Universities Cancel Classes in Israel
Amid the turmoil in the Middle East, a number of major American colleges and universities have cancelled fall semester undergraduate study programs in Israel.
Although a cease fire was recently announced, UMass Amherst had already cancelled all study for undergraduates in Israel for the fall semester, due to the fighting in the Gaza Strip, university officials announced.
The university said its International Risk Management Committee made the decision based on advice from the U.S. State Department, insurance companies, risk management consultants and other sources.
Insurance companies cover students for health, accidents, security and even evacuation, for some colleges.
New York University suspended its Tel Aviv program for the fall semester after being approached by some students and their families who expressed concern about the situation in the region.
“The safety of these 10 students was our foremost concern in our deliberations about whether or not to disrupt the academic program,” the university said. “We look forward to resuming classes at the Tel Aviv site in January.”
Other schools that have suspended programs in Israel or the West Bank include Trinity College in Hartford, the University of Iowa, the University of Michigan, Michigan State, Claremont McKenna College in California, and Penn State, according to the Associated Press.
Colleges told the AP that security was the top concern.
“The State Department recommends that U.S. citizens consider the deferral of non-essential travel to Israel and the West Bank,” according to the department’s latest travel advisory for the region.
“Israel is certainly on our list for civil unrest” at Middleburg, Va.-based Wallach & Co. Inc., providers of international travel insurance, said Belinda Smallwood, office manager.
“Basically, there are certain countries that go on the civil unrest list and underwriters can choose whether they want to add more war risk coverage,” she said.
John W. Cook, president of East Hartford, Conn.-based QuoteWright.com, said coverage for travel to Israel is still available, but the following exclusions are common to all travel insurance policies: declared or undeclared war, or any act of war; and any government regulations or prohibitions.
“So cancellations or interruptions caused either directly or indirectly by the military action will probably not be covered,” said Cook, whose firm’s website allows consumers to compare, review and buy travel insurance.
Thomas R. Petersen, vice president of Valencia, Calif.-based Petersen International Underwriters, said his firm has noticed that Israel has made an “incredibly strong push to say how safe it is to be in Israel.”
“When you get rockets lobbed near to the airport, it’s getting awfully close, but that doesn’t seem to penetrate a lot of people’s thinking,” said Petersen, whose firm is a Lloyd’s of London cover-holder that handles all forms of special risk insurance administration.
Petersen said his firm has not seen a decrease in sales of travel medical policies for Israel. “What we have seen is an increase in inquiries in war and terrorism coverage,” he said.
“I would say compared to normal it’s probably, on average, a 500 percent greater amount [of inquiries] compared to last year,” Petersen said. “Is that 50 more inquiries? Probably. I know it’s a significantly higher number of people asking about war and terrorism coverage than they ever have in the past.”
Indications are the same number of people in general still plan to travel and they don’t fear it, Petersen said. “They may be more cautious as opposed to scared,” he added.
Petersen noted that many of the requests his firm receives for travel medical policies are from fairly young people.
“A lot of them in theory have to be students, because a lot of them stay for six months or nine months or a year at a time,” he said. “I mean they’re not going just to see the Wailing Wall and then getting back here. They’ll be spending time there.”
Wallach & Co.’s Smallwood said the firm’s global health care plan for undergraduate students studying abroad lasts up to six months.
“You purchase it by the week and it’s $250,000 in coverage with a $100 deductible per illness or injury,” Smallwood said. “It covers accident and sickness coverage, which includes medical evacuation and repatriation.”
The standard rate would be $9 per week. In Israel, Wallach would have to know where a student was going to be located to determine a quote, Smallwood said.
Israeli educational programs are not the only victims of civil unrest. UMass Amherst also suspended programs in Syria, and St. Lawrence University in New York called off its program in Kenya, citing a State Department travel advisory.
