For years, employers have been pushing their workers to pay more for health care, raising premiums and out-of-pocket medical expenses in an effort to save money for the company and force workers to seek only the most necessary care.
Now some employers are reversing course, convinced that their pennywise approach does not always reduce long-term costs. In the most radical of various moves, a number of employers are now giving away drugs to help workers manage chronic conditions like diabetes, high blood pressure, asthma and depression.
Major employers like Marriott International, Pitney Bowes, the carpet maker Mohawk Industries and Maine’s state government have introduced free drug programs to avoid paying for more expensive treatments down the road.
Companies now recognize that “if you get people’s obesity down, cholesterol down, asthma down, you save a lot of money,” said Uwe E. Reinhardt, a health economist at Princeton University.
Despite the Bush administration’s efforts to promote “consumer directed” health care, many companies are recognizing the limits to shifting too much of the cost of medical care to employees. Experience, Professor Reinhardt said, is contradicting the theory that “patients will be more prudent shoppers for health care if they ache financially when they ache physically.”
Another motive for the business world could be to stave off a greater government involvement in health insurance, now that most presidential candidates and other politicians are promoting health care reform.
Big drug makers like Pfizer and Merck, which could benefit politically and financially from the employer drug programs, are also supporting the effort.
Richard T. Clark, the chief executive of Merck, made the political connection in a recent trade journal article. “If we all don’t do a better job, the private employer-based market will continue to weaken and the country will move forward toward rationing of care and greater government control, with greater pressure for a single-payer model with price controls,” Mr. Clark wrote in the American Journal of Managed Care.
One clear motive is to help workers stay well, averting expensive emergency room care and hospital stays. As health coverage has grown more costly, many people have been skimping on care, and millions of Americans are going without health insurance altogether.
Employers are reacting to a disturbing trend. As most employer-sponsored health plans have raised co-payments sharply for drugs in recent years, employer drug spending has slowed. But total health care spending by employers has nonetheless continued to rise: 7.7 percent last year, or more than double the general inflation rate, according to the Kaiser Family Foundation. The free drug programs are being adopted in hopes of countering the rising costs, taking their place alongside other steps by some employers that have included opening or expanding health clinics in their factories and offices, and offering checkups and medicines at no cost or for a modest co-payment.
Given the millions of Americans who suffer from heart disease, depression, asthma or diabetes — about one in four working-age adults — the movement toward free drugs and preventive care has the potential to help many people, said Craig Dolezal, a health care specialist at Hewitt Associates, a consulting firm.
Co-payments of $10 to $20 a prescription have become typical, while the co-pay for some expensive drugs can be $50 or more for a month’s supply. The new employer programs are waiving those fees.
For people with serious health problems, free medicine is an incentive not only to stay with their prescribed regimens, but also to keep in touch with nurses and pharmacists who monitor changes in their weight, blood pressure and other vital signs.
At the Mohawk Industries carpet factory in Dublin, Ga., about 200 of the 750 employees signed up for free blood pressure and heart drugs last summer after the company held meetings to describe the benefits of lowering blood pressure and cholesterol.
Alan Christianson, Mohawk’s benefits administrator, said that the company recognized a few years ago that it could eventually face health costs so high that employees could not afford insurance. “We felt we had to do something about it,” he said.
Peggy Cauley, 36, who supervises a customer service unit at Mohawk’s factory, said she was 30 pounds overweight and had spent $40 a month on blood pressure and heart drugs before she started the program.
Now the drugs are free, and Charles Posey, an independent pharmacist stationed at the plant, monitors her blood pressure and gives advice on “how to maintain my weight,” Ms. Cauley said. She has lost 20 pounds, she said, but is “still 10 pounds over my goal.”
Eastman Chemical, which is based in Kingsport, Tenn., and has offered free mammograms for its workers and free vaccines for employees’ children, now also provides free drugs and supplies for diabetics under its health plan.
The company is trying “to drive value and to target where care is most needed,” said David H. Sensibaugh, the director of integrated health.
The state of Maine found that it was spending more than $20 million a year on treatment for about 2,000 diabetes patients in the state’s health plan, which covers 40,000 employees, retirees and dependents.
