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National Association of Counties • Washington, D.C.      Vol. 34, No. 18 • September 30, 2002

The H.R. Doctor Is In

How Healthy is Your Health Insurance?

Health insurance is perhaps tied with retirement for first place in the “benefit sweepstakes” as the benefit most valued by staff members. However, the health insurance programs offered by local governments are often themselves sick and in need of treatment.

Health insurance seems to frustrate everyone. Employees and their dependents are often confused and annoyed by their “close encounters” with questions of costs, provider access, whether a particular treatment or prescription drug is covered, etc. An employee or dependent feeling ill and wanting to see a doctor faces questions such as: Do I need a referral? Is the doctor a preferred provider? How long will it take to get an appointment in a limited network? What is the deductible? These questions only add to their feelings of illness.

Even if the person is not really sick, or only suffering from a minor ailment, the employee may often feel drained or depressed by the time they have sought care and fought the health insurance battles.

Health care providers, including doctors and hospitals, whine incessantly about low reimbursement rates, payment delays, mountains of paperwork, managed care restrictions, etc.

What about employers, such as local governments? Serious symptoms of hardening of the insurance system arteries are easily observed, but too easily ignored. The symptoms include annual demands by providers for rate increases, accompanied by explanations and justifications shrouded in the mystic language of actuaries.

If the rates aren’t going up, then access to the network is reduced or there are increases in copays or deductibles, pharmacy restrictions on what drugs are covered and increased paperwork for the organization as well as employees.

Providers have also adopted a tactic of delaying as long as possible the dreaded announcements to organization leaders (often the agencies’ Human Resources leaders) about how much of a rate increase they demand. Word comes so late that the cumbersome agency procurement processes make it impossible to launch a new search for alternative providers in time for the start of the next benefit year.

For example, if the benefit year is Jan. 1 in your agency (as it typically is), the enrollment period for benefits will likely have to take place in October or November to ensure that all the enrollment decisions and payroll adjustments are prepared for the Jan. 1 start.

In any engagement with health insurance, whether self-funded or fully insured, the employer has an obligation to monitor and take prompt and effective action at the first sign of trouble or risks.

In order to do an effective open enrollment, there has to be employee communications, printing of material, perhaps the particular joys of collective bargaining with multiple unions, and more.

This means the decisions about providers and benefit levels have to be made in August, if not July. In turn, this means that the formality of life in a bureaucracy, such as preparing contract documents and soliciting signatures by the providers, as well as reviews by purchasing, attorneys, county administrators, etc., must all be accomplished before the deal is done.

That means tentative selection of providers takes place in May or June in order to shepherd the decision through the complex processes of organizations which may not be designed to make rapid or flexible decisions.

Finally, in order to be in a position to make a provider selection decision in May or June, a procurement process may have to begin in January or February.

In other words, the process is so bizarre that it overtakes itself. There may be a brief window, perhaps lasting as long as 15 minutes, when there actually is one contract in place and a process for the next renewal has not yet began. This would be the perfect time for a brief staff celebration to recognize how hard people have been working on a tread mill, which may not allow them to feel as though they have actually gotten anywhere.

The HR Doctor recalls being on a NACo program with a colleague who headed purchasing in a large county in Maryland. He introduced himself by saying, “My job is to pour epoxy into the wheels of government to keep them turning.” Often the procurement process for health insurance reflects exactly what the speaker meant.

The process is complicated, the costs are high, and they are growing. The paperwork and complexity of medicine itself is increasing. The beautiful HR daughter, Rachel, is a third year medical student. I never mean to scare my daughters, so I am not going to let her know that by the time she is ready to retire as a physician, the entire body of medical knowledge she is now learning would have changed at least 100 percent.

So what is an employer and especially a public employer, supposed to do in the face of the importance of health insurance as a benefit and its incredible cost and complexity? The first and obvious answer for us as individuals is “don’t get sick.” However, even elected officials are not able to pass an ordinance banning personal illness.