Risk Management Is the Natural Owner of Compliance
With the adoption of Enterprise Risk Management (ERM), many organizations have already begun to include compliance risks as part of their organization’s risk management portfolio. However, even if the organization has not yet climbed aboard the ERM bandwagon, risk managers should be actively supporting, if not directing, their organization’s compliance efforts in several key areas, namely, interdepartmental risks.
After all, the compliance challenges in most organizations will not be those that land neatly in one department. Dining services managers will be on top of sanitation regulations; comptrollers will file their taxes.
No, the greatest compliance challenges are those that cross division and department lines.
Take a look at some of the compliance requirements that prove challenging to institutions of higher education.
• Title IX: Which prohibits discrimination on the basis of sex, covers not only equity in sports but also sexual assault and misconduct. Consequently, this impacts nearly every division of the institution.
• Americans with Disabilities Act (ADA): Its related laws and regulations impact academics, student life, facilities, IT, human resources, admissions, athletics and a multitude of other departments.
• Export Controls: A mishmash of laws that similarly effects any department involved with academics, research, technology, and travel.
• Records Retention Policy: Required under the tax form 990, covers every division and department and has additional privacy and security implications.
“…the compliance challenges in most organizations will not be those that land neatly in one department.”
Institutions traditionally find it difficult to manage compliance requirements such as these because there is no natural “owner” of the requirement. It is here that risk managers are ideally situated to help their institutions by gathering together individuals from the affected departments into a committee or task force.
Together, they can begin to create a shared management process for the institution. In the absence of hierarchical authority, committees and task forces can wield significant influence, especially if appointed by the president or board.
Furthermore, many compliance requirements are a natural fit within a risk management portfolio because they address insured risks. Compliance with anti-discrimination laws (like Title IX and ADA) is a perfect example, as acts of discrimination may be insured through educators’ or employers’ legal liability policies.
Other compliance matters may directly affect the essential identity of the institution. For instance, if an institution violates the regulations on political speech, it could lose its non-profit status and suffer reputational damages.
While it is impractical for a risk manager to be on top of every regulation that an institution is required to be in compliance with (they number in the hundreds) it is important that the risk manager be a leader in compliance matters that, when not addressed, can directly impact insurance and claims.
Offer to help organize a compliance effort. Make sure to (successfully) follow though.
You don’t have to be a subject expert to do this! Your results can showcase risk management services in the institution, reduce risk, and create a template for your next compliance project.
Beware of Medical Hyper-Inflation!
Historically, medical inflation rates nationwide have been fairly consistent. However, data is now showing that medical inflation is not a “one size fits all” phenomenon, with hyperinflation spikes occurring in some locations…but not others.
This geographical conundrum means hyperinflation can occur as narrowly as two hospitals having dramatically different charges on the same street in Anytown, USA. So, uncovering these anomalies is akin to finding the proverbial needle in a haystack.
“In recent years, workers’ compensation saw claim frequency decline, while severity rates went up. This basically means that increased job safety has offset increased medical costs,” explained Jason Beans, CEO of Rising Medical Solutions, a national medical cost management firm. “So, whenever a client’s average cost-per-claim went up, it was almost always caused by catastrophic, outlier-type claims.”
But beginning in 2013 and extending into 2014, Beans said, things changed. “I’ve never seen anything like it in my 20-plus years in this industry.”
“Our analytics made it very clear that small pockets around the country are experiencing what could only be described as medical cost hyperinflation. The big spikes in some clients’ claim costs were driven by a broader rise in medical costs, rather than catastrophic claims or severity issues.”
– Jason Beans, CEO, Rising Medical Solutions
Data dive uncovers surprising findings
On a national level, most experts describe medical costs increasing at a moderate annual rate. But, as often is the case, sometimes a macro perspective glosses over a very different situation at a more micro level.
“Our analytics made it very clear that small pockets around the country are experiencing what could only be described as medical cost hyperinflation,” explained Beans. “The big spikes in some clients’ claim costs were driven by a broader rise in medical costs, rather than catastrophic claims or severity issues.”