About half the diabetics had at least one additional serious problem like heart disease, said Frank Johnson, the Maine plan’s administrator.
Working with Anthem Blue Cross and Blue Shield, a unit of Wellpoint, the state has started offering free drugs and supplies to employees with diabetes who take part in a face-to-face interview with nurse educators and agree to a year of follow-up telephone sessions, Mr. Johnson said.
Benefits executives at dozens of large companies are weighing the initial costs and potential savings of free co-pay programs and other health-plan incentives at seminars, including one last week at the Midwest Business Group on Health in Chicago and another scheduled for next month <>There can be perceived drawbacks for employers, according to a recent academic article that was generally favorable toward the programs.
Companies with high rates of worker turnover may believe that they will not get their share of the eventual savings from a free drug program, while smaller employers may fear attracting too many workers with chronic illnesses, according to the article by Michael E. Chernew, a health care policy professor at Harvard, and Dr. Allison B. Rosen and Dr. A. Mark Fendrick, both of the University of Michigan.
Their report was published last month in the online edition of the journal Health Affairs.
Later this year, a Marriott executive is to make a presentation at the University of Michigan, where researchers are analyzing Marriott’s move to waive co-payments for generic drugs related to heart disease, diabetes and asthma.
“We can see in the preliminary numbers that employees taking part have improved their compliance,” said Jill Berger, the vice president for health and welfare at Marriott, which covers 160,000 hotel and resort workers and dependents.
Active Health Management, a health data technology unit of the Aetna insurance company, has been helping to identify Marriott workers who are eligible to volunteer for the heart, diabetes or asthma programs.
Protecting the privacy of employees is an “enormously important and sensitive issue” in these programs, said Dr. Lonnie Reisman, Active Health’s chief executive.
“We don’t share the health plan members’ data with physicians or anyone else, unless a member explicitly gives permission,” Dr. Reisman said. Only “if we see something that is a real health issue, we will call the doctor without getting permission,” he said.
Dr. Reisman said his company scans records of millions of drug purchases and refills and other medical claims in search of high-risk patients who are candidates for free drugs and other incentives to get their health priorities in order.
Perhaps the oldest free drug program was started 10 years ago with diabetes drugs for city workers in Ashville, N.C. Since then the city has added free drugs for asthma, blood pressure, cholesterol problems and depression.
Patients in the Asheville program agree to meet regularly with pharmacists who advise and encourage them to take their medicine and adopt healthy habits. The program has been emulated by more than 30 employers nationwide.
Frank Street, 63, a retired employee of the tax collectors office of Polk County in Georgia, said he had been getting six free drugs from the county for diabetes and blood pressure for about two years.
“At one point, my blood pressure was so out of whack that they started monitoring it on a daily basis,” Mr. Street said. The program’s records are managed by Thomson Medstat, a health care information firm.
Now his blood pressure is “down to target level,” and he reports once a month to his doctor and Liz Berndt, the program’s pharmacist. Without the county program, his drug co-payments would total $110 a month, Mr. Street said.
As employers grapple with rising health costs “and we become more aggressive about cost-shifting to patients,” said Dr. Reisman, the Active Health executive, “it will be important to have this kind of safety net.” <<
By Walter Updegrave and Kate Ashford, Money Magazine February 13 2007: 2:17 PM EST
(Money Magazine) -- When Jacqueline Epcar of Valley Glen, Calif. turned 19 last year, she no longer qualified for coverage on her parents' health plan. So her mother, Ellyn, signed her up for a new individual policy with Blue Shield of California.
The insurer cashed the Epcars' check, and their broker gave Ellyn a policy number and told her coverage would start July 1.
Shortly after, Jacqueline went to the doctor with a sore throat - she'd been getting them for months. The doctor in turn sent her to a specialist, who ordered a white-blood-cell scan. The scan indicated an auto-immune disease.
That's when Blue Shield decided that it hadn't really meant to cover Jacqueline after all.
