Risk Insider: Jason Beans

Medicare Paves the Way

By: | April 12, 2016 • 2 min read
Jason Beans is the Founder and Chief Executive Officer of Rising Medical Solutions, a medical cost management firm. He has over 20 years of industry experience. He can be reached at [email protected]

While it’s uncommon to think of Medicare blazing a trail anywhere, it is certainly at the forefront of value-driven health care. As of January 1, 2016 the Centers for Medicare & Medicaid Services (CMS) deployed 10 alternative payment models that increasingly tie healthcare payments to value.

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With the ACA as a catalyst for change, Medicare is making assertive advances to replace the fee-for-service model we all know and love. Recent/upcoming activities include:

  • New Bundled Payment Plan for Joint Replacements – On April 1st, CMS launched its bundled payment initiative that’s designed to eliminate the significant geographic variance in reimbursements for inpatient total joint procedures.
  • First Set of Core Measures Used as Basis for Quality Payments – In February, CMS released seven sets of clinical quality measures to be used for value-based care.
  • Merit-Based Incentive Payment System (MIPS) – In January, CMS met its 2016 goal of shifting 30 percent of fee-for-service payments to value-based reimbursements; in 2018, they’re committing to 50 percent.
  • Physician Quality Reporting System (PQRS) Initiative – In 2017 physicians will receive negative payment adjustments for not satisfactorily reporting quality metrics to CMS.

One outcome of Medicare’s advancements that particularly caught my eye was reported by the Agency for Healthcare Research and Quality (AHRQ) in November 2015.

Their research indicates that hospital-acquired conditions (HAC’s) decreased 17 percent between 2010 and 2014, from 145 to 121 per 1,000 discharges, while readmission rates dropped 8 percent.

This resulted in an estimated 87,000 lives saved, and a cost reduction of $19.8 billion. These dramatic results occurred during a period of concerted effort by hospitals to reduce adverse events spurred by Medicare’s move toward value-based payment models.

Currently, the best fit for workers’ comp is Medicare’s Bundled Payment models, which set a single rate for services during an episode of care. This concept is certainly not unfamiliar to workers’ comp.

While these numbers certainly illustrate the business aspect of health care, more than that, they illuminate the striking financial and quality impact that value-based models can have on healthcare delivery.

Most compelling is that the 2010-2014 programs that drove these drastic improvements were largely Medicare’s pilot forays into value-based care.

Now that Medicare is fully implementing these programs, imagine the impact broader application could have in areas like workers’ comp.

At their foundation, value-driven models reward high quality and cost effective patient care. While Medicare has many models, there are four basic forms, three of which—Affordable Care Organizations (ACOs), Merit-Based Incentive Payment Systems (MIPS), and Capitated Rates—pose major obstacles for most workers’ comp payers today. All require significant patient volume to mitigate the providers’ risk and administrative burden, historical data and benchmarking efforts, and direction of care capabilities.

Currently, the best fit for workers’ comp is Medicare’s Bundled Payment models, which set a single rate for services during an episode of care. This concept is certainly not unfamiliar to workers’ comp.

The simplest (and oldest) model is DRGs, where hospitals are paid a flat rate for a diagnosis/procedure, regardless of treatment. We’ve also long seen case rates