from the healthcare industry. The KPMG survey found healthcare executives more positive about growth compared to their peers in other industries, and "consumer engagement is inherently reflected in that perception," Scher said.
"Even in advance of the ACA, it was clear that we couldn't sustain ourselves in what was going on in healthcare," he said, adding that providing consumers with pricing and quality information has the potential to transform the healthcare industry. "It's not a comprehensive system today. Providers need to think about not only treating patients but also attracting patients… But the key player here is the consumer."
Now that consumers have "skin in the game," there is a growing expectation that financial incentives will help steer patients to best practices and create "more efficient and cost-effective care," Scher says.
Health plans with high deductibles and consumer-directed health plans are being used by employers to incentivize workers to take a more active role in their healthcare spending decisions, he says. "They may not actually be spending more money out-of-pocket, but they see the money go out," Scher said of workers in consumer-directed health plans.
Other NBGH Survey Findings
Skinny Plans −Next year, about one in six large employers plan to offer "skinny plans" to workers who fall short of the federal healthcare coverage requirements under the Patient Protection and Affordable Care Act. While acknowledging federal regulators and employers "are going to have to address" the potential for creating second-class health plans, Marcotte said there is a pressing need to find a way to offer affordable healthcare coverage to workers at businesses with tenuous profit margins. "The need for a skinny plan is real," he said. "Even in the new exchanges, they are looking at offering plans with benefits lower than the bronze plans."
Telemedicine−is being embraced by large employers. In 2014, about 28 percent of large companies offered telemedicine services, mostly to fill gaps in primary care for minor conditions, Marcotte said. The 2015 NBGH survey found 48 percent of large employers will be offering telemedicine services next year. "We're seeing an explosion in telemedicine," he said. "It's part convenience. It's less expensive for certain conditions. And, hopefully, it keeps people out of emergency rooms."
Drug costs −Large employers are alarmed over the growth rate of specialty pharmacy drugs such as chemotherapy treatments, with annual costs rising at about 20 percent. "What's going to help here is price transparency," Marcotte said.
California and Mississippi are investing in health information technology projects that incorporate a broad range of longitudinal patient data and promise insight into population health.
Efforts to upgrade the quality of patient data on statewide health information exchanges are taking a leap forward in California and Mississippi.
In The Golden State, a pair of healthcare payers have announced ambitious plans to launch the California Integrated Data Exchange. Blue Shield of California and Anthem Blue Cross have committed $80 million to operate Cal INDEX for three years.
The HIE will feature longitudinal patient information, which will enable healthcare providers and payers to see a broad range of clinical information over time, such as hospitalizations, medications prescribed, lab results, and allergy histories. This type of data is more comprehensive than encounter-based health records and can be used to study and track population health.
In Mississippi, the state Division of Medicaid has cut a deal with a healthcare analytics firm to create a statewide clinical data repository, a master patient index, and longitudinal patient records for more than 750,000 Medicaid beneficiaries.
No More "Islands of Information"
Cal INDEX is being designed like a public utility, Simon Jones, VP of health information technology product strategy at Blue Shield, said this week. As is the case with utility companies, uniformity and interoperability are key goals for Cal INDEX, he says. "It will allow us to plug information into that grid in a more uniform way."
Healthcare institutions, he notes, are notorious for creating "islands of information" such as primary care physician records.
Like a new public utility, Cal INDEX is expected to spread across the state over time, with early data collection efforts focused on large population centers. "You start out at big cities, then they get more ubiquitous over time and end up at the farm."
With access to Cal INDEX data set to be provided to patients, providers, payers, and academics, the new health information exchange is also embracing the philosophical spirit of a public utility, Jones said: "It's supposed to be for everybody."
Access to longitudinal patient data has the potential to drive significant gains in quality and cost efficiency. "People move across the healthcare ecosystem, and their information hasn't followed them," Jones said. But "Cal INDEX gives [physicians] a complete picture to provide the best care that they can" by offering a timeline view of a patient's health history.
Longitudinal patient data is an essential tool in population management, enabling providers to "get more proactive" about treating chronic diseases, which account for the bulk of healthcare spending nationwide, he adds.
Cal INDEX is also expected to help cut healthcare costs by reducing duplication and waste, including unnecessary repetition of lab tests.
After the Cal INDEX seed money runs out in three years, the health information exchange will be financed through subscription fees. While the precise mechanism for the subscription financing has not been determined, Jones says the cost of operating Cal INDEX will be spread as evenly as possible. "No single entity will bear the entire cost."
Cal INDEX is slated to be operational by the end of the year. The health records of 9 million people, about one quarter of California's residents, are expected to be available through the health information exchange.
Boosting Medicaid Management in MI A health information exchange effort announced in Mississippi last week is expected to boost efficiency and quality of care in the state's Medicaid program.
The first step in the Mississippi project was creating a master patient index, boiling down the records of several million Medicaid beneficiaries over the past decade to identify the 750,000 residents who are actively using the Medicaid program today, state officials said.
The next step was creating a repository of longitudinal patient data, according to the state DOM Office of Information Technology Management.
"To increase efficiency while improving care, we need to offer Medicaid providers a full 360-degree, instantly accessible view to a high volume of data, said Rita Rutland, the agency's deputy administrator, in a media statement.
Emeryville, CA-based MedeAnalytics was brought in to build a master patient index for Mississippi's Medicaid beneficiaries. The senior VP and general manager of its health plan business unit calls the MPI for Mississippi's Medicaid beneficiaries "foundational infrastructure."