The insurer sent a letter explaining she was not eligible for a policy because she had, among other conditions, inflammatory acne. But she didn't. So the Epcars refuted the information.
Blue Shield then sent a new rejection letter saying Jacqueline's policy hadn't been in effect when she was diagnosed, and it wouldn't cover someone with an auto-immune disease - even though it had already taken Ellyn's money and given Jacqueline a policy number.
The rejection left the Epcars with $8,000 in medical bills, an uninsured daughter (later diagnosed with lupus) and bitter feelings toward their insurer.
"They just didn't want to cover somebody who had a problem," says Ellyn. (Luckily, the family did find other coverage. Blue Shield declined to comment.)
Most of the time, when insurers don't pay, the reason is obvious.
Maybe you missed a premium payment or forgot to mention last year's quadruple-bypass surgery on your application. Or maybe your policy's fine print excludes the kind of damage you incurred.
But sometimes, as in the Epcars' case, an insurer's reason for not paying is...well, hard to fathom.
Are insurers more hard-nosed with claims than they used to be?
Since the industry is regulated by the states, there are no national data to draw on. But the scattered state-level evidence suggests that insurers may be taking a harder line.
In Michigan, for instance, complaints against insurers are up 16 percent over 2001, while in Connecticut, justified complaints against health insurers (those considered to have validity by regulators) have risen more than 60 percent since 2000.
Enforcement action is up too: In Texas last year the number of cases against insurers increased 21 percent compared with 1999.
Current headlines, meanwhile, leave a strong impression.
For starters, there's the ongoing Hurricane Katrina saga, in which companies like Nationwide, State Farm and USAA debate thousands of plaintiffs on such existential issues as whether the damage to the Gulf Coast was due to flooding, which typically isn't covered, or wind, which is.
In California, meanwhile, Blue Cross recently settled more than 60 cases in which policyholders claimed their coverage had been unfairly voided, and regulators slapped both Blue Cross and Kaiser Foundation Health Plan with six-figure fines for wrongful rescissions. (The carriers say they're working with state regulators to improve their practices.)
Against this contentious backdrop, it's ironic that insurers are thriving. Big public health carriers have been posting 20 percent-plus gains in earnings, and property/casualty companies (which cover, for example, autos and homes) are more profitable than ever.
Or maybe it's not so ironic.
A study this January by Robert Hunter, a former insurance commissioner of Texas, now the insurance director of the Consumer Federation of America, shows that property/casualty insurers are paying out less in claims relative to the premiums they collect than at any time in the past 20 years.
That's partly due to smart underwriting and higher premiums, which have jumped 100 percent or more in some coastal markets over the past few years. But lower claims payouts also play a role.
Hunter, along with a chorus of consumer advocates, attributes some of that to increasingly aggressive claims management across the industry. More bare knuckles in the claims department, more battles with consumers.
Next page: Hardball with homeowners [cut for brevity]
You're covered...then you're not
Waiting for an overdue reimbursement check is a hassle. Finding that your health insurance has been nullified after you've incurred serious medical costs can be an outright catastrophe.
Called "rescissions," such ex-post policy denials are rare - insurers say they affect only about 1 percent of individual policyholders (they don't occur in employer-sponsored group plans) - but the practice appears to be growing.
Last year, for example, California regulators launched investigations into the rescission practices of Blue Shield, Health Net, PacifiCare and other providers. Meanwhile, the Connecticut Department of Insurance is also investigating Assurant Health after 15 of 20 complaints to the state attorney general involved its use of retroactive denials of coverage. (Assurant asserts that it enacts rescissions only when policyholders don't provide truthful or complete information during enrollment.) Rescission is, in effect, the neutron bomb of health insurance. If you're hit by one, you're not only left without insurance to cover the illness at hand, but you're also liable for your previously paid claims.
In some states, insurers can't void your policy unless they can show you meant to deceive them; in others, including Michigan and Ohio, they can drop the bomb over any inaccuracy, even an innocent mistake.
"This is a very serious concern," says Cindy Ehnes, director of California's Department of Managed Health Care. "The consequences of failing to list something as simple as headaches can be profound."
