A major contributing factor to the health insurance crisis is an epidemic of obesity that’s boosting the health care spend and accounting nearly a quarter of health care costs. A Cornell University study published in the January issue of the Journal of Health Economics estimates obese patients incur medical costs that are $2,741 higher in 2005 dollars than if they were not obese. Nationwide, that translates into $190.2 billion per year, or 20.6 percent of national health expenditures, according to the research, which notes earlier estimates measured the cost of obesity at $85.7 billion, or 9.1 percent of national health expenditures.
While a major driver of health care spending, obesity is merely a distressing symptom of a larger dysfunctional set of American cultural economic and lifestyle choices that drive up health care utilization. They include poor work-life balance (long workweeks, long commutes to obsolete office spaces and associated stress), lack of exercise (and sufficient time for sustained daily exercise), too little sleep, unhealthy diets (and their commercialization via the “foodie” culture) and the expectation that health issues can be “repaired” by medical treatment and the state of the art pharmaceuticals.
California legislation limiting self-insured small employer medical stop loss coverage moves forward
California lawmakers are concerned a trend of small employers self insuring their employee health benefits and purchasing stop loss coverage for cases when a given worker incurs high medical bills will play havoc with the state’s small group health insurance market. The chief concern is the arrangement will further reduce an already shrinking and distressed market segment and foster adverse selection as the state prepares to bolster the market starting in 2014 with a Small Business Health Options Program (SHOP) offered through the California Health Benefit Exchange.
Lawmakers are responding by imposing restrictions on medical stop loss coverage with SB 1431, legislation sponsored by California Insurance Commissioner Dave Jones and approved this week by the Senate Health Committee setting higher attachment points for the insurance. Stop loss coverage has been reportedly offered with attachment points as low as $10,000 to $20,000. Combined with a $1,000 to $2,000 deductible, employers would be responsible for an employee’s medical bills in a relatively narrow window above the employee deductible and below the stop loss attachment point. Stop loss insurance kicks in when an employee’s medical costs exceed the attachment point.
“SB 1431 is necessary to prevent the state’s small group market from falling victim to adverse selection and unsustainable premium levels and protecting California’s small businesses, its employees, and the success of the post-ACA (Affordable Care Act) insurance market,” the committee’s analysis notes.
Various California officials have been signaling over the past month or so that the Golden State would implement health reforms similar to those of the Patient Protection and Affordable Care Act (PPACA) if the U.S. Supreme Court rules the law unconstitutional this summer.
One influential state lawmaker, Senate Health Committee Chairman Ed Hernandez, put that intent on record this week. He amended his SB 1487 to state legislative intent “to enact into state law any provision of the Affordable Care Act that may be struck down by the United States Supreme Court and that is necessary to ensure all Californians receive the full promise of the act.”
The individual health insurance market isn’t a feasible replacement for employer-based coverage. So concludes the 2011 Commonwealth Fund Health Insurance Tracking Survey. The survey of 2,134 U.S. adults found 25 percent experienced a gap in their health insurance in 2011, with a majority remaining uninsured for one year or more. Losing or changing jobs was the primary reason people experienced a coverage gap.
“The individual market has proven to be a weak stop-gap option for families who lose employer insurance,” the survey states. It reported those who attempted to find coverage in the individual market reported substantial difficulties finding affordable coverage that met their needs. Almost half of those surveyed ended up going without coverage as a result, with affordability the most common reason for not purchasing a plan.
In an information intensive economy, those who create, process, analyze and add value to information can do so from anywhere thanks to the proliferation of Information and Communications Technology (ICT) over the past two decades. Yet paradoxically, many Americans still engage in a daily commute to the office as if it were the 1950s of Dagwood Bumstead or the 1980s that inspired the more modern day office place comic strip, Dilbert. In those days, commuting to the office was necessary because that’s where the office equipment was — telephones, typewriters (and later, dedicated word processors), photocopiers and fax machines. Not anymore. Today, nearly any setting can function as an office where a knowledge worker can concentrate and be productive.
