By Jack Pladziewicz
For the Chippewa Valley Post
The previous article in this series compared healthcare costs and benefits in Wisconsin’s public and private sectors. It summarized the efforts of the Wisconsin Employee Trust Fund’s (ETF) Group Insurance Board (GIB) to lower or constrain costs while improving the health outcomes for its members.
The article also summarized the recommendations made by Segal Consulting in a report delivered to the GIB in May, 2015. Many of these recommendations were adopted by the GIB and are reflected in the 2016 state health insurance plan now in effect.
A second report from Segal Consulting (Segal-2) was presented to the GIB last November and was reviewed at the group’s meeting last month. Some key recommendations from that report are scheduled for action at the GIB’s Feb. 17 meeting.
This article and one to follow will summarize the conclusions and recommendations of Segal-2 and their potential impact on ETF members, both those who are retired and those still working.
That impact could conceivably be huge in reducing health care costs and therefore the costs of health care insurance. But that will happen only if the report’s recommendations to improve the health of state employees are also implemented.
(For an explanation of the acronyms in the following material, click here.)
Introduction
Segal-2 is an extensively researched 162-page report with wide-ranging recommendations for the management and delivery of healthcare to Wisconsin state employees.
The report is based on a review and analysis of national, regional and Wisconsin healthcare data for both public and private sector employees. Its primary objective is to recommend strategies to the GIB that increase efficiency (i.e., lower or constrain costs) while improving healthcare outcomes for ETF members.
It is likely that most of the recommendations in Segal-2 will be adopted by the GIB and the full report is highly recommended to anyone interested in the future of healthcare in Wisconsin.
The report outlines the role that Total Health Management (THM) and effective utilization of pharmacy benefits can play in improving outcomes for those with chronic diseases and for reducing the long-term chronic disease risk for the group as a whole. The recommendations focus on motivating participation in wellness programs rather than just making them available. It describes how structural changes in healthcare delivery and moving to a self-insurance system for medical benefits can significantly reduce costs with no decrease in coverage.
The report makes a compelling case that acquisition and analysis of accurate, comprehensive data will play a key role in achieving the dual objectives of cost efficiency and better healthcare outcomes.
Finally, the report recommends specific actions in regard to each of the ETF membership subgroups: active state employees, non-Medicare retirees, Medicare retirees and local government employees.
Total Health Management
THM uses financial incentives and proactive measures directed at patients, providers and employers to reduce the insured group’s health risks. These include educational programs, wellness screening for early detection of disease or health risks, preventive care, behavior modification (e.g. smoking cessation) and financial rewards to motivate participation and adherence to health maintenance regimens.
THM includes the collection of data to quantify the effectiveness of each measure taken. The overarching goal is to provide high quality, cost-efficient care and reduce risk.
Not all current plans serving ETF members can report data on how chronic health conditions are managed and therefore cannot document their effectiveness. This is of particular concern because chronic condition rates for ETF members (64%) exceed national norms (50%), with diabetes being of particular concern.
Wellness programs among ETF members are undersubscribed – 17% – as compared to 70-90% for some other states. Since nearly 90% of healthcare costs in Wisconsin are for treatment of chronic conditions (e.g., heart disease, asthma and diabetes), obtaining accurate data on wellness program utilization and effectiveness is crucial to constraining costs, maximizing positive outcomes and reducing risk.
Based on analysis of ETF members’ chronic disease profiles and wellness program engagement, Segal-2 estimates that $267 million annually is spent unnecessarily on chronic disease treatments related to such risk factors as obesity, alcohol abuse and failure to follow treatment protocols. The Segal report said that $60-$80 million a year of these costs could be saved if ETF members were persuaded to get more involved in THM.
Segal-2 cites examples of other states where modest financial incentives have increased participation from 20% to as much as 95%. Effective application of THM to chronic diseases offers a huge opportunity for both reducing costs and improving the health of Wisconsin state employees.
Segal-2 makes several recommendations to address these issues, including using a separate vendor to manage wellness programs and collect data for all members regardless of who provides their healthcare. This would allow ETF to “own” the data and collect consistent and comparable data across vendors and providers for all regions of the state.