"When you cannot be certain whether two patient records are the same patient or two separate patients, and you multiply this by millions of cases at the population level, you see that you cannot have accurate multi-domain systems like that which we implemented in Mississippi without an MPI in place," said Scott Paddock.
His company reviewed millions of records spanning a decade, found 7 million non-unique individuals, and condensed them into 2.3 million unique beneficiaries.
State and federal funding is paying for the Mississippi health information exchange effort, but the cost was not disclosed.
A Call for Responsibility, Accountability
Kevin Coleman, head of research and data at Sunnyvale, CA-based HealthPocket, says health information exchanges have the potential to revolutionize the healthcare industry, but not without risk.
"The emerging use of vast amounts of patient data… holds the promise of reduced medical spending and improved clinical results, but it also brings with it the prospect of intrusions into medical choices previously decided between doctor and patient," he said.
Given the "enormous benefits" patient data can bring the nation, however, "the question for society is not whether or not to allow for the widespread use of patient data but, rather, how can it be [used] most responsibly and accountably."
The medical loss ratio, also known as the 80/20 rule, is trimming spending by payers. But the fate of the nation's drive to cut healthcare costs rests in the hands of the biggest spenders—providers.
Are healthcare payers parasites or purveyors of value?
As the nation struggles to rein in healthcare spending, which federal officials pegged at $2.8 trillion in 2012, payers and providers have been subjected to intense pressure to boost efficiency and reduce waste. The necessity to take action is undeniable: The share of the economy devoted to healthcare spending is about 17 percent and it is threatening to crowd out other essential goods and services.
One step in the monumental journey toward healthcare cost control is the Medical Loss Ratio law under the federal Patient Protection and Affordable Care Act. Also known as the 80/20 Rule, the MLR requires insurers to spend at least 80 percent of every premium dollar on patient care. Insurers that fail to meet the 80/20 Rule standards are required to pay refunds to health plan members.
In 2012, health plan members gained from upfront premium reductions estimated at $3.4 billion and $500 million in rebates. Last year alone, the 80/20 Rule saved consumers $3.8 billion up front on their premiums as insurance companies operated more efficiently.
Additionally, consumers nationwide will save $330 million in refunds, with 6.8 million consumers due to receive an average (2013) refund benefit of $80 per family for a total of about $9 billion in savings since the MLR program's inception.
But here's the takeaway number for me: 0.00139 percent. This number represents the healthcare spending reduction in 2012 that federal officials tied directly to the 80/20 Rule.
Providers Hold the Keys
The 0.00139 percent figure is a mathematical representation of a truth about the US healthcare system that data analytics pioneer David Burton, MD, shared with me earlier this summer: If you want to make a dent in healthcare spending, the real action is on the provider side of the equation.
Don't get me wrong. Every billion worth of savings we can squeeze from healthcare spending makes a difference.
But don't be fooled, either. Extracting unwisely spent pennies out of payers for each premium dollar is not going to fundamentally fix our healthcare spending problem.
Burton, former CEO and chairman of Salt Lake City-based Health Catalyst, told me that politics and public relations were the prime motivations behind the relatively speedy rollout of the 80/20 Rule compared to the sweeping changes required to reform the way healthcare providers do business. "It's backwards," he told me of the federally driven healthcare reform process under the PPACA.
America's Health Insurance Plans, which represents payers in Washington, has an even darker perception of the 80/20 Rule. Earlier this week, an AHIP spokeswoman provided me with a scathing critique. "The MLR does nothing to address the real drivers of premium increases: the underlying cost of medical care," she said.
"Instead, it limits any expense that does not go directly to pay for medical care or is not included on a pre-approved list of 'activities that improve healthcare quality.' As a result, this regulation places an arbitrary cap on what health plans can spend on a variety of programs and services that improve the quality and safety of patient care, help patients navigate a complicated delivery system, and help control soaring medical costs."
Steve Zaharuk, a senior vice president at Moody's assigned to follow the US health insurance market, told me AHIP's concerns over the 80/20 Rule are well-founded. "Really what you're saving is administrative costs," he told me, adding that administration can have significant cost-cutting impact. "Insurance companies put a lot of money into managed care oversight. It seems the emphasis [of the MLR] is in the wrong direction. It should be focusing on just managed care."
MLR is Just One Step
Susan Horras, director of healthcare finance policy, health plan and population health initiatives at the Healthcare Financial Management Association in Winchester, IL, says the 80/20 Rule is a step in the right direction, but many more steps will be needed to control healthcare spending.
"MLR isn't designed as the definitive answer to reducing overall healthcare costs," Horras told me this week. "MLR has accomplished creating some transparency within the system, which is something all constituents in the industry are working toward. Transparency on healthcare costs will continue to expand as consumers become more educated and demand more information to make healthcare decisions."
If we manage to get there at all, I have a feeling it will be several years before we get close to the definitive answer for our healthcare spending problem.
With anxiety rising over the potential for a physician shortage in the years to come, a push is on for interstate medical licensure.
Physicians seeking to practice in more than one state and hospitals seeking to alleviate staffing shortages may find their paths eased if a proposal for an interstate licensure compact is approved and adopted.
Humayun Chaudhry, DO
President and CEO of the FSMB
The proposed Interstate Medical Licensure Compact, crafted by the Federation of State Medical Boards, and released last month would create a commission to oversee interstate medical licenses and function alongside the existing licensing authority of state boards. Humayun Chaudhry, DO, president and CEO of the FSMB, says there is a pressing need for the compact.
