Is Your Lack of “MQ” Costing You Money ?

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As health reform continues to play out across state legislatures and within Washington, employers continue to wrestle with rising costs and the corrosive effects of skyrocketing medical trends. It’s clear that there is enormous variability among employers in their confidence and abilities to identify, mitigate and manage the complexities of the employer sponsored healthcare delivery system.

Many industry pricing and billing practices are opaque. Employers are not always getting good advice and often have to entrust the management and control of employee benefit plans to generalists who do not have the time, resources or ability to engage in managing a corporate expense that has eclipsed a composite average of $11,000 per covered employee.

If employer sponsored healthcare is going to survive to drive market based changes that cut fraud, waste and insist on personal health improvement, corporate decision makers must improve their Medical Quotient (MQ). While larger employers such as Safeway have begun to reap the dividends of lower costs by driving employee health improvement and employee engagement through prevention and chronic illness management, small and mid-sized businesses are increasingly getting failing scores for understanding and managing their own cost drivers.

Success in managing medical costs begins with understanding one’s own MQ and committing to improve it against a rapidly changing market that is exceeding the rate of change of many HR and financial professionals. Jack Welch once commented, “When the rate of change outside an organization exceeds the rate of change within, the end is near.” While ignorance can be bliss, it is an expensive consequence in employer sponsored healthcare. Can HR generalists and less engaged CFOs and CEOs finally grab the horns of their own population health costs and drive toward a healthier tomorrow?

Consider the following as you gauge your own MQ:

1. A Value based plan design:

a) indexes an employee’s maximum out-of-pocket to their gross earnings

b) limits co-pays and out-of-pocket costs for drugs and specific treatment therapies to facilitate chronic condition compliance

c) offers multiple plan design options based on an employee’s gross earnings

d) waives all cost sharing for all benefits to remove barriers to care

e) establishes a fixed fee amount that an employee must pay for every service rendered under a health plan to promote consumerism

2. The American’s With Disabilities Act (ADA) and the Health Insurance Portability and Accountability Act (HIPAA) preclude an employer from:

a) collecting and evaluating (through Human Resources) claims data on each employee and then setting contribution penalties based on chronic conditions

b) collecting and evaluating (through a Third Party) claims data on each employee and then setting contribution incentives based on prevalence of risk factors and compliance with wellness program engagement

c) relegating smokers to a less comprehensive plan design if they refuse to engage in smoking cessation

d) charging up to 30% contribution differentials to those employees or spouse who do not participate in a health risk assessment, biometric testing or general wellness program

3. Match the following percentage of modifiable risks per 100 workers in an employer population:

a) Obese/Overweight                               1. 21%

b) Smoking                                                  2. 66%

c) Sedentary Lifestyle/No Exercise       3. 29%

d) Stress/Anxiety/Mental Health         4. 39%

e) High Blood Pressure                            5. 33%

4. What did a recent National Business Group on Health survey calculate as the additional percentage of cost increases that unengaged employers are likely to pay for healthcare versus employers who have committed to managing population risk and employee engagement:

a) 2%

b) 5%

c) 10%

d) 20%

e) No difference

5. Match the average percentage of retail charges for medical care that is generally charged by physicians and reimbursed based on the plan payer:

a) Medicare                                  1. 126%

b) Commercial Insurance        2. 250%

c) Uninsured Consumer           3. 67%

d) Medicaid                                  4. 84%

6. Match the percentage of your claims dollar attributable to its corresponding category of costs:

a) Facilities – Inpatient & Outpatient                            1. 50%

b) Physicians (Primary Care)                                          2. 12%

c) Prescription Drug                                                           3. 23%

d) Physician (Specialists)                                                 4. 15%

7. According to Compass Consumer Solutions, contracted rates for services can vary by as much as what % within the same approved PPO network?

a) 15%

b) 300%

c) 75%

d) 1000%

e) No variation – all contracted rates are consistent between providers

8. In 2014, health insurance exchanges will offer the following:

a) community rated plans that allow for preferred pricing if employers achieve health improvement and lower utilization

b) federal subsidies for all employees who choose to purchase through the exchange

c) access to the Federal Employee Benefit Plan to take advantage of government employee purchasing economics

d) bronze, silver and gold coverage options for consumers and employers under 50 employees seeking to purchase pooled, insured coverage

e) tax credits for employers who choose to drop coverage and subsidize coverage for all employees purchasing through the exchange

9. Under new health reform legislation, an insured employer of 50 or more employees’ individual loss ratio ( claims as a percentage of total premium ) cannot be less than:

a) 80%

b) 85%

c) 75%

d) 90%

e) Loss ratio rules do not apply to each employer, only across insurer books of business by license and by state

(See Answer Key for scores)

A higher MQ means a lower cost – As you tally your scores and ponder the range of questions and answers, understand that a lower MQ is costing you money. If you are relying on a broker or advisor who does not help you understand the increasing complexities of insurer underwriting, network economics and provider contracting, you are not getting full benefit for your advisory spend. It’s not enough to delegate the role of managing plans to a third-party.  A high will, but low skill brokerage relationship may have you permanently stuck in remedial Health 101 with no hope of graduating to lower costs.

