HHS Nominee Vows To Tackle High Drug Costs, Despite His Ties To Industry

What is President Trump’s solution for fighting high drug prices? From Kaiser Health News, check out this article on the new Department of Health and Human Services (HHS) nominee.


Senate Democrats on Tuesday pressed President Donald Trump’s nominee for the top health post to explain how he would fight skyrocketing drug prices — demanding to know why they should trust him to lower costs since he did not do so while running a major pharmaceutical company.

Alex M. Azar II, the former president of the U.S. division of Eli Lilly and Trump’s pick to run the Department of Health and Human Services, presented himself as a “problem solver” eager to fix a poorly structured health care system during his confirmation hearing before the Senate Finance Committee. Azar said addressing drug costs would be among his top priorities.

But armed with charts showing how some of Eli Lilly’s drug prices had doubled on Azar’s watch, Democrats argued Azar was part of the problem. Sen. Ron Wyden of Oregon, the committee’s top Democrat, said Azar had never authorized a decrease in a drug price as a pharmaceutical executive.

“The system is broken,” Wyden said. “Mr. Azar was a part of that system.”

Azar countered that the nation’s pharmaceutical drug system is structured to encourage companies to raise prices, a problem he said he would work to fix as head of HHS.

“I don’t know that there is any drug price of a brand-new product that has ever gone down from any company on any drug in the United States, because every incentive in this system is towards higher prices, and that is where we can do things together, working as the government to get at this,” he said. “No one company is going to fix that system.”

Azar’s confirmation hearing Tuesday was his second appearance before senators as the nominee to lead HHS. In November, he faced similar questions from the Senate Health, Education, Labor and Pensions Committee during a courtesy hearing.

If confirmed, Azar would succeed Tom Price, Trump’s first health secretary, who resigned in September amid criticism over his frequent use of taxpayer-paid charter flights. A former Republican congressman who was a dedicated opponent of President Barack Obama’s signature health care law, Price had a frosty relationship with Democrats in Congress as he worked with Republicans to try to undo the law.

Price and the Trump administration often turned to regulations and executive orders to undermine the Affordable Care Act, since Republicans in Congress repeatedly failed to enact a repeal. “Repeal and replace” has been the president’s mantra.

But at the hearing, Azar was circumspect about his approach, noting that his job would be to work under existing law. “The Affordable Care Act is there,” he said, adding that it would fall to him to make it work “as best as it possibly can.”

Senate Republicans touted Azar’s nearly six years working for the department under President George W. Bush, including two years as a deputy secretary. Committee Chairman Orrin Hatch (R-Utah) praised Azar’s “extraordinary résumé,” adding that, among HHS nominees, he was “probably the most qualified I’ve seen in my whole term in the United States Senate.” Hatch, who is the longest-serving Republican senator in history, has been a senator for more than 40 years.

In addition to drug costs, Azar vowed to focus on the nation’s growing opioid crisis, calling for “aggressive prevention, education, regulatory and enforcement efforts to stop overprescribing and overuse,” as well as “compassionate treatment” for those suffering from addiction.

Pressed about Republican plans to cut entitlement spending to compensate for budget shortfalls, Azar said he was “not aware” of support within the Trump administration for such cuts.

“The president has stated his opposition to cuts to Medicaid, Medicare or Social Security,” Azar said. “He said that in the campaign, and I believe he has remained steadfast in his views on that.”

But Democrats pushed back, pointing out that Trump had proposed Medicaid cuts in his budget request last year. Sen. Sherrod Brown (D-Ohio) said such cuts would hurt those receiving treatment for opioid addiction.

“What happens to these people?” he said.

Despite such Democratic criticism, Azar is likely to be confirmed when the full Senate votes on his nomination. An HHS spokesman Tuesday pointed reporters to an editorial in STAT supporting Azar, written by former Senate majority leaders Bill Frist and Tom Daschle — a Republican and a Democrat. “We need a person of integrity and competence at the helm of the Department of Health and Human Services,” they wrote. “The good news is that President Trump has nominated just such a person, Alex Azar.”

