AIM Business Insider

AIM Benefits Report: Health Insurance Changes Slow to Reach Employers

Breathtaking changes that hold the promise of controlling the cost of health insurance in Massachusetts have not yet reached most employers and their workers.

The 2012 AIM Benefits Report provides a compelling snapshot of the time lag that always falls between revolutionary changes and their implementation throughout an economy. Benjamin Disraeli had it right when he said that “great revolutions, whatever may be their causes, are not lightly commenced, and are not concluded with precipitation.”

Health care and health insurance costs remain the dominant benefits challenge for the 236 Massachusetts employers who participated in the benefits survey. A staggering 98 percent named providing health insurance to their workers as the primary concern of their companies.

But despite the development of cost-reducing health insurance plans that encourage patients to seek care in reasonably priced settings, and the development of payment structures that reward doctors for good outcomes rather than tests, most employers continued to use traditional cost shifting to address their health premium issues in 2011.

The report indicates that only 2 percent of employers offer a tiered network plan, which provides workers low co-pays for treatment in community settings, and 1 percent of companies offered a limited network plan that reduces costs by requiring patients to seek care in within a defined group of providers.

Thirty-eight percent of employers, meanwhile, increased co-pays for employees. Forty-one percent boosted deductibles and 37 percent increases co-payments for visits to the hospital emergency room.

Analysts expect those numbers to change drastically this year as employers get their first taste of innovative new insurance plans:

• Tiered network plans, with premiums 12 percent below those for an average HMO, now make up 15 percent of the Massachusetts market.
• More than 1.2 million Bay State residents are now covered by cost-reducing health plans that pay doctors for outcomes instead of procedures and reward consumers for seeking care in high-quality community facilities.
• Steward Health Care System received approval in December to market a limited-network health plan that the company says will cost 15-30 percent less than a typical health maintenance organization.
• Small employers in Massachusetts face average premium increases of 1.8 percent in 2012, down from 16.3 percent two years ago.

The changes in the health care market can’t come soon enough for frustrated employers who realize that cost-shifting ultimately erodes their ability to attract and retain key employees. Lower health premiums are just the prescription for increased economic growth and job creation.

Can This Man Control Your Health Care Costs?

Ralph de la Torre is operating on the Massachusetts health care market with the same precision he used to become one the nation’s foremost heart surgeons.

Employers are hoping the patient makes a speedy recovery.

The Chairman and CEO of Steward Health Care System shocked the medical establishment in November 2010 with a deal to have private equity giant Cerberus Capital purchase six struggling Caritas Christi hospitals. For-profit Steward has since grown into the largest integrated community care organization in New England with eight hospitals, 14,000 employees and four more acquisitions scheduled to close before year-end.

Friends and colleagues say the warp-speed acceleration of Steward into a major player in the health care market reflects what the Boston Globe called the “ample ability and breathtaking ambition” of de la Torre, a doctor-turned executive who grew up the son of a Cuban-American physician in Florida. More importantly, observers say, de la Torre’s vision of a network of low-cost, high-quality community hospitals has changed the dynamics of a health care market that remains one of the most expensive in the country.

De la Torre will speak at the AIM Executive Forum this Friday at 8 a.m. at the Westin hotel in Waltham.

The growth of Steward comes as hospitals, doctors, insurers, employers and policymakers seek to control health premiums by changing the way in which health care is delivered. As Massachusetts moves to a system of global payments and integrated accountable care organizations, the community hospitals that Steward is acquiring take on newfound importance.

Can de la Torre create a new national model of delivering health care? Analysts say the fact that he choreographed an $895 million deal involving a private equity firm, a network of former Catholic hospitals, labor unions, community activists and public officials tells you all you need to know about the determination of the former chief of cardiac surgery at Beth Israel Deaconess Medical Center.

