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Untangling the Knot

Human Resource Executive magazine...October 16, 2009 (Cover story on health care reform)

By Stephen Barlas

For all the heated rhetoric devoted to the congressional battle over healthcare reform, or maybe because of it, any final bill -- if there is one -- probably will affect the status quo among large employers (especially self-insured ones) only at the margins. Smaller employers may bleed some dollars, but very few of them are headed for the economic emergency room as a result.

"There is a lot of noise out there, shouting and screaming," says Delia Vetter, senior director of benefits at EMC Corp. in Hopkinton, Mass. "But there is nothing in the House or Senate bills that is going to create any concerns for us at a very surface level."

The corporate world has hoped that any omnibus healthcare reform bill would detour around company health-insurance plans, and that has essentially happened. The concern now is the potential for collateral damage from any new, national individual market served by a federally-run public plan, which may or may not come to fruition.

Meanwhile, many of the other potential bugaboos bouncing off trade-association press releases have been over-inflated. For example, new federal mandates prohibiting annual and lifetime caps in corporate plans, or outlawing co-pays for preventive services, would have almost no effect on self-insured plans and perhaps only marginal impact on fully-insured plans. Nor would the taxation of so-called "Cadillac" corporate plans drive many companies anywhere near the brink.

In fact, companies have been so busy playing defense against the bloated bogeymen in the congressional proposals that they haven't had the time, resources or energy to play offense -- this despite a recognition that the healthcare cost-and-delivery equation needs to change.

Johnna G. Torsone, executive vice president and chief human resource officer for Stamford, Conn.-based Pitney Bowes, says, "We almost all agree that the current system is unsustainable."

Few Incentives for Change

There was talk on Capitol Hill earlier this year, when the healthcare reform bill got rolling, about the dire need to "bend the cost curve," a goal applauded by business, by changing the way physicians and hospitals are paid. Instead of basing payment on volume of services, as is the case now, fees would be determined by the quality of care provided, and the health outcomes.

"Payment reform is not part of the package," says Vetter. Neither are incentives for employer adoption of healthcare information technology. Vetter, for example, says EMC has reduced its rate of healthcare-cost increases from double digits seven years ago to "mid-single digits" today.

This has been accomplished via a holistic approach to employee wellness that includes a bevy of personalized programs, including personal healthcare management options around the use of healthcare information technology.

These include programs such as SmartBeat, a Web-based hypertension-monitoring program offered in partnership with the Center for Connected Health, in which employees use wireless devices to monitor and self manage their blood pressure and confidentially share data with their healthcare providers through a "personal health record" offered by EMC in partnership with WebMD Health.

Although the stimulus bill Congress passed last winter appropriated nearly $20 billion to help doctors and hospitals purchase healthcare IT, there was nothing in it for companies that spend on electronic health initiatives.

Nor are there incentives in the emerging House or Senate bills that corporate HR departments can take to their CEOs to help make the case for adoption of programs like SmartBeat and HealthLink, EMC's interactive employee-health portal. "Many employers don't understand the power of integrating technologies to drive consumer behavior, and manage overall health," says Vetter.

Aside from shortcomings in the area of system reform and health IT incentives, the emerging House and Senate bills do nothing to change the nation's thinking about healthcare.

"What is troubling to me is that you do not hear enough in the public debate about the need to incent, inform and educate individuals about their responsibility to take ownership for their health and healthy behaviors and to use the system more effectively and efficiently to drive disease prevention, not just disease management," says Torsone.

"It is a moral hazard not to be honest about this or none of us may ultimately get adequate care in the future."

Lacking a "Wellness Offensive"

Like EMC, Pitney Bowes has been a leader in propagating a "holistic" approach to wellness programs. PB has gone so far as to redesign its buildings' stairwells so as to make them an inviting venue for exercise, which the company exhorts employees to get for at least 30 minutes a day. Before PB agrees to pay for stomach-reducing bariatric surgery, it will ask the employee to first consider going through a structured weight-loss program.

"We have had several high-visibility executives go this route and their success has been viral, in a way," says Torsone. "But in the public discussion about healthcare reform, I don't hear this talked about. Period."

While corporations have had somewhat of a free hand to create wellness programs, Randy Vogenberg, a principal at the Institute for Integrated Healthcare, an organization whose clients include the National Business Coalition on Health and its 60 affiliate coalitions around the country, explains that some human resource departments are counseled by their legal departments not to go too far.

The legal line can be blurry, based on foggy and sometimes conflicting state and federal laws. For example, one company recently won a federal district court decision against an employee who sued because of a corporate prohibition against smoking. Congress could have chosen to clarify federal law in this area as part of healthcare reform, opening a much wider wellness highway for corporate HR departments. Yet there are zero initiatives in any bill on this score.

The only wellness provision in both the House and Senate bills to pass through committees establishes a grant program -- which may or may not be funded through an appropriation -- for community wellness programs.