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High-Deductible Health Plans Cut Costs, At Least For Now

Originally posted on March 26, 2015 on www.npr.org.

Got a high-deductible health plan? The kind that doesn't pay most medical bills until they exceed several thousand dollars? You're a foot soldier who's been drafted in the war against high health costs.

Companies that switch workers into high-deductible plans can reap enormous savings, consultants will tell you — and not just by making employees pay more. Total costs paid by everybody — employer, employee and insurance company — tend to fall in the first year or rise more slowly when consumers have more at stake at the health-care checkout counter whether or not they're making medically wise choices.

Consumers with high deductibles sometimes skip procedures, think harder about getting treatment and shop for lower prices when they do seek care.

What nobody knows is whether such plans, also sold to individuals and families through the health law's online exchanges, will backfire. If people choose not to have important preventive care and end up needing an expensive hospital stay years later as a result, everybody is worse off.

A new study delivers cautiously optimistic results for employers and policymakers, if not for consumers paying a higher share of their own health care costs.

Researchers led by Amelia Haviland at Carnegie Mellon University found that overall savings at companies introducing high-deductible plans lasted for up to three years afterwards. If there were any cost-related time bombs caused by forgone care, at least they didn't blow up by then.

"Three years out there consistently seems to be a reduction in total health care spending" at employers offering high-deductible plans, Haviland said in an interview. Although the study says nothing about what might happen after that, "this was interesting to us that it persists for this amount of time."

The savings were substantial: 5 percent on average for employers offering high-deductible plans compared with results at companies that didn't offer them. And that was for the whole company, whether or not all workers took the high-deductible option.

The size of the study was impressive; it covered 13 million employees and dependents at 54 big companies. All savings were from reduced spending on pharmaceuticals and doctor visits and other outpatient care. There was no sign of what often happens when high-risk patients miss preventive care: spikes in emergency-room visits and hospital admissions.

The suits in human resources call this kind of coverage a "consumer-directed" health plan. It sounds less scary than the old name for coverage with huge deductibles: catastrophic health insurance.

But having consumers direct their own care also requires making sure they know enough to make smart choices. That means getting vaccines and skipping dubious procedures like an expensive MRI scan at the first sign of back pain.

Not all employers are doing a terrific job. Most high-deductible plan members surveyed in a recent California study had no idea that preventive screenings, office visits and other important care required little or no out-of-pocket payment. One in five said they had avoided preventive care because of the cost.

"This evidence of persistent reductions in spending places even greater importance on developing evidence on how they are achieved," Kate Bundorf, a Stanford health economist not involved in the study, said of consumer-directed plans.

"Are consumers foregoing preventive care?" Bundorf asks. "Are they less adherent to [effective] medicine? Or are they reducing their use of low-value office visits and corresponding drugs or substituting to cheaper yet similarly effective prescribed drugs?"

Employers and consultants are trying to educate people about avoiding needless procedures and finding quality caregivers at better prices.

That might explain why the companies offering high-deductible plans saw such significant savings even though not all workers signed up, Haviland said. Even employees with traditional, lower-deductible plans may be using the shopping tools.

The study doesn't close the book on consumer-directed plans.

"What happens five years or 10 years down the line when people develop more consequences of reducing high-value, necessary care?" Haviland asked. Nobody knows.

And the study doesn't address a side effect of high-deductibles that doctors can't treat: pocketbook trauma. Consumer-directed plans, often paired with tax-favored health savings accounts, can require families to pay $5,000 or more per year in out-of-pocket costs.

Three people out of 5 with low incomes and half of those with moderate incomes told the Commonwealth Fund last year their deductibles are hard to afford.

As in all battles, the front-line infantry often makes the biggest sacrifice.


'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.


One-Third of Workers Say ACA Will Delay Their Retirement

Originally posted May 27, 2014 on http://annuitynews.comACA-123rf-24247155_m

Although the Congressional Budget Office projects a smaller U.S. workforce in coming years as a result of the Affordable Care Act (ACA), the majority of American workers don't believe that the ACA will allow them to retire any sooner, according to a new survey from http://MoneyRates.com. On the contrary, the Op4G-conducted survey indicates that one-third of workers expect that the ACA – also known as Obamacare – will raise their health care costs and thereby force them to retire later than they previously anticipated.

