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Meager Spending on Behavioral Health Treatments Appears to Result in Higher Healthcare Costs

Since the Covid-19 pandemic began this past March, we have all been forced – seemingly on a week-by-week basis – to adapt to whatever the ‘new normal’ has been prescribed for us at work, home and in our respective communities.

For many of us, change from the status-quo has been difficult to confront and accept. In fact, living in a perpetual ‘snow globe’ that is constantly shaken keeps us from digging out of a never-ending blizzard of newness. ‘Taking things day-by-day,’ a commonly-used phrase, is perhaps an understandable approach for each of us during these uncertain times.

It is no surprise then, that our behavioral health has been adversely impacted during 2020.

This Should be Important to Employers because…

A direct result of people with behavioral health conditions – such as anxiety, depression or a substance abuse disorder – can relate to low job performance, whether it be through absenteeism, presenteeism, or negatively impacting relationships with co-workers and peers.

Employers know that anxieties – regardless of the source – cause stress in the workplace and can negatively affect the entire business operation. Some undesired effects of this stress include:

  1. Higher Employee Turnover – Chronic stress may lead to high employee turnover because job satisfaction is compromised, and employees don’t feel fulfilled or satisfied with their work. Hiring and training of employees is expensive, both in time and money.
  2. Missed Deadlines – Low job performance equates into missing key deadlines, which can reduce overall organization effectiveness with customers, etc.
  3. Overall Company Reputation Suffers – An organization’s highly-regarded image – carefully earned over years and decades – cements the treasured trust given by the public. However, having a high rate of employee turnover may taint the perceptions of prospective employees, who may question if the organization is deficient in offering the ‘right’ kind of engaging and collaborative workplace culture.

Pandemic, Civil Unrest and Political Divide

According to a Boston University study published in the medical journal JAMA Network Open, anxiety and depression are rising among Americans due to the Covid-19 pandemic. Half of U.S. adults surveyed reported at least some signs of depression, such as hopelessness, feeling like a failure or getting little pleasure from doing things. For many, the problem is considered mostly angst rather than full-blown psychiatric illness, but it still requires genuine professional help.

Feelings of isolation and interpersonal concerns related to physical distancing fuels anxiety and depression. The study found the symptoms to be most common in young adults, low-income study participants and those who lost jobs or experienced Covid-19 deaths of friends and relatives. Even though the study was performed prior to the recent spike of civil unrest beginning in late May, other research suggests that racial unrest also contributes to angst and depression symptoms.  Additionally, the lack of civil discourse found in our political system causes anxiety for a growing number of Americans.

A New Source of Concern for Employers – Being Penny Wise, but Pound Foolish

Consulting firm, Milliman, recently analyzed commercial insurance claims for 21 million people and determined that employers and commercial insurers spend meager amounts of money on behavioral health treatments, even though people with behavioral health conditions tend to have higher healthcare costs from other medical conditions.

Is this a causality dilemma also known as the ‘chicken or the egg?’ Which comes first, the behavioral health condition(s) or other non-behavioral medical condition(s)?

At least with the Milliman study, there appears to be little consensus.

A key finding from the Milliman report was that 27 percent of the people who had a behavioral health condition (e.g. anxiety, depression or a substance use disorder) in addition to other medical problems accounted for 57 percent of the total annual healthcare costs across the entire study population. In other words, the annual costs for people who had a behavioral health condition were about 3.5 times higher than costs for people WITHOUT those conditions.

Under this context, it was determined that spending on behavioral health treatment was a mere fraction (4.4 percent) of total healthcare costs for the 21 million people. In fact, half of people with behavioral health issues had less than $68 of total annual costs for behavioral health treatment. Another 25 percent of behavioral patients had very limited spending on behavioral treatment, amounting to $68 and $502 per year.

The study’s findings may suggest that to reduce total healthcare costs, payers must ensure that people with behavioral health conditions receive appropriate treatment. Oftentimes, behavioral conditions exacerbate medical conditions, causing the cost for medical conditions to increase much greater than for those without behavioral conditions. Effectively coordinating treatment for those who have both behavioral and medical conditions may significantly help reduce the overall costs.

