Category Archives: Affordability

The old and the beautiful: How age and gender affect costs and premiums in commercial healthcare

We generally consider living a long life an important goal, and it certainly does beat the alternative. But one side effect of getting older is that, as we age, we typically acquire additional acute and chronic medical conditions, and the prevalence of many common chronic medical conditions increases significantly. Age/gender rating is an area in which actuarial considerations are often in direct tension with social or public policy considerations: there is a natural tension between the policy goals of making coverage more affordable for older people (with higher average costs) and the goal of encouraging younger people (with lower average costs) to purchase health insurance coverage.

In an article first published in the magazine The Actuary, Milliman consultants Doug Norris, Hans Leida, Erica Rode, and Travis (T.J.) Gray explore how age and gender affect costs and premiums in commercial healthcare.

Preexisting conditions and the effects on health insurance

Solving the preexisting conditions issue is a significant hurdle in healthcare reform. Making health insurance available to individuals with preexisting conditions—while also ensuring affordability in a system in which health insurance is optional—has proven to be very challenging so far.

In this article, Milliman’s Tom Snook discusses why the coverage of preexisting conditions is a key issue in health insurance, particularly with respect to affordability and sustainability, and outlines varying approaches to addressing it.

Alternative payment models advancing telehealth use

Alternative payment models that incentivize value and improve population health management are a catalyst increasing telehealth’s acceptance. Employers also realize the potential cost-saving advantages of offering telehealth benefits under alternative payment models.

In her article “Telehealth under alternative payment models,” Milliman’s Susan Philip highlights some alternative payment models adopting telehealth services to improve the quality and delivery of care. In addition, she discusses how an assessment of these solutions can help organizations gauge their prospective returns on investment (ROI).

Here is an excerpt:

Cost savings and efficiency gains under alternative payment models will be driven by delivery system transformation and successful population health management initiatives. Telehealth has the potential to boost the impact of population health management initiatives while improving access and convenience of healthcare delivery.

Telehealth’s potential is not lost on investors and employers. In 2014, companies focused on telehealth technologies received about $285 million in venture capital funding, a substantial increase from less than $100 million in 2013.6 A recent employer survey indicated that about a third of employers expect to offer or are considering offering telemedicine consultations to employees as a low-cost alternative to emergency room or physician office visits for nonemergency health issues.7 The same survey found that telemedicine has the potential to deliver close to $6 billion in savings to U.S. companies.

Such high expectations must be calibrated. To conduct appropriate ROI evaluations, telehealth solutions and programs should be designed to consider the purpose of the solution. In general, we think of telehealth solutions for one of three primary purposes: improve access to specialty care, support care management, or provider nonemergency acute care services….

By design, telehealth programs intended to provide convenient access to a limited set of nonemergency, acute care services can be expected to increase the use of those services. Vendors such as Teledoc, American Well, or Doctors on Demand typically offer 24/7 video visits for common symptoms that may require consultation with an advance care practitioner or a physician. Examples include UTIs, skin issues and rashes, diarrhea and vomiting, and cold and flu symptoms such as sinusitis, or bronchitis. These services are not designed to substitute for an ongoing relationship with patients’ primary care providers but rather to provide an alternative to urgent care or ER visits for nonemergency conditions. Robust evaluations of the potential return on investment should consider whether services merely drive up total use and cost of healthcare for a given population, or whether the telehealth services successfully replace other, more costly services such as emergency care or urgent care visits.

Health insurers, purchasers, and investors will look to properly designed evaluations to assess return on investment and metrics related to utilization, costs, access, and quality of care.

For perspective on how telehealth technologies are being used within microinsurance schemes in sub-Saharan Africa and rural health clinics in California, read the article “m-Health: Remote access.”

Telehealth enhancing health microinsurance programs

In her article “m-Health: Remote access,” Milliman consultant Lisa Morgan discusses how mobile technologies, specifically telehealth services, are being used around the globe, from their incorporation into health microinsurance schemes in sub-Saharan Africa to rural health clinics in California, increasing provider reach.

Here is an excerpt:

There are many examples of telehealth in HMI [health microinsurance] schemes (typically telephone contact with a nurse or doctor).

‘Dial-a-doctor’ programmes are already reaching millions of members of large HMI schemes, as shown in Tables 1 and 2 (below). Unsurprisingly, tech-savvy youngsters under 40 have proved to be the earliest adopters.

…m-Health not only increases efficiency but has huge potential to change health-seeking behaviour. This in turn could translate to significant savings for entire healthcare systems. With recent experience in Africa, Jonathan Govender of Bupa sees shifting customers’ behaviour towards trusting mobile interactions as a key challenge. In the UK, Vitality has just launched its new app, ‘Vitality GP’. Time will tell whether we are ready for video chats with our doctors in the UK rather than face-to-face visits. Available to all members, the Vitality app provides direct access to a private GP from home or anywhere, video consultations within 48 hours, calls to doctors 24/7, direct referrals to consultants and delivery of written prescriptions.

