What are the Forecast & Desires for Health Employee Benefits
In the 110th Congress?
Presented at the Carnegie Leadership Seminar 11/10/06
By Frederick D. Hunt, Jr. – President
Society of Professional Benefit Administrators (SPBA)
You're going to be hearing a very different perspective from me, so let me explain the background. SPBA is the national association of Third Party Administration (TPA) firms which provide comprehensive ongoing benefit administration services for employee benefit plans & employer sponsors. It is estimated that 52-55% of non-federal US workers with health employee benefits are in plans using some degree of TPA. SPBA has a unique perspective, because its members have experience in every size and format of employment, including large & small, single employer, collective-bargained multi-employer, state & local government units as employers, and religious entities as employers. This large & broad perspective, and a reputation for candor means that many government officials brainstorm with SPBA about what would work or not work in the "real world". SPBA is non-partisan and non-political.
Our focus is on the nitty-gritty, where the rubber meets the road. So, for us, regulatory agencies are where the action is, especially as Congress has gotten more vague and sloppy in its wording. So, details of how legislation will impact is decided by regulators, not by legislators.
In contrast, for most organizations, legislation efforts ebb when the President signs a bill. However, that's when we at SPBA shift into high gear. It is also why most organizations have one or a only few open legislative issues, and we have almost 300 open projects, since some laws take decades to be fully worked out.
The other point I would make is that because we keep such a wide-angle focus, we've noticed a problem with Congress. It is like when you are in your back yard, and the mosquitoes are biting. You decide to solve the problem by going into the house. However, when you open the door to go for the solution of going inside, a bunch of other bugs enter at the same time, and now you have new problems.
So, that's a long folksy introduction to say that if you were to poll our SPBA members (and most of their well-informed clients), the over-whelming answer to what do you hope for in the new Congress would be: "Nothing". We have found that even well-intentioned legislation has a way of not working out as expected and having unintended consequences. We're still mopping up the mess made by a couple of hundred previous legislative actions.
To be fair, sometimes laws seen as poison to employee benefits and health coverage turn out to be great. For example, I started my career in these legislative issues when ERISA was still in formation, so I remember the discussions among the Congressional players as well as among those of us who would be regulated. I have to tell you that 95% of employers and benefit plan officials felt that ERISA was the absolute death knell of private employee benefits. "Who'd be fool enough to start or even continue a plan if saddled with all this onerous reporting and restrictions. So, ERISA, at birth was dubbed "Every Ridiculous Idea Since Adam". Of course, today we say ERISA in reverent tones.
Let me shift to my crystal ball prediction about health legislation in this new Congress.
First, I would warn you not to jump to conclusions & assumptions, such as that single-payer insurance is inevitable if a certain party or certain individuals get power. One of the earliest lessons I learned is that, unlike most issues in Congress, employee benefits have no natural enemies; no party or wing is out to kill employee benefits. However, employee benefits have no natural reliable friends. Some of the worst things imposed on employee benefits have been done by Administrations & Congresses most of us would consider friendly. It is important to remember this fact. No one in Congress is your permanent enemy...or friend.
Here's a lesson on "inevitable" legislation. When ERISA was being created in the early 1970's one of the reasons that health got only a passing role in the law is that the conventional wisdom at that time, and continuing well into the 1980's, was that Senator Kennedy's National Health Insurance (NHI) was absolutely positively going to pass soon and become the mode of health in this country. For 10 years, I kept my resume at the ready, because it was a known fact that NHI was going to happen, and I was going to be unemployed.
It's a quarter century since the "certainty" of NHI legislation fizzled, and I think its chances of passage decline each year now....though I recognize that big legislation usually becomes law because of some tangential event....such as ERISA grew out of the bankruptcy of Studebaker Corporation. So, some kind of pandemic or major economic shift could catapult Congress into a knee-jerk emotional rush to pass "something" to be able to brag about in the next election. However, NHI had far better chances & reasons for passage in the past 25 years than today.
