'Cadillac' Tax Could Diminish Union Health Plans

Originally posted by Bob Herman on March 3, 2015 on businessinsider.com.

Health plans obtained through union collective bargaining agreements often include much more generous benefits than other employer-sponsored plans. But such benefits are likely to be pared down as the Affordable Care Act's excise tax nears, a new study in Health Affairs contends.

That excise tax, often called the “Cadillac” tax, will go into effect Jan. 1, 2018. A 40% tax will be levied on every dollar of total premiums paid above $10,200 for individual health plans and $27,500 for family plans.

Policymakers included the Cadillac tax in the ACA as a way to raise revenue to fund the law. The Congressional Budget Office estimates it will bring in $120 billion between 2018 and 2024. Most of that will come from higher taxes on employees' taxable wages instead of the tax-exempt insurance benefits.

But the tax also was viewed as a way to reduce the number of health plans that have little cost-sharing and premium contributions, which some argue contribute to the overuse of healthcare. President Barack Obama has been quoted as saying the excise tax will discourage “these really fancy plans that end up driving up costs.” Lavish executive-level health plans and collegiate benefit packages, like Harvard University's, have been oft-cited targets. However, many collectively bargained policies fall into the Cadillac bracket as well.

The Health Affairs study, published Monday, sought specifics about what kind of health benefit packages unions provide for employees. People with union plans have lesser out-of-pocket obligations and don't pay as much per month toward their premium as others with employer-based insurance, but the surprise was “the magnitude of the differences for certain things,” said Jon Gabel, a healthcare fellow at NORC at the University of Chicago and one of the study's authors.

For instance, families in collectively bargained plans paid about $828 per year toward their premium, or about $69 per month, according to the study's surveyed data. That compared to $4,565 for the average employer-sponsored family plan, or about $380 per month, according to 2013 data from the Kaiser Family Foundation.

Cost-sharing requirements also were less onerous in union health plans, the study found. The average annual in-network deductible for an individual in a collectively bargained plan was $203. The average deductible at other employer-based plans was almost six times higher at $1,135.

Although the federal government is considering some flexibility for “high risk” unionized occupations such as miners and construction workers, many employers are looking to get ahead of the excise tax by slimming down benefits.

“For those who are fortunate to have a Cadillac plan right now, it's probably not going to be so comprehensive in the future,” Mr. Gabel said. However, he said, reduced benefits should lead to increased wages to offset higher cost-sharing.

Tom Leibfried, a health care lobbyist for the AFL-CIO, a federation of 56 unions, calls the Cadillac tax “a misnomer” because union plans apply to middle-class Americans with modest wages. The issue should not be about the generosity of health coverage, but rather whether the coverage is appropriate for people based on the health care costs in their geography, he said.

“Trying to control utilization in that way really does amount to a cost-shift,” Mr. Leibfried said. “This is really a middle-class problem.”

Higher compensation supplanting lost benefits is not a sure thing either, Mr. Leibfried said. Indeed, wages and salaries have been mostly stagnant the past decade, barely edging out inflation even as health benefits shrink.

Technology plays growing role in benefits

Originally posted January 27, 2015 by Mike Nesper on www.ebn.benefitnews.com.

Employers of all sizes are increasingly shifting toward using technology for enrolling in and managing their employee benefits. The market for technology-based platforms has been “growing leaps and bounds over past the five-plus years,” says Mark Rieder, an Austin-based senior vice president at NFP.

Ten to 15 years ago, he says, only large groups were focused on technology. Today, “they’re all very much interested in becoming more efficient,” Rieder says. “Technology has become affordable enough to [deploy] regardless of size.”

Offering a variety of support tools is important to help employees make the best selections, Rieder says. Employees want to be able to compare the cost of a procedure at various providers, he says. “Transparency tools are becoming more and more of a hot topic,” Rieder says. “Folks want to know what they’re buying.”

Employees also want to manage all of their needs — payroll, HR, benefits — in one location, Rieder says. The goal is to have a useful platform when it’s needed but not be in the employee’s face when they don’t, says Michael Askin, senior consultant with Mind Over Machines, a Maryland-based software development technology company.

