Fwd: qotd: Private exchanges are sending us in dangerous directions

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-------- Original Message --------
Subject: qotd: Private exchanges are sending us in dangerous directions
Date: Fri, 21 Feb 2014 12:47:51 -0800
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



Bloomberg
February 19, 2014
Employers Turn to Private Health Exchanges to Cut Costs
By Caroline Chen

One-third of U.S. employers plan to move their workers' health-care
coverage to a private exchange in the next few years, a survey found,
following the lead of companies like Walgreen Co. seeking to reduce costs.

While 95 percent of employers said they would continue to offer health
care in the next three to five years, 33 percent may use a private
exchange to provide the benefit up from 5 percent currently, according
to a survey released today by a unit of Aon Plc.

Traditionally, most large employers are self-insured, meaning they take
on the financial risk of their employees' health costs. Under a private
exchange, workers are given a subsidy to pick from a limited number of
health plans and the insurer takes on the risk.

"Employers are telling us they are losing confidence in their
traditional approaches, like vendor changes or employee cost-sharing,"
which only deliver "incremental" improvement, Jim Winkler, Aon's chief
innovation officer for health benefits, said in a telephone interview.
"Employers are saying, 'I need to do something different.'"

About 38 percent of the companies surveyed by Aon said they would offer
no benefits to part-time workers within the next three to five years.

Retiree benefits are also being reworked. International Business
Machines Corp. (IBM) said last year that it would send 110,000 retirees
to Towers Watson's Extend Health, the largest private Medicare exchange.

The Aon survey found that two-thirds of employers who wanted to make
changes in retiree benefits were looking to follow IBM's lead.

Only 25 percent of large employers offer subsidized retiree health
benefits, Aon said, down from about 50 percent in 2004.

http://www.bloomberg.com/news/2014-02-19/employers-turning-to-private-health-exchange-to-cut-costs.html

****

Aon
February 19, 2014
Aon Hewitt Research: Employers Will Continue Sponsoring Health Benefits
for Employees and Retirees, but Deliver Those Benefits in New Ways

According to Aon Hewitt's soon-to-be-released Health Care Survey of more
than 1,230 employers covering more than 10 million employees, 95 percent
of employers say they plan to continue providing health care benefits to
active employees in the next three-to-five years. However, a growing
number plan to move away from their traditional "managed trend"
approach, which includes aggressively managing costs through vendor
management and employee cost sharing.

Thirty-three percent said offering group-based health benefits to active
employees through a private health exchange will be their preferred
approach in the next three-to-five years.

Despite having the ability to direct part-time employees to purchase
health coverage through the public marketplaces, Aon Hewitt's survey
shows very few employers plan to do so in the near future. Almost
two-thirds plan to continue to offer the same level of benefits to
part-time employees as they do to full-time employees, with or without
an employer subsidy. Just 38 percent plan to offer no benefits to
part-time workers in the next three-to-five years.

According to Aon Hewitt's annual Retiree Health Care survey of 424
employers covering 3.8 million retirees, 20 percent said they are
favoring moving all or a portion of their pre-65 retiree population to
the individual market/state exchanges to purchase coverage in the next
three-to-five years. Today, just 3 percent of employers do so.

According to Aon Hewitt, the number of employers offering subsidized
retiree health benefits has slowly declined over the past decade, with
just 25 percent of large employers doing so today, compared with
approximately 50 percent in 2004.

Of those companies that offer health benefits to post-65 retirees, a
growing number of organizations now provide or are seriously considering
providing health benefits coverage through the individual Medicare plan
market. Aon Hewitt's annual Retiree Health Care Survey found that 30
percent of companies have already sourced benefits through the
individual market―most through a multi-carrier private health exchange.
Of those companies contemplating future changes to their post-65 retiree
strategies, two-thirds are considering this approach.

"A growing number of employers are leveraging multi-carrier private
exchanges for Medicare beneficiaries because they see the value in both
the competitive mix of plans offered and the Medicare-specific
navigation and advocacy offered by these private exchanges," said John
Grosso, leader of Aon Hewitt's Retiree Health Care Task Force.

http://aon.mediaroom.com/2014-02-19-Aon-Hewitt-Research-Employers-Will-Continue-Sponsoring-Health-Benefits-for-Employees-and-Retirees-but-Deliver-Those-Benefits-in-New-Ways

****

Towers Watson
OneExcahnge (previously Extend Health)

OneExchange has helped more than 300,000 retirees find the perfect
Medicare plan for their needs and budget. We are the trusted leader in
private Medicare exchanges.

https://medicare.oneexchange.com

****

USA TODAY
February 20, 2014
Private exchange sees surge in health care enrollment
By Kelly Kennedy

The number of customers on the nation's largest private health insurance
exchange increased by 50% in the final three months of 2013, a direct
result of demand created by the Affordable Care Act, the company's CEO
said Thursday.