One-quarter of respondents felt that Obamacare would have no impact on their retirement date, and another one-quarter weren't sure how it would impact their retirement. Those who felt Obamacare would allow them to retire earlier were the smallest segment of respondents at 17 percent.

Many of the workers who indicated that Obamacare would delay their retirement said that the delay would be lengthy. Seventy percent of those respondents said they expected the delay to be at least three years, including the 39 percent who said it would be at least five years. The respondents who said they expected an earlier retirement were more moderate in their projections, with 71 percent indicating it would hasten their retirement by three years or less.

Richard Barrington, CFA, senior financial analyst for http://MoneyRates.com and author of the study, says that the purpose of the survey wasn't to determine whether Obamacare would truly delay or hasten anyone's retirement, but rather to gauge the fear and uncertainty that surround the program today.

"It's too early to tell whether Obamacare will actually delay people's retirements," says Barrington. "But what's clear at this point is that the program has created a lot of concern about health care costs as a burden on workers and retirees."

Barrington adds that whether or not these concerns are warranted, there are steps workers can take to better manage their health care costs in retirement, including budgeting for health insurance within their retirement plans, shopping regularly for better deals on insurance and using a health savings account as a way of handling out-of-pocket medical expenses.

"The poll reflects a high degree of uncertainty over the impact of Obamacare on retirement," says Barrington. "One way to reduce the uncertainty is to take active steps to manage how health care will affect your retirement."


Health plan costs moderate, but larger increases ahead

Originally posted May 15, 2014 by Dan Cook on www.benefitspro.com.

The rate of employer-provided health care plan costs is either going up or down this year, depending on who you talk to.

Either way, the difference won’t be much. And overall, the news is good: cost hikes are fairly stable.

Towers Watson and Buck Consultants this week each released their own projections for employer health care spending for 2014. Towers Watson surveyed 173 medical carriers from around the globe; Buck got input from 126 carriers and administrators.

Want good news? Look to the Buck survey. It says the rate of increases in all types of health plans will be less in 2014 than in either of the two prior years.

Costs for PPO plans, it said, rose 8.7 percent this year, lower than last year’s 9 percent growth and the 9.2 percent seen in 2012. HDHPs show the biggest decline in cost increases, rising 8.6 percent this year compared to 9.1 percent in 2014. HMO and POS plans fell as well. For plans that supplement Medicare, though, the health-cost hike spiked to 5.5 percent from 4.1 percent last year.

The average prescription-drug cost increase for this year is 9.2 percent, down from 9.9 percent a year ago.

Buck said reduced utilization was cited by some as the primary reason for the decreases.

“This may be a result of the economic slowdown and its impact on consumers’ willingness to seek medical treatment,” said Harvey Sobel, a Buck principal and consulting actuary who co-authored the survey. “Even though the decline is good news, most plan sponsors still find 8-9 percent cost increases unsustainable.”

Meanwhile, if you’re a pessimist, Towers Watson is for you.

After two years of 9.1 percent increases, non-U.S. American plans (North American plans outside of the U.S.) are projected to rise in cost by 9.7 percent this year, its respondent said.

Globally, Towers Watson’s survey indicated that employee health benefits costs will increase 8.3 percent this year, compared to 7.9 percent last year and 7.7 percent in 2012.

Further, its respondents expect costs to start to edge up again in the future.

“More than half (55 percent) of insurers in all regions anticipate higher or significantly higher medical trend over the next three years. Asia Pacific insurers are particularly pessimistic, with more than two-thirds (69%) saying they expect medical trend in the next three years to be higher or significantly higher than current rates,” the study said.

“While the cost of providing health care benefits to employees has stabilized over the past few years, controlling rising costs remains a significant concern for employers worldwide,” said Francis Coleman, director, International Consulting, at Towers Watson. “In fact, in all regions, health costs continue to rise at twice the rate of inflation. That’s a major concern for employers, with many insurers projecting costs to again escalate in the coming years.”