Employers need to understand an increasingly complex landscape and be capable of deconstructing their healthcare spend.  Ignorance literally is costing you money. A higher MQ requires knowledge of: every insurer’s product plan design options, population health management programs, utilization data analytics options, predictive modeling tools that can forecast future utilization trends, options to identify high risk and at risk insureds through biometric testing, clinical outreach programs intended to stimulate engagement, state and federal legislative trends and more cost effective risk financing options such as self insurance. If you have a low MQ, the odds are you are probably paying too much for your risk transfer (insurance) and not enough time on understanding your claims.

The good news is that a low MQ is treatable and that sophisticated solutions are no longer the exclusive domain of the larger employer. In an industry crowded with advisors, there are no bad students, only bad teachers. A good teacher pushes their student out of their comfort zone.  In healthcare, a strong advisor forces an employer to understand the difference between change and disruption. For most mid-sized employers, the MQ resources required to properly understand and manage costs do not have to exist within your own organization. They can reside with other knowledge workers – your insurer, your broker/consultant, and third-party vendors who specialize in managing health risk. However, each year, your own understanding of your costs and the industry should be improving. In the end, the investment you make to understand your own corporate health will be paid back through the significant dividends of lower average medical costs and a greater sense of control in a turbulent market.

Answer key and explanation:

1. b Value based designs are intended to improve compliance for at risk and chronically ill employees to ensure stability in those populations and prevent higher rates of catastrophic illness arising out of unstable conditions. A Safeway study revealed a staggering 55% of diagnosed diabetic employees not complying with recommended courses of treatment. Value based designs eliminate financial barriers to care for specific conditions and help remove excuses for chronically ill to remain compliant.

2. a Contrary to those who might use ADA and HIPAA as a reason to not engage in wellness, the legislation affords employers more than enough latitude to gather biometric data through a third party ( you cannot do it yourself ),  warehouse aggregated population data through a third-party vendor and evaluate health risk profiles and trends to better understand how to impact your population’s health. You can target smoking cessation, obesity, and a range of lifestyle based behaviors that can give rise to catastrophic or acute episodic claims. This data coupled with additional information gathered through claims reviews and health risk assessments can aid any employer in better structuring incentives for employees to improve health status.

3. a2, b1, c4, d5, e3 Most employers have no line of sight on the risks that exist within their specific population. Many of these risks arise out of modifiable behaviors. An alarming number of catastrophic claimants had not filed a claim in the preceding 24 months prior leading up to their event suggesting that they were not under a physician’s care, not compliant with basic preventive services and/or asymptomatically ill but had not seen a physician in the prior 24 months. An alarming 40% of men over 40 years of age have not seen a primary care provider in the last 24 months.

4. c In 2010, medical trend increases for engaged employers tracked a full 10% less than those of their less committed peers. To put this in perspective, calculate your total medical spend in 2010 for claims and administrative expenses. Now reduce that by 10%. Is this 10% dollar savings worth it to you to begin the process of improving your MQ?

5. a4, b1, c2, d3 As government begins to cut back reimbursements for Medicare and Medicaid, cost shifting to the uninsured and commercial insurance will accelerate. Once the uninsured are covered under PPACA in 2014, employers over 50 lives will be vulnerable to cost shifting and will need to understand the implications of this commercial pricing shift to avoid subsidizing the major shifts in healthcare reimbursement

6. a1, b2, c4, d3 Employers need to understand where services are being delivered to employees. A simple access shift such as reducing emergency room visits, expanding the use of primary care providers, using soft steerage techniques to guide employees to lower cost, equal quality outpatient care centers can save as much as 15% of one’s medical spend. This savings could be equivalent to the entire administrative spend an employer may make in a year! Loss control and financial management begin with understanding where care is most cost effectively delivered and creating incentives to access the system through these points of entry.

7. b Most employers do not realize the difference in pricing for the same procedures within their own preferred provider network. There is a significant cost an employer bears by insisting on the broadest networks and open access PPOs. Insurer negotiated fee for service discounts do not eliminate the significant variability in charges from one hospital or provider to another. Employers must possess better consumer engagement tools and create financial incentives for people to choose higher quality, lower cost providers or you will end up paying dearly for the cost of your ignorance.

