Healthcare and Insurance Outlook Assembly

    Since its passage in 2010, the Affordable Care Act has presented a tantalizing mix of potential improvements in healthcare delivery and a goal of lowering insurance costs, along with regulatory and consumer-behavior pitfalls. Six years on, the good, the bad and the just plain ugly consequences are still with us. But seismic changes in the way providers deliver care are indeed afoot. Changes in the way employers build benefit programs, and provide incentives, are well along their way. Changes in the way consumers accept responsibility for their own health? Well . . . we can hope, can’t we? Those issues and more were on the minds of a dozen influential health-care executives and providers who met at Ingram’s on Sept. 6 to assess the current state of affairs in healthcare and insurance.

    Steered by co-chairs Ron Rowe and Dr. Gregg Laiben of sponsoring Blue Cross Blue Shield of Kansas City, their fast-paced, two-hour conversation demonstrated how far we’ve come since 2010—and how far we have still to go. It was also a powerful reminder of how much is at stake for the businesses that drive our economy, and for those they employ.

    American healthcare offers no shortage of venues for change, and those at the table jumped into the subject matter with zest. From the way medicine is being practiced, delivered and financed to the impacts of technology, demography and consumer behaviors, participants agreed that healthcare today is a frothing cauldron of innovation, opportunity, clashing priorities and misaligned incentives. Yet all remain committed to the search for new processes and methods for improving the efficiency of the system they work in, and the costs it imposes on businesses, healthcare providers, insurers, brokers and, ultimately, the patients.

The ACA
    The first question participants addressed: How the Affordable Care Act had affected their respective organizations in different ways, for good or ill.

    “The biggest change that the ACA brought about is, it forced innovation and rewarded innovation,” said Mark Fendler, president MedTrakRx Services, a pharmacy-benefit management com-pany serving corporate clients. “As companies waited to see how the legislation would roll out, those who sat on the sideline fell behind, and those who were nimble and creative in the healthcare system were rewarded.”

    Matt Condon falls squarely into the former group as CEO of Bardavon Health Innovations, a three-year-old data-driven company that focuses on getting injured workers back on the job. He’s seen the impact of ACA not just on clients, but personally. “As a small business owner and provider, the most difficult part is the massive need for education in the marketplace,” he said. Not enough people know the difference between coverage and affordability, and how their use of healthcare affects insurance premiums.

^{1. Co-chair Gregg Laiben launched the discussion by asking how the Affordable Care Act had specifically affected participants’ organizations. | 2. BlueKC, said co-chair Ron Rowe, swung into innovation mode the day ACA was passed. | 3. Jessica Lea represents a company that was born from innovation in the pharmaceutical space. | 4. The increasing use of data, said Matt Tritz, would continue to define and shape healthcare strategies.}
     Matt Tritz, a vice president for Lockton Companies, an insurance brokerage and benefits consultancy, also sees innovation occurring “as we try to move the needle from fee-for-service to quality of care.” Another, he said, was in the data realm, where employers are finding new tools to reduce costs. But a prime directive of ACA, he said, had not been met: “Costs are not going down.”

     Stephen Salanski, who has twin perspectives as medical residency program director at Research Medical Center and as president of the Kansas City Medical Society, sees the immediate impact of having more patients with insurance coverage. “But there’s still a huge gap between what they have and what they think they have,” he said. For providers, he said, the biggest change was the focus on providing quality care, rather than high-volume care.

    Another change for providers, said Raghu Adiga of Liberty Hospital, “is how we are reimbursed for the healthcare we provide.” That, and the shift from inpatient treatments—historically the most expensive level of care—to outpatient care. “The change is hard,” he said. “Our inpatient volumes have gone down, like everywhere else, and our outpatient is going up.”

     For employers, said Matt McInnes, president and CEO of the benefit consultancy McInnes Group, “the biggest thing is the fear of the unknown, fear of more regulation, less choice, and obviously, the costs.” That makes education paramount, particularly for new players at the benefit-design table, such as CPAs and attorneys, who are trying to figure out where the leadership must come from. “That turned out to be us,” he said.

    BlueKC’s Ron Rowe said innovation at the non-profit insurer started on March 23, 2010, with passage of the ACA. But regulatory inconsistency, he said, had stifled innovation. “Every time the rules change, you have money invested in a new innovation that can’t be used anymore.” When he started there 20 years ago, he said, there wasn’t even a compliance department. That’s clearly not the case for insurers today.