The fact that many employers are still using paper isn’t necessarily a bad thing, Askin says. “There are lessons to be learned from other industries,” he says. Perhaps more importantly, paper protects employee information from hackers, Askin says. Ultimately, the goal of a technology-based platform is to increase employee engagement without increasing security exposure, he says.

A common misconception about security breaches is where the vulnerability lies, Askin says. “Most security issues are actually internal,” he says. For consumers, Askin recommends having a credit card for Internet-only purchases.

Cost savings attributed to self-funding, wellness

Originally published September 6, 2013 by Tristan Lejeune on http://ebn.benefitnews.com

Dianne Howard has understandably made a number of changes during her tenure as director of risk and benefits management with the School District of Palm Beach County, Fla. - after all, she's been there for 18 years. One change in particular six years ago paved the way for many other beneficial ones: The district went self-funded. It's a shift that may not be an option for many employers, but Howard - winner of the 2013 Benny Award for Benefits Leadership in Health Care - says it allowed her to be more hands-on with internal policies and institute real, lasting improvements.

"I'm a big believer in self-insurance," Howard says. "I think you can buy excess insurance to protect yourself, you know, specific and aggregate. You can't be too small, but for groups of 1,000 or more, it's the way to go. You can control things, you can subcontract, you can get in there and say, 'Well, why is this costing us so much money?'"

She recalls an incident where MRIs - hundreds of them in total - were being paid for without having the deductible applied. Providers never informed them of this until the district took the reins themselves; they had just assumed that hospital stays were involved.

"And it was just a mistake - I'm not trying to throw anybody under the bus - but because we looked at it, we could fix it and change it so that the design as we negotiated [it] was in there, and we're getting the savings that we thought we would get," she says.

After going self-insured, the district used a data warehouse to analyze its claims and find ways to control costs. Estimated savings? At least $4 million. It also added a tobacco surcharge to insurance plans and helped write the Florida law banning smoking on school property. But the initiative Howard is most eager to talk about is one that has been widely embraced even as its financial efficacy has been increasingly questioned: wellness.

Not an easy sell

Many who have tried it will tell you that initiating a wellness program is not the easiest sell to an employee population. Just ask Howard: "People don't like being told what to do," she says, and she saw quite a bit of resistance. That's normal enough for a private company, but Howard's position comes with extra challenges.

"We're a public entity, so noise gathers," she says. "It doesn't just come to me and my staff. It goes to me, to my boss and maybe to our school board. You just want to be able to defend your position, get it well-communicated and get the unions on board to help you communicate. We told them, 'If it works and we keep our rates down, maybe we won't need rate increases every year.' And for 2014, we're not going to need a rate increase."

Marilyn Boursiquot, benefits manager for the district, agrees that wellness was not exactly a welcome change for employees, but she says the work is paying off.

"Our culture is slow, and some folks are still being dragged along kicking and screaming, but we can truly say that we're starting to see the light of creating a culture of wellness, which is really exciting," Boursiqout says.

Howard's "tenacity" and her "willingness to be on the edge" has helped steward the district through year after year of change, Boursiquot says. And she thinks that's what makes Howard worthy of her Benny Award.

"When we look at other school districts, and just other employers in general, they're willing to go to a point, but then when the rubber hits the road ... it's not always easy to introduce programs like this," Boursiquot says. "You take flak for it. And to actually keep moving forward in spite of all that - that's what I really admire about her."

Medical trends

The School District of Palm Beach County boasts an average five-year medical trend of 6% - 4% below the industry median of 10%. It also shed 1,000 dependents (estimated long-term savings: $4.4 million) after an audit found them ineligible - one of many reviews made possible through self-insurance.

Howard, however, believes the wellness program has been helping keep costs down for the district, which has 20,000 full-time employees. It was a slow road, she says, and the program "evolved" from weak to strong.

"We started out by saying, 'Here's a health assessment you could do.' In a district our size, we got 25 people to do it, and we gave gift cards at the time," she says. "And that really was poor. So about four or five years ago, we started talking with the unions, and we found a different way to negotiate with them and said, 'Let's bargain something two years out,' and that gave them time to think and to plan.

"We wanted to get to the point where employees have to get blood work, so they know their condition, and get a physical. ... More than half our employees never saw a doctor. So we said, 'OK, preventive stuff is what we should do,' so we had talks with our carrier about what's important, and we figured the health assessment was very important."