Financial fears have many workers planning to delay retirement

Originally posted by Melissa A. Winn on http://ebn.benefitnews.com

Although U.S. workers on a whole are more satisfied with their current financial situation than in years past, most (58%) remain concerned about financial stability in retirement and say they plan to continue working until age 70 or later, a new Towers Watson survey shows.

With many workers expecting to fall short on their retirement savings, nearly four in 10 plan on working longer, an increase of 9% since 2009. A large majority of these employees expect to delay retirement by three or more years and 44% plan on a delay of five years or more, the Global Benefit Attitudes Survey finds.

In 2009, 31% of workers planned on retiring before 65, and 41% planned on retiring after 65. According to the 2013 survey, only 25% plan on retiring before 65 and half expect to retire after 65. One in three employees either does not expect to retire until after 70 or doesn’t plan to retire at all.

The nationwide survey of 5,070 full-time employees found that nearly half of respondents (46%) are satisfied with their current finances, a sharp increase from 26% in 2009. Still, nearly six in 10 remain worried about their financial future.

Employees’ confidence in their ability to retire has also climbed steadily since the financial crisis, with nearly a quarter (23%) very confident of their income sufficiency for the first 15 years of retirement. However, only 8% are very confident they’ll have adequate income 25 years into retirement.

“Employees might be on firmer financial footing now than they were five years ago, but many remain nervous about their finances and prospects for a secure retirement,” says Shane Bartling, senior consultant at Towers Watson. “This is especially true for older workers who are likely better positioned to assess their retirement income than workers overall. The financial crisis hit workers age 50 and above particularly hard, with the stock market fall creating a huge dent in their retirement savings and their confidence levels.”

The survey also finds that employees of all ages are especially worried about health care costs and public programs. Only two in five employees believe they can afford any medical expenses that arise in the next 12 months and more than half of all employees (53%) are concerned they will not be able to afford health care in retirement. Most employees (83%) also believe Social Security will be less valuable in the future and 88% have similar fears about Medicare.

More than half of employees (56%) say they are spending less and postponing big purchases as a way to pay down debt and start saving for retirement, the study says. Just over half (51%) of employees say they review their retirement plans frequently.

Saving for retirement is cited as the No. 1 financial priority for all employees age 40 and older, the study notes.

“Employers and employees are both facing increasing retirement pressures. Employers understand that they have a role to play in helping their workers plan and save for a secure retirement. Today’s employees are considerably more engaged, and are looking to their employers for more information about health care costs and the value of their retirement programs,” says Bartling. The increased use of tools, including mobile apps, also represents an opportunity “for employers to help their employees plan for a successful retirement.”

 


CFOs say they’ll increase health plan cost-sharing, blame PPACA

Originally posted January 09,2014 by Dan Cook on http://www.benefitspro.com

The old employee health care cost pass-along is going to heat up considerably this year. And guess who’s getting the blame for it? Yep, the Patient Protection and Affordable Care Act.

At least that’s the consensus from an in-depth survey of 96 corporate CFOs executed by Deloitte Consulting. Respondents told Deloitte they’ll be asking employees to kick in more for company coverage and, when asked why they have to, they’re going to point to Obamacare as the cause.

Health insurance trends were just part of this much broader survey. In general, the companies sampled are optimistic about 2014 and seem to feel their employers have done a good job of getting the ship in shape for this year. While they are forecasting relatively low sales increases in 2014 vs. 2013, earnings expectations actually increased slightly, and 54 percent expressed “rising optimism” about quarterly returned compared to 42 percent last quarter.

When it comes to health insurance costs, containment is the key word. These CFOs have been told to rein in health costs and they’re going to do so by shifting costs to those covered.

That this is the preferred option over reducing coverage was made clear when just 10 percent said they would offer employees less robust coverage packages. Instead, 60 percent have raised or will raise the employee portion of cost, keeping benefits where they’re at. (Only 10 percent said they’d beef up the health benefits package.) Another 28 percent are considering doing so.