Most health insurers include behavioral health as a covered benefit, but according to a 2019 study by the Congressional Budget Office, commercial insurers and Medicare Advantage plans pay in-network behavioral health providers lower rates than Medicare – about 13 percent less for common mental health services. Because of this, behavioral health providers are inclined to stay out-of-network, making treatment more expensive for insured patients, who may forgo seeking appropriate care. A shortage of behavioral providers certainly contributes to the problem, but telehealth can help increase the availability of care.

It certainly does not help that, due to the pandemic, more employees are working remotely making it difficult to gauge their behavioral needs and deficiencies.

This study was commissioned by The Path Forward for Mental Health and Substance Use and funded by the Mental Health Treatment and Research Institute LLC. The National Alliance of Healthcare Purchaser Coalitions was one of the groups that launched the Path Forward initiative, and you can learn more about this study here.

Going Forward

Employers should work with their insurers and community health providers to explore new ways for employees and their family members with behavioral conditions to receive the most appropriate care from the provider community.  Perhaps consider using the collaborative care model in which primary care clinicians work closely with care managers and psychiatric consultants to care for patients and to monitor their progress over time.

Making your workplace less stressful can include keeping your lines of communication open.  Perhaps offer ‘lunch and learn’ sessions to talk about how to manage work tasks effectively, help set boundaries to separate work from family life, and develop an overall culture of wellbeing for all employees.

Carefully bridging the gap between mental and physical health is certainly worth the effort.

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Comparing Two Iowa Counties on Health Insurance Tax Credits

Once again, another attempt is being made by the other major political party to fix what ails our national healthcare ‘system.’ But this newest attempt by House Republicans, the American Health Care Act (AHCA), has already been met with opposition by major stakeholders, such as the American Medical Association, American Hospital Association, the insurance industry, in addition to Democrats and uber-conservative Republicans.

Despite the flurry of headlines, summaries, analysis and opinions about what this bill does and does not do, the Congressional Budget Office (CBO) has scored that the cost of this bill would reduce the federal deficit by $337 billion through 2026, however, it would leave 14 million people without insurance in 2018 compared with the ACA.  The CBO just released its’ findings.

To ensure coverage, the Affordable Care Act (ACA) currently subsidizes insurance premiums based on age and income. The ACA also attempts to factor the local cost of insurance into its subsidy. In addition, for those making less than 250% of poverty, cost-sharing assistance is provided to lower the deductibles and copayments for those enrolled in eligible marketplaces. The AHCA, on the other hand, provides tax credits based on age only, and this phases out for individuals with incomes above $75,000.

For any healthcare reform plan to work, there must be a large incentive for young and healthy people to seek coverage to help equalize (or subsidize) the unhealthy population. This is largely known as Health Insurance 101 – mitigating adverse selection risks.

I took great interest in an interactive map (at the county-level) provided by the Kaiser Family Foundation that compares estimated premium tax credits consumers would receive under the ACA in 2020 compared to what they would receive under the AHCA released by House Republican leaders on March 6. The interactive map does not factor in the cost-sharing assistance offered through the ACA, only the premium subsidy (ACA) and tax credits (AHCA).

I wanted to learn just how different subsidies and tax credits were between the ACA and AHCA, based on age and income, comparing a metropolitan county (Polk) to a rural county that I grew up (Appanoose). The results are quite staggering.

As a 27-year-old earning $20,000 and living in Polk county in 2020, the ACA is estimated to provide a $2,360 subsidy while the AHCA would provide a $2,000 tax credit. Living at this same age (and income) in Appanoose county, the ACA would provide an even greater subsidy of $4,440 vs. $2,000 (AHCA). At this younger age, and presumably healthy, this individual would have a greater incentive to seek insurance coverage through the marketplace under the ACA compared to the new version that would replace it. We don’t know if the replacement plan will generate lower-premium health plans for the public to purchase – this is pure speculation at this point.

