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SPBA Email Alert – December 20th, 2011

Health Reform Insights

Personal candid observations from SPBA Active Past President Fred Hunt

STATE OF THE TPA INDUSTRY & FORECAST FOR 2012 has been posted on the member + public SPBA websites. SPBA President Anne Lennan asked me to continue the very candid reports I’ve done for 30 years. Many firms use them as discussion for their corporate planning, and many investors, buyers, lenders, etc. also use it for a candid assessment of the industry’s pro & con prospects. (About 95% upbeat news this time. Please see if your firm is falling short on the one worry mentioned.)

INSURED HDHPs NEED YOU TO TAKE OVER:

Employers with HSAs backed up by FULLY-INSURED high-deductible health plans are going to need you to take over the plan with a self-funded HDHP in order to keep their popular HSA program. In yet another kick-in-the-gut to insurers (this time probably unintentional), MLR in PPACA is going to pretty much force insurers out of the high-deductible market. There is no government edict. It is simply math. The MLR formula split between medical costs and administrative costs will almost always put insured HDHP plans in a “fail” position. The reason is that (obviously, by design) HDHPs don’t start paying medical claims until the high-deductible is met, so total direct medical payments are lower. So, the medical payment side of the MLR formula is low, but the administrative costs of an HDHP are not proportionately lower. (MLR does not apply to self-funded plans.)

So it seems that insurers will need to cancel such insured HDHP policies or lose money. It is sad. Individual HSAs that use insurer HDHPs may have no alternative, since self-funding is geared to employer plans.

HSAs have been the fastest-growing segment of health coverage. Most SPBA members have entered the HSA TPA market with companion SELF-FUNDED HDHPs. Our immediate goal is to prevent a public relations black-eye for both HSAs and the private employee benefit system if insurers feel obligated to their investors to suddenly pull the plug on their HDHP plans…and thus undercut the workers’ HSA and thus whole health coverage plan.   (This would, of course be spun in the media and government and statistics as a “failure” of the private employee benefit system and HSAs.

YOUR ASSIGNMENT: To avoid the bad PR and stranded employers & workers, please find ways to reach out to employers who have insured HDHP and HSAs or are planning to implement such a plan. Let them know that if an insurer pulls out of the insured HDHP, or they are worried about getting blind-sided when it comes, there is a remedy and you can provide it. MLR does not apply to self-funding. Please make this effort so that the private employee benefits system and a big chunk of the health coverage market doesn't needlessly wither and get a reputation as being “impossible” or a loser. 

LEGISLATIVE + REGULATORY NEWS:

>> INDESCRIBABLE LEGISLATIVE GYRATIONS are now the norm. It is all posturing & maneuvering (such as jumping through hoops so voting to kill some provision can look like it is a “yes” vote instead of a ”no”). Meanwhile some long-waiting issues like the unfortunate docs’ SGR “doc fix” continues to be like a tennis ball bouncing back and forth. The culprit is that every little thing gets blown out of proportion and used by the opposition as a gotcha. Ironically, all of the foolishness is to impress you the voters. An interesting development from all of this is that the traditional Washington DC big-dollar lobbying system has proved less and less effective. As SPBA has told you for years, the real power now (ultimate lobbying) is people like you and your clients letting Congressmen know the real-world factors of what you recommend to them.

>>RYAN-WYDEN:   A discussion proposal (not a formal bill yet) has been raised by a conservative Republican Congressman, Paul Ryan, and liberal Democrat, Ron Wyden, (being nicknamed “RY-WY”) to provide seniors a choice between taking Medicare…or being paid to stay in their existing plan. Being bi-partisan and with leading liberal & conservative proponents should make it a sweetheart idea, especially appearing late last week in the midst of partisan battles. However, all sides seem to have complaints (which is usually evidence of being a good compromise). It is being battered now, but keep an eye on it, because once the bickering runs its course, Congress is going to want to do “something” to show voters that they are hard at work and deserve reelection. Also, this is a heads-up because this will be an opportunity for traditionally-more-cost-effective TPA self-funded plans to shine, and a way to keep senior officers of clients personally included and interested in the plan. Stay-tuned.

Ironically, the guts of what is now the RY-WY idea was once the law of the land. It was in the Medicare Premium Support demonstration program as part of the 2003 Medicare Part D law. It was to be a test program for 5 years, starting in 2010. However, it was aborted by PPACA in 2010. Go figure.

>> DOL CRACKING DOWN ON MEWAs. See the “Wishful thinking” piece on MEWAs on the SPBA Website. The explanation was originally requested from SPBA by some State Attorneys General when DOL referred them to SPBA to clear up “the double talk” they said they were getting out in the field. They subsequently circulated it as reference for all State Attorney General offices. It is certainly not official guidance, but I mention the story because that is what a state Attorney General’s office is apt to use if a questionable plan comes to their attention. SPBA members have been extremely professional on the MEWA issue, but I know that clients & brokers sometimes come to you with ideas. So, you can now say you have the inside scoop that DOL is now stepping up their oversight, and you can also share the “Wishful thinking” piece with the broker and or client. Also, DOL will soon issue proposed rules to allow DOL itself to swoop in with an instant cease & desist (normally just states have actually taken action).