The move could be a boon to rural hospitals with chronic staffing shortages and lack of access to specialists. It could also break down staffing barriers impeding the progress of telemedicine.
"The compact would create a new pathway to expedite the licensing of physicians seeking to practice medicine in multiple states, which would address multiple issues," he said this week.
"Among them: physician shortages, the expected influx of millions of new patients into the healthcare system as a result of the Affordable Care Act, and the growing need to increase access to healthcare for individuals in underserved or rural areas through the use of telemedicine."
Chaudhry says the compact would ease the daunting administrative burden that physicians face when they try to practice medicine in multiple states. "The compact would make it easier and faster for physicians to obtain a license to practice in multiple states, thus helping extend the impact and availability of their care at a time when demand is expected to grow significantly."
"Proponents of telemedicine have often cited the time-consuming state-by-state licensure process for multiple-license holders as a key barrier to overcome."
Under the proposed interstate license mechanism, a physician would designate a "state-of-principal-license" inside the compact where the physician holds a full and unrestricted license to practice medicine.
Other proposed standards for a state-of-principal license include the designated state serving as a physician's primary state of residence or the location of a physician's employer. Physicians would apply for an interstate medical license through the medical board in the state-of-principal license.
This streamlined process for obtaining medical licenses in multiple states would generate a range of benefits, Chaudhry contends. "The primary benefit is extending the availability of physicians at a time of increasing patient demand and helping facilitate the growth of telemedicine in the United States, which is expected to become more and more common in healthcare delivery," he says.
"In addition, the draft compact includes new information-sharing agreements between states that would make it possible to better track and investigate physicians who have been disciplined or are under investigation."
Managing the proposed compact's "coordinated information system" would be one of the key responsibilities of the compact's commission, according to the draft rules for the compact released July 16.
"Notwithstanding any other provision of law, member boards shall report to the Interstate Commission any public action or complaints against a physician licensed who has applied or received an expedited license through the Compact," the document states.
Strict confidentiality standards would be established for information submitted to the compact's commission about alleged physician misconduct. "All information provided to the Interstate Commission or distributed by member boards shall be confidential, filed under seal, and used only for investigatory or disciplinary matters," the compact's draft rules state.
The compact's commission, which would include two representatives from each member state, would have several other crucial responsibilities, Chaudhry says.
"The Interstate Commission will provide oversight and administration of the Interstate Medical Licensure Compact, create and enforce rules governing the processes outlined in the compact, and promote interstate cooperation, ultimately ensuring that the compact continues to facilitate safe and expedient access to care and physician licensure."
Watchful Waiting at AMA
The president of the American Medical Association, which represents more than 200,000 physicians nationwide, says the group favors reforming medical licensure procedures.
"The American Medical Association policy calls for reform of the state licensure process to reduce costs and expedite applications," Robert Wah, MD, said this week via email. "Modernizing current state licensure processes should be a priority, and the AMA commends the Federation of State Medical Boards for working on the compact and other reforms to achieve that goal."
Weighing Telemedicine's Pros and Cons
Wah says the FSMB should proceed carefully, however, in the area of telemedicine.
"Through licensing, the state medical boards assure that physicians are qualified – reviewing their education, training, character, and professional and disciplinary histories. A different system or exception for telemedicine is not warranted," he said.
"State-based licensure ensures that out-of-state providers are accountable for the medical care they provide to patients located in that particular state. It is used to enforce local medical practice laws, protect patient safety and promote quality care."
In an opinion piece published in JAMA July 28, Robert Steinbrook, MD, of the Department of Internal Medicine, Yale School of Medicine, wrote:
"If the Interstate Medical Licensure Compact were to move forward, it would herald a major reform in medical licensing. But the actual influence on practice is likely to be gradual, and there would be no effects on physicians seeking additional state licenses until multiple states enacted the compact. "
With several years of reimbursement rate cuts expected, large Medicare Advantage insurance carriers have distinct advantages over their smaller counterparts. For one thing, the cuts are driving efficiency gains and zapping waste.
For Medicare Advantage carriers, size matters.
Over the past two weeks, Moody's Investor Service, Aetna, and a House Ways and Means subcommittee hearing have illuminated the prospects for payer success in the MA realm.
The program is feeling the pinch of reimbursement cuts linked to a decade-long, $300 billion reduction in Medicare funding to help finance the implementation of the Patient Protection and Affordable Care Act.
Last week, Moody's released a report focused on large MA carriers titled "Medicare Advantage Cuts: Prognosis Not Bad for Most Health Insurers." The report's key findings speak volumes about the big players in the MA business. Four out of five of the top MA carriers have a "manageable" MA risk exposure because they operate several other insurance lines, Moody's says.
And MA products are "sustainable" despite the reimbursement cuts and potential for lower membership growth rates, and the "track record" and "adaptability" of large MA carriers indicate they can weather the reimbursement cut storm.
After reading the Moody's report, I spoke with an official at Aetna, one of the large MA carriers the investor service had analyzed. The Hartford-based insurance giant does indeed appear to have a manageable and sustainable MA business with a track record of adaptability.
Nancy Cocozza, president of Medicare business at Aetna, says the MA reimbursement cuts have driven the company to boost efficiency and root out waste.
"It's forced us and others in the industry to make progress," she told me, noting Aetna's strategy to maintain its MA products includes strengthening provider partnerships to reduce wasteful spending and maximizing gain-sharing from the MA star rating system for quality. "These are things that we've been hard at work trying to accelerate. The results have been positive."