8. d Sadly, health insurance exchanges will not offer significant flexibility or reduced premiums to employers over 50 employees in 2014. In many states, exchanges will not even be available until 2017 for larger employers. The exchanges will be required to engage tight community rating rules limiting the benefits an engaged employer might receive over a less healthy employer. Additionally, a surge in previously uninsured participants covered under expanded Medicaid coverage could lead to a less than desirable risk pool as chronically ill individuals, now covered under Medicaid, seek care through emergency rooms – unable to find providers willing to accept Medicaid.

Regulators will work to control proposed insurer increases with price controls on renewals but these will only serve as stop-gap measures. Employers with over 50 covered insureds need to understand reform was designed to expand coverage for the uninsured and to facilitate aggregated purchasing for individuals and small employers. As insurers lose the ability to make higher margins on smaller business, costs will move to insured employers over 50 lives who will continue to procure healthcare outside exchanges.

9. e Minimum Loss Ratios will be calculated by each insurer – by license and by line of business in each state. Employers may still experience low loss ratios but be underwritten in such a manner that they may receive higher rate increases. Pooled insurance will continue to cost shift from bad risks to good risks. This will drive smaller employers to begin to consider self funding risks to avoid state mandates, premium taxes, insured pooled underwriting cost shifting and limited line of sight on one’s own claims experience.

17-20 points – Valedictorian – You understand the issues. You should be achieving low, single digit trends

14-17 points – Honors – You know what you don’t know. Now do something about it

10-14 points – Passing – You still have a lot to learn. Ask for help.

< 10 Points – Remedial  – You may need to repeat another year of high increases

The Goblins Will Get You If You Don’t Watch Out

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Little Orphan Annie’s come to my house to stay. To wash the cups and saucers up and brush the crumbs away.To shoo the chickens from the porch and dust the hearth and sweep, and make the fire and bake the bread to earn her board and keep. While all us other children, when the supper things is done,we sit around the kitchen fire and has the mostest fun, a listening to the witch tales that Annie tells about and the goblins will get ya if ya don’t watch out!

When the night is dark and scary and the moon is full, and creatures are a flying and the wind goes Whoooooooooo, you better mind your parents and your teachers fond and dear, and cherish them that loves ya, and dry the orphans tearsand help the poor and needy ones that cluster all about, or the goblins will get ya if ya don’t watch out!!!

– James Whitcomb Riley, 1875

Summer is just around the corner – it is a time of endless oceans of daylight falling into purple  shrouded twilights  filled with tales of the unexpected.  It was on these warm summer nights, that my brothers and I would camp in backyard “tents” of blankets anchored by ropes and lawn furniture.  We would lay motionless – adolescent grunions on the edge of a shoreline of weak light that ebbed from the windows of our back porch – telling ghost stories.

I loathed and loved my older brother’s perpetually embellished tale of the young couple stranded in their car, while their radio warned of a psychotic killer with a hook for a hand who had managed to escape from a local insane asylum.  It appears that in the 1960’s security was extremely lax at hospitals for the criminally insane.  As well, it seemed that every town had an asylum – along with supermarket, laundry mat and diner.  And what about the hospital’s choice of prosthetics? Could you at least replace a psychopath’s razor sharp hook with a rubber thumb or feather duster?  Not! Alas, the macabre tale  always concluded in some shockingly improbable ironic twist and was punctuated with the shrieking of a girl who turned one last time to catch the sight of her disemboweled boyfriend.

My all-time favorite was a highly politically incorrect story aptly named, “Clubfoot Tom “. Tom was a downed WWII German pilot who had become horribly disfigured when his plane crashed while on a secret bombing run over Los Angeles ( yes, Los Angeles.  My brother failed history ).  He was 6′ 8″ tall with burns over 99% of his body.  After pulling himself from the flaming wreck, Tom lived off small animals and eventually children who would stray too far from their campgrounds.  Tom’s victims would first detect a sort of dragging noise ( footstep – dragging sound.  Footstep – drag ) in the near darkness.  Perhaps one might even hear a deep feral grunt just moments before a massive scarred monster struck with surprising quickness out of the corner of your eye.

