Feature Article: Thinking Outside The Box: Could Innovative & Create Thinking Improve the Health Insurance Marketplace? How Do We Make Health Care Great Again?
By Dorothy Cociu, RHU, REBC, GBA, RPA, OCAHU VP Communications & Public Affairs
President, Advanced Benefit Consulting & Insurance Services, Inc.
So here we are, entering the fall of 2018, with general elections in November, and we’re all wondering what it will mean to our industry. Here in California, we’re anticipating a likely win for Gavin Newsome for Governor… a single payer supporter. In Washington, Medicare for All is looked at as a possible solution. Will we be facing Single Payer threats? Will our industry be destroyed? Will insurance agents and commission income be eliminated? Those are some tough questions, and no one has any definitive answers as of now.
All of this talk about Single Payer, Universal Health Care, Medicare for All makes me wonder… Are we all being a little too gloom and doom? Are we so used to just going with the flow and buying what the politicians are selling that we’re forgetting to use the one thing we have that politicians don’t? Our experience (and some would say, our brains!)? Are we too stuck in the same thoughts and ideas, and not opening up to new, innovative ideas or creative thinking to perhaps solve our industry’s problems?
We all agree that we have the best health care system in the world… but we fail to agree on how to make it affordable and sustainable. How do we make health care great again?
I have been throwing out my thoughts for the past few years on a regular basis in various feature articles… But I’d like to go one step further. I wanted to share with you some of my thoughts, as well as some from industry leaders you may or may not know, and share some interesting ideas that could perhaps solve the problems of the health insurance industry. It’s at least worth pondering!
I asked Alan Katz, Next Agency and Past NAHU President, Don Goldmann, Past OCAHU and NAHU President, and Rick Paul, President of US Benefits, an actuary specializing in self-funded health plan underwriting, their thoughts on how we could make health care great again, and they shared some ideas with me.
But first, I’d like to summarize my own thoughts, most of which I’ve been preaching for years:
1) The need for Transparency in Health Care Costs; I would suggest that a federal law be passed that requires all provider facilities and services to publish their rates, so that consumers could make comparisons in choosing a hospital, surgery center, imaging center or other, the same as we compare automobiles, homes, or other important purchases. The concept is so basic, but it works. Consumers would then see price comparisons and choose accordingly. No more guesswork and no more not knowing what health care services costs until after the services are performed…
2) The need for Prescription Drug Reform… I would suggest lowering the time period for brand name drug patents… If we allowed patents to expire earlier, we could get generic drugs to the market faster, and we would have lower cost options sooner. I also feel that the prescription drug industry is a bit shady in their private dealings with providers and others, such as incentives to prescribe their way-over-priced brand name drugs… if this were regulated, this may not happen. Get rid of TV advertising of the most expensive drugs in each category. Use mandatory mail order for maintenance medications and cut out the middle man (the pharmacy that has additional costs). The amount of rebates given in my opinion is almost criminal… Why not just lower the price to begin with, rather than offering providers or TPAs rebates (third party administrators are now frequently receiving rebates on prescription drugs used by their clients, such as self-funded employers)? In my own book of self-funded business, I’ve recently seen tens of thousands of dollars per group paid out to parties other than the self-funded clients I represent, and I was not at all happy about it. If rebates are given out, then they should go back to the employer or individual on an individual plan paying for the cost of the prescriptions in the first place. Why should doctors, hospitals, TPAs, etc. get rebates on drugs that they didn’t pay for in the first place? And if TPAs are receiving them, why aren’t they being disclosed on 5500 Schedule A forms as required by ERISA? Shouldn’t these rebates be considered “non-direct compensation”? And if physicians and hospitals are receiving rebates, shouldn’t the patient be notified that this provider is prescribing a drug that contains a rebate back to the provider? How do we know they aren’t prescribing the wrong drug, just to make a profit?
3). The need for a stable pricing base for providers and facilities. As I have written about before, reference based pricing does this. A plan based on reference based pricing pays the providers at a known rate; a percentage of Medicare (for example, 140%, 150% or 200% of the Medicare rate). If we had a specific base rate, such as a Medicare rate, then the “discounts” of one PPO network versus another would no longer be a mystery. As I explained in a previous feature article on Reference Based Pricing (November/December 2017 issue of the COIN), this has proven to be highly effective in self-funded health plans across the nation. It’s been slower to hit the west coast, but it’s working very well in the east, southeast, and mid-western states since primarily 2014. The plans using reference based pricing are seeing much greater overall savings than plans using PPO networks. There are extreme differentials between the network discounts provided… Employers are receiving discounts off of an unknown starting rate, with zero consistency, in both fully insured and self-funded plans.
