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A Cluttered Desk and a New Resolution!

I like to think that I keep my office and desk clean and organized. Most of the time, it is. I have learned at a very young age, thanks largely to my mother, to always keep my bedroom ‘spic and span’ and make sure the bed is made before beginning my day.

I decided to write this particular blog because I was immediately struck by something I saw in my office after grabbing a fresh cup of coffee…and I realized it would not be flattering – especially to my mother!

When I’m not working on my own research, I spend a great deal of my office time developing benchmarks for clients, writing blogs and articles, and dabbling in other more mundane business-related activities. Writing for me has always been a challenge, primarily because it requires a combination of perseverance, creativity, and mostly – deep thought.

Sitting down and quickly typing something for immediate release is not my usual approach. Perhaps the best way to explain my writing process is to think of marinating your favorite meat in the refrigerator using a good concoction of ingredients. It takes time and a quality seasoning mix to alter the taste of that meat. Doing so will usually result in a pleasing meal for the palate.

Writing is a process of ‘marinating’ a myriad of ideas with adequate time to allow the end product to become ‘consumable.’ However, for this particular blog, the marination process was completely bypassed – so my apologies!

During the past year, a number of people have contacted me to request that I write about certain subject matters, specifically relating to healthcare and employee benefits issues. A few examples include Medicare-For-All, surprise medical bills, reviewing an on-line analytical pharmacy, physician conflict-of-interest, medical errors, and proposed mergers of health systems. As you can imagine, each topic requires a great deal of ‘research’ time, ensuring there is enough backroom ‘due diligence’ to provide a balanced discussion.

As I write this specific piece, I was struck by how messy and chaotic my desk appeared when I walked back with a newly-brewed cup of coffee. I’ve come to the realization that whatever I decide to write, must be somewhat similar to how sausage must be made in the back room.  Making sausage, we are led to believe, is somewhat sickening to watch and may not render complete confidence about the process.

The holidays provide a good time to work on resolutions for the upcoming year.  Having a cleaner desk to set my cup of coffee will serve as a great start. Perhaps ‘making sausage in my office’ will not be as painful as what the picture suggests!

I wish you a very Happy Holiday season and a peaceful and prosperous (and tidy) 2020!

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Three Key Iowa Employer Health Cost Projections for Next 10 Years

Given the evolution of rapidly-developing technologies in any given industry, with a blink of an eye we are enjoying new product launches that substantially impact our daily livelihood and newly-acquired habits. For example, just one decade ago (2009-2010), the Apple iPad was being launched, self-driving autos were a wishful idea still in conception, and the Chrome OS and Chromebook computers were not yet a ‘thing.’ Cast forward to now and we have countless new products that we never dreamed of having available 10 years ago.

Much of this ‘advancement,’ one might argue, has centered our lives around personal conveniences at a relatively affordable cost.

Unfortunately, when it comes to healthcare trends in the next 10 years, I do see the continuance of our national inaction of ‘fixing’ the healthcare system. Escalating costs will continue its upward projection for the foreseeable future.

With this in mind, it might be interesting to forecast three primary cost-sharing responsibilities that Iowa employers and their employees will face when paying for healthcare coverage 10 years from now:

  1. Monthly health premiums
  2. Monthly employee contributions of these premiums
  3. Health plan deductibles.

Using a simple linear regression1 trend line tool, I will share what these costs may project to be in 2029 – a decade from now. Linear regression analysis will serve as my ‘crystal ball’ of what health costs may be in Iowa without any meaningful reform changes during the next decade – including economic downturns and other factors that may impact health insurance coverages.

It is also worth mentioning that median household income will also be different for Iowans by 2029. In 2017, the median household income in Iowa was $58,570. Annualized at 1.5 percent for the next 10 years, the median household income is projected to be $70,027 by 2029.

PROJECTED MONTHLY HEALTH INSURANCE PREMIUMS IN 10 YEARS

In our 2019 Iowa Employer Benefits Study©, we learned the average single and family health premiums were $585 and $1,611, respectively. Based on prior results dating back to 1999, the linear regression graphic (found below) shows that the monthly premium for single and family coverages could jump to approximately $800 and $2,000 by 2029.

This finding may appear to be somewhat tame, but this increase would be much greater if employers refrain from altering their health plans to keep them ‘affordable.’ As we know, this does not happen, as employers have always ‘watered down’ their health plans to maintain some sense of affordability. This is typically done by shifting additional costs to employees through higher payroll deductions and plan design alterations that require more financial exposure by employees. Both are discussed below.