Nevertheless, on average Americans spend nearly an hour a day getting to and from an office that ICT has effectively rendered obsolete. That adds up to a lot of wasted and often stress filled time piled on top of an increasingly sedentary culture that battles the rising health care costs of lifestyle-induced chronic conditions linked to a lack of exercise, poor diet, and inadequate sleep. For the time crunched trying to balance family obligations with work, avoiding these adverse health impacts is even more challenging. Just look around any traditional office setting and chances are you’ll see plenty of stressed out, sleep deprived, and overweight people who are more likely use medical services and in turn increase their employers’ health care utilization costs.
What’s needed is a new model for traditional office-based work that can free up time for exercise, healthier home cooked meals and sleep that would otherwise be wasted on daily commuting. Fortunately, such a model better suited to today’s highly connected, information everywhere economy exists: ROWE or a Results Only Work Environment. A ROWE values getting the work done over daily office attendance. Early indications are that workplaces that adopt ROWE can achieve better health status at a time when workplace wellness is getting increased attention to slow the nation’s unsustainable rise in health care costs. A University of Minnesota study issued in December 2011 found workers in a ROWE realized increased health-related behaviors of more sleep and exercise — behaviors that can go a long way toward maintaining health and reducing medical utilization. ROWE is poised to become the successor to traditional “workplace wellness” programs that have been slow to demonstrate tangible progress in reducing employer health care costs.
Health plans are paring plan rates they boosted in 2011 to cover health reform mandates, reports Buck Consultants in its National Health Care Trend Survey. That factor along with reduced medical utilization due to weak economic conditions resulted in the survey projecting a 9.9 percent average increase in 2012, the first time the figure fell below 10 percent since 2001.
Daniel Levin, a Buck principal and consulting actuary who directed the national survey of 129 insurers and plan administrators, noted that despite the lower expected increase this year, “health care costs continue to outpace both general inflation and wage increases, creating real business challenges for organizations.” Levin added that plan sponsors are showing increased interest in health insurance exchanges and accountable care organizations.
California leaning toward Kaiser Permanente’s small group HMO as individual and small group plan benchmark
California continues moving forward to implement the Patient Protection and Affordable Care Act (PPACA), advancing legislation this week setting minimum coverage standards for health plans offered by small employers and sold through the California Health Benefit Exchange.
Section 1302 of the PPACA delineates 10 “essential health benefits” small group and individual market plans must offer including ambulatory and emergency services, hospitalization, maternity and newborn care, treatment for mental health and substance use disorders, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management and pediatric services, including oral and vision care.
Since health insurance markets vary among the states and to speed state efforts to establish health benefit exchanges, the U.S. Department of Health and Human Services late last year issued guidance allowing states to choose one of the following plans sold in their jurisdictions as a benchmark:
- One of the three largest small group plans in the state;
- One of the three largest state employee health plans;
- One of the three largest federal employee health plan options;
- The largest HMO plan offered in the state’s commercial market.
California advanced legislation this week, AB 1453, defining HMO Kaiser Permanente’s small group plan as of December 31, 2011 as the Golden State’s benchmark.
More indications of support for California version of insurance mandate if federal version tossed by high court
The Los Angeles Times‘ Chad Terhune via the Sacramento Bee quotes a key California legislator expressing support for a California version of the Patient Protection and Affordable Care Act’s (PPACA) coverage mandate if the federal law’s mandate is ruled unconstitutional by the U.S. Supreme Court. California Insurance Commissioner Dave Jones also seems to favor an insurance mandate if the Golden State ultimately moves to put its own in place but doesn’t directly say so in Terhune’s story.
A week earlier, California Human Services Secretary Diana Dooley expressed support for the mandate, which state payer organizations contend is essential to prevent adverse selection in the state’s individual market, the largest in the nation as a percentage of working age adults and their dependents.