Vogenberg explains that some community wellness programs exist in various forms, with some sponsored by poverty centers, hospitals, federally funded healthcare clinics and other groups. But the relatively small number of people who take advantage of those programs are the self-motivated, and the bigger question is not how you fund more of these programs, but how you get the "unmotivated" -- the much larger group in need of such help -- to participate.

The two Senate committee bills each have one small provision on corporate wellness programs. The Senate Health, Education Labor and Pensions Committee increases the cap on the premium concession companies can award employees who participate in wellness programs.

The draft of the Senate Finance Committee bill turns a current corporate tax deduction for wellness programs into a tax credit. It is not clear whether either of these provisions will make it into a final bill, if in fact there is a final bill.

Again, wellness incentives are skimpy in the House and Senate bills, in part because the Congressional Budget Office has found it difficult, for arcane statistical reasons, to credit wellness provisions with "savings" to the federal government.

However, the business community hasn't exactly played offense on behalf of wellness, either. Some individual companies, such as Safeway, have made the case for wellness incentives. But in general, the larger business community and its trade associations have marshaled most of their political resources to oppose a public plan and taxation of employee health benefits. There's been little time or money left over for wellness advocacy.

A Question of Caps

In terms of federal mandates within some of the proposed legislation that would have a major impact on companies, the top one, according to Vogenberg, is a requirement that companies eliminate caps on annual and lifetime health costs that they will pay. He says almost all companies have these caps, which are all over the place in terms of dollar value and what they include. Some have caps that include drug expenditures; some don't.

"When I was at Aon Consulting," says Vogenberg, "we did a study of specialty pharmacy and medical benefit designs, which found that the most critical factor when determining out-of-pocket expenses [cost sharing] for both employers and employees was where annual and lifetime caps were set."

Jack Mahoney, a physician and consultant on strategic health initiatives for Pitney Bowes, says the company does not require co-payments for preventive care, nor does it have an annual cap on health-insurance expenditures. PB does have a $2 million lifetime cap. But in the past five years, according to Mahoney, only one of the company's 35,000 employees has exceeded the cap.

"Most large companies have fairly generous caps," he says. Moreover, Mahoney adds, a potential mandate that insurance companies extend coverage to everyone, regardless of pre-existing conditions, has stirred much debate but would have almost no impact on the cost of corporate health insurance plans.

Such a mandate would not apply to corporations because the Health Insurance Portability and Accountability Act already requires that companies cover all new hires unless a health problem was not covered under an employee's previous policy with another employer.

The requirement to cover all enrollees, regardless of pre-existing conditions, in a so-called "public plan" would probably result in higher healthcare costs for the private sector. The corporate concern here is that the 46 million Americans now without insurance would pay relatively low premiums in a public plan because of low fees imposed by the federal government on hospitals, physicians and other providers. Those providers would theoretically increase their fees to employers to compensate for the low government rates.

In addition, some healthy workers with good but fairly expensive corporate coverage might defect from employer-provided health insurance plans to a cheaper policy in the public plan, forcing companies to pay fees for that desertion (the Senate HELP bill puts a price tag of $750 per full-time employee) and, perhaps more troubling to employers, leaving corporate plans with an older, sicker group to cover.

Some of those 46 million Americans lacking coverage are employees of small businesses. Any health insurance reform legislation would require companies with employees over a certain total, maybe 25, to provide insurance. If they didn't, they would have to pay a fee (again, $750 has been mentioned) to help underwrite the cost of the individual policy the employee would purchase from the public plan.

Given that the cost of a policy for an employee would be considerably more than $750, Torsone says, some companies might shrug at the fee. They'd be wise to think longer-term, she adds.

"From a shareholder perspective, if one is thinking short term, a corporate officer might be compelled to say, 'For a $750 fee, why wouldn't I let employees go to a public plan?'" she says. "But, long-term, one would worry about the design and cost of that public plan and whether companies will be affected by adverse selection and have to pay for a public plan through higher taxes."

The impact of a public plan on the private sector depends considerably, of course, on the details of how the plan would work. Those are still very much up for grabs.

So, too, are the specifics of what might constitute a Cadillac health plan, whose value above a certain "average" dollar level would be taxable. The Senate Finance Committee's serious consideration of a Cadillac tax has generated fear among the Fortune 500. But here, too, false fears may be afloat. "We do not have any Cadillac plans," says Torsone.

Paul Dennett, senior vice president of healthcare reform at the American Benefits Council, says that if a Cadillac plan was valued at $25,000, that would be 50 percent to 60 percent higher than the average plan offered by the Federal Employees Health Benefit Program. The FEHBP value is a benchmark of sorts for what constitutes a reasonable average family health-insurance plan.

"Very few corporate plans are at the $25,000 level," Dennett says. "In any case, many plans that are over $20,000, for example, are not Cadillac plans. They are high-cost because of where employees are located, because a large percentage of employees are older or early retirees, or because the employer has a small group."

October 16, 2009

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