…m-Health is increasing provider reach, effectiveness and productivity as much as it enables consumers to move to the centre of the healthcare universe and to receive care more naturally in daily life, whether in emerging or developed markets.

As this relatively young technology matures, generates more insightful data, and comes to be better understood, it may help propel provider and insurance transactions beyond the zero-sum logic that has historically limited options for patients.

Employer-sponsored health insurance faces affordability challenge

How will the Patient Protection and Affordable Care Act (PPACA) affect employer-sponsored health insurance? Employers have to consider whether they want to preserve their existing coverage, self-insure, or pay fines for suspending coverage. That decision may hinge on an employer’s ability to maintain affordable costs while offering minimum coverage.

Paul Houchens recently discussed affordability and PPACA’s minimum benefits compliance with Healthcare Payer News. Here is an excerpt from the article:

Across industries, the main challenge will be having minimum coverage and keeping it as affordable as possible…

Wellness benefits across corporate and small firms vary from tobacco cessation programs to on-site fitness centers, free produce and commuting perks. For ACA minimum benefits compliance, though, it’s still not clear how exactly the affordability test will be measured against wellness incentives, said Paul Houchens, an Indianapolis-based consulting actuary with Milliman.

“Let’s say you have a plan that charges $2,000 for single coverage without wellness incentives, but $1,000 if you’re a non-smoker. Is that affordability going to be measured based on the $2,000 or that $1,000? Particularly for employers with large wellness incentives in their plans, it’s difficult to do a lot of planning without having that information.”

More broadly than wellness, Houchens sees employers probing the value of their current sponsored insurance and calculating the costs and benefits of different options, as federal agencies finalize rules for the individual and employer mandate, premium assistance and eligibility.

If all of an employer’s workers are above 400 percent of the federal poverty level (FPL), Houchens said, “None of them are going to qualify for premium subsidies and probably in a lot of cases are going to be paying a lot more for health insurance under exchanges than they would under (their) plan.” Or “if you have an employer with dominantly low-income employees, maybe some would actually be better off in the exchange versus your employer plan.”

While the level and relative affordability of coverage will probably vary by industry and income, Houchens and colleagues think that the cost of dropping coverage is likely to outweigh the savings.

“Even for some of the low-income employers, I think a key point to remember is that your health insurance is a tax-deductible expense, whereas the penalties are not,” Houchens said. “That’s a huge difference for the for-profit companies. And also, you’re being penalized on every full-time employee. You’re not just being penalized on the people that would participate on your plans.”

A company with 60 percent health plan participation is “really only paying for health insurance for 60 percent of employees,” he said. “But with the exception of the 30 employee exemption, you would be paying a penalty on 100 percent of the full-time employees; that’s non-tax deductible. We’ve run the calculations for a number of employers. The math of terminating coverage and trying to make them whole, it simply doesn’t add out. So employers are thinking prudently. They’re probably going to continue to offer coverage in 2014.”

Download Milliman’s Healthcare Reform Strategic Impact Study which helps answer important reform questions employers are dealing with.

Also, for more of Paul’s insights on healthcare reform, follow him on Twitter @PaulHouchens.

Health microinsurance as a component of aid in Pakistan

The Atlantic reported last month about an unconventional aid organization in Pakistan that appears to be overcoming some of the barriers to traditional aid programs:

So while USAID is very good at quickly mobilizing assistance to disaster-afflicted communities, it carries a lot of political baggage — so much so in places like Pakistan that the U.S might be better off in the long run by downsizing USAID’s direct activities there and working through alternative programs.

One good model might be the Rural Support Programmes Network. A sprawling collection of local NGOs, the RSPN was founded by the Agha Khan Network in 1982, and has since become its own, separate program. While the stats about its reach are impressive — reaching millions of the poorest homes across a vast swath of Pakistan — what’s especially fascinating about RSPN are its methods.

Put simply, RSPN has a different focus than normal aid programs. They emphasize the development of institutions first, and only after that institution is established do they worry about its output or performance. The NGO also heavily invests in the smallest scale of the community, from conceptualization to execution, hiring mostly locals to administer projects. Lastly, they have extraordinarily long project timelines — sometimes as long as 15 years from start to finish.

RSPN’s activities might be of interest to readers of this blog because they run a significant health microinsurance program:

But the most interesting project RSPN has done in rural Pakistan is a collaborative micro-healthcare insurance system. For very little money — $3.50 a year in some cases — poor people can get access to basic medical care (especially maternity care) and assistance if they face hospitalization.

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