>> FSA & CAFETERIA FOR CLASS? A bill (just a bill) to replace CLASS would allow Cafeteria & FSA plan money to be used to by long term care. Nothing passed yet. Just FYI & stay tuned.

>> I TOLD YOU SO: Allow me to gloat. In my first long-range discussion with the SPBA Board in 1980, I said that based on what I saw & heard from the wise-head Congressmen during passage of ERISA in 1974, the idea of charging Medicare premiums based on income (“means testing”) would come. It seemed crazy at the time, but government had already done it with “lifetime” health care for veterans. Well, now it is an idea firmly “on the table” (most legislation and hidden pieces are composed of things that have been “on the table”). So keep an eye on this as health & budget proposals & deals emerge. Depending on how such a provision is written, it could become yet another reason why senior (usually older) executives of your client plans will want to stay on the employer plan.

>> EHB ADDENDUM: Last week, I gave you the pre-scoop that HHS would issue the Essential Health Benefits (EHB) as guidance, not a specific list. That is true, with the nuance that states should base their EHB lists on what “benchmark plans” in their states offer. (Needless to say, the consumer and special interest groups who wanted a rigid national mandatory EHB list with every conceivable treatment are shocked and angry.)

>> ACO PIONEERS: This week HHS will announce the list of 32 Accredited Care Organization (ACO) Pioneers who have gotten innovation incentives to create & operate ACOs as a model. The Pioneer ACOs are supposed to be up and running by January 1. If there are some in your market area, study how they interact with your TPA operation and plans. Please report back to me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it with any things we should note and share with your fellow members.

HUMAN NATURE IN MEDICAL PLANNING:

>> APPS FOR PATIENTS: The Surgeon General is urging app developers to create technology tools that are fun & easy for people to use for improving/maintaining their health. The Office of Natl. Coordinator for Health IT is holding a contest this month on this.

SPBA keeps alerting you to these kinds of items, websites, etc. so that they will be on your radar to access or adapt or make available to your clients/participants to enhance your clients’ overall plan experience and make your firm more valuable & appreciated than competitors.

>> COST OF HUMAN NATURE GOOFS: A New England research project estimates the following unnecessary costs (nationwide) due to patient bad habits. Since self-funded plans can custom design and usually have closer relations with plan participants, see if there are ways you can save your clients money.

Overuse of ERs = $38 Billion. Reduce/eliminate over-use of antibiotics = $63 Billion. Get patients to take meds as directed = $290 Billion.

>> DRUG SHORTAGES: SPBA members were the first to spot & report (and thus SPBA seemed to be the first to tip-off FDA) what is now a serious national problem. The shortages, especially generics, are now so bad that some hospitals are forced to not only use more expensive name brands, but also to cut doses and/or ration.   TPAs should do some homework to examine what plan language says (such as if higher-priced name drugs are substituted because of the shortage of generics), chat with PBMs, hospitals etc.   This is a mutual problem. This is just to tip you off of the problem so you are prepared & aware.

FUNNIES & HEAD-SHAKING:

>> HEALTH REFORM COMIC BOOK: I know, I know, you’d like me to convert these e-mails into comic book format. Well, MIT professor Jonathan Gruber has made a serious try to condense all of PPACA into a comic book called Health Reform. I have not seen it, but it has actually gotten pretty good reviews. Ah…just the New Year’s present for all your staff & clients. ;-)

>> DOUBLE-TALK TO THE BOSSES: How does a government agency phrase a nbon-answer to two of its leading Congressional bosses?? The General Accountability Office (GAO) was asked for a definitive answer whether PPACA will help Americans out of “job lock”. (Remember: this was a major reason for passing PPACA…to help workers who feel trapped in a job or else they will lose health coverage and add to the number uninsured.) GAOs answer to the explosive question was: “The experts we interviewed generally agreed that expanded access to health coverage under PPACA may help mitigate job lock, but had differing views or were less certain of or had differing views about whether PPACA would decrease premiums or encourage more employers to offer coverage, and thus were less certain about their likely impact on ‘job lock’.”

Got it?? Do you now feel informed and reassured?? (Note that GAO, like SPBA, uses the full initials for the law, PPACA, not ACA.)

STOP-LOSS FOR CONGRESS! In trying to follow churning legislation in the budget discussions, I realized that our wise Stop-Loss Service Partners need to run for Congress. Why? Hidden in almost all of the hodge-podge budget deals are huge loopholes and open-ended spending that would magically not appear as a budget expenditure.   The Congressmen don’t know or care about the concept of spending above the agreed document. They need some Stop-Loss 101 education. So, we need Stop-Loss in Congress and the key budget agencies.

As you rush off to holiday fun, don’t forget the to-do items in this e-mail (such as read the State of/Forecast + contact insured HSA plans to replace insured HDHP.)

Merry Merry & Happy Happy from the entire SPBA office staff !!

Fred