Innovation
    There’s no question that the ACA has driven new lines of business. Jessica Lea is the CEO of Tria Health, a medication-management service that focuses on identifying risk in managing medication use and improving outcomes. The company didn’t exist until after the ACA became law. Because of the healthcare reforms, she said, there’s a sharpened focus on successful health outcomes, not simply on treatments. “Improvement of quality care and innovation are important, and those came out of ACA,” she said.

    At BlueKC, said Gregg Laiben, vice president for health innovations and medical director, officials have been compelled to seek new solutions because the newly insured “tend to be coming on board with significantly more chronic disease and chronic conditions than patients traditionally had.” That has compelled new initiatives with physicians, pharmacies, medical centers and others, resulting in a value-based approach to delivery of care. “We found more innovative ways to foster quality of care and control costs,” he said. “And I think we’re continuing to do so.”

    Kathy Ross, chief health officer at Government Employees Health Association, said officials initially saw the ACA as an opportunity for a new line of business with the health-insurance exchanges. That, she said, led to designs for new products the insurer could offer, test in the marketplace, and make modifications.

^{1. Employers, said Matt McInnes, are increasingly concerned about the loss of choice when it comes to crafting a health plan. | 2. Mark Fendler said the ACA forced innovation across the healthcare spectrum, but also rewarded it. | 3. One example of how delivery models are changing, said Raghu Adiga, is Liberty Hospital’s role in the Norterre healthy-living community. 4. Stephen Salanski noted the increased financial risk shifted to doctors under ACA.}

    The innovation imperative is likely to grow. Gregg Laiben cited concerns about how the long-projected “death spiral” in insurer coverage capabilities might be emerging as more national carriers, overwhelmed with larger pools of sicker individuals, withdraw from participation in the federal exchanges in some areas.

    Matt McInnes cited one clear example of how that’s leading to reduced choice. His company lost the ability to work with UnitedHealthcare on plans for parents with autistic children. That’s no longer an option, he said, “so now we’re looking for a new partner or go-to carrier for that segment of people it was important to. Now, there are fewer and fewer choices.” The decreasing options for choices, he said, are “scary.”

    “There’s no question that the individual exchange marketplace is in a death spiral,” said Matt Tritz. “Exiting of carriers from a market is not good for it.” The real issue there, he said, is that the individual mandate for coverage doesn’t have a substantial penalty “and until that is addressed, we’re going to continue to have this issue.”

Cost-Shifting
    As a consequence of higher insurance rates for businesses and employees, lower reimbursement levels for providers and gaping holes in insurers’ profit models, a considerable amount of cost-shifting is taking place. And with it, attempts to shift risks.

    Higher out-of-pocket costs for consumers, said Raghu Adiga, “has increased uncollectable debt. It is going to get worse, and I’m sure providers are trying to group together and improve negotiating power and look for ways to reduce cost. As providers, I don’t think we have a whole lot of choice.”

    Stephen Salanski said providers right now are “at the mercy of the health plans in some ways. We don’t get much say about what happens to our patients. Some will choose to not keep coverage now or those who get it will have very high deductibles.”

    That, said Alan Flory of ReDiscover, a behavioral-health organization, is not trival. “We have noticed a huge problem with high deductibles. With a lower income group, they can’t afford the deductibles, and some are refusing care, while the original intention was to get them the care.” Common increases to deductible levels of $5,000, he said, represent “a huge hit for somebody who is
at 150 percent of the poverty level.”

    The cost-shifting, said Vishal Adma of KVC Behavioral Health, had pulled in caregivers, as well. “Even the physicians might be saying ‘I don’t want to provide service to some patients,’ so for those patients, there is less choice. It’s affecting insurance companies, patients and physicians in different ways.”

    “Employers”, said Ron Rowe, “are more at risk than anyone, because as carriers leave the exchanges, those companies have fewer options.” As a result, many companies are flirting with a potentially risky strategy of self-insuring. “With smaller businesses, over the past couple of years, that conversation has been more frequent,” said Matt Tritz. Small to mid-size companies, he said, “are asking what’s out there in the market, something innovative that I can find. Like larger companies, it has forced them to think about things differently: “What’s my philosophy, why it is the way it is, does it need to be this way, and if not, what have we got to go through to change it?”

    “For the large employer groups,” said Matt McInnes, “when ACA came out, they asked about dropping their plans, but most didn’t. If they didn’t then, why would they now, with a penalty for that?” As a consequence, he said, they are trying to find creative ways to save in other parts of their benefit plans.