Andrew Dreyfus, President and CEO of Blue Cross Blue Shield of Massachusetts calls de la Torre’s successful conclusion of the Cerberus acquisition “one of the most remarkable acts of public persuasion that we’ve seen in this community on a long time.”

In the past eight months, Steward has acquired Merrimack Valley Hospital in Haverhill and Nashoba Valley Medical Center in Ayer. The company has also signed purchase agreements for five additional hospitals – Morton Hospital and Medical Center in Taunton; Landmark Medical Center in Woonsocket, Rhode Island; Rehabilitation Hospital of Rhode Island in North Smithfield; Quincy Medical Center in Quincy; and Saints Medical Center in Lowell.

Steward facilities now total more than four million square feet and the company has committed to $270 million in construction during the next five years. Total investment in facility upgrades and renovations will hit $260 by the end of 2011.

The key question for employers is whether Steward and other providers can succeed in controlling cost by convincing patients to obtain all but the most complex medical care at community hospitals. It is the same issue identified by Attorney General Martha Coakley in a recent report that challenged employers to buy health insurance that used tiered or limited networks to direct employees to reasonably prices treatment.

De la Torre believes his plans will work.

“My goal is to fix health care,” he told The Boston Globe.

Give Cities and Towns the Tools to Save Millions on Health Coverage

Cash-strapped cities and towns in Massachusetts gain the opportunity to save millions annually, avert layoffs, and maintain services. No brainer, right?

Well not exactly.

Governor Patrick signed a law in 2007 allowing cities and towns to negotiate with their unions and retirees to join the state’s Group Insurance Commission (GIC), which provides health insurance to more than 300,000 public employees and their dependents at generally lower cost than most municipalities can offer.

But only 19 cities and towns, mainly located in Greater Boston, have taken advantage of the law. The lack of participation comes despite the fact that those 19 communities are together saving $40 million annually on health insurance costs.

AIM, the Massachusetts Taxpayers Foundation (MTF) and several regional chambers of commerce have sought to address the muted response to the GIC opportunity by backing legislation to give local officials the power to design their health insurance plans outside of collective bargaining, and to require all eligible local retirees to enroll in Medicare as their primary source of health insurance. The measure would allow cities and towns to save an estimated $100 million per year almost immediately and as much as $2 billion by 2020.

The Massachusetts Legislature unfortunately failed to act on the bill before adjourning from its formal session in July.

A recent study conducted by the Boston Foundation and the Metropolitan Area Planning Council found that savings among cities and towns that joined the GIC range from $4.5 million for Brookline to $426,000 for Millis. Those savings have helped the communities cope with a severe revenue squeeze caused by cuts in local aid and rising costs for health insurance and energy.

Municipal health insurance costs have increased at double-digit rates since 2000, more than five times the rate of inflation. Premiums will grow from just 6 percent of municipal budgets in 2001, to a projected 20 percent by 2020.  The failure to realize projected savings through tools such as plan design will inevitably result in layoffs and cuts in local services such as education.

How can you help?

• Find out whether your city or town has taken steps to purchase health insurance through the GIC. Go to www.mass.gov, click on to the Administration and Finance section and look for the municipality insurance information page.
• If you find that your city, town or school district has joined the GIC, thank them. If they have not joined the GIC to purchase health insurance, ask your local officials why not.
• Ask candidates for election or reelection to the Legislature where they stand on allowing cites or towns to go outside bargaining agreements to purchase health insurance from the GIC for public employees.  

Heavy Handed Sick Days Mandate Will Hold Back Hiring in Massachusetts

Editor's note - Organized labor will rally on Beacon Hill today in support of a bill that would mandate a "one-size-fits-all" policy on sick days for employers. Karen Orlandi, Director of Human Resources for AIM-member and medical-device maker AliMed Inc., writes in the post below that such an approach would place a dangerous damper on job creation. 

I find it odd that proponents of mandatory paid sick day legislation use the argument that it is good for business.