Consider Barbara and Don Saxby of San Rafael, Calif., a self-employed couple who applied for an individual health insurance policy with Nationwide in January 2006.
When Barbara showed the application she'd submitted to Don, he pointed out a couple of gaps in his medical history. Barbara called Nationwide to correct the application, but was told not to worry, the insurer would catch omissions during underwriting.
Shortly after the policy went into effect, Don, 41, tore most of the ligaments in his left knee in a skiing accident. The ensuing surgery was unusually expensive, partly due to a condition in which Don's blood doesn't clot normally. (The blood condition was on record with his doctors, who didn't consider it a problem. Nor had it stopped Don from qualifying for insurance in the past.)
In December, Nationwide sent a letter rescinding Don's policy due to a "misrepresentation" on the application. The Saxbys now find themselves saddled with more than $400,000 in medical bills and are pursuing litigation against Nationwide. "This just isn't right," says Barbara. "They don't even bother to do due diligence." (Nationwide declined to comment on the case.)
For many applicants, the trouble starts when they sign a medical release giving insurers access to their medical records. Don't assume the insurer is going to examine those records before okaying coverage.
It may not follow through, says Paul Roller, a former insurance commissioner of Alaska who's now a plaintiffs lawyer in California. "The company takes the position, 'We have a clean application so there's no need to get records,' " he says. "The insurer, in effect, says, 'If I know about a condition and you get sick, I'll have to pay. So don't tell me.'"
The period of convenient ignorance ends, of course, as soon as you file a claim. Many insurers use software that singles out claims for review by diagnostic code. The review then determines if you may have had a pre-existing condition or left anything off the initial application.
While insurers need to protect themselves from people who misrepresent their health status to get coverage, the potential for abuse is obvious: An insurer looking to lower risk can use the review to find any excuse not to pay an expensive claim.
Says Connecticut Attorney General Richard Blumenthal: "There is powerful evidence that 'look back' provisions are used systematically to exclude people with valid claims simply because those claims are expensive."
So what should you do if your health policy is rescinded? File an appeal with your insurer right away. And if the company sends you a check refunding your premiums, don't cash it.
That can be taken as tacit agreement, says Bryan Liang, executive director of the Institute of Health Law Studies at California Western School of Law in San Diego.
If you lose the appeal, file a complaint with your state. If all else fails, consider hiring an attorney.
Meanwhile, shop for a new policy. If you live in a state like Massachusetts, where insurers are required to offer you coverage, you'll likely pay more, but at least you'll be insured.
In states like California, which allows insurers to refuse to sell a policy to anyone with a previous medical condition, you may be relegated to your state's high-risk insurance pool.
Obviously it's better to try to avoid rescission from the get-go. When filling out an application for a policy, err on the side of telling too much, noting any condition you've ever been seen or treated for.
And if you've been with a health plan for two years or more, be cautious about switching carriers. Rescissions are typically allowed only within the first two years of a policy.
Liang, for one, sees practices like rescission and lowballing as a sign that insurers - property and casualty companies as well as health carriers - sometimes forget the business they're in: buying risk.
"Risk means you win some, you lose some - you can't eliminate it," he says. "That's not what insurance is about."
The best insurers know that. But to assume yours is one of them may be taking on more risk than you should.
You can improve the odds that you'll collect the policy benefits you expected, if and when you need them, if you take these steps.
Preventive measures
Keep good records. Create an inventory of your possessions to make it easier to document any losses. You can download a home inventory form at the Policyholders of America Web site (Policyholdersofamerica.org) or create your own video inventory by walking through your home, recording each item and narrating pertinent details, such as the cost.
Keep records of remodeling jobs as well as building plans that attest to your home's size and type of construction. Store copies of these records in a repository outside your home (like a safe-deposit box) so they're not lost in a fire or other disaster.
Be frank: If you're applying for an individual health insurance policy, err on the side of providing more info. Spell out any condition for which you've seen a doctor or been treated. If you need more space, attach an explanation.
"Writing a letter about the knee problem that went away five years ago is appropriate," says Maureen Smith, director of consumer relations for Connecticut's Office of the Health Care Advocate.
