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February 11, 2009

Federally Funded COBRA?

As you may have seen in the news recently, President Obama has been actively campaigning in support of his economic stimulus package. The package includes such items as a tax cut for lower-income wage earners, an increase in unemployment benefits and numerous other items in an effort to help Americans survive the worst recession in decades. A couple of items in this package that should be of special interest to benefit plan managers are the proposals to expand COBRA. The first proposed change to COBRA is to provide a Federal subsidy for those employees who have been involuntarily terminated from 9/1/2008-12/31/2009. This subsidy is proposed to run for either 9 or 12 months (depending on conference committee negotiations). The Federal subsidy is 65% in the stimulus package that passed the House of Representatives, and 50% in the package that passed the Senate yesterday. The subsidy is to be collected by employers via an annual tax credit. One obvious point of concern for employers is the likelihood of adverse selection, as COBRA continuees account for a higher than average amount of health care spending. However this likelihood of adverse selection may be mitigated if "healthy" employees, who would have gone without medical coverage without the subsidy, now elect to retain coverage.

The second proposed change to COBRA coverage allows any involuntarily terminated employee who is 55 years or older, or who has 10 years of service, to elect COBRA coverage until Medicare eligibility. Under this proposal, and employee could theoretically be terminated at the age of 35 after 10 years of service, and elect to purchase COBRA all the way until Medicare eligibility. This is a scary proposition for employers. However, this portion of COBRA reform is less likely to become law. It was included in the House portion of the stimulus package, but absent from the Senate package.

Do you find this kind of COBRA change "stimulating"? Or does it feel more like another unfunded burden for employers to administer? Speak now or complain later.

Posted by Derek Sloan at 11:21 AM | | Comments (0) | TrackBacks (0)

Could it be a Typo?

I recently came across a letter from a Vice President of the National Association of Manufacturers (NAM) to Speaker Nancy Pelosi and Chairman David Obey (Committee on Appropriations).  The subject of the letter was "comparative clinical effectiveness of medical treatments and services."  I quote, "While we support funding in the economic recovery package to conduct comparative clinical effectiveness research, we believe the current proposal can be improved.  We request that Congress clarify its intent by including clear language that the government will not use comparative effectiveness information to influence coverage or payment recommendations." (emphasis added) 

Is this possible?  Is this really the view of NAM's membership?  Or is it the view of pharmaceutical manufacturers? 

We view clinical effectiveness research to hold great promise and to be an important "public interest" function for the government.  It is certainly superior to the FDA's almost unbelievable use of a "lesser harm" standard in drug approval. This standard allows less effective drugs to be approved for market use as long as they aren't too much lesser.  Does that sound like the kind of drugs you want to buy?  Well, combine it with slick advertising, and that is what people do every day. 

We can't expect the average consumer to follow clinical effectiveness research.  They need the help of coverage sponsors to influence their purchase decisions through plan design and provider payment schedules.  The better, more independent data we have to do so, the better off we will all be.

Posted by Rick Chelko at 09:45 AM | | Comments (0) | TrackBacks (0)

February 05, 2009

What's Really Usual or Customary?

United Healthcare, Aetna and Health Net have all been on the New York AG's hot seat as of late.  It is about their administration of "usual and customary" fee limits for out-of-network health services.  One of United's subsidiaries, Ingenix, is also in the mix and was accused of manipulating the claims data and/or formula to intentionally cause underpayments to out-of-network providers and plan members who use them.  There was a legal settlement without any admission of guilt and an agreement to set up a new "independent" entity (probably a university) to calculate usual and customary.  Now, providers and plan members are lining up to obtain settlements for past underpayments. Today's Wall Street Journal described the problem from the perspective of the typical plan member: "insurers" reimbursements to out-of-network medical providers at the usual-and-customary rate are often lower than the actual fees providers charge.  Sounds a bit unfair doesn't it?  For some reason, neither the New York Attorney General nor the Wall Street Journal addresses the reasonableness of provider billing amounts. 

Why is it that providers are regularly willing to accept half or less of their billed charge amounts as payment in full for their services?  In our experience, negotiated discounts are sometimes as much as 85% off of billed charges.  Do PPO networks really have so much negotiating clout that physicians are willing to provide their services at half price or less?  Or, is it that physicians have inflated their billed charge levels so much since the advent of PPOs that now there is no realistic relationship between billed and negotiated charge levels?  Isn't this really just a billing war between providers, PPO networks and health plan sponsors - and the plan members who go out of network are subject to collateral damage?  Providers get to say "we gave in to negotiations and deeply discounted our fees." Networks get to say, "We are great negotiators and are delivering discount value to our customers." Employers are able to say, "We are smart buyers and are saving our company and employees lots of money off of provider charges."  In the meantime, employees who venture out-of-network (intentionally or un-intentionally) are often left with big bills to pay.

Unfortunately, unless we want governmental price controls, there isn't a lot we can do about this.  Employers can change the payment level for out-of-network services to a percent of Medicare's fee level (i.e. 120% of Medicare).  This avoids the whole debate about what is usual and customary.  However, this will still leave employees exposed to large balance due amounts for billed charges less the Medicare-pegged allowable amounts.  As always, and easier said than done, consumers need to first ask providers if they will accept the plans eligible charge amount as payment in full.

 

 

Posted by Rick Chelko at 12:16 PM | | Comments (2) | TrackBacks (0)