Aetna has established accountable care contracts with more than 800 healthcare providers nationwide: "They are, in essence, moving toward payment for outcomes," Cocozza told me.
The insurer is also embedding case managers at healthcare facilities to help providers perform at a higher level in the areas of care coordination and transitions of care, she told me: "We are vigilant any time there is a transition, it's an opportunity for things not to go right."
Realizing efficiency gains through MA providers is far preferable to hiking premiums or slashing benefits, Cocozza told me. "We try to understand our member population. We know they like things to be stable," she said.
One of the positive consequences of the financial pressure being applied to MA is the promotion of cooperation between insurers and providers, according to Cocozza. "The ACA has caused all of us to get out there and act more like partners than adversaries… We still haven't cracked the code, but there's a change in intent. Changing behavior is hard. It takes a lot. It takes more than a contract … to effect change," she told me. "It really takes sitting down with clinical leaders and seeing what works."
Banking gain-sharing from the MA five-star rating system for quality is a critically important part of Aetna's business strategy, Cocozza told me, noting that 64% of the company's MA beneficiaries are enrolled in 4-star plans. "Aetna has the highest star rating compared to our national counterparts," she said. "We take it really seriously. It is very much industry-leading."
One of the ways Aetna is achieving high quality ratings is through in-home risk assessments with MA members. "We do pretty extensive visits with home nurse practitioners," Cocozza told me. "It's a way for us to make sure members get preventive care training. Members feel like their health plan is trying to do something good for them."
The prospects for smaller insurance carriers offering MA products are less rosy.
The CEO of SCAN Health Plan, which offers MA prescription drug plans to about 170,000 people in California and Arizona, provided the smaller-player perspective two weeks ago at a House Ways and Means subcommittee hearing. "We are evolving to these cuts. We have no choice," Chris Wing told the lawmakers.
Unlike the much larger Aetna, which has MA plans in counties across the country and a diverse array of insurance products, SCAN and other smaller MA carriers are being forced to make changes that will be destabilizing for members, Wing testified.
"There will be withdrawals from markets. There is one geography where SCAN is withdrawing entirely in 2015," Wing said in response to questioning from a congressman. "There will also be a slight trimming of the networks in California and Arizona. We're a nonprofit, but we have to have a margin."
Wing testified that SCAN is struggling to find ways to maintain "special needs plans" for 30,000 MA prescription drug plan members who suffer from multiple chronic conditions such as heart disease and diabetes. "We love to do the special need plans, but they are underfunded," he said.
If federal officials want to ease the pain of big MA cuts, they'll need to focus on the smaller carriers.
Large employers and healthcare payers are turning to nontraditional partners in their quest to contain health costs.
Data-driven, technology savvy, consumer friendly new entrants to the healthcare industry appear to be filling a gap in the shift from a fee-for-service healthcare system to value-based delivery of services.
Scott Rotermund
Chief Growth Officer
Welltok
"We bring engineering depth from the consumer world," Scott Matthews, VP of product marketing at San Francisco-based Castlight Health, said Monday in an interview. "We're bringing modern consumer technology to healthcare."
Founded in 2008, Castlight reported 2014 first-quarter total revenue of $8.38 million, with $1.79 million gross profit. Matthews says the consumer-driven technology company is geared to steer the healthcare industry in a new direction. "Castlight's mission is to fundamentally transform the healthcare system with market forces," he said. "We're working with 35 of the Fortune 500."
Castlight is helping several large self-insured employers optimize their health and wellness benefits with cloud-based, cost-controlling technology. Matthews says U.S. employers spend more than $600 billion annually on healthcare costs associated with their workers, adding "30 percent of that is wasted, and the costs rise 8 to 10 percent annually."
Castlight's Enterprise Healthcare Cloud features four "solution centers," he says. "It's a holistic system that works together."
One of those four pillars is Castlight Connect, which helps employers optimize the impact of their suite of health and wellness programs, Matthews says, noting that large employers often have more than a dozen programs that offer services beyond traditional medical and dental insurance policies.
"All these programs are very expensive, but have the potential to drive tremendous gains for both employers and employees," he said of worker benefits such as prenatal care, nurse hotlines, employee assistance programs, second opinion services, wellness programs and preventive care.
"The fundamental problem is the employees don't use them. Typically, they are not aware of them in their time of need."
As employees face higher out-of-pocket expenses for healthcare including deductibles and co-pays, the consumer's need for information has increased exponentially, Matthews said. "You have to reach the employees at their point of need. Employers have to step up with how they do their communication," he said. "We live in a world of immediacy… They want what they want very quickly."
Matthews says Castlight uses cloud-based technology to give employees their companies' pertinent healthcare information instantaneously as the workers use the Enterprise Healthcare Cloud's platform.
"We know what employees are talking about. We know what they are typing in," he says, citing an employee entering the word "pregnancy" into the platform's search engine as an example. "Right then and there is the time to tell what programs the employer has for you."
Castlight recognizes the necessity to avoid appearing intrusive, Matthews says, explaining that the Enterprise Healthcare Cloud search engine would display a company's pregnancy-related programs off to the side of the search results for "pregnancy."
"To the user, it feels very natural," he said. "It's very subtle."
Guarding privacy and establishing trust is an essential element of Castlight's consumer-friendly business model, Matthews said. "Employees go to Castlight and set up their account. It has an initial registration piece [and] first-time user experience.