If the application has only four or five broad questions, offers instant approval or asks for your lifetime medical history (instead of a specific period like 10 years), consider going with a different company.
Read the fine print: Renewing your homeowners policy or buying a new one? Make sure the policy doesn't include special deductibles for wind damage, onerous limits on replacement costs or other expensive restrictions on coverage, advises Robert Hunter, director of insurance for the Consumer Federation of America.
Switching employer health plans or buying an individual policy? Read the plan documents carefully, noting the policy's exclusions and limitations, as well as its appeals process (including deadlines). If the plan won't cover treatment you're likely to need, better to know that up front.
Be a boy (or girl) scout: Before you go in for an expensive health procedure, call your insurer to make sure that it's covered. Get preapprovals and referrals, as required.
Document your calls (jot down the name of the representative, date and time) and keep copies of referrals and other relevant paperwork.
Making your claim
Do your homework: Don't automatically accept an insurer's damage estimate; instead, document the claim yourself.
If, say, a storm has seriously damaged your home, get bids from three qualified local contractors and have them spell out exactly what repairs are needed and what that will cost.
If the insurer's estimate comes in appreciably lower than your own, the estimates will provide you with evidence to help make the case for a higher payout.
Keep your cool: Getting angry with an adjuster or other insurance rep rarely helps your case and could hurt it.
"It might make you feel better, but if you get angry, more than likely your file is going to the bottom of the pile," says Susan Dressler, owner of Health Claim Assistance, who spent 17 years working in the claims department of several insurers.
Instead, get the name and phone extension of anyone helping with your claim and make him your ally.
Don't take no for an answer: If you're turned down for a higher payout or your claim is denied altogether, appeal. Relatively few policyholders challenge coverage decisions, but those who do are often successful. Studies show that nearly half of appeals are decided in favor of the consumer.
Get help: Still can't get any satisfaction? Ask your state regulator and department of insurance for help. Bear in mind, though, that insurance commissioners in some states are decidedly more useful than in others.
Find other state health-care advocates at familiesusa.org (click on Consumer Assistance Program Locator). For problems with health coverage, a claims assistance professional can also fight on your behalf (find one at claims.org). Fees range from $30 to $160 an hour.
Weigh your last resorts: So you've exhausted your appeals to no avail. What to do? Sure, you could hire a lawyer and sue. But because of the cost involved, a lawsuit usually doesn't make sense unless you have a very large claim or the insurer's actions are so egregious you might get punitive damages. Lawsuits can also drag out for years.
A better bet for homeowner claims: Invoke the appraisal clause that's part of most policies, allowing you and the insurer to both hire appraisers who try to agree on a binding settlement. If they can't come to terms, an umpire chosen by the appraisers or a judge will arrive at a figure.
Where to go for help
Preparing to file a claim? Concerned you're not getting the full benefit you're owed? Check out these online tools and tips.
Families USA (familiesusa.org): Find state agencies that help with health insurance issues. http://familiesusa.org/
Georgetown University Health Policy Institute (healthinsuranceinfo.net): Go here for state-by-state guides that spell out your rights as a policyholder. http://healthinsuranceinfo.net/
National Association of Insurance Commissioners (naic.org): Get direct links to state insurance departments. http://naic.org/
Policyholders of America (policyholdersofamerica.org): Download home inventory forms and get help crafting effective complaint letters. http://policyholdersofamerica.org/
United Policyholders (unitedpolicyholders.org): Go to Claims Tips for advice about the best techniques for filing claims and resolving disputes quickly and fairly. http://unitedpolicyholders.org/
Here's a question to ask any presidential candidate from either political party: How do you plan to ration health care?
If the answer is "I won't," then he or she doesn't understand health care. Or, more likely, they understand health care and aren't in any mood to talk straight about it.
"Rationing" has a bad connotation, which is odd, because we ration just about everything. In fact, that's what capitalism does best.
Not everyone gets an S-Class Mercedes-Benz or courtside tickets to the NBA playoffs or roses on Valentine's Day. Who does? People who are willing to pay for them.
