The Employer R(E)volution

In healthcare, there are many different “players”.  The typical players are providers (doctors, hospitals), payers (insurance companies), employers (who typically provide health insurance for their employees), brokers (who help employers buy health insurance amongst other things), and vendors (who sell additional services and products to those in healthcare who need them) and individuals.

[Each of these players exists to serve (directly or indirectly) the needs of the patient, a key player indeed. However I will be focusing on the other players in this post.]

Many of these different players try to be everything for those they serve.  Lets take a look at each one.

Providers are the ones who are there to take care of you when you need it.  They have the knowledge and know how to fix what’s broken. Well, most of the time they do.  However, they are often the most fragmented of all the players in healthcare.  You can be seeing two different doctors in the same practice who have offices right next door to one another. But they may not be collaborating on your case.  The hope is that they’ve entered all that is needed into an electronic record and that the doctors are reading those records.  However, too many times the care is not coordinated. And people sometimes end up getting hurt because of it.

Payors provide insurance coverage so that you can get access to care.  In addition, they have disease management programs to help those with chronic diseases and wellness programs to help keep the rest of us healthy.  But here’s the problem – employers who buy health insurance are often forced to “market” their insurance because of the typical increases received upon renewal – thus they shop for a better rate.

If the employer gets a better rate, they may change insurance.  If that happens, the disease management and wellness programs that were in place for a few years, maybe 2-3 years, is now gone.  The process of engaging those employees with a chronic illness and those interested in wellness begins again. The continuity is often lost during this turnover – this changing of the insurance guard.  Not exactly ideal.

Brokers also provide a certain degree of assistance as well.  Some offer wellness consulting services for its clients.  If an employer isn’t interested in the services offered by the broker, then the broker may be responsible for marketing wellness to find a vendor that best fits the needs of their clients. So the wellness service may come from the payor, the broker, or a separate third-party.  That’s a lot of folks offering wellness.

The employers are the ones calling the shots typically. They choose the brokers who market their programs.  They tell the broker which insurance they would like (typically with counsel from the broker).  They choose insurance plans with networks that may or may not include certain providers.

They are the ones who hold the burden of employee engagement more than any other entity in this equation.  They are the ones with the most at stake.  Healthy employees cost less.  Engaged employees stick around longer and reduce the cost of turnover.

Yet they may not be receiving enough services from any of the other players to promote enough employee engagement to really change the company. Perhaps their broker offers services to help engagement.  But what about the providers?  Likely not.  The payors?  Maybe, but as I mentioned, they’re often turned over every few years due to cost/pricing concerns.

So we’re left with employers struggling to fully engage the very people who are at the heart of the healthcare system – its patients.  The employers are tasked with this. I can’t think of another country who puts this burden onto the businesses who make their economy hum.

And even with state exchanges just a few years out, recent surveys from Mercer and Towers Watson showed that only 1 in 10 mid-sized to large employers are actually considering dropping health insurance and pushing its employees to buy from these exchanges.  Therefore 9 out of 10 employers still value health insurance as a benefit to help attract and retain employees and will continue this uphill battle.

I happen to believe that employers hold a really strong place in this equation.  If they are committed to offering the benefit of health insurance to their employees, then they’re going to take steps to further engage their employees and help control costs.

Some employers are working with vendors like Healthstat to offer on site clinics at the employer site so that the employees working at there are able to see doctors in the confines of their own work area.  Think about that for a moment…keeping your employees on site so they’re contributing to the company’s mission and not spending half a day sitting in a crowded doctor’s office getting coughed on by sick individuals.  Lower absenteeism. Higher presentee-ism.  Win – Win.

And I don’t think this is where employers will stop.  One of the issues with care coordination is the lack of documentation (or records) that “follows” the patient around. Many hospitals have chosen medical record vendors already. But what if you use two different hospitals that use different vendors and they don’t talk to one another?  That’s a problem.

But what if the employer offered the patient record to their employees?  If they’re a self funded employer, they’ll have access to the data.  If the HIPAA/security aspect of it is acceptable to employees, then perhaps the employer can offer incentives to have employees adapt this…perhaps money into an employer sponsored HRA.  The employer could look to make this record portable so that if an employee leaves, they can bring it home and to any future medical doctor’s visit.

Since the payors are also looking at ways to individually engage their members,  I believe they’d have an interest in collaborating with employers to do this.  Of course brokers are looking to evolve as well as I wrote about in a previous blog.  In addition, the third-party vendors now have a new market in which to develop and sell products – the employer market.  A lot of the EHR vendors sell to providers and payors only. Maybe this will change.

I also happen to believe that this is only the beginning of what employers will begin to do. This is only scraping the surface of innovation and collaboration amongst the different players in healthcare.