    Matt Condon, who sold his physical therapy company a few years ago, noted the contrasts facing employers of differing sizes. “The benefits cost for having under 50 employees is twice what it is for more than 100,” he said. With some of those costs rolling onto employees, he said, more are saying, “Give me that money and keep that benefit—I’m not afraid of that penalty on the exchange.” Everybody, he said, “is trying to shift risk to someone else—insurer to  employer, employer to employee, and we’re running out of places to shift it.” A recent trend involves more workers compensation claims being filed by employees who can get medical treatment without having a co-pay or deductible. “We’re still a long way,” Condon said, “from having those cost centers allocated correctly.”

     That’s evident in the most recent round of rate-increase notifications. Rowe said some companies that had been underrated previously were see-ing premium increases of less than 5 percent for the next year. But for those in the modified community rating pool, “all the bad-risk groups are there, and they’re looking at 40- to 50-percent rate increases.”

The Pharma Factor
    Gregg Laiben turned the discussion toward the pharmaceutical piece of the puzzle, where some eye-popping increases in prescription drug prices were compounding the cost-shifting imperative.

    “You talk about the death spiral—this is the price escalator,” said Mark Fendler. Prescription drug prices overall rose 15 percent last year, he said, with new drugs costing roughly $250 and specialty medications $4,000. “The one industry that lobbied the most for ACA and emerged unscathed,” he said, “is pharma. They were left to control their own prices, set the list price, if you will, and let the market react.”

    The market’s reaction, at least from employers, hasn’t been entirely receptive. With higher costs for drug plans, smaller employers in particular are at risk in their quest to attract and retain talented employees who might balk at being asked to pick up a higher share of those costs.

     Vishal Adma pointed out the cost-control strategy of requiring a physician’s prior authorization on prescriptions, but said “it is more time commitment to the physician to get that paperwork done.” Compounding the challenge, he said, is a culture that has accepted mass marketing of new and expensive drugs—try watching a nightly newscast without seeing an ad for one—fueling demand for the most expensive treatments, when cheaper alternatives drugs might suffice.

    The amounts being reserved by pharma companies for their R&D, said Jessica Lea, are “exorbitant.” “That’s hard for anyone to swallow,” she said. And programs that tout a consumer’s ability to access medications at low cost, even no cost, are misleading: “That’s being paid by someone, somewhere,” she said. Without some type of regulation, Lea said, “these meds are going to continue to break the employers.”

^{1. Lower-income patients, said Alan Flory, are particularly vulnerable to the effects of high-deductible insurance plans. | 2. Vishal Adma pointed out that patient choice is further reduced if doctors decide not to treat those with lower reimbursement levels or an inability to pay. 3. Why, asked Matt Condon, must all his employees bear the same co-pay and deductible when not all present the same healthcare risk to insurers. | 4. Rollout of the ACA presented opportunities for new lines of business at GEHA, said Kathy Ross}

    Ultimately said Kathy Ross, it’s “the consumer who has to be brought along and figure out that what we’re doing today is not sustainable. If there isn’t mass movement to the narrower networks or tighter formularies, you put yourself at a competitive disadvantage.”

    Matt Tritz cited the employer concern about a comparatively new hire who might have a debilitating condition like hepatitis-C. “You’re going to spend a couple hundred thousand dollars on medications for someone who’s only been there six months and might be gone in another six,” he said. “That has made employers ask, ‘How can I manage this pharma benefit differently?’” One key, he said, was more and better data.

    Raghu Adiga said misaligned incentives add to costs. Private insurance coverage for one treatment, he said, might not be matched by Medicare or Medicaid. A doctor who sees patients unable to pay out-of-pocket costs for in-home supplies might send them to a provider where the care is covered, but at a much higher cost ­borne, in this case, by taxpayers.

Millennials and Convergence
    Gregg Laiben offered a sobering statistic, noting that in just four years, the oldest Millennials will start to turn 40—prime age for onset of chronic diseases that show up in mid-life. And there are 78 million of them. What will that infusion of higher-need patient volumes have on a system already strained for resources?

    “What you find with that age group,” said Kathy Ross, “is that they want their care now, they want answers now, they don’t want to make a traditional call and have to wait.” Better informed than previous generations, they want to evaluate their own symptoms using online tools, and to tell the doctors what they think they need, rather than asking for advice, she said.