When asked about health care cost controls, Deloitte said nearly two-thirds of companies have taken at least one major cost-control step, usually either implementing wellness programs or raising employees’ financial responsibility. About 45 percent plan to take a second cost-control step in the next 12 months. For cost pass-along employers, most choose higher premium contributions and deductibles.

Perhaps fearing a slump in morale or an increase in negative gossip, these CFOs weren’t about to let the company take the blame for higher employee cost sharing.

Deloitte said “42 percent of (U.S.) chief financial officers who have shifted additional healthcare costs to workers cited the Affordable Care Act as their impetus. The number blaming the healthcare law rose to 63 percent for CFOs planning to shift costs in the next year. The statistics suggest that Obamacare is aggravating the trend of employers charging staff higher healthcare costs in order to contain spending, and came as most CFOs expressed rising optimism about their companies’ prospects.”

The PPACA served as whipping boy on other fronts. The survey said:

  • About 13 percent blamed reduced their earnings forecasts on the act;
  • 8 percent cited the act for constrained hiring;
  • 4 percent said the act forced them to shift toward part-time staffing.

Cost of benefits, ACA compliance main concerns of midsized businesses

Originally posted by Andrea Davis on http://ebn.benefitnews.com

The cost of health coverage, the Affordable Care Act and the volume of government regulations are the top three concerns of midsized business owners and executives, according to a new survey from the ADP Research Institute.

Seventy percent of midsized businesses – those with between 50 and 999 employees – surveyed said their biggest challenge in 2013 is the cost of health coverage and benefits. ACA legislation  came in as the No. 2 concern, cited by 59%, a 16% increase over last year. And rounding out the top three list of concerns was the level and volume of government regulations, cited by 54%.

“What was a surprise to us was that midsized business owners’ level of confidence in their ability to comply with the laws and regulations doesn’t reflect reality,” says Jessica Saperstein, division vice president of strategy and business development at ADP.

For example, the survey finds that, overall, 83% of midsized businesses are confident they’re compliant with payroll tax laws and regulations, nearly one-third reported unintended expenses – fines, penalties or lawsuits – as a result of not being compliant.

“The majority say they’re confident but many of them are experiencing these fines and penalties,” says Saperstein. “On average, it’s about six times a year and the average cost of one of these penalties or fines is $90,000.”

Nearly two-thirds of benefits decision-makers at midsized companies are not confident they understand the ACA and what they need to do to be compliant. Ninety percent aren’t confident their employees understand the effects of the ACA on their benefits choices.

 


To incent or not to incent

Originally posted October 18, 2013 by Rhonda Willingham on lifehealthpro.com

There is a lot of confusion and more than a few questions about the use of incentives in benefits these days.

What do the Health Insurance Portability and Accountability Act’s (HIPAA) new wellness regulations mean? How can we incentivize employees, without risking noncompliance with new regulations?

Incentives are an especially big question mark for employers because so many want to find ways to motivate, encourage and lower the health care costs for the 5 percent to 10 percent of their employee population that is driving 80 percent or more of their costs.

Often these are employees who have chronic conditions such as diabetes or heart disease, or who may be obese – a condition now classified by the American Medical Association as a disease. Often these are also valuable tenured employees who have the skills, knowledge and expertise a company may need; helping them helps the company.

Here’s what you can tell your group health employer clients about the complex issues surrounding incentives today:

1. Offer a health risk assessment
One of the first steps toward getting employees to improve their health is the health risk assessment (HRA), which is the entry point for most wellness programs. Employers frequently offer financial incentives, premium discounts, or even PTO to get people to take the HRA.

Yes, HRAs have come into question of late in benefits circles – but, despite the current controversy, they remain a very smart tool for employers. They provide important information about the health status of employees and what programs (based on aggregate, not individual data) could provide the most value to the organization.

But . . . and here’s where a lot of employers have gotten into trouble . . . you must fully explain their value, including how they work. Include the steps that need to be taken to protect privacy and ensure employees know they can opt out – preferably without penalties - if wanted.