Once the employer is committed to continuing health insurance coverage for their employees, I think you’ll see some new ideas coming from these empowered employers and their business partners in healthcare. Perhaps some new companies may be created to help serve these employers.

And maybe…just maybe…some of these newly created companies will make it into one of my future “In Good Companies” posts.

(If you enjoyed this post, I welcome you to check out some of the other posts in my “R(E)volution” series)

The Payor (R)Evolution

[As seen first on the Unified Patient Information Management Blog]

I had originally titled this piece “A World Without Health Insurance” but figured I’d get fired from my day job if I did that, so enjoy the new title, healthcare fans.

All joking aside, I am writing this piece to have you think about a world where patients and providers are empowered to do what is best for them and the health insurance companies (aka Payors) will need to evolve in order to keep up.

Have I got your attention?

Let’s look at a few facts:

1)  The Patient Protection and Affordable Care Act (PPACA) is adding approximately 32 million formerly uninsured people to the ranks of the insured. Good news for the health insurers, by the way.  Can you imagine if the Feds mandated that we all eat pizza?  Papa Gino’s and other pizza vendors would be pretty happy about that.  Can you also imagine the new Dartmouth Atlas that shows which regions of the country like pepperoni and which prefer mushroom?

I digress. Back to the current state of affairs.

Our healthcare system today already has problems with cost control. And now we’ve added 32 million people to it with little to no education and empowerment.  So this could get interesting. And by interesting I mean bad. As in its Saturday night, I have a headache, and since I have health insurance now I’m going to the ER at a world-class teaching hospital to get it checked out bad.

2)  Doctors aren’t happy with PPACA. Not all, of course, but a good number of them. A Thomson Reuters-HCPlexus National Physicians Survey released earlier this year showed that nearly two-thirds of doctors surveyed felt that PPACA will worsen care.  Not to mention it won’t help the docs financially.

3)  Employers aren’t exactly thrilled with PPACA either. In fact, only 16% were in favor of it according to this article from Employee Benefit News (quoting the 2011 UBA Benefits Opinion Survey). Couple this with double-digit premium increases from their health insurance plan year-over-year and you have some pretty peeved people.

How about you?  Feeling good about our healthcare system and PPACA?  Maybe you are…for the moment.

Let’s play make-believe.  (I love this game).

Above I have painted a real-life picture where two-thirds of doctors do not like PPACA.  Some of them are likely in the later stages of their careers.  Let’s pretend that they choose to retire rather than endure a complete healthcare system overhaul.

Now you have fewer docs.

Oh, and don’t forget, you have 32 million more patients.

Fewer docs + 32 million more patients = longer waits, fewer resources, likely more doctor mistakes.

If you think waiting for your doctor in today’s system is a problem…just wait until PPACA really kicks in.  And if you aren’t advocating for yourself when it comes to healthcare, well I hope it’s on your to-do list in 2011.  Or at the very least before 2014.

So how does all of this tie into this blog post?  Well, the docs aren’t just retiring. They are looking for alternate ways to keep working but without the hassle of PPACA or insurance reimbursements.

Enter telemedicine.

The more I read on this stuff, the more I think we’ll all be seeing docs via live chats in the next few years.  Companies like MD Live Care out of Texas are making it easy for John Q. Public to be seen by a doc almost instantly.  Or at the very least seeing the doc when John Q. wants to see the doc, not when the doc wants to see John Q.

You log in, create an account, tie it to a credit card, schedule an appointment and bang – you see the doc. It likely costs about as much as a co-pay today. Well, a higher co-pay, maybe $30 to $40 or so, but hey – it’s worth it so you don’t have to leave work and sit in a waiting room full of sick people coughing all over you right? (Side note – keeping us out of the germ-infested doctor’s office keeps us healthier. Win Win).

Docs love this.

And it doesn’t hit the insurance company either.

How about the companies that are doing contract surgery work directly with employers?  Have you heard about these yet? A trend known as employer direct healthcare?  If you haven’t yet, you will.  Companies like National Surgery Network are one example.  These companies work with hospitals and large self-funded employers to find the best rates in the market for particular surgeries and procedures.  They negotiate greatly discounted rates for a company’s top cost-driving procedures and surgeries while putting some perks in place so that traveling out of the normal area for the care doesn’t seem too bad. Savings are significant, too. I’ve read upwards of 50% savings for some procedures vs. the traditional model. And that reduces healthcare expenses significantly for employers.

Thus, employers love this.

Once again, it doesn’t hit the insurance company.

