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Summary from Albers & Company’s Accountability ExchangeTM: “Managing Risk, Not Just Regulations” September 24, 2013 Our presenters: John Riherd, Riherd Law Office, and Albers’ Employee Benefits Attorney Paul Bogumill, Principal, DataSmart A recent 3-part series entitled ‘Special Report: Fall Insurance Renewals’ on CFO.com highlights a diverging propertycasualty insurance market. For a variety of reasons, businesses appear on the verge of getting decent pricing on property risks . . . while casualty insurance – particularly workers’ compensation coverage – is hiking prices as much as 25 percent. Driven by surging employee claims for workplace injury and illness, and lawsuits asserting bodily injury by third parties, soaring rates for workers’ comp are prompting CFOs and risk managers to reenergize their efforts to reduce claims. The series states there are some things CFOs and CROs can do to keep their casualty and workers’ comp prices level and their coverage adequate, from playing the market to: Our Advisors: Brent Price | 253.596.0613 Brett Meade | 253.596.0600 Jeff Albers | 253.596.0601 Jon Montgomery | 253.596.0611 Matt Reiss | 253.596-0616 Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS making sure your company’s premises are safe and relatively risk-free, retaining as much risk as you can via deductibles, training workers in proper safety measures, and rigging workplaces with up-to-the-minute safety engineering and machinery. Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 1 Just Like P&C Insurance, Employee Benefits Risk Can Be Managed Too – Many employers fall into a hapless cycle of managing their employee benefits annually. You shop carriers. You cut benefits. It’s still too expensive, so you shift more premium costs to employees. The result? Costs still go up. You’re disappointed. Your workforce is unhappy, and resentful. Yet before you know it, it’s time to start the cycle all over again. Sound familiar? We all recognize it. We’ve even named it— The Relentless Dissatisfaction Cycle Is this where you are today? Increasing costs Limited options Negative employee perceptions Which leads to… Company efficiency stalls Hopelessness ensues Employees suspicious and resentful Which evolves to… Increased cost-sharing Everybody feels trapped ER-EE relationships breakdown The Risk Management Spectrum – Today’s C-Suite Team has the opportunity to apply the same “risk management” mindset to its employee benefits program. It’s about educated predictability. Amazon routinely predicts the next book we should buy based on our buying patterns. Similarly, iTunes helps us choose our next favorite music or movie. Google knows more about most of us than we care to admit. Future high claimants can be anticipated too. Every employer has employees who have catastrophic claims potential – those employees who have not been to the doctor, never filed a claim or are ignoring their provider’s advice. In the next twelve months they may be the next million dollar claimant. If they are also a key employee or one with critical skills, your expense just doubled. Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 2 Health Care Reform: Managing the Regulations The 2010 Affordable Care Act introduced sweeping changes to both the insurance market and healthcare delivery systems. Don’t feel alone . . . everyone is confused, even those charged with enforcing it. Two main ACA provisions were implemented in 2014: 1. The individual mandate kicks in, requiring most everyone to have medical insurance or pay a penalty. 2. Exchanges: A key component, the health marketplaces (which are also called the exchange) are scheduled to open Jan.1, 2014. Most Americans will be eligible to enroll in the marketplace, and many will be eligible for assistance paying the premium. Each state will have its own marketplace. About onethird of the states will run the marketplace themselves and the federal government will run the marketplace on behalf of the remaining two-thirds of the states. Washington will have a state-operated marketplace: Washington Healthplanfinder. Navigators will help individuals enroll although they cannot make recommendations; only a broker may give advice on plan selection. Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS Delayed – Employer mandate delayed until January 1, 2015 although the individual mandate to have health care coverage remains in effect starting January 1, 2014 Defense Of Marriage Act (DOMA) decision impacts plans offering coverage to same sex domestic partners; the DOMA decision only affects same sex marriage; employers still need to deal with benefits and tax issues if they choose to offer coverage to domestic partners Exchange Notices intended to help educate employees about the marketplace are not required to be distributed; it’s up to you whether it still makes sense in your organization Various ACA provisions that have gone into effect over the years, starting in 2010 through 2014, to date – No annual limits on “essential” benefits Minimum health benefits required (bronze level @ 60%) First dollar coverage for specific preventive services including contraceptives Must cover emergency room services at in-network levels regardless of provider OBGYN available without referral; Primary Care Physician (PCP) can be a pediatrician No