Self-funding is not necessarily a better answer than being fully insured by some for-profit company. Such a company only yesterday was probably merged with another larger company, which, in turn, will be merged again with an even larger company. Self-funding does have one particularly powerful attraction. It allows an elected or appointed official to appear to be a short-term hero when the process initially begins. This is because the premiums that come into the system, from employees and from the agency’s own contributions, begin mounting up immediately.

However, in the first several months of the program, bills have not yet come in nor have they been validated or paid. The result is that most self-funded programs will amass positive cash flow initially.

Fast-forward a couple of years, however, and the picture changes. Utilization is uncontrolled, costs go up at a double digit pace, and the organization is reluctant to appear to complicate employee relations with ongoing rate increases or benefit reductions to keep pace. The results can be a disaster and the hero turns to a villain if one critical component is absent in the self-insurance plan. That component is vigilance.

Don’t even think about self-funding, is the HR Doctor’s best advice, unless it is clearly understood and strongly supported by the governing body and the employees and their many unions that the program’s success demands monitoring of trends, restrictions on unnecessary or excessive utilization, and the ability to make rapid adjustments when negative trends first appear, rather than waiting a year or more.

In any engagement with health insurance, whether self-funded or fully insured, the employer has an obligation to monitor and take prompt and effective action at the first sign of trouble or risks.

By the way, the concept of “prompt and effective action” is the same concept that the U.S. Supreme Court has told us in a landmark sexual harassment case what we should be doing to prevent liability in this important area as well. Monitoring and vigilance begin and end with data analysis. It is simply a matter of knowing how your money is being spent. Demand a list of all the providers receiving payment under the plan. You may be surprised to find that there is a significant cluster of payments going to only a few providers. Or, you may find that a very significant amount of money is going to providers in certain specialties.

The HR Doctor knows of one agency where the number one benefit cost in a self-funded health insurance program is for chiropractors and physical therapists. Such information should be seized upon as a basis to innovate and perhaps negotiate substantial discounts with the top providers in trade for restrictions of access to other providers.

Besides the lack of vigilance and rapid response, the other area of concern for the viability of insurance programs is the lack of attention paid to prevention and excessive utilization.

Don’t even think of self-funding without ongoing employee education. Make prostrate screening and mobile mammography tests so readily available — right at the front door of the office building — that you “take excuses away” from employees who might not go for a cancer screening. Disease management of chronic problems such as asthma and diabetes is well worth the money spent in implementing the program.

Neighborhood hospitals may already have disease management programs that can be used in the agency. The more attention and affirmative action, if you pardon the expression, that is demonstrated concerning the need to be responsible consumers, the more responsible most people’s health care behavior will become.

Unfortunately, there will always be some employees dumb enough to continue smoking incessantly, not wear their seat belts, or not exercise. The effects of such preventable unhealthy behavior on programs, especially small agency self-funded programs, is negative and hurts the program’s viability for everyone.

What about the long term future? There must emerge some fundamental national reforms, in the HR Doctor’s opinion.

The cost of health care is only going to continue increasing, at an even greater pace than in the past. In the long run, the effective management of such cost increases, balanced with positive employee relations, will be beyond the scope of most employers in the United States acting alone.

Partnerships with providers, innovative education and health improvement programs, the willingness of unions to accept a responsible role in attacking a mutual problem, as well as state and federal courage to face a growing national crisis, are all requirements for an emerging solution. For the purpose of this short article, the HR Doctor’s best advice is to keep good watch on how money is spent and to take good care of yourself.

I have already made an appointment to see future Dr. Rachel. Unfortunately, I will be sitting in her waiting room for about two years until she graduates and is ready to see me. I wonder if I will need a referral from mom.

The HR Doctor wishes you and your family good health and good health insurance!

All the best,
Phil Rosenberg
The HR Doctor •