This conclusion is supported by several key data patterns:
- Geographic dependency: While many payers operate at the national level, only relatively small, geographically clustered claims showed steep cost increases.
- Median cost per claim: The median cost per claim, not just the average, increased greatly within these geographic clusters.
- Hospital associated care: Some clusters saw a large increase in the rates and/or the number of services provided by hospital systems, including their broad array of affiliate locations.
- Provider rates: Other clusters saw the same hospital/non-hospital based treatment ratios as prior years, but there was a material rate increase for all provider types across the board.
- Utilization increases: Some clusters also experienced a larger number of services being performed per claim.
One of the most severe examples of hyperinflation came from a large Florida metropolitan area which experienced a combined 47 percent workers’ compensation healthcare inflation rate. Not only was there a dramatic increase in the charge per hospital bill, but utilization was also way up and there was a shift to more services being performed in a costlier hospital system setting.
“The growth of costs in this Florida market stood in stark contrast to neighboring areas where most of our clients’ claim costs were coming down or at least had flat-lined,” Beans said.
An Arizona metropolitan area, on the other hand, experienced a different root cause for their hyperinflation. Regardless of provider type, rates have significantly increased over the past year. For example, one hospital system showed dramatic increases in both charge master rates and utilization. “Even with aggressive discounting, the projected customer impact in 2014 will be an increase of $773,850 from this provider alone,” said Beans.
ACA: Unintended consequences?
So what is going on? According to Beans, a potential driver of these cost spikes could be unintended consequences of the Affordable Care Act (ACA).
First, the ACA may be a contributing factor in recent provider consolidation. While healthcare industry consolidation is not new, the ACA can prompt increased merger and acquisition efforts as hospitals seek to improve financials and healthcare delivery by forming Accountable Care Organizations (ACO). ACOs, the theory goes, can take better advantage of value-based fee arrangements in existing and new markets.
“As hospital systems grow by acquisition, more patients are being brought under hospital pricing structures – which are significantly more expensive than similar services at smaller facilities such as independent ambulatory surgery centers and doctors’ offices,” Beans said.
Unfortunately, there is little evidence that post-consolidation healthcare systems have become more efficient, only more expensive. For example, a recent PwC study reported that hospital IT infrastructure consolidation alone is projected to add 2 percent to hospital costs in 2015.
Another potential ACA consequence is group health insurers may have less incentive to keep medical costs down. An ACA provision requires that 85% of premium in the large group market must be spent on medical care and provider incentive programs, leaving 15% of premium to be allocated towards administration, sales and subsequent profits. “Fifteen percent of $5000 in medical charges is a lot less than 15% of $10,000,” said Beans. “This really limits a group health carrier’s incentive to lower medical costs.”
How do increased group health rates relate to workers’ comp? In some markets, a group health carrier may use its group health rates for their work comp network so any rate increase impacts both business types.
In the end, medical inflation is inconsistent at best, with varying levels driven by differing factors in different locations – a true “needle in the haystack” challenge.
What to do?
Managing these emerging cost threats, whether you have the capabilities internally or utilize a partner, means having the tools to pinpoint hyperinflation and make adjustments. Beans said potential solutions for payers include:
- Using data analytics: Data availability is at an all-time high. Utilizing analytical tools to spot problem areas is critical for executing cost saving strategies quickly.
- Moving services out of hospital systems: Programs that direct care away from the hospital setting can substantially reduce costs. For example, Rising’s surgical care program utilizes ambulatory service centers to provide predictable, bundled case rates to payers.
- Negotiating with providers: Working directly with providers to negotiate bill reductions and prompt payment arrangements is effective in some markets.
- Underwriting with a micro-focus: For carriers, it is vital that underwriters identify where these pockets of hyperinflation are so they can adjust rates to keep pace with inflation.
“This trend needs to be closely watched,” Beans said. “In the meantime, we will continue to use data to help payers of medical services be smarter shoppers.”