Gary Lauer, CEO of eHealth Insurance, said individual memberships rose
50% in the fourth quarter of 2013 compared with the same period in 2012,
from 113,600 applications in the last three months of 2012 to 169,800 in
2013.

The site operates much like the federal and state exchanges, and now
that people have a better understanding of what "exchange" means,
they're drawn to the private sites, as well. In fact, many employers
offer private exchange coverage, so employees may pick a plan, and many
insurers are creating their own private "exchange" sites, so they can
offer more products to consumers.

Those shopping on private exchanges might include business owners who
make more than 400% of the federal poverty level, but who couldn't get
insurance before; retirees who are not eligible for Medicare; or people
who simply disagree with the Affordable Care Act and choose to find
insurance outside the federal and state exchanges — even if those plans
are also through private insurers.

Premium rates, Mast said, dropped 25% when the law went into effect, as
more people chose the less expensive bronze-level plans.

http://www.usatoday.com/story/news/nation/2014/02/20/fourth-quarter-reports-show-high-insurance-enrollment-in-private-sector/5639725/

****

Comment by Don McCanne, M.D.

The activity around the implementation of the Affordable Care Act and
the initiation of federal and state insurance exchanges has seemed to
stimulate much interest in private insurance exchanges, in all of their
various forms. While some may praise the private sector for coming to
the fore, we should take a closer look at what this means for patients.

Perhaps the greatest concern is the fact that this Aon survey shows that
about 33 percent of employers will be eliminating their own health
benefit programs within the next three to five years and start sending
their employees to private exchanges to shop for their plans. This gives
their employees greater choices in health care coverage, so why should
we be concerned?

By providing their employees with what amounts to a voucher, employers
are able to control their future health benefit costs by limiting the
rate at which the value of the voucher increases. As health care costs
continue to increase at rates greater than inflation, the employees will
have to bear the additional costs, either through higher premiums or
through further cost sharing and limitations in benefits offered by the
plans.

This extends the national trend of converting employee benefit programs
from defined benefit to defined contribution programs in which both risk
and higher costs are shifted from employers to employees. The nation's
workforce is being left behind while the productivity gains are now all
going to the top.

eHealth is the largest private insurance exchange, and many are now
turning to it to purchase their plans now required by the individual
mandate, but there is an important difference between the public and
private exchanges. Most people purchasing plans in the federal and state
exchanges are purchasing silver plans to qualify for the government
subsidies - subsidies which are not provided for bronze plans. But what
are people purchasing in the private exchanges?

Silver plans have an actuarial value of 70 percent, leaving 30 percent
of costs to be paid by the patient (though adjusted down for credits and
out-of-pocket caps, but up for out-of-network care). Bronze plans have
an actuarial value of only 60 percent, but these are the plans selected
by those shopping the eHealth market simply because they are the
cheapest (i.e., they have the lowest premiums). So the concern about the
surge in eHealth sales is that far too many individuals will be
underinsured - having a plan that will leave them with excessive medical
debt should they need significant amounts of health care.

Another form of private exchanges is represented by Towers Watson's
OneExchange - the largest private Medicare exchange - which has found a
great market created by employers' termination of employee retirement
health benefit programs. Employers can now send their over-65 retirees
to OneExchange where they can select from a variety of Medigap, Medicare
Advantage and Part D Medicare drug plans. If you go to their website
(link above) you will find that most Medigap plans charge a significant
premium whereas most of the Medicare Advantage plans have no premium at
all. Just as eHaelth shoppers buy the cheapest plans, no doubt the
Medicare shoppers on the private Medicare exchanges will buy the
cheapest plans as well - forgoing traditional Medicare and buying the
private Medicare Advantage plans instead. Privatization of Medicare
marches on.

So these various private exchanges are shifting us to defined
contributions, to lower actuarial value plans with greater exposure to
health costs, to privatization of Medicare, and to compounding the great
divide between the few super-wealthy and the rest of us. This is what we
want out of the private market!?

When you think about it, all of this is because we continue to insist
that we have a health care financing system in which each individual is
shoved into a slot with a given insurance program - a system that has
proven to be so expensive and complex that the sources of the funds to
pay for health care are looking for ways out. They are taking what
deceptively appear to be the cheapest exits when, in reality, total
costs just keep going up.

How about getting rid of the concept of a separate plan for each
individual. It would be less wasteful, far less complex, and would
provide us with much greater value if we had just one comprehensive plan
for everyone - an improved Medicare for all. And it would actually work.