My forecast does not mean that there will not be a steady flow of pontificating, posturing, and proposals about "solving" the health "crisis". It will be constant and emotional. However, unless there is some tangential emotional event that either triggers a flurry of activity in the health arena or drags along some kind of health reform bill on its coat-tails (such as some kind of pandemic or terror/natural event or swept up into legislation for federal regulation of insurance or federal reinsurance, or CHIPS, stem cells or Part D discounts ), I think the next few years will be a replay of 1975-85, when everyone predicted radical health reform, but it never had true impetus. Also, let's face it, Democrats don't want to let George Bush have a Rose Garden signing ceremony getting credit for "solving" the health "crisis". No, all actions are going to be guided by the Presidential campaign for 2008.
Another reason that I don't think single-payer or some revolutionary scheme is on the horizon is that after a third of a century as an up-close observer of the desires, realities, and economic factors on this battlefield, I can say that there is no magic solution. There is simply no way to provide everyone with as much health services as they think they deserve. It is simply a no-win situation. I believe that thinking people (as differentiated from ignorant or political opportunist people) in government know this. The current US single-payer systems are facing disaster; Medicare, Medicaid, Veterans. Also, about a dozen countries with single-payer systems have sent delegations to talk to us at SPBA to say their systems are failing, and ask how they can make their systems more like our private employee benefit system. I know that these delegations have also met with Congressional & Administration officials. These are countries like Japan, France, Australia, Mexico, England, Canada, etc. So, between the problems US government leaders face every day with Medicare, Medicaid, VA, and Social Security, and hearing the dilemmas from countries who have universal coverage systems, they'd be idiots to actually impose such a system in this country.
Besides, who would Uncle Sam have to cost-shift his responsibilities onto and take credit for imposing mandated benefits, if the private employee benefit system weren't around?!? We've all been hit repeatedly by that kind of cost-shifting.
However, let me warn you of a type of health reform that I think does have a chance to slip through into law. It is actually another form of cost-shifting. It is a movement that has been rampant for about 15 years, but below the radar.
I learned the lesson rather bluntly in the Summer of 1991, when the campaign of then-Governor Bill Clinton called and said that they'd heard we had some ideas to improve the health benefits system, and they'd like to hear them. SPBA is totally non partisan and non-political, so we'll talk to anyone.
We sat down, and I started rattling off all kinds of practical things that could be done to have the system work more smoothly and cost-efficiently. The lady whom I believe was then Clinton's chief of staff gave me the sports "T" hand time-out signal, and said, "Fred, you don't understand. This is the governor of a state being eaten alive by Medicaid costs, and he is the head of all the other Governors whose budgets are being destroyed by Medicaid. THAT's the issue." At the time, there was not much I could suggest on Medicaid.
However, if you look at the subsequent Hillary Clinton proposal, the true purpose and effect of it was to ease Medicaid for states. The proposed state pools were a way to create a new vehicle into which states could dump their Medicaid people and blend that high risk with a group of the general public. Thus, it was a way to cost-shift, and also allow some budget manipulations to help state budgets look better without the glaring Medicaid drag. That's why the debate ended up being whether all employers below 500 or 100 would be forced into such plans. The issue was how many warm bodies these state pools would need to spread this blended risk.
I urge you to remember this story, because I have noticed that the root of many of the health reform proposals ever since has been to cost-shift or ease the Medicaid load. This is not a party issue....states with budgets getting clobbered have both Democrat and Republican Governors and Congressmen, and Uncle Sam, of course, makes matching payments of Medicaid expenditures, so it is save-save as far as the government is concerned. Keep your antenna up to spot ideas that are actually driven by this unspoken Medicaid purpose.
Where will the meaningful healthplan action be? I think states will take initiatives, as we have seen Massachusetts and some other states already do. Some state leaders are desperate because of the Medicaid quagmire, and some are seeking to get into the media spotlight as the next generation of political leaders. I think Congress will be quietly delighted. If states take the lead, it looks like "progress", and every state program becomes a trial balloon with someone else taking the blame for any flops. Also, major laws, such as ERISA, have often emerged from a model set by a state.
State initiatives will cause some problems. Most of us think that ERISA preemption insulates us from state laws. However, ERISA only preempts state INSURANCE laws, and DOL and the courts seem willing to cut states slack. Or, a state can pass something as an employment requirement or requirement of individuals. So, don't count on ERISA preemption. Meanwhile, I remember a statistic several years ago that 80% of US employers have some kind of multi-state personnel situation. Not only are most major cities on or near a state border with commuters who cross state lines, but there are branch offices, satellite employees, retirees, etc. So, your plan could suddenly find itself jumping through hoops to satisfy some distant state for some personnel, and jumping through other hoops for other states for other employees....while still trying not to get in trouble with IRS non-discrimination rules.