preexisting conditions, hence the mandate that everyone have insurance Over the counter drugs cannot be reimbursed under an FSA, HRA or HSA unless prescribed Wellness programs expanded and available as both participation or outcomes based (reasonable alternatives must be built in); incentives can be richer but keep in mind that HIPAA, ADA, GINA and ERISA all apply Eligiblity waiting period maximum 90 calendar days –many plans establishing the first of the month after 60 days employment Must provide coverage for dependent children to age 26 (was 25 in Washington); expanded to include those married or employed Claims appeal procedures redefined Coverage cannot be rescinded Employers issuing 250+ W-2s in a year must report benefits cost Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 3 Self-Funding Produces Savings on Several Fronts: Managing the Cost Self-funding used to be considered viable only for the largest of employers. Today, even employers <50 employees tread, albeit lightly, down the self-funding road. General Self-Funding Advantages: Lower administrative costs – the overhead of a Third Party Administrator (TPA) is typically 15-20% less than an insurance carrier. Governed by Federal versus State laws, therefore State mandates are optional – up to each employer to decide, item by item No State premium taxes Flexibility with reinsurance carriers; Washington State has a favorable attachment point, the level of claims when the reinsurance kicks in Reserves work for the employer not the insurer Multi-State employers can offer the same plan to all employees – simplification, as State mandates need not apply Added advantages offered by ACA No ACA insurance fee (2-4%) Avoid community rating bands of 3:1 ratio or worse Avoid essential health benefits parameters; employer’s choice to offer more or less Avoid minimum loss ratio of 85% claims payout, and the burdensome outcome of refunding premiums to employees if standard not met It’s real dollars; you do the math – Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 4 DataSmart Analytics: Managing the Risk by Managing the Data Run your health plan like you run your business. Comprehensive healthcare data analytics allows employers to shift from simply “collecting information” to “compiling and analyzing data.” Properly written self-funded plans ensure your organization owns the data. Comprehensive data analytics tools provide the educated predictability. Traditional Disease Management Weaknesses Your current carrier or TPA typically takes a guess about the future claims by looking back at past claims. On top of that, on average they only look at 40% of your population since most of your enrollees have never had any claims or their claims are so insignificant or varied they are inconclusive. If Walmart only scanned 40% of their sales, could they manage their inventory? In this example below, 14 of the highest claimants were not even identified as their health risk was unknown to themselves and the plan based on traditional disease management protocols. There’s little or no data to recognize that these individuals are about to experience a catastrophic health episode. Wellness Program Results Less Impactful when Stand Alone Wellness programs may help manage care and potentially improve participants’ quality of life, but don’t necessarily save money. Unfortunately the health care system is astute. When ER rooms became a target and patients began moving to after hour clinics, costs were increased so revenue remained stable by shifting profit margins. When prescriptions move to generic status, new even more expensive drugs are introduced. Better? Perhaps. Not necessarily. Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS Results from a Four-State Bank’s participation-based Wellness Program. Green indicates the percent of time their wellness program identified these risks. Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 5 Improving the Odds of Predictability The DataSmart team discovered that by adding vision data they could predict more; a lot more. Using findings from a vision exam, vision doctors were able to predict these chronic conditions without any other indicators or medical tests, often to the surprise of the unknowing patient. Using sophisticated algorithms from organizations like Johns Hopkins, Towers Watson and Milliman – much like the tools Walmart uses to identify where to put its next store – DataSmart’s analysts discovered even higher predictability when they included a more sophisticated biometric panel and a personal health risk assessment. In fact biometrics and health risk assessment information – things like height and weight, blood pressure, specific labs available without Doctor’s orders – can prove to be a more valuable predictor than past medical claims data While age is indeed the single most important indicator of risk, a combination of other factors can also produce significant probability of high risk. INPUTS DATA HITS R2 (Predictability) 40% 28% Vision +20% +16% Biometric & HRA +30% +31% 90% 75% Medical and Rx Total In this case study, DataSmart’s analysts were able to identify future high claimants before their life changing health conditions occurred. Those employees were shielded. Company productivity was secure. Claims were averted. The Health Plan’s annual increase has gone flat. It is a win for all. Benchmarking Helps – What’s normal? Every organization will have some claims, so you don’t want to spend time fixing what is normal. Do your employees have abnormally high risk factors? Are spouses driving claims cost? Perhaps with ACA you should send them to the Exchange? But you don’t know until you can look at the data. Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 6 DataSmart Reports are Actionable A Clinical Compliance Report identifies where to spend your time and money managing your enrollees’ risks. Recommendations can range from introducing benefit offerings like a stronger wellness program to redefining eligibility to communications about where and how to access the most efficient care. Do you need more high risk case management? With ACA, and its increased incentive options, would a stronger wellness program help? What’s a meaningful incentive to your employees? In an attempt to reduce the Here’s an illustrative example of one client’s early findings via their spend on their retirement plan, DataSmart analytics – one employer had changed its a) Implement wellness/vision programs with robust screening retirement plan vesting results data aggregation schedule. The change b) Improve Rx data quality; review available alternatives to inadvertently rewarded current PBM program employees for staying on c) Implement “Emerging Risk Identification” reporting; review longer, as they aged in place. current high risk Members and Members with frequent ER Their health care claims utilization for Case Management exploded. Like a water balloon, attempting to control costs in d) Consider implementing Mental Health and Cardiovascular one arena may inadvertently DM/Wellness Programs have a costly impact in another. e) Review current premiums structure to overcome Spouse enrollment’s adverse selection f) Review current emergency room benefit to prevent unnecessary utilization g) Consider Medicare Advantage program to covered Members 65+ Managing Risks, Not Just Costs You don’t know your most costly risks, until you have good data that allows you to paint an accurate and complete picture of all your benefits costs, with benchmarks and trending. Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 7 Where the currency of success is proven wisdom The Accountability Exchange™ is an ongoing, collaborative exchange between Business Owners and Key Executives. Facilitated by Albers & Company, the exchange provides access to ideas, resources, world-class expertise and proven wisdom; we call this “the currency of success”. It is one of the many ways in which we hold ourselves accountable for helping you distinguish your company in the employee market. A partial list of participants in Albers’ Accountability Exchange™ AHBL AIM Physical Therapy All West Select Sires Apex Engineering, PLLC Apple Physical Therapy Artbeads/Stores in Motion Ashley House Bargreen Ellingson BCRA Belco Forest Products Binford Metals BPCI Construction Bremerton Housing Authority The Business Examiner Business Interiors NW Catholic Community Services of Western WA CFM Consolidated, Inc. Charles Wright Academy City of Lakewood City of Tacoma Cole Screenprint Columbia Bank Commencement Bay Development Community HealthCare Danner Corporation Davies Pearson, P.C. Dobler Management Company Eisenhower & Carlson Embassy Management LLC Emerald Queen Casino Evergreen Fire and Security Farrelli’s Woodfire Pizza Federal Way School District Fircrest Golf Club The Geneva Foundation GENSCO Gordon Thomas Honeywell Greater Lakes Mental Healthcare HopeSparks Immedia Interstate Distributor Company Jesse Engineering Company Johnson, Stone & Pagano Kitsap Bank & Mortgage Korsmo Construction Korum Automotive Group LeMay-America’s Care Museum Lindquist Dental Clinic for Children Marine View Ventures Martha & Mary Mason County Fire District #2 MC Delivery Albers & Company | www.alberscompany.com 253.272.2711 | 888.8ALBERS Medosweet Farms Member Access Pacific Metropolitan Park District of Tacoma Momentum Partners Moss Adams Mountain Construction Multi-Service Center Northwest Cascade Northwest Partitions Our Community Credit Union Pacific Alaska Freightways Pacific Integrated Handling Pacific Lutheran University Pacific Overhead Door Patriot Fire Protection PCS Structural Solutions Peninsula Truck Lines Potelco Poulsbo RV Precision Machine Works Rainier Connect Ram International Rickabaugh Pentecost Development Round Table Pizza Salal Credit Union SeaTac Packaging Selden’s Home Furnishings Setina Manufacturing SGS Distribution Shuttle Express Simpson Investment Company SiteCrafting Sitts & Hill Engineers, Inc. Smith Fire Systems Sound Credit Union Sound Options, Inc. Sprague Pest Solutions Star Moving Systems Steilacoom School District Stellar Industrial Supply, Inc. STI Fleet Services Tacoma Community College Tacoma Community House Tacoma Housing Authority Tacoma Goodwill Industries Tacoma Lutheran Retirement Community T. E. Walrath Trucking Ted Brown Music Thrift Books Topia Technology Town & Country Markets Toy Investments, Inc. dba Toysmith TrueBlue Trusteed Plans Service Corporation TwinStar Credit Union Verity Credit Union Washington Architectural Hardware Westmark Products Whitfield’s United Wilmar Corporation YMCA of Pierce and Kitsap Counties Managing Risk, Not Just Regulations Albers & Company’s The Accountability Exchange | September 24,2013 8