The district upped the reward for HRA completion substantially to a $50 premium reduction per month. "And that number," Howard says, "really was motivating to our employees." In its first year, the new program saw 85% compliance. And now, as she says, health insurance costs won't rise for workers next year. This, too, is a bigger deal for a public entity.

"We're government employees," Howard points out. "We haven't had raises in a few years."

Of course, even wellness programs' biggest proponents will admit they can only get you so far; the district has had to do its share of belt-tightening. Copays and premiums have risen in recent years, and there are newly designed pharmacy tiers, too.

Estimating in 2010 that diabetes accounted for 20% of its health claims, the district implemented a diabetes health plan. In its first year, the plan reduced total net costs by 9%, or around $2.9 million.

In another "self-funded only" gain, the district now gets 100% of its pharmacy rebates, which not only helps its coffers but also future plan design.

"Our rebates are approaching $5 million a year, and that's money that goes right back into the health plan," Howard says. "We had no idea it was so much money - only self-insured employers do."

Schools run mini-programs

But Howard again credits the district's wellness plans for starting long-term change. Schools, she says, can be excellent incubators for mini-programs that could work just as well at businesses with multiple locations. In addition to administrative offices, the Palm Beach County district runs some 180 locations, serving approximately 176,000 students.

"We had what we called 'wellness champions' at each school," Howard says. "What we said we would do is give them some resources so that they could run a program for their school - if they wanted to run a class on exercise or Weight Watchers or whatever. We have two big meetings a year with them, we give them a $500 stipend out of our health budget and for that they have to do a certain number of programs at their school. ... We went from 30 to 170 [wellness champions] in four years. And each of those people can [reach out] to the 200 to 400 people at their school and they know them."

Employees might be more amenable to such programs when they're initiated by a friendly co-worker and not some distant HR office. Making it personal and fun helps, too: In a different effort, called the Apple-a-Day Program, participants can submit photos of themselves eating apples while walking, reading medical care info or doing other healthy things. Howard says vendors donated prizes for the best photos, and local orchards even donated some apples. It's definitely a program she plans to repeat.

Kimberly Sandmaier, Palm Beach County wellness coordinator, admires Howard for her dedication and knows the district health plan is in good hands. "She's worked so hard with all our programs," Sandmaier says, and positive results are coming in on all fronts.

"I've always looked up to her and seen her as a leader. Whether it's meeting with a vendor or the unions, she gets a lot of respect from them. I think she does a great job, and she handles everything with grace."

As for what lies ahead, Sandmaier says, "We're trying to be proactive. We're trying to figure out the best thing out there to reduce our health care costs, especially in light of everything that's happening with health care reform and some of the additional charges that we may see in the future."

In the next phase of evolution, Howard plans to make her wellness programs results-based. Though she concedes it "may be not quite as successful," she remains optimistic.

"I think people are going to do it. I mean, you're taking the blood work anyways," she says. "Ideally people will say 'I've been doing the blood work for three years, I've had high blood pressure for three years - why don't I do something about it?' But that might not happen."

Whether self-insured or not, whether public or private, Howard recommends employers commit to wellness. "I really believe that you need a wellness component and work toward having your population having a little accountability in your health care," Howard says. "Don't give up when the noise gets a little loud. Use your data to show people, 'Look, this is what happening.' I just really believe in it; it's been good for us."

The numbers

Here are just a few of the results achieved by the School District of Palm Beach County under Dianne Howard's leadership:

2007: Switch to self-funded plan.

0: Cost increase in 2014 for self-funded medical plan.

6%: Average five-year medical trend.

100: Percentage of pharmacy rebates now received.

$4 million: Savings achieved from using a data warehouse to dig into claims to see where the school district was spending the most money and analyze what could be done to control those costs.

1,000: Number of dependents moved off the health plan thanks to a dependent eligibility audit.

$4.4 million: Estimated savings from dependent eligibility audit.

80%: Average participation rate in the wellness program.

$2.9 million: Estimated savings from the implementation of a diabetes health management program.

$600: Annual tobacco surcharge.

195: Number of wellness champions, up from 16 a few years ago.