We call that a market, which is just rationing with a more attractive name. Everything worth having is scarce to some degree, so we use prices to figure out who gets what.
Health care is similar to German cars and basketball tickets -- not everyone gets everything they want. But health care is obviously different in a crucial respect: People who don't get what they want may become sick, stay sick, or even die. Unlike roses or Lakers tickets, health care is literally a life-and-death matter.
As a result, the most fundamental policy question related to health care is who gets what kind of care -- or, put another way, how we choose to ration resources. Forget all the other complications, like aging baby boomers, malpractice lawyers, greedy drug companies, shockingly fat Americans, insurance forms in triplicate, and so on.
Do those things help to explain why our system is expensive and getting more so? Yes. But for anyone looking to control costs (e.g., a presidential candidate) those factors pale in comparison to the fundamental health care design question: Who gets what care and why?
There's nothing inherently wrong with spending lots of money on our health. Many medical breakthroughs have huge price tags -- and correspondingly huge benefits.
Consider a recent example. The American Cancer Society is now recommending that women at high risk for breast cancer undergo a yearly MRI exam. The MRI can detect small tumors that a mammogram would miss. Of course, an MRI exam can cost 10 times as much as a mammogram. You get more, and you pay more for it.
But not always. The confounding problem with health care is that lots of unnecessary, ineffective, or marginally effective procedures are expensive, too. The wisdom lies in 1) being able to tell the difference, and 2) doing something about it.
Just Saying No
Every existing or prospective health care system rations care in some way. The Canadians and Europeans make people wait. Everyone has access to basic care, with two important caveats. First, the sickest get priority. You'll get your hip replacement or heart surgery, but you'll have to queue up for it. And when sicker people come along, they get to jump the queue.
And second, the government has wide discretion to deny or limit certain kinds of care not deemed cost-effective. Britain's National Health Service will deny payment for treatments that are known to be effective if the incremental benefits (measured in "quality adjusted life years") do not justify the costs.
That sounds heartless and terrible -- some bureaucrat telling Grandma she can't have a second open-heart surgery or the latest Alzheimer's drug. But remember, every time someone says "no," they're simultaneously saying "yes" to other patients. The resources freed up when Grandma gets denied can be used to provide asthma medicine for lots of children, or heart surgery for a younger, healthier patient.
Health Care Haves and Have-Nots
Our current American system rations care, too, though we do it primarily through access to health insurance. Those with good coverage get expansive health care -- the best, the brightest, the newest, the shiniest, the fastest. True, insurance companies sometimes say "no," but not often compared to other systems around the world. The general expectation is that health insurance ought to pay for anything that does anyone any good.
People without insurance get health care, too, but it's likely to be cobbled together from charity care, public hospitals, and whatever they can pay for out of pocket. The net effect is that millions of people don't get relatively cheap treatments that would have done them a lot of good.
And therein lies the fundamental inefficiency of the American system. We have no good mechanism for saying "no" to expensive technologies and treatments that provide marginal benefits. If you're a patient, that sounds terrific; your doctors will spare no expense. If you're a business trying to keep up with skyrocketing health care costs, or a family trying to pay for benefits, it's not. And, of course, as insurance costs go up, fewer people will have access to that kind of coverage.
At the same time, we don't do a very good job of saying "yes" to treatments for the uninsured that would profoundly improve their health.
The combination of those two factors goes a long way toward explaining why the U.S. spends a ton of money on health care (15 percent of the GDP, compared to 8 percent for Britain and Japan and 10.5 percent for France) and gets relatively mediocre outcomes[#msg-16968419]. Life expectancy is not only lower in the U.S. than in all three of those countries, it's below average for all industrialized countries.
In short, the rest of the industrialized world does a better job of rationing health care than we do.
Which brings me back to my original point. Every presidential candidate is going to talk about controlling health care costs. Most are going to talk about expanding coverage, too. Those goals are impossible unless we can design a system that says "yes" to the most cost-effective care -- even very expensive treatments, provided they have corresponding benefits -- and "no" to treatments with benefits that are too small to justify their costs. In other words, rationing. <<
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