So, enough about my thoughts and repeating what I’ve been saying for years…. Let’s hear from others on their thoughts about how to think outside of the box and make health care great again…
Industry Experts Discuss Three (or more) Industry Wishes
In my discussions with Rick Paul, ASA, MAAA and President of US Benefits in Irvine, I asked him “You’re known in the self-funded industry as being an innovative thinker. If you could put your hands on a magic industry wand or you wandered upon a genie in a bottle that granted you three industry wishes, what would you ask for?”
Rick’s response, as always, was thoughtful and innovative.
“How [do we] make healthcare great again? Here is my simple five point fix: A. Require all prescriptions be sold at the lowest price of the major industrial nations; B. Require all emergency care/transportation and nonprofit hospitals accept for reimbursement the Medicare allowable charge; C. Require all healthcare providers accept for reimbursement one price set and communicated as a percent of the Medicare allowable. This healthcare charge index provides transparency and the insurance plans will provide reimbursements based on a percentage of the index with a minimum being 100%. The greater the percentage, the more providers will be available for the insured; D. Require insurance companies and self-funded plans to fully underwrite and have the right to refuse to cover applicants who are deemed uninsurable. [Editor’s Note: in a follow-up discussion, he stated that this would only apply for new coverage, and he felt they should be automatically renewed once underwritten]; E. Allow those deemed “uninsurable” to be covered under Medicare at a price equal to the greater of the average public price for the same plan or [a percentage up to 25%, perhaps the lessor of] their expected claim cost. Any deficiencies are covered by an increase in payroll tax that employers and employees pay.”
I asked Rick to expand on item E as it may be deemed a bit controversial. “I think if the person can’t afford it, then there would have to be some sort of subsidy provided by the government.”
Rick went on to discuss using an 80/20 rule to lower costs. He stated that by using (C) above (provider payments using a percentage of Medicare), “This will lower costs significantly. Using the 80/20 rule, [letter C above] lowers costs by 75%. This opens up competition throughout the marketplace. [It] eliminates care facilities that are unable to compete competitively or efficiently. It replaces the idea of single payer with single price multiple payers. It eliminates monopolies and price fixing. Transparency is the foundation along with true insurance. The public bares the cost of the people who are uninsurable, not an employer or individual.”
I asked the same question of Alan Katz. “If I suddenly received my Hogwarts letter, I’d ask for: 1) an outbreak of non-partisan, policy-focused health care reform in Congress and state legislatures that focused on reducing health care costs and increasing access to health care coverage; 2) a sudden public awareness as to how health care and health insurance works; and 3) a focus by health plan CEOs and other top executives (and the shareholders to which they are beholden) on long-term strategies and awareness of the political impact of their decisions.”
Don Goldmann had thoughts as well.
“My three wishes in no particular order of priority are: 1) Create and fund state by state major risk pools tied to Medicaid networks using the money currently spent to regulate and subsidize the various mandates and administrative functions in the ACA with those major risk pools handling the typically uninsurable or hard to insure. I believe that it would cost less doing this compared to the money collectively spent on the ACA and assigning insureds in the major risk pools to Medicaid networks would encourage them to purchase coverage sooner and keep it to avoid later going into the major risk pool.
2) Create pricing bands that allow persons not choosing to get health insurance to buy coverage with pre-existing conditions at a later date, but at a rate that increases over time for each year not covered. Otherwise, they would go into the major risk pool.
3) Require all states to return to small group pricing and rules (AB1672) similar to what occurred prior to the ACA except require all states to use a 10% plus or minus range with small groups being defined as 2 – 100 consisting of full time employees at 35 hours or more.
Priorities to Fix the Market
Next I asked the three industry experts what they think the top priorities would be to fix the health insurance market… Their responses varied greatly.
Rick Paul stated: “Two major flaws exist in today’s health insurance market, discriminatory gouging/pricing and insuring, uninsurable risk.” Both pricing and risk issues were discussed in his comments above.
Alan Katz responded as follows: “The problem with the health insurance market is that policy makers refuse to address and the public does not seem to recognize that the cost of health care coverage is driven primarily by the cost of health care. Any long-term, meaningful solution will require addressing already high and constantly increasing cost of care.”