    Who, though, doesn’t want that kind of immediacy, Laiben responded. The larger point is that if everyone is adopting such behaviors, and there are 100 million members of the Silent and Baby Boom generations ahead of the Millennials, the system could be overwhelmed. So how does care delivery adapt to that challenge?

    It’s an issue, said Matt Condon, of convergence: demographics, technology and changing consumer demands. “Millennials don’t even know what a Blockbuster is,” he said. They’re expecting technology to drive a better patient experience, but the challenge for healthcare in general is to use that technology and data potential to meet that demand. “But we’re still waiting to find out what to do with the data we do have,” he said, “and we’d better figure it out. Not only are Millennials going to use more healthcare, Medicare is going to double, and all these issues are going to converge at once.”

    Raghu Adiga noted the changes that are already taking place in delivery methods to appease a new type of consumer, such as evening and weekend hours for providers, or urgent care options that are far cheaper than emergency-room treatment. We have a long way to go, he said, to properly educate consumers about the consequences of their healthcare appetites.  The risk of the “I-want-it-now” mindset, said Stephen Salanski, is that consumers might make choices that defeat efforts to streamline the flow of information needed to provide quality care in a cost-effective manner.

The Consumer’s Obligation
    The key there, participants agreed, was better education of all healthcare consumers. “But how do we better communicate?” asked Mark Fendler. “The ‘I-want-it-now’ mentality does no good if I’m folding this piece of paper up, sticking it in the mail to a patient and it arrives three days from now. It’s up to all of us to understand the technology and communication habits of that generation.”

^{1. Consumer demand for immediate service, said Stephen Salanski, can thwart efforts to provide streamlined, comprehensive care. | 2. Ron Rowe said consumers must bring a greater sense of responsibility to decisions about healthcare. | 3. Pharmaceutical companies are retaining exorbitant amounts of money for research and development, said Jessica Lea. | 4. Fear of the unknown and fear of further regulation are major concerns for employers, said Matt McInnes, and that uncertainty is hampering decisions about growth strategies.}

    That, Gregg Laiben pointed out, has a cost associated with it, whether it’s modifying an office with better tech tools, changing staffing levels and business hours, or investing in more effective electronic medical record-keeping. “How many years ago did they say we’re going to have this system to share records electronically?” asked Alan Flory. “And we still can’t get access to records.”

    Change will come, said Ron Rowe, when those who demand care that they’re not paying for start shouldering more of the cost. “We talked about cost-shifting by employers, raising deductibles, and that has got to be part of the equation, not just ‘I want it now, the way I want it,” he said. “There’s got to be some responsibility.”

    We can create models for improved reimbursements and better outcomes, said Jessica Lea, “but how much emphasis do you put on the individual? If we’re not educating the individual on how they get to where they need to be, that’s a challenge, even for the Millennial generation.

    The larger point, she said, was that Millennials aren’t alone: “The challenge is, almost no one really understands how their healthcare works,” she said. “How many patients do you work with where you can give them everything in the universe to get where they need to be, but don’t accept the responsibility on their end?”

    This, some at the table said, is where policy goals run headlong into privacy concerns.“Every politician will stand up and say they want to make healthcare more affordable,” said Matt Condon. “No politician wants to say they’re going to get you to stop smoking, or exercise. But that is a conversation we’re going to have to have.”

^{1. By 2020, the oldest Millennials will turn 40, an age where chronic ailments begin to show up, said Gregg Laiben. | 2. Misaligned incentives, said Raghu Adiga, continue to add to the costs of healthcare delivery. | 3. Demographics, technology, changing consumer demands and other factors are converging on the healthcare system, said Matt Condon, and it must respond accordingly or risk systemic failure.}

    For businesses trying to manage costs with wellness plans, the challenge can be a tricky one. Are you really going to tell a staff member what they shouldn’t be eating, or how they should behave off-hours, at home? And why, Condon asked, do each of his employees have to bear the same deductibles and co-payments, when not all are presenting the same coverage risk?

    Clearly, said Gregg Laiben, “there’s a huge behavioral component that makes the medical component worse.” ome of the current challenge, said Ron Rowe, stems from the loss of the underwriting methods predating ACA. “We used to be able to say your rates will be X because of your pre-existing conditions,” he said. Now, he said, insurers may not be able to do anything about the disease a customer may have, but there should be room to say, “if you’re doing certain things, this is what you’re going to pay,” he said. “If you’re drinking a fifth of scotch a week, or smoking, you’re going to pay more.”