2. Understand what new regulations do and don’t say
What employers can and can’t do with incentives is governed in part by the Patient Protection and Affordable Care Act (PPACA) and HIPAA.

One of the many provisions of PPACA is that it allows employers to link greater financial incentives to the achievement of predetermined health targets, such as smoking cessation or healthy weight. HIPAA also governs what group health plans can do with benefit programs.

Most importantly, HIPAA prohibits employers from charging different premiums based on health status. People can’t be penalized just because someone is overweight or has diabetes or heart disease.

HIPAA’s new wellness regulations, introduced in June of this year, state that:

…a group health plan…may not require any individual (as a condition of enrollment or continued enrollment under the plan) to pay a premium or contribution which is greater than [that] for a similarly situated individual enrolled in the plan on the basis of any health status related factor…

The other major component for HIPAA is guidance on the dollar amount allowed for incentives.

Health plans and insurers will be able to offer higher financial rewards to participants achieving healthy behaviors such as quitting smoking or reducing cholesterol. Specifically, as of Jan. 1, up to 30 percent of the total cost of health plan coverage (employer and employee cost of coverage with no cap) may be tied to an incentive. Tobacco cessation and usage reduction programs allow rewards to be increased to 50 percent. Now, in reality very few employers will go up to that 30 percent, but it is an option.

The real trick to compliance with HIPAA’s wellness regulations is that wellness programs will have to ensure they do not discriminate against people based on health factors. For example, if an employee is extremely obese and unable to participate in a walking program that provides financial incentives, there must be an alternative program for that employee.

3. Determine if you will use a carrot or stick
Employers have developed a range of approaches to incentives over the past few years. Most incentives today are based either on participation, outcomes or progress. Participation-based programs are simple.

You participate, sign a sheet that you came to the stop-smoking class or joined a gym, and you qualify for the incentive. Outcome-based programs usually include financial incentives.

Employers have learned over time that money is a great motivator for participation in either the HRA or a wellness program. The threshold for motivating employees seems to be right around $300 to $500 annually.

The key characteristic of an outcome incentive is that the employee doesn’t get that incentive unless he or she achieves a pre-determined goal or health standard, such as quitting tobacco use, losing 10 percent of body weight within six months, or bringing cholesterol levels within normal limits, etc.

Progress-based incentives are viewed as a “kinder, gentler” approach. They reward employees based on incremental, individually-attainable goals rather than a singular goal for all. In other words, you may need to lose 50 pounds, but the employer says, “We know losing even five pounds helps you and helps us, so you will still get the incentive.” (Studies show even small reductions in risk lower health care costs.)

Here again is where the incentive question gets tough and complicated. A Towers Watson 2012 survey reports that 62 percent of employers plan on switching from incentives for participation – which employees like – to incentives for improvements – which employers like – because it holds employees more accountable and the thought/hope is it will produce more tangible and measurable outcomes.

So what’s an employer to do when it comes to incentives? As we are learning from recent high profile news stories, employees will push back hard if they don’t support a wellness program and its goals (which typically happens if there is poor communication), or if they think non-participation penalties are too punitive. We all understand the need for accountability, but if that comes at the price of an unhappy employee population, what have you really won?

Every organization is different; I think it’s difficult to mandate you must do X, Y or Z. As part of my job with a leading health and wellness company and as a member of a number of key organizations evaluating worksite wellness programs and incentives, my recommendation is to consider a developing and evolving plan with incentives that engage, motivate and encourage all employees.

Start with simply incentivizing participation. Then as the program becomes better accepted with employees experiencing success – and as you do more education and communication – you can always migrate to the incorporation of a program that incentivizes progress.

Again, there is no one-size fits all, but we do know that what truly motivates people are programs that build intrinsic motivation. Program designs with the best chance of fostering such intrinsic motivation are those that use extrinsic tools (e.g., a weight loss program for employees) in a way that doesn’t make employees feel pressured but creates a supportive and empowering environment that promotes individual choice.

The last word on incentives is that the ultimate goal is not to get people to engage in behaviors for a short period of time just to get dollars. The objective is for employees to internalize the goal and learn how to make and sustain better lifestyle choices themselves.