Then there are other companies whose goal is to provide more basic medical care without the hassle of insurance.  Companies like White Glove House Call Health who was featured in a previous blog post.  Instead of leaving work to see doctor for a sick visit, you schedule a nurse practitioner to see you where you are.   You pay a small fee, your employer pays a per member per month fee.  Cost avoidance due to reduction in use of insurance, doctor charges and absenteeism = happy patients and employers.

Or how about a company like Healthscape Partners who have created a new business model that benefits both the consumers of healthcare (including employers) as well as the organizations who join the Healthscape Alliance, like two of the companies named above.  Think collaboration, not competition – companies that cover a number of healthcare related verticals benefit from shared business development activities to help reach clients they might not have normally reached.  Wow.  If this type of collaboration for the betterment of healthcare is a sign of the future, sign me up now.

Last but not least, there’s the creation of state exchanges to offer health insurance bound by common rules around pricing and offerings which promotes pricing and consumer choice.  Not to mention portability of insurance despite job change and more consumer information.

Seeing a trend here?

What do you think?  Lower costs? Seeing the doctor quickly will minimal hassle?  Little to no insurance involvement?  And when there is insurance involvement, there’s choice and competition involved? Are you loving this?

So, Mr. Insurance Company…how are you going to evolve to continue to be a player in this ever-changing healthcare field?

Perhaps I’m unfairly singling out the insurers here.  Nah, not perhaps.  I am.

But guess what – they’re worried. And they should be.  The world as they know it is changing rapidly around them.  I recently heard a story from a colleague about a health insurance worker saying that they are wondering if they (the insurance company) will still be around in 5 years.  Yikes.

Before you write them off – don’t.  Disruptive technologies have a way of bringing out the best in people and companies.  And folks aren’t giving up on the system that is in place today.  This system can still work, it just needs a kick in the behind. And the other players in the system are working with the payors to make it happen.

Look at all of those electronic medical records vendors creating solutions using meaningful use standards to assure health IT is as functional as can be, or as Janice McCallum puts it: “Data that can do stuff.”

Companies like NaviNet, the company that created a real-time communications platform that links the major players in health care: providers, health plans and other industry partners, is one example. Their platform for unified patient information management (UPIM) turns data into meaningful information for payors.  Their EMR, practice management and e-prescribing solutions for providers make it easier for docs to deliver high- quality connected care.

Heck, even the feds are in on the fun by pushing for the creation of Accountable Care Organizations to drive quality outcomes and a better, more coordinated patient experience. How’s this for “Nah, the old system ain’t working very well. Whatdaya say we push aside the old fee-for-service payment system and trying something different”?

That’s some pretty cool stuff, no?

Now…put it all together.

Will it work?  Some would say that it is already working. Others will say that it’s too early to tell.  And still some naysayers believe it will fail.

But like I said – disruptive technologies have a way of bringing out the best in people and companies.  Payors will need to evolve as will each of the players in the healthcare system…because revolution isn’t really an option.

And I think the best is yet to come.

The Broker (R)Evolution

Years ago, there was no Internet.

And there were travel agents.  People that could help you book a trip to your favorite get-away.

Then the Internet arrived (thank you, Al Gore).  Sites like Travelocity and Expedia helped make trip booking as easy as a click of a mouse.

Then there were no more travel agents.

Ok, so that’s not entirely true.  There are still travel agents, but the demand for them has shrunk significantly.  And those who use travel agents are typically those who want the all-inclusive trip with flight, hotel, car, tours, etc.  Those who have lesser needs utilize the Internet.

Thus, the travel agent hasn’t gone away.  They still exist.  In fact, travel agents use sites like Travelocity and Expedia to serve their customers.  The travel agent has embraced change and done what it needed to do to survive. The travel agent has evolved.

In the insurance world, there are insurance brokers.  Brokers are the people who help individuals and businesses buy insurance including health insurance, dental insurance, short-term/long-term disability, and life insurance to name a few.

Then the Patient Protection and Affordable Care Act (PPACA) came along.

Will there soon be no more brokers?

Of course not.  Similar to the travel agent, the brokers aren’t going anywhere. Some will go out of business. Some will be bought. Some will merge.  But they will still be around.

What you can count on is this: they will need to evolve.  In fact, some already have.

Just like the travel agents did when the Internet arrived, the brokers are in the process of evolving to assure that they will still be relevant and needed post PPACA.

Perhaps I’m unfairly tying the evolution of the broker to PPACA, but there is a lot in the healthcare reform bill that will impact brokers.

One of the biggest changes that will affect brokers is due to a trickle down piece of PPACA.  When the bill was passed there was a component in it stating that medical insurance companies need to have a medical loss ratio (MLR) of 85% for large group health plans and 80% for small group and individual plans.  This was to take effect in 2011.  If the insurer did not meet the MLR guidelines, the penalty was to provide rebates to the plan members.