Large employers thoroughly vet Castlight's privacy safeguards, "They don't mess around with this stuff," Matthews says.
'Guiding Consumers to Optimal Health'
Denver-based Welltok is another new entrant to the healthcare industry seeking to combine technology, data analytics and retail strategies to deliver a higher level of value for healthcare consumers and payers.
About 10 million consumers were using Welltok's CaféWell platform last year, according to Built In Colorado, which has reported that Welltok raised more than $21 million in investor funding during the first quarter of this year.
Welltok enables health insurers and other population health managers to guide and incentivize consumers to achieve their optimal health," Scott Rotermund, Welltok's co-founder and chief growth officer, said via email last week.
"Welltok’s CaféWell health optimization platform organizes the growing spectrum of health and condition management programs, apps, communities and tracking devices. CaféWell's unique integration platform then drives engagement through the creation of personalized, adaptive plans for each consumer based on his or her health status, benefits and goals… The platform leverages social, gaming and cognitive technologies to provide a fun, rewarding experience for consumers. Currently, CaféWell is sponsored for consumers by health plans, which may distribute it through an employer group or community health systems."
Rotermund says new entrants with technical and retail skills are equipped to tackle the consumer engagement challenge in the evolving healthcare industry.
"We need to elevate the discussion away from the fitness and nutrition basics that the industry has been harping on for over a decade and more towards optimal health. Wellness and prevention are important components, but incomplete." Rotermund says.
"We need to be drilling down to an individual level and guiding consumers to optimal health given their health status, conditions, benefits and goals. For example, telling a pre-diabetic, middle-aged man to eat healthy and exercise more isn't working. We need to tap into his unique circumstances, motivations and then provide the actions – aligned with incentives – that will drive engagement and outcomes."
Integrative approaches are crucial when utilizing technology to help organizations and consumers clear healthcare hurdles, he says. "There's great buzz about wearable devices … and other neat solutions coming to market."
"However, the risk is that all of these great innovations are trying to elbow their way onto the market and not getting to the consumers who could really benefit from them. Comparable to the digital entertainment industry, a platform is crucial to bring all of these assets together and provide recommendations or 'playlists' for consumers."
Matthews says tech-savvy and consumer-centric new entrants have an opportunity to upend the healthcare industry.
"Our intention is to move the market, improve the quality of care. That's going to benefit everybody. We envision a world where the entire healthcare system benefits from this."
Average 2015 premium rate increases on the new health insurance exchanges are likely to stand in the high single digits, according to data collected from half the states.
Nationwide, increases in proposed 2015 premium rates in the individual health insurance market, which includes the new public exchanges, are trending between 7 percent and 8 percent, according to data collected by New York-based PricewaterhouseCoopers LLC.
"It seems to be staying in that single-digit range," Caitlin Sweany, senior manager at PwC's Health Research Institute, said on Thursday. "We've [analyzed] several iterations of this data."
PwC is tracking the release of public data on proposed 2015 individual premium rates and has highlighted the information with an interactive map. As of Thursday, the consultancy had reported data from 24 states and the District of Columbia, with the aggregate average proposed premium increase pegged at 7.5 percent.
State regulators will announce the actual 2015 individual insurance premium rates by the fall.
Most Americans, about 165 million, get health insurance through employer-sponsored group plans. With 8 million lives enrolled in the new Patient Protection and Affordable Care Act-spawned exchanges, the individual market is now in a state of HIX domination.
"The individual market in most states is pretty much what's on the exchange," Sweany said.
Assessing the Numbers
State-by-state variation in key data points, such as enrollment and number of participating insurance carriers, has been a HIX hallmark in the exchanges spawned under the federal Patient Protection and Affordable Care Act.
Wide variation is also present in the proposed 2015 individual insurance rates, Sweany said. "It really depends on the market and the state," she said. "It's really hard to generalize."
In Arizona, insurance carriers offering individual health insurance policies filed a wide range of proposed premium changes for 2015, the PwC data shows, with one carrier seeking a 27 percent increase and another proposing a 23 percent rate cut. Vermont is on the high end of the average-premium-rate increase spectrum, with a 12.6 percent hike proposed statewide for next year, according to PwC.
"People are looking for one number to hang their hats on," Sweany said. "There's a lot of variation in the individual market."
Jaime Estupiñan, a partner at New York-based Strategy&, which is working with PwC to monitor individual premium rates, said there are a host of factors influencing next year's health insurance markets.
"We're looking at a composite of various markets, and each market is complex," he said of the effort to track individual premium rates. "Coming out with a single number is going to be fraught with over-simplification."
One trend in the data should have a calming effect on premium rates in the exchanges, Estupiñan said.
"In many of the insurance exchanges, some of the larger national players did not join. In many markets, there will be more of these kinds of new entrants [to the exchanges] in 2015," he said, adding these established healthcare payers are adopting a "conservative premium-setting approach."
In particular, the set of carriers that will be new to the exchanges in 2015 appears unlikely to try to under-cut HIX competitors with aggressively low premium rates, he added.
Cost-sharing Calculation
Premium rates only tell part of the story about 2015 HIX consumer costs and the business strategies of carriers operating on the exchanges, said Katherine Hempstead, team leader and senior program officer at the Princeton, NJ-based Robert Wood Johnson Foundation.
"When we look at rates, we also need to look at cost sharing," she said, adding that the number and scale of cost-sharing mechanisms on the exchanges such as co-pays and deductibles has fueled some of the harshest HIX criticism. "There's a lot of experimentation going on. At some point, we need to have fewer cost sharing options."