Aon Hewitt Analysis Shows Lowest U.S. Health Care Cost Increases in More Than a Decade

Originally posted October 17, 2013 on http://www6.lexisnexis.com

In 2013, U.S. companies and their employees saw the lowest health care premium rate increases in more than a decade, according to an analysis by Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON). After plan design changes and vendor negotiations, the average health care premium rate increase for large employers in 2013 was 3.3 percent, down from 4.9 percent in 2012 and 8.5 percent in 2011. In 2014, however, average health care premium increases are projected to move back to the 6 percent to 7 percent range.

Aon Hewitt's analysis showed the average health care cost per employee was $10,471 in 2013, up from $10,131 in 2012. The portion of the total health care premium that employees were asked to contribute toward this premium cost was $2,303 in 2013, compared to $2,200 in 2012. Meanwhile, average employee out-of-pocket costs, such as copayments, coinsurance and deductibles, increased 12.8 percent ($2,239) in 2013, compared to just 6.2 percent in 2012 ($1,984).

For 2014, average health care costs are projected to increase to $11,176 per employee. Employees will be asked to contribute 22.4 percent of the total health care premium, which equates to $2,499 for 2014. Average employee out-of-pocket costs are expected to increase to $2,470. These projections mean that over the last decade, employees' share of health care costs-including employee contributions and out-of-pocket costs-will have increased almost 150 percent from $2,011 in 2004 to $4,969 in 2014.

"There are many factors that contributed to the lower rate of premium increases we saw over the past two years that we don't expect to continue in the long-term. These include the lagged effect from the economic recession on health care spending and continued adjustments as employers and insurers phase out the conservatism that was reflected in earlier premiums due to uncertainty around economic conditions and health care reform. Additionally, employers and insurers will now be subject to new transitional reinsurance fees and health insurance industry fees," said Tim Nimmer, fellow of the Society of Actuaries, member of the American Academy of Actuaries and chief health care actuary at Aon Hewitt. "While we are seeing pockets of promising innovation in the health care industry, we expect to see 2014 premium increases shift back towards the 6 percent to 7 percent range overall."

Costs by Plan Type
On average, Aon Hewitt forecasts that companies will see 2014 cost increases of 7.5 percent for health maintenance organization (HMOs) plans, 6.5 percent for preferred provider organization (PPOs) plans and 6.5 percent for point-of-service (POS) plans. That means that from 2013 to 2014, the average cost per person for major companies is estimated to increase from $10,880 to $11,696 for HMOs, $10,222 to $10,887 for PPOs and $11,450 to $12,194 for POS plans.

Year HMO POS PPO National
2014* $11,696 $12,194 $10,887 $11,176
2013 $10,880 $11,450 $10,222 $10,471
2012 $10,375 $10,955 $9,955 $10,131
2011 $9,833 $10,553 $9,508 $9,662
2010 $9,103 $9,464 $8,790 $8,903
2009 $8,461 $8,778 $8,363 $8,380
2008 $7,975 $8,321 $8,004 $7,983

 

*Projections
Costs are plan costs (premium or budget rate) on a per employee basis. They include employee contributions, but not their out-of-pocket costs (i.e., co-payments, coinsurance).

2013 Cost Increases by Major Metropolitan Area
In 2013, major U.S. markets that experienced rate increases higher than the national average included Los Angeles (6.9 percent), Orange County (6.9 percent), Washington DC (5.3 percent) and San Francisco/Oakland/San Jose (4.8 percent). Conversely, New York City (1.6 percent), Milwaukee (2.1 percent) and Atlanta (2.4 percent) experienced lower-than-average rate increases in 2013. Of note, Minneapolis saw a decrease in rate increases at -0.1 percent.

Employer Actions to Mitigate Trend
"Health care remains a top priority for U.S. employers, and most are taking action to prepare for increasing cost, risk and change," said Jim Winkler, chief innovation officer for the U.S. Health & Benefits practice at Aon Hewitt. "As the health care industry continues to evolve, employers realize that a traditional 'managed trend' approach will be less effective in mitigating costs increases over time. Instead, they are exploring innovative new delivery approaches, requiring participants to take a more active role in their own health care planning, and holding health care providers more accountable to reduce unnecessary expenses and create more efficiency in the way health care is purchased."