The biggest challenges & obstacles in health costs are not with us the payers. It is with the broad medical community. Health is sold as if it were candy or used cars. New drugs and new names for previously-vague ailments are exploding onto the scene, so health is like a carnival arcade.
Doctors & hospitals feel victimized by Medicare shortchanging what they feel they should be paid. So, they have become extremely talented at techniques to maximize their income at the expense of every other kind of patient. However, the medical community seems immune to the normal oversight and criticism any other business would get with such wild pricing practices. So, they feel no pressure to change, and seem to get more entrenched in their self-righteousness.
Meanwhile they seem loathe to spend money on things like bringing uniformity, safety and savings to patient care. Medical payers were forced by Congress to spend an estimated total of about $1 billion dollars to get up to speed on EDI. It was only voluntary for the medical community, so virtually none of them did it. SPBA has been involved with HHS early-on in their efforts to modernize the health provider & payment process. The medical folks will gladly tell officials how they support the idea and cause.....but will not proceed without "incentives". So, the medical processing side will remain archaic until it is paid for them (a.k.a. "incentives"). Gee...someone should introduce a bill in Congress to give payers retroactive "incentives" for the $1 billion we were forced to pay for EDI. J
Consumer-Directed Health Plans (CDHP) & HSAs: Another reason I don't think massive health reform or single-payer will pass into law is that we finally are building a body of individuals who have a personal vested interest and thus growing awareness of what the medical community provides and how it charges. We are still only at the start of a long cultural education & change. It will take a while for individual patients to become familiar with comparative information in price transparency, and it will take a while for patients to work up the nerve to be tough consumers with doctors and medical facilities. I predict individuals will be more effective in protecting their health costs than governments and we in the benefits payer world have been. That will also make the whole system more efficient.
Politically, as more and more Americans have health coverage geared to individuals (though the majority of CDHP coverage is now in an employer plan format), it will be harder and harder for Uncle Sam or states to take it away. There is historical precedent. Many years ago, IRS decided that 401(k) was being used far more than they had intended, so they wanted to close what they considered a "loophole". However, when they went to Congress, and Congress floated the idea, there were too many voters who had a 401(k), and didn't want to lose it. So, the more HSAs are sold the more voters there will be to scream if governments try to take them away via single-payer or impose harmful "reforms".
Is health really a top issue of interest to voters? A recent newspaper survey asked what is the single most important issue for Congress to address this year. Among all voters, health was ranked fifth, with 10%. Among GOP voters, it ranked fourth, with 9%. Among Democratic voters, it ranked second with 14%. The other issues ranked high included, Tourism/Homeland Security, Iraq, Immigration, Education, and Economy/Jobs. So, we are not nearly as much on the political mind as we think. Also, even these numbers are misleading, because words like "health" and "health coverage" are considered to mean about a dozen different things to different groups of people. So, I question whether Americans are clamoring for revolution in the health benefits system.
In summary:
>>I don't think we will see major health reform or single-payor pass. There will be constant rhetoric and posturing, but not final passage.
>>I do think that cost-shifting opportunities will continue to be tried, especially ways that would have the net effect of easing the Medicaid load on states and Uncle Sam.
>>I think States will be encouraged to try their own health reform programs. Often these will have the secret agenda of cost-shifting Medicaid, but states are a convenient test tube for Uncle Sam to see what works and doesn't. ERISA had its roots in a New York law, for example.
>>I think that as more and more voters become vested players in the health arena via HSAs and other forms of Consumer Directed Health Plans, they will realize the hanky-panky that has gone on with mandates, cost-shifting, and pricing, as well as the impending collapse of government-run programs such as Medicare, Medicaid, and VA. They will not want government to stop the health nest-egg they are building. Meanwhile, HSAs & CDHP are very compatible in employer-sponsored benefit programs.
>>It will take at least a decade for the medical community to evolve into efficient business partners.
So, I guess my view could be described as cynical but optimistic for employee health benefits, and I'm not shaking in my boots for fear of the next Congress or the next Presidential administration.