PROJECTED MONTHLY EMPLOYEE CONTRIBUTIONS IN 10 YEARS

By 2029, Iowa employees with single health coverage are projected to contribute about $140 per month ($1,680 annual) for employer coverage, while an employee with family coverage is projected to contribute $600 monthly (or $7,200 annual). This projection is found in the graphic below.

PROJECTED SINGLE AND FAMILY HEALTH PLAN DEDUCTIBLES IN 10 YEARS

Health plan deductibles serve as the common approach for employers to shift rising health costs to employees and their family members. As premium costs continue to rise during this next decade, employers will most likely continue this trend. Based on the graphic found below, the average single and family deductibles will shift to about $3,000 and $6,000, respectively. The average 2019 deductibles in Iowa are $2,192 for single and $3,975 for family.

Not illustrated here, but the current out-of-pocket maximums (OPMs) that Iowa employees are paying through their employer plans are at $3,700 single and $6,800 family. The linear regression line for single and family OPMs illustrates an increase to $5,000 and $10,000 respectively.

I must admit, I’m a bit surprised that all three graphics did not display greater increases during the next decade. But again, health reform, aging of boomers and economic conditions play a crucial role on how this might impact key cost components of employer-sponsored health coverage in Iowa.

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1In simplified statistical terms, a linear regression is a basic and commonly-used type of predictive analysis, that examines a set of predictor variables to determine a relationship over a period of time.

Healthcare Price Transparency? Its Time Has Finally Come

NOTE: Given the latest hospital price transparency developments, this blog enhances the one I published last March,  A Potential Game Changer – Making ‘Secretly-Negotiated’ Medical Prices Public.

The insurance card that you carry represents lost wages and financial bonuses that have been unnecessarily diverted to pay exorbitant healthcare fees to others.

From our 2019 research, the average annual Iowa employer premiums were $7,017 for single and $19,335 for family. Since 1999, these premiums have increased by 240 percent and 251 percent, respectively. Additionally, largely under the push for ‘healthcare consumerism,’ Iowa employees have been asked to pay much higher deductibles – now at $2,200 for single and $4,000 for family coverages.

The escalating prices we pay for healthcare services operate in a black box. Whether for hospitals, doctors, pharmacy or other healthcare providers, we have no idea what the negotiated prices actually are between insurers and health providers, at least until sometime AFTER the services have been rendered. Such opaqueness is intentional. To paraphrase noted economist Uwe Reinhardt, where there’s mysteries in pricing, there’s larger-than-normal margin to be had. In healthcare, obscene money is made when it is allowed to operate in a dark room of denial and obfuscation.

On November 15, the Centers for Medicare and Medicaid Services (CMS) issued a final rule that requires hospitals to disclose the rates they negotiate with insurers. This hospital price transparency rule, set to begin in 2021, requires hospitals to disclose the standard charges for all items and services, including supplies, facility fees and professional charges for employed physicians and other practitioners. The final

Additionally, the final rule requires hospitals to post payer-specific negotiated rates online in a searchable and consumer-friendly manner for 300 of the most popular services shopped by patients.

Under a separate CMS proposal, health insurers will be required to disclose on a public website their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers. Health insurers will need to offer a transparency tool to provide covered members with personalized out-of-pocket cost information to all covered services in advance. The language for this proposed rule can be found here.

Negotiated prices are largely bound by confidentiality agreements between healthcare providers and insurance companies, and are so closely guarded that even mega-sized employers are not allowed to penetrate this veil of secrecy.

It is revealing that the American Hospital Association (AHA) and the Federation of American Hospitals are exploring legal options to argue that transparent pricing will constrain private contract negotiations.

Two influential insurance organizations have revealed their opposition to price transparency – America’s Health Insurance Plans and the Blue Cross and Blue Shield Association. A spokesperson from the BC/BS Association indicated these rules “will not help consumers better understand what health services will cost them and may not advance the broader goal of lowering healthcare costs.” The argument made is that price transparency can actually increase prices because clinicians and medical facilities will bid up prices, rather than lower rates.

Despite these self-serving arguments, the status quo only works for hospitals and insurers, but not for those who actually pay for healthcare. This must change.

By itself, real prices made public will not solve the inherent problems that persist throughout the healthcare system, but price transparency is a good first-step to have. Clearly, it is not the sole remedy to a ‘system’ that requires massive incremental fixes.

Admittedly, the push for healthcare ‘consumerism’ has been relatively slow. However, it is likely that consumerism will find new legs due to third-party entrepreneurs and technology companies who will find disruptive ways to make pricing a relevant decision-making tool for many patients. All purchasers want the best value in the healthcare being purchased.

Regardless of political party affiliation, price transparency in healthcare should be widely accepted by Iowans and all Americans.

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