AliMed Inc. offers multiple benefits, including health care, long-term disability, and wellness programs to our employees. And yes, we do this because we have determined what is good for our business to ensure that we are competitive and continue to retain talented employees.

But our business, benefits and employees are unique and AliMed Inc. would never suggest to another business that it must adopt a similar strategy. Legislating such a “one size fits all” mandate would impose significant additional costs on employers, especially small businesses like ours, during a time when the Massachusetts unemployment is near 10 percent. It would cause further job losses, hold back new hiring and wage growth, create a new area of potential (and inevitable) abuse, and add yet again another reason not to do business in Massachusetts.

In a time of general agreement that small business must lead our economy out of recession, wouldn’t elected officials and unemployed citizens of the commonwealth prefer that employers use their limited dollars to create new jobs? Enacting this type of legislation is bad public policy, especially now because it sends the message that job creation is not the priority.

We strongly oppose Senate Bill 688 and House Bill 1815 or any other similar proposal that would mandate paid sick days, and urge legislators to focus on making Massachusetts more business friendly.

Reports say President to Make Becker Recess Appointment

President Barack Obama plans to use a recess appointment to place union lawyer Craig Becker on the National Labor Relations Board, Iowa Senator Tom Harkin told Congressional Quarterly yesterday.

"It's going to happen," Harkin told CQ. The Iowa Democrat is chairman of the Senate Health, Education, Labor and Pensions Committee.

Congress begins a two-week recess on Friday. Senate Republicans blocked a vote on Becker's nomination last month in one of the first votes taken by newly elected Massachusetts Senator Scott Brown.

AIM and other business groups have opposed the nomination because of concerns that Becker, associate general counsel of the Service Employees International Union, might seek to impose administratively the most anti-employer sections of the stalled Employee Free Choice Act. EFCA would deprive workers of the right to a secret ballot in union elections.

Economist Anne Layne Ferrar has estimated that EFCA would cost 600,000 American jobs per year.

"The appointment will unquestionably change the balance of the NLRB away from employers," said AIM's Michael Rudman (mrudman@aimnet.org), who has spent 30 years working in the area of labor relations and union negotiations.

"The message I stress when teaching labor relations seminars or working with AIM member employers is that good management is the best defense against unionization. The new landscape in Washington DC underscores that approach." 

The five-member NLRB has operated with only two members since January 2008.

Employers Walk Benefits Tightrope During Economic Downturn

Massachusetts employers spent 2009 walking a tightrope between the need to control benefit costs amid a recession and the need to maintain a competitive benefit structure to retain key people. Get ready for a similar high-wire act in 2010.

AIM's newly published 2010 Benefits Survey Report finds that the global economic downturn dominated benefits practice during 2009. Ten percent unemployment, declining sales, and the increased cost of doing business pushed companies to their limits.  Employers responded by freezing salaries, instituting furloughs to reduce labor costs and looking hard at employee benefit programs to find ways to carve out cost. 

There is little dispute that the cost of employee benefits cuts into the bottom line.  The good news is that despite the poor economy, employers recognize the importance of competitive benefits as an integral part of overall employee compensation.

Experts say that while the economy is healthier than it was a year ago, it still faces an uncertain journey toward recovery during 2010. The economy has resumed growing, but a turnaround in the employment market remains months away and the jobless rate is expected to remain near double digits.

"We've been stabilized, and moved from intensive care to the recovery floor of the hospital, but we're still in the hospital," says Raymond Torto, Global Chief Economist for CB Richard Ellis Group.

The sluggish recovery will keep the pressure on employers to maintain employee benefits in the face of strained earnings, flat investment results and the rising cost of health insurance. Ninety-five percent of companies cite controlling health insurance costs as their benefit priority for 2010, and many expect to continue shifting premium and deductible costs onto employees as national health reform lurches forward in Washington, D.C.

At the same time, employers know that too many reductions in benefits may leave them vulnerable when the recovery accelerates late in the year. Welcome to the tightrope.