Healthcare providers view cost-sharing as a net negative financially because higher cost sharing results in a higher debt collection burden.
In July, the Robert Wood Johnson Foundation and Breakaway Policy Strategies released a report on exchange cost sharing in 2014. The key findings, which focus on HIX health insurance policies in the "silver" tier, include primary care physician visit copays as high as $75 and specialist visit copays as high as $150.
In addition, unlike most employer-sponsored insurance, many silver policies on the exchanges subject PCP and specialist office visits to a deductible, the report found.
"Anyone who's only looking at the premium rates in 2015 is going to miss a lot of action," Hempstead said.
Using nutrition to improve the prevention, treatment, and palliative care of disease could be the most cost-effective cure for America's rising healthcare costs and health insurers are getting into the act.
Rebecca Katz
Americans have created a self-destructive relationship with food that is fueling chronic disease epidemics and driving up healthcare costs.
"Other cultures do not behave the way we do with our food," Rebecca Katz, a California-based chef and author of three books based on her philosophy of "sustainable nourishment," told me recently. "We want it cheap and we want it fast, and there's a price to be paid for that. We have to get back to the basics."
The Baltimore native is a longtime chef who earned a master's degree in nutrition and health education from Hawthorn University. In 1999, she experienced the powerful connection between health and food first-hand when her father was diagnosed with cancer. Katz had no idea how to cook for someone fighting laryngeal cancer, and neither did anyone else.
"At that time, food and cancer was like inviting ants to a picnic. Nobody wanted to talk about it," she told me. "There was so much more science to look at."
Since then, Katz has taken a careful look at the scientific data linking food to clinical outcomes.
Her second book, The Cancer-Fighting Kitchen, notes some powerful data points, including the astounding figure that as many as 80 percent of cancer patients are malnourished, "in some cases leaving them too weakened to withstand ongoing treatment."
Helping her father survive his cancer ordeal was the first step in an epic quest for Katz, who believes the concept of sustainable nourishment is an essential ingredient in any recipe designed to help Americans lead healthier lives.
Health Objective: Sustainable Nourishment
While insurers, employers, healthcare providers and government regulators are seeking to craft carefully calibrated rewards and penalties to incentivize people to embrace better nutrition, Katz says more fundamental changes will be necessary to achieve changes in the American diet that are more than passing fads or resolutions that last a few weeks, if you are lucky.
"This isn't rocket science," she assured me.
Sustainable nourishment is "nutrient-dense, health-supportive food that tastes great," she says, noting that systems of rewards and punishments have limited effectiveness in changing a human behavior as engrained as someone's eating habits. "If it doesn't taste good, you won't eat. It's not enough to put someone on a really strict diet."
Katz says changing people's dietary habits is a hands-on process. "It's not just enough to say it. Demonstrating it and having people taste it is what works," she told me. She has led classes and appeared on videos, but prefers workshops with patients and healthcare providers "where they actually taste the food."
Working with "point-of-care providers" to teach them how to cook for someone undergoing cancer treatment helps healthcare providers teach patients sustainable cooking habits, says Katz, who has led a series of workshops for oncology caregivers at Stanford University. "It's not just the doctors, it's anybody who is touching the patient," she told me. "Oncologists are incredibly interested in this."
And so are insurers and employers.
How Health Plans Promote Good Nutrition
"We offer Highmark customers flexible incentive programs to facilitate behavior change and reward positive lifestyle practices, such as good nutrition," Anna Silberman, the Pittsburgh-based Blue Cross Blue Shield affiliate's VP of clinical client relations, told me this week. "We work with customers to develop customized reward programs that address their unique population's condition prevalence, culture, and lifestyle risks."
Highmark health plans include several wellness programs that promote good nutrition, Silberman says. As part of rewards programs, employers can offer through Highmark insurance policies, members can complete online "wellness profiles" that assess lifestyle risks and help establish a plan to change dietary habits.
"This interactive tool covers nutrition and addresses readiness, motivation, and confidence to change eating habits. After completing the questionnaire, members better understand their health status and a personalized action plan is provided to improve or maintain healthy eating habits," Silberman told me.
Highmark and its employer clients reward members for working with coaches who help them make dietary changes, she told me: "Coaches provide onsite and telephonic personal wellness consultations and personal nutrition coaching. Inbound and outbound calls are made based on chronic conditions, lifestyle risk, and customized programs."
Beginning in January, Highmark is set to offer grocery store loyalty cards that will be "used to track and reward healthy food purchases," Silberman says.
Minneapolis-based United Healthcare also has several programs to encourage health plan members to make positive dietary changes. In Tennessee, United offers health plan members Care4Life, an education and support program for people living with Type 2 diabetes.
The program uses online tools, including a mobile app, to deliver personalized diabetes management information. Care4life provides access to healthy recipes, nutrition tips, and behavior modification information provided in collaboration with the American Diabetes Association.
Employers are watching their workers waistlines closely, LuAnn Heinen, vice president at the National Business Group on Health, told me this week: "Large employers have deployed a range of strategies to promote healthy eating at work, at home, and when dining out."
Those strategies include plates and cafeteria trays that guide appropriate portion size, third-party programs such as Weight Watchers, and individual coaching for weight management, she says.
Employers and their health plan partners definitely have a role to play in encouraging healthy eating habits. "It makes sense to consider incentives at the workplace… pricing that favors healthier options, rewards card programs for on-site dining and so on," Heinen told me.