For those of you who have health insurance through a not-for-profit health insurance carrier or have coverage through a large employer – guess what?  Your insurer likely has an MLR that meets the criteria or is pretty darn close to it.  (No rebates for you!)

However, many of the insurers our there, especially those serving the small group market, are going to feel this trickle down.

So what the heck is the importance/significance of MLR?  To put it simply: insurers allocate dollars towards the payment of claims – their medical loss ratio.  Anything else is typically considered “administrative”.  This includes administrative expenses, overhead and, of course, profit.  So if the MRL is 80%, then the idea is that 80% of every dollar goes to pay claims and the remaining 20% goes into the administrative bucket.

With PPACA limiting what insurance companies can put in the administrative bucket, it is cutting into their profit.

What is the impact on brokers?

Many brokers are paid a percentage of the medical premiums that their clients pay to the insurers.  This is generally in the low single digit percentage range though it fluctuates based on broker/agreement with employer.  Since medical insurance is typically the biggest line item on any employer’s budget, it is also the largest source of income for brokers.

Additionally, there is something known as contingent commissions or bonus that brokers are paid by insurers.  Many times this bonus is tied to volume, meaning if broker A sends xx number of new clients to insurer B, then insurer B will send an additional amount of compensation to broker A.

Aside from the conflict of interest that this poses (brokers being paid additional compensation tied to volume regardless if the health insurance plan isn’t the best choice for the broker’s client), this additional compensation has long been an accepted business practice.  Though it’s not shouted from the roof tops, it’s also not done behind closed doors and in back alleys. Many employers are aware that their broker is receiving additional compensation from their insurer and do not have an issue with it.

Regardless of how one feels about this practice, it is likely to change.

With the MLR rules affecting insurance company profits, insurers need to find a way to become more lean.  They can only pass along so many double-digit rate increases before an employer leaves them.

Since it makes sense for employers to stay with an insurer long-term so that insurer-sponsored disease management and wellness programs have time to take effect, insurers should be looking to retain customers rather than raise premiums and make up for the MLR loss elsewhere.

Where do you think the next cut will be?

Let’s just say that brokers can count on getting squeezed by medical insurers in the form of lower bonus and commission.

So now you have brokers being paid less.  And with state exchanges due to roll out in 2014, do you think brokers are going to be needed for those individuals and small groups that are most affected by the MLR change and most likely to be the biggest customers of these state exchanges?  Likely not.

Thus, we have the fixings for a broker (r)evolution. I  throw the “r” in there because some may revolt.  But the smart ones will evolve.  Here are a few ways that I believe they will evolve.

First, get into shape.  Similar to companies cutting costs prior to being acquired, brokers need to position themselves to succeed in a new market.  This may mean merging with other brokers, or selling their books of business and stepping out of the game to let those who are “in shape” take the lead.  Those who refuse to get in shape will likely go out of business. It may also mean discussing alternative payment models with their clients or perhaps adding additional services to their portfolio (maybe both!)

Since the creation of state exchanges are likely to make it pretty easy for individuals and small businesses to buy insurance, it is the broker serving individual and small markets that have the biggest need to evolve.

Second, brokers need to become more than just brokers.  If the single benefit a broker brings to the table is the ability to shop for insurance and then pound on the insurance vendors to get the lowest rate…sorry.  This is the basic broker transaction that every other broker brings to the table.

Brokers need to do more – they need to become extensions of their clients, helping with employee communications and education, introducing vendors who can help employers save money and cut costs, navigating the maze of healthcare reform so that their client partners in HR can focus on their employees.

This evolution is already occurring to some extent, but I believe there’s more work to be done.

I often wonder if the role of brokers will become more employee-facing rather than strictly a “Benefits Manager – Broker” relationship.

Think about it:  if a broker can take on a larger role in open enrollment communications and education…if they can conduct educational seminars on how employee decisions and lifestyle affect premium…if they can become more involved in promotion of wellness programs and become more involved in the creation of total rewards programs to increase employee engagement…isn’t this a natural progression for today’s broker?

Similar to the travel agent being the one-stop shop for all travel needs including being the first person called when the traveler loses his/her purse or wallet, the broker can evolve to be the first person a benefits manager calls when its time to educate their employees on the new Consumer Directed Health (CDH) plan with HSAs or discuss how more treatment doesn’t necessarily translate into better health.

Are we still a few years away from this model?  Definitely.

But it does appear to be the natural evolution of the broker…especially if survival is at stake.

Now if you’ll excuse me, I need to call my travel agent.  The picture of the hotel in the brochure looks nothing like the place I just checked into.

[Note: My thoughts and comments in this blog are my own and do not in any way represent my employer or my employer’s views.]