For Don Goldmann his top priorities would be , “Make creative and expanded use of major risk pools to resolve the uninsurable and hard to insure population. Create regulations to enhance transparency.”
Potential Laws and Regulations for our Industry
None of us like laws and regulations much, but I asked all three experts if we HAD to have new laws for the industry, what do you think they should do or regulate?
Don Goldmann contributed: “Find pricing mechanisms that encourage the purchase of health insurance, but not mandate it.”
Alan Katz simply stated: “I believe laws and regulations should assure that everyone in America can obtain health care coverage with meaningful benefits and responsible coverage.”
Rick Paul shared his thoughts as follows: “Prescription laws that forbid advertisements and require that prescriptions be sold at the lowest price of the major industrial nations at the point of sale. Ban rebating. All emergency care/transportation and non-profit hospital care [should] be done at the Medicare allowable charge. Require providers to accept one and only price they accept for payment as a percent of the Medicare allowable. The provider is free to set the price as a percent of the Medicare allowable, e.g. 125%. Patients will understand how to shop providers and understand they could be balanced billed if the provider charges more than what their insurance covers. Allow for insurance companies and self-funded employers to fully underwrite their insured population and deem the uninsurable as such allowing them to become Medicare eligible.”
Visions of a Perfect Health Insurance Market
Lastly, I asked the experts to share their vision of the perfect health insurance market. They shared vastly different visions.
Alan Katz had some interesting thoughts. “There is no perfect health insurance market, but there are many markets that would be better than what we had before the ACA and better than the ACA. I’m becoming increasingly interested in a version of an all-payer approach to health insurance in which providers are required to declare and publicize the percent of Medicare reimbursement they are charging while health plans offer products that establish and publicize the percent of Medicare reimbursement they will pay. Under this system network consumers know what they’re buying will cover (e.g., a plan with a specified deductible, co-insurance and out-of-pocket maximum that covers up to 300% of Medicare) and what their treatment will cost them net of that coverage because they’ll know if they’re going to a provider that charges more than 300% of Medicare. This would be a simpler system for consumers that promotes transparency while enabling the public to find the coverage that best fits their unique needs. It dramatically changes the networking process (and the resulting fights between carriers and providers). Providers would set their reimbursement levels based on competition in their community and their costs. Administration costs would be reduced as providers would charge patients the same regardless of their health plan. Insurers would find it easier to set prices and have the flexibility to design plans that reward wellness and control costs. This transparent, all-payer approach would demonstrate once and for all whether the free market can work in the health care world, as all stakeholders in the system would be setting their pricing (or paying premiums) based on their competitive environment. It’s also a system that requires no new taxes and, if the ACA subsidies continue, could provide meaningful and affordable health care coverage to all Americans. Again, it’s not a perfect system, but it’s better than what we’ve got or what we’ve had.”
Don Goldmann had some interesting thoughts on this. “Pre-existing coverage guaranteed, but with financial and health care choice limitations for persons that do not choose to get and keep coverage on an ongoing basis. Pricing at the individual level that allows a maximum variation of coverage levels. No individual or group mandate. Small group up to 100 lives without mandated coverages and with pricing similar to California’s old AB1672, but with a 10% plus and minus range required in all states. Reduced paperwork for employers particularly on ERISA and any remaining ACA regulations that continue to affect businesses.
Conclusions & Common Thoughts
In summary, I hope I’ve shown you, through the eyes of various industry perspectives, that there are ideas out there that should be looked into. We, as industry experts, I feel are the best possible people to be solving our problems. Not the politicians. We have the expertise, the ideas, and the want to fix this, without a political agenda.
The most common themes discussed seem to be summarized as these:
- Pricing Transparency. It’s needed and would resolve a lot of issues.
- Use a consistent, known base rate to pay providers and facilities. The most common discussed is a percentage of Medicare, which is known and accepted. In the self-funded world, we call this reference based pricing.
- Prescription Drug reform, getting rid of the additional layers put on the cost of drugs, regulate the industry and the add-on payments and rebates.
- Work on the underwriting problem… Come up with consistency in underwriting. Look at the use of risk pools or other ideas presented in this article.
Education of the masses
No one has all the answers. But some of us have a lot of good ideas. Why not share these and see where it goes?
I’d like to thank Rick Paul, Don Goldmann and Alan Katz for their contributions to this article. ##
Originally published in the County of Orange Insurance News (The COIN), Published by the Orange County Association of Health Underwriters, Sept/Oct. 2018.