Recent Aon Hewitt research shows that 72 percent of employers focus their health care strategy primarily on programs that improve health risk and reduce medical costs. As the health care landscape continues to evolve, employers will look to reduce costs using a mix of traditional and non-traditional approaches. These include:

Innovative Approaches to Providing Employer-Sponsored Coverage - Private health exchanges are becoming increasingly attractive to organizations that want to offer employees health care choice while lowering future cost trends and lessening the administrative burden associated with sponsoring a health plan.

In this model, employers continue to financially support health insurance, but allow employees to choose from multiple group plan options and insurance carriers via a competitive, health insurance marketplace.

According to Aon Hewitt research, about 28 percent plan to move into a private health care exchange over the next three-to-five years. Eighteen large employers, includingWalgreensand 2013 participantsSears Holdings,Darden Restaurantsand Aon plc, are offering health benefits this fall through theAon Hewitt Corporate Health Exchange, the nation's largest multi-carrier private health care exchange.

Plan Design Strategies - Aon Hewitt's research shows that consumer-driven health plans (CDHPs) have surpassed health maintenance organizations (HMOs) as the second most popular plan option offered by employers. A growing number ofemployers are offering CDHPs as the only plan option. While just 10 percent of companies do so today, another 44 percent are considering it in the next three to five years[1].

Managing Dependent Eligibility and Subsidies - Many employers are reassessing the way they offer and subsidize health coverage for dependents. Specifically, they are:

Reducing the employer subsidy for covered dependents. Aon Hewitt's research shows that 54 percent of employers are considering reducing subsidies across all dependent tiers in the next three-to-five years. Implementing or increasing surcharges for adult dependents with access to coverage elsewhere. Aon Hewitt's research shows 69 percent of employers have implemented or plan to implement surcharges for adult dependents. Adopting a unitized pricing approach, where employerscharge per dependent. While just 4 percent of employers currently adopt this approach, another 47 percent are considering it in the future. Assessing the eligibility of covered dependents in their plans. A recent Aon Hewitt survey shows that two-thirds ofemployers have completed a program audit of covered dependents to ensure only those who are eligible will remain on the plan.

Increased Cost Sharing - As health care costs increase overall, the amount of money employees will need to contribute out of their paychecks-both in premiums and out-of-pocket costs-is continuing to climb. Today, employees' share of the overall health care premium is 22 percent, compared to just 18.6 percent a decade ago.  Additionally, Aon Hewitt's research shows that 47 percent ofemployers have increased participants' deductibles and/or copays in the past year, and another 43 percent are considering doing so in the next three-to-five years.

According to Aon Hewitt, employers are increasing cost sharing through:

Altering plan designs, including shifting from fixed dollar copayments to coinsurance models, where employees pay a percentage of the out-of-pocket costs for each health care service. Increasing deductibles out of pocket limits and cost sharing for use of non-network providers.

Wellness and Health Programs - With employers facing the impacts of rising health care costs and declining health of the population, employees can expect to see more employers offering programs that encourage them to take a more active role in managing their health. For example, 75 percent of employers offer health risk questionnaires (HRQs) and 71 percent offer biometric screenings such as blood pressure and cholesterol.

New Provider Payment Strategies - A growing number of employers want to ensure that the health care services they are paying for are actually leading to improved patient outcomes and are seeking to hold providers more accountable. According to Aon Hewitt's research, 53 percent of employers said that moving toward provider payment models that promote cost effective, high quality health care results will be a part of their future health care strategy, and one in five identified it as one of their three highest priorities.

About the Data
Aon Hewitt's data is derived from the Aon Hewitt Health Value Initiative database, which captures health care cost and benefit data for 516 large U.S. employers representing 12.8 million participants, more than 1,200 plans and $61.2 billion in 2013 health care spending.