The report recommends offering financial incentives to members completing specific wellness activities. It also recommends that all vendors be required to provide comprehensive healthcare utilization data for their services, and for ETF to put in place the technology needed to do data analysis and risk modeling of the group.
Finally, Segal-2 recommends that ETF, in conjunction with insurers and employers, utilize such new approaches as telemedicine and employer-sponsored on-site clinics to engage employees in managing their health.
Program Structure
Segal-2 suggests that the way ETF’s health insurance system is now organized is counterproductive. The report says the system’s current fragmentation makes it difficult if not impossible for ETF to negotiate the most favorable discounts with vendors as well as adding other administrative costs. (It’s not mentioned in the report, but this also creates some confusion about which plans provide what coverage in which areas.)
Health insurance is now provided to ETF members by 17 different plans operating in five geographic regions. Members choose from plans in effect in their region and these plans insure medical treatment at a large array of networks of hospitals, clinics, physician groups and other providers. Many insurance providers offer plans in more than one geographic region and use overlapping provider networks as well.
The report recommends consolidation from five geographic regions and 17 plans to three regions with a minimum of two plans (i.e., insurers) per region plus a statewide plan. Minimal disruption to existing member-provider affiliation is anticipated because many providers (e.g., hospitals) accept multiple health plans. Segal’s analysis anticipates that consolidation would enhance ETF’s ability to obtain better provider discounts, which are anticipated to produce annual savings of some $67 million statewide.
Segal-2 also recommends the use of tiered networks with more stringent requirements than previously used for Tier 1 status. Currently most plans are Tier 1. To be classified as Tier 1 going forward a plan would have to demonstrate significant financial advantage over Tier 2 plans as well as receive the highest scores for healthcare outcome quality. Initially, the report suggests that most providers should be classified Tier 2 until they demonstrate significant cost and outcome advantages over other providers.
The report recommends other strategies for reducing cost, including contracting with providers for certain specialty services (e.g., medical imaging or hip and knee replacement) at a pre-determined discounted price. Other suggestions include using existing centers of excellence which offer a discounted bundled price for all care associated with a particular set of procedures.
Other recommendations include tweaking of the current “Its Your Choice” plan in several ways, to encourage enrollment in the most cost-effective plans. These proposals include reducing office visit co-payments to preferred providers and for members who participate in disease management programs
A further incentive to use THM is the recommendation for a $50 ($100 for family coverage) monthly premium reduction for those completing wellness programs, coupled with identical premium penalties for those who do not participate.
For example, the Tier 1 monthly premium for 2016 is $83 ($209 family). With a proposed wellness reduction/penalty, 2017 Tier 1 monthly premiums are projected to be $52 ($135 family) with participation in the wellness program and $102 ($235 family) without it.
While significant savings to ETF are not anticipated from THM benefit restructuring alone, Segal-2 does anticipate savings over time as the reference-based pricing and centers-of-excellence components are implemented and grow. Reference-based pricing is setting a payment cap for some common procedures (e.g. knee replacement) that have wide cost variations. Savings to the ETF occur as members either pay the cost difference or seek a provider offering the procedure within the cap payment, or as higher price providers lower their prices to fall within the cap.
The benefit and premium structure is designed to support the recommended THM strategy rather than to generate savings to ETF by shifting costs to employees. However, if members choose lower tier plans or non-participating providers and do not engage in their own health management, they will pay more.
The remainder of the Segal-2 report, and its potential impact, will be analyzed in a second article which will be published lnext week. That analysis will include material on a proposed state self-insurance program, the current Navitus self-insured pharmacy benefit, how the proposed changes could benefit retirees and local government employees and the role of data management. It will also compare the Wisconsin and Minnesota state health insurance experiences, and will summarize the Segal-2 recommendations while also looking briefly at some potential longer term results.
About the Author: Jack Pladziewicz was a member of the chemistry faculty of UW-Eau Claire from 1973-2002 and is Professor Emeritus. Between 2003-2014 he worked in various capacities for Research Corporation for Science Advancement (rescorp.org), a private foundation dedicated, since 1912, to funding basic scientific research in the United States. He retired as president of the foundation in 2014.