Friday, October 2, 2009

Health Exchanges: Reform Impact to "Ancillary" Health Services

I received a great set of questions on yesterday’s Wyden and Wellness posting:

"Regarding employees' purchase of government plans, what will happen to ancillary plans like Dental, Vision, and Mental? Many employers offer these, which are also very important from wellness viewpoints.  Many cases, insurance brokers even package EAP, wellness programs, newsletters, together with physical health plans. What will insurance brokers will do? Or will employers basically offer a government plan as just one of the option through brokers?  For example, most employers offer a few choices, e.g. BCBS, Aetna, Kaiser, etc. I can easily see they can add government plan on top of the list of offerings." 

The questions were intended to be simple, but unfortunately the answers are not. A comprehensive account of how Wyden’s original bill, Wyden’s amendment, the House bill, and the two senate bills would impact each of the “ancillary” health benefits is beyond the scope of this blog. I will provide just the highlights and some speculative conclusions on how proposed legislation will collide with the provision of ancillary health benefits.

I’ll answer in reverse order.

Yes, Wyden’s Free Choice Act would allow an employer to add access to a government-sponsored exchange alongside its traditional health plans. This assumes that by “government plan” you mean a private insurance plan purchased through a government-sponsored exchange. The technical mechanism by which an employer would grant employees access to a government-sponsored exchange would be to pay out the employer’s contribution to the employee in cash and then leave it to the employee to shop around on the exchange. In fact, the employer would be required to do this in certain circumstances.

The degree to which a broker would be involved in setting up the “cash out” process is questionable. If the Free Choice Act is adopted, the federal government will specify regulations detailed to guide the cash out process. The end result will probably be more like COBRA administration – highly automated and low touch.

More broadly speaking, what role will brokers play with regard to the procurement of ancillary healthcare services? Let’s assume that brokers exist today to help employers and individuals sort through the details of ancillary plans and other complexities. Exchanges will supposedly simplify those complexities through mandated disclosures and coverage standards, reducing the role that the broker plays. I say “supposedly” because the fine print on your bank and credit card statements are government-mandated disclosures that fall short of simplicity. If the broker’s traditional role is lessened, however, brokerage firms could redeploy themselves towards winning lucrative government “navigator” contracts, where government funding is directed towards helping disadvantaged groups use exchanges effectively.

One of the possible standards that will be required in order to list a medical policy on the exchange will be that the policy must include some form of ancillary coverage. The House bill (HR 3200), for example, requires that the medical carrier itself include dental coverage for children. This would require some significant reshuffling of responsibilities from ancillary dental plans to the medical plans. According to Delta Dental, 97 percent of employer-sponsored dental contracts are written separately from medical coverage. Delta Dental is not happy about any decrease in that percentage.

In the case of wellness programs, the main reform legislation bills provide a variety of incentives, and do not appear to require bundling.

  • Wyden’s original Healthy Americans Act would require exchange listed policies to include wellness programs and mental health parity.
  • The House bill would require development of a national strategy for wellness activities and mental health parity.
  •  The Senate HELP Committee bill would require health insurers to provide financial incentives to providers to promote wellness. It would also encourage employers to provide wellness programs by conducting targeted educational campaigns to raise awareness of the value of these programs and by increasing the allowable premium discount for employees who participate in these programs from 20 percent to 30 percent.
  • The Senate Finance Committee bill would provide grants to small businesses to establish comprehensive, evidence-based workplace wellness programs; it would also permit employers to offer employees rewards of up to 20% of the cost of coverage for participating in a wellness program.

My take-away is that wellness program will grow in the short term. As I posted yesterday, however, the separation of certain wellness programs from the rest of an employer’s benefit package could cause the efficacy of the programs to decrease.

Expanded mental health parity requirements signed into existence late last year, supported by Senator Obama, are taking effect January 1st 2010. These provisions had an exclusion for small business, but the HELP Committee bill makes full parity a requirement for any medical policy listed on an exchange. The ultimate compromise reform bill will probably also require full parity. Parity provisions don’t require that mental health coverage be included, however – just that any mental health coverage be similar in scope to traditional medical coverage.

Some have argued that extra taxes being levied on rich benefit plans, as planned in the Senate Finance Committee bill, would cause employers to drop ancillary coverage. I doubt that this prediction will come to fruition – the employer will likely be able to play with the numbers to keep ancillary plans included in mainstream health plans. Normally a broker would be making those calculations, but in the brave new world of health exchanges, the intent is to have it be simple enough for employer HR staff (no offense, HR people) to calculate.

1 comment:

  1. Allow me to expand on the dental side of the equation. The House bill does not allow stand-alone dental plans (97 percent of all current policies) to continue to be offered separate from a qualified health plan carrier - at least not the children's portion. This means between 40 to 50 million children with current dental coverage would be forced to jettison their current separate, stand-alone dental coverage, and instead buy the minimally mandated benefit from their medical plan in order to meet the definition of "essential benefits." Parents will need two dental policies where they currently only have one. Some children may no longer get to keep their current dentist if the new carrier does not contract with that dentist.

    The Senate Finance Committee has corrected this problem with its recent adoption of the Stabinow amendment (Senator Debbie Stabinow, D- MI) which allows stand alone dental to be offered and priced separately in the exchange and outside.

    The Delta Dental Plans and the National Association of Dental Plans, with support now by the American Dental Association, is doing its best to apply pressure on the House and get them to follow the Senate's lead on these provisions, but it's very hard to get Committee staff who draft these bills to care much about dental, or what happens to the dental industry in geneteral. They are committed to simplicity and do not appear to "get" why medical and dental are different, and why it's no easier or simpler to offer the two combined under one company.