Beyond Waistlines I hope the efforts to transform the American waistline do not stop at the border line. Our high-sugar, high-fat, high-salt cuisine has become one of the top U.S. exports. Do you really need a hint to know what American restaurant chain has a presence in nearly every country on Earth?
Hint: hamburger.
"It was not always this way," Katz told me. "Unfortunately, our way is infiltrating into other countries, and you're seeing diabetes in places where it never existed before. We should be incorporating more of other countries' foods into our diet, not the other way around."
The California chef's fourth book on the connection between food and health, "The Healthy Mind Cookbook: Big flavor recipes to enhance brain function, mood, memory and mental clarity," is slated for publication in February. She told me the book will break new ground: "The gut is the second brain. What we put in the gut affects how we feel."
With Medicare programs taking a $300 billion hit to help fund value-based healthcare reforms under the Patient Protection and Affordable Care Act, Medicare Advantage health plans are feeling the pinch.
Among the lawmakers in attendance, last week's House Ways and Means healthcare panel hearing on Medicare Advantage featured partisan fireworks over reimbursement rate cuts to the value-based healthcare insurance program.
The testimony of a key witness, Chris Wing, CEO of Long Beach, CA-based SCAN Health Plan, displayed some of the economic responses insurers are making to adjust MA drug and health insurance policies in response to the federal cutbacks.
Chris Wing
CEO of SCAN Health Plan
With $300 billion slated to be slashed from MA and traditional fee-for-service Medicare programs to help fund the Patient Protection and Affordable Care Act, insurers have to respond, he testified. "We are evolving to these cuts, we have no choice," Wing stated in his opening remarks.
SCAN is a not-for-profit Medicare Advantage Prescription Drug plan with about 170,000 members in California and Arizona. Wing, who offered testimony on both MA prescription drug plans and MA health plans, said 38 percent of seniors in California are enrolled in MA health plans. Affordability is a prime enrollment draw, and 90 percent of SCAN members pay no premium for their Medicare prescription drug benefit. "No wonder people are voting with their feet and choosing Medicare Advantage. But there are storm clouds on the horizon," he testified.
Wing stated that improving collaboration between MA payers and providers is an effective way insurers can offset the financial blow of lower federal reimbursement rates. "The goal is: how can we work together to improve the model"
In an interview after last week's hearing, Wing noted that seniors will have to bear some of the burden as cuts to MA reimbursement continue to be made through the rest of this decade.
"Over the past few years, the MA program has sustained a series of significant funding reductions," he said. "Some seniors have already begun to feel the impact of these cuts in higher out-of-pocket costs, reduced benefits, and more limited provider choice. Many more seniors will be impacted as the vast majority of the ACA cuts—80 percent—take effect over the next few years."
Wing said SCAN had stepped up its efforts to collaborate with healthcare providers who are serving Medicare Advantage patients.
"Reimbursement rates cannot continue their recent steep decline… SCAN is pursuing a collaborative approach. In California, we have always enjoyed the trust of our physician groups. Several years ago, we launched what we call our 'Provider Integration' initiative. We are now creatively collaborating with our physician partners to meet the financial challenges of MA while delivering the 'triple aims' driving healthcare reform: lower cost, higher quality and improved access."
Assessing MA's Future
Despite the billion-dollar blows ahead, officials at Hartford-based Aetna Inc. are bullish on the MA program.
"Over the last several years, we have seen how the growing popularity of Medicare Advantage among beneficiaries has translated into political support for the program. Members of Congress from both sides of the aisle have successfully weighed in with CMS the last two years to push for changes to lower proposed rate cuts," Aetna officials said in a prepared statement Monday in response to questions about the program's future.
The commercial payer gave assurances that achieving value-based healthcare delivery and hitting star-ratings benchmarks for quality will be critically important in attaining MA success for years to come,
"Medicare Advantage plans are able to demonstrate value for beneficiaries in health outcomes, care management, and innovation through new programs and partnerships. As long as we continue to provide good value to consumers and maintain a high star-rating performance, Aetna is well-positioned to offer high-quality and innovative products to employers and beneficiaries despite this challenging environment."
With healthcare providers spending at least 85 cents of every healthcare dollar, Aetna said working with providers to improve efficiency and establish value-based payment models will also be a critical factor for carriers as they absorb federal reimbursement cuts.
"Medicare's ACOs alone won't solve all of Medicare's financial issues, but moving toward this model is a huge step in the right direction," they said. "We have demonstrated that ACOs can not only reduce healthcare costs, but can also help improve the coordination and quality of care, without drastic cuts to benefits."
SCAN's CEO said MA health plans are an essential element of value-based care delivery in the broader Medicare program. "Nationally, 30 percent of Medicare beneficiaries are now enrolled in MA and more than half of new Medicare beneficiaries are choosing MA."
"MA plans offer lower costs than traditional Medicare and that is extremely important for lower income and chronically ill seniors… Almost all quality measures point to Medicare Advantage as better than traditional Medicare. Medicare Advantage plans also have made a measurable, positive difference in quality of care relative to hospital readmission rates, quality of life and effective management of chronic conditions."
When it comes to cutting the budgets of federally administered programs such as MA, where you sit often dictates where you stand on the issues, Paul Clark, a legal analyst at New York, NY-based Wolters Kluwer, said after last week's Ways and Means hearing.
"CMS and HHS are increasingly looking for value for the money they spend on federal healthcare programs, including every part of Medicare. Every change delivered under the guise of quality incentive or improvement can be looked at a couple of different ways—the federal government is cutting back on funding for hospitals, or home health agencies, or physicians. Or, the federal government is looking to get the best value for its healthcare dollar."
In addition to the reimbursement cuts linked to the PPACA, Clark said the evolution of value-based reforms in traditional, fee-for-service Medicare will play a decisive role in the future of Medicare Advantage.
"It will be interesting to see how overall Medicare program changes put into effect the last few years will affect MA enrollment in the future," he said.
"Ten years ago, MA plans could distinguish themselves by offering preventive healthcare or prescription drug benefits that were not necessarily available under traditional Medicare. But now a beneficiary can get preventive health care at no extra cost under traditional Medicare, or a prescription drug benefit under Part D, so there may be less incentive for a beneficiary to sign up for Part C. The evidence doesn't show that happening yet – MA enrollment keeps on growing. But if MA enrollment starts declining in the next few years, you have to look beyond just MA reimbursement for the cause."
The ability of cost savings achieved through healthcare reform efforts to offset the coming cuts to Medicare Advantage is hotly debated at a House Ways and Means health subcommittee meeting.
A decade-long, $300 billion hit to Medicare to help fund the PPACA is coming home to roost.
The question that loomed large Thursday over a hearing before the House Ways and Means health subcommittee centered on gauging the impact of deep cuts to payments for Medicare Advantage—privately operated health insurance policies for seniors that feature value-based healthcare delivery.
Medicare provides health insurance coverage to about 54 million Americans, according to Kaiser Family Foundation. Most beneficiaries have coverage in Medicare's traditional, fee-for-service payment model, with about 15.7 million people enrolled in privately operated MA policies this year.
Everyone in the hearing room, including the four witnesses who testified before the House panel, agreed cuts are coming. But the ability of cost savings achieved through healthcare reform efforts to offset cuts to Medicare Advantage was hotly debated among lawmakers, as well as among those seated behind the witness table.
Rep. Kevin Brady (R-TX), the chairman of the health subcommittee, offered a dark view of cuts to Medicare Advantage, which several GOP members of the panel pegged at an annual average of $3,700 per MA beneficiary.
"Can these popular plans continue to be able to serve seniors?" Brady said in his opening remarks, noting MA enrollment had tripled over the past decade. "The future for Medicare Advantage may look grim."
Congress and officials at the Centers for Medicare & Medicaid Services could trigger a widespread destabilization of the MA market if they allow the Medicare cuts to accelerate in 2015, Brady said. "Millions of seniors in every area of America face cuts. We need to make sure seniors have this valuable option."
The ranking Democrat on the health subcommittee offered a far brighter view of MA than Brady's dire warnings. "There's a good story to tell about the Medicare Advantage program," Rep. Jim McDermott, (D-WA), said. "As I listen to the chairman, it's all about the scare tactics of the past."
McDermott predicted a positive financial report on the Medicare trust fund, which is expected to be released any day. Surging MA enrollment and a steady decline in MA premium rates indicate the companies operating MA health plans are on sound financial ground, he argued. "Which insurance company has gone in the tank in the past five years? Their revenue and profits continue to grow."
Dueling Witnesses Two of the witnesses who appeared before the subcommittee mirrored the divided opinions of the lawmakers.
Robert Book, PhD, senior research director at the Washington, DC-based consultancy Health Systems Innovation Network LLC, predicted market disruptions in the form of higher premium rates, diminished benefits, or health plan withdrawals from the MA market if deep payment cuts are allowed to occur.
"Every county in the country will see [an MA] cut by 2017," Book said citing research he has conducted on the PPACA-related reimbursement cuts.
"There are more cuts to come," he said, estimating payments to MA health plans will experience a "27 percent overall cut" from the health reform-linked payment reductions. "It's going to be extremely difficult for plans to maintain Medicare Advantage benefits in the face of those cuts."
Joe Baker, president of the DC-based Medicare Rights Center, testified that MA health plans are robust enough to weather the payment-cut storm.
"The Medicare Advantage program continues to be stable and strong," he said, noting that the cost savings generated from MA's value-based healthcare delivery model have strengthened Medicare broadly. "Improved savings in the Medicare Advantage program benefits all Medicare beneficiaries."
Baker also pointed to the range of MA health plans available to Medicare-eligible Americans, noting seniors have access to an average of 18 MA health insurance policies.
The Medicare Rights Center president acknowledged that there is room for improvement in the MA program such as boosting the transparency of MA claims, and providing information to seniors that allows them to clearly see the premium and benefit design variation between MA policies. "Even with the success, Congress should take steps to improve the MA program," Baker said.
'An Attractive Option'
As is often the case in Washington politics, the truth about PPACA-related cuts to fee-for-service Medicare and Medicare Advantage probably resides somewhere in the middle ground between warnings and congratulations.
"The Medicare Advantage program has been criticized for years for reimbursing private plans at rates that are much more than what Medicare would pay to cover the same beneficiaries under traditional Medicare. So cutting back on MA payments has been an attractive option for federal policymakers for years," Paul Clark, a legal analyst at New York, NY-based Wolters Kluwer.
With about 20 percent of the Medicare cuts already enacted, he said, MA health plans appear to be financially stable under the payment ax for now. "Although there has been a lot of criticism of the ACA's MA cuts, four years after the ACA was enacted, payment cuts have been rolled out in half of all U.S. counties, and MA enrollment has continued to grow year after year," he said.