Years later I would question several elements of the timeless Aryan cannibal. Just how does a 6’8″ man qualify as a Stuka pilot? What were the Germans bombing in Los Angeles? How come the police never caught the creature – a 6’8″ mass of scar tissue and fingernails is hard to miss. My brother would shake his head and smile sardonically.  He would have made a great politician.  He had a frustratingly impossible to verify answer for everything.  “You’re such an idiot.  The Germans were creating the master race.  Their engineers could make everything. They measured the cockpit of the wreckage and determined the man who occupied it must be at LEAST 6′ 8″.  The Germans were bombing Disneyland as the US was secretly building nuclear bombs underneath the amusement park ( Disney did not open until 1960 ).  As to your most preposterous question, they still have not caught Bigfoot and he probably has an entire family in the forest.” He would stare at me with derision.

One fact was irrefutable  Clubfoot Tom was a cannibal and German and everyone brought up on WWII movies knew Germans ate babies and committed acts of atrocity for sport. Each summer, there were endless permutations of Tom’s havoc, horror and misery.  However,  each curious case would always conclude in the same manner, “…and the last they saw Tom was somewhere right-around- HERE!” This would always be followed by excruciating silence and an almost inaudibly whispered question from the most frightened among us, “is-that-story-true? “  My brother would nod slowly, sadistically turning off his flashlight leaving us only with the seeds of the supernatural and our pregnant imaginations.

The night became eight hours of endless terror.  A squirrel became a sociopathic clown intent on killing 8 year old boys. A cat jumping into the adjacent ivy was the advance guard of a legion of shapeless pitch black goblins. On these evenings, I made it a habit to never drink water ‘lest biology force me to sprint past Club Foot Tom who was most likely lurking in the hydrangeas.  Dawn was a governor’s death row reprieve.  With the sun, an unknown neuorchemical was released in our brains melting the midnight phantoms into morning dew. The next camp out, we would beg for another story.

Years later, I would pay forward my brother’s gifts to my campers as a counselor at YMCA camp in Mammoth Lakes, California. Ok, so there were a few complaints  from parents whose kids came home wanting to sleep with them until they were 18 years old. And yes, to this day, I am still getting in trouble with my wife and other parents when this latest generation of fear junkies beg me for a scary story.  I am certain a psychologist would have a Freudian field day with my adolescent phantasms, but come on, we live in a region rich in legends of spooks, goblins, witches, ghostly apparitions and haunted woods.  A kid growing up in New England needs a regular meal of Washington Irving and Salem Witch Trials spiced with tales of an insane local “Leatherman” ( those hides were not made from deer ) and haunted Indian spirits like the Wendigo an evil spirit the native Americans believed was created whenever a human being resorted to cannibalism.

There are many who have consciously avoided horror movies their entire lives. There are those pacifists who feels Bambi was given too liberal a rating, ( the forest fire scene was terrifying ) and regularly convey deep disapproval of scary stories in a manner that only those who are married and live in the state of disapproval can understand.  (By the way, the state of disapproval is the 51st state in the US.  It has no area code or zip code but it is the largest contiguous land mass in the continental US.  All husbands pass through this place while some have taken up permanent residence.)  It is here that we tell stories to children that scare them into Sunday and where we get chastised for our prehistoric preoccupation with disappearances, murders and grisly discoveries – – all wrapped in a blood stained thick brown wrapper.

Scary stories served useful purposes since the dawn of time.  Most phantasms were invented by authority figures wanting to keep their children from doing something  dangerous.   In England, the green decomposing water faerie, Peg Prowler swam the edges of rivers and lakes, looking to snatch the ankle of a reckless child standing too close to the water’s edge.  Redcaps, who dipped their caps in human blood were found near dark forests, abandoned huts and caves.  The native Americans had good and evil spirits competing for the hearts and minds of children nestled shoulder to shoulder in long houses and lodges.  The greatest story tellers focused less on mayhem and more on metaphor to surgically embed a social guardrail into the brains of their wide-eyed audience.  Perhaps some of us enjoy seeing them squirm a little too much. However, the ghost story is an important stimulant to a child’s imagination.  It helps us to keep our strange mythology alive and to counteract a modern day adolescent digital mind stunted by graphic gratification, electronic realism and politically correct resolution that ensures nothing remains unexplained.

Lets face it.  The real world is scary enough. Clubfoot Tom has become the monster of public debt and the specter of hyperinflation.  The insane asylum escapee is now an ideological terrorist or a faceless pandemic.  I want to hide under my bed just thinking about all these crazy, non negotiable threats that loom out there beyond my control. Personally, I prefer the old stories where there was a sort of implied social contract with the cosmos.  If you followed the rules and you did what you were told, you just might make it out alive.   Don’t talk back to your elders, do your chores and go to church.  Kids who kept their wits about them always seemed to find a way through the scary places.

And remember –  bad things can happen to people and the goblins will get you if you don’t watch out.