Below are summaries of how people compare based on age, income and location (Polk and Appanoose counties). The subsidies and tax credits in red indicate that this amount is less than the opposing plan at that same age (ACA or AHCA). Generally speaking, the comparisons suggest that older people with lower-income (and live in higher-premium areas) receive larger tax credits under the ACA than they would under the AHCA replacement plan. This first chart is for those who earn $20,000, $30,000 and $40,000 annually.

This next chart compares people who earn $50,000, $75,000 and $100,000.

As I have written numerous times in the past, this second attempt to fix healthcare will be meaningless unless we focus on the true drivers of cost, which includes waste, lack of transparency and the exceedingly poor health of our population.

With that said, what are we really trying to solve?

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Ten-Year Projection of Employer Health Insurance Costs in Iowa

Projecting into the FutureI just can’t help it.

Give me some historical data and I want to run projections into the future. If it is good enough for Congress to rely on the Congressional Budget Office (CBO) to make budget projections based on assumptions that impact legislative proposals, why not do the same for Iowa employers on the health insurance they pay?

Many assumptions we make usually begin with a very short, yet powerful, word – ‘if.’ This word provides a fallback position for anyone who is willing to venture guesses on what the future may hold on any given subject matter. The Merriam-Webster dictionary explains how the word ‘if’ is used:

  • to talk about the result or effect of something that may happen or be true
  • to discuss the imaginary result or effect of something that did not happen or that is or was not true
  • to say that something must happen before another thing can happen

So, I want to make a few projections (not necessarily predictions) of what family health premiums ($15,743 in 2016) will be for Iowa employer-sponsored plans over the next 10 years (2017-2026). To do so, I will first need to make a few assumptions using the word, “if.” So here we go…

IF we assume over each of the next 10 years:

  1. Employers continue to offer health insurance coverage; and
  2. Employer-sponsored medical premiums increase by 7.7 percent (using the average annual growth in premiums between 2012 and 2016 received by Iowa employers PRIOR to making benefit plan changes); and
  3. Iowa employers make NO changes to their plans and accept this average increase; and
  4. Medical inflation is similar to 2016 rates and continues unchanged; and
  5. No deep recession (depression) has occurred; and
  6. ‘Pay-for-value’ reimbursement systems remain ‘experimental,’ meaning that there is no clear consensus on controlling costs and appreciably enhancing value of care delivered; and
  7. The average employer share of paying for family premiums remains at 68 percent of the total premium (employees pay the other 32 percent); and
  8. The median household income in Iowa during 2014, $53,816, increases annually by 1.5% to 2026; and
  9. Lack of political decisiveness continues without passing any new major health reform measures beyond what we currently have in 2016; and FINALLY
  10. Life continues as we currently know it today.

THEN we may see:

By the year 2026, total family medical premiums will have exceeded $33,000, which would be 51 percent of the projected 2026 median household income in Iowa ($64,344).

Ten-Year Projection of Family Premium at 7.7 Percent

IF we make the same assumptions above, but tweak #2 and#3 to make the likely assumption that employers WILL make changes to their medical plans to keep them more competitively priced, and that the average annual growth of premiums will increase by only 3.5 percent annually, the average family premium by 2026 will grow to $22,207, or 35 percent of the projected 2026 median Iowa household income. The power of compound rates can make a huge difference. In this case, the 2026 family premium would be $10,849 less using 3.5 percent compared to 7.7 percent.

Ten-Year Projection of Family Premium at 3.5 Percent

Before we become somewhat giddy about ‘saving’ this type of premium by using a lower percentage, it is important to understand what is NOT shown on this particular graph – how health plans will change by 2026 AFTER the employers make annual alterations to keep their plans affordable. Deductibles and out-of-pocket maximums would continue to increase, offsetting any potential ‘savings’ made by not having higher premiums. However, employees would assuredly bear the undeniable burden of paying more out-of-pocket expenses when seeking more expensive medical care.

In 2014, according to the Health Care Cost Institute, total annual spending was $660 less per person with those employees who had high deductible health plans, or about 13 percent less than spending in conventional health plans. But what is not known is if this ‘savings’ came from avoiding needless tests and procedures or employees skimping important (and necessary) treatment, which can be detrimental to long-term health.

Something tells me that the use of the word “giddy” will not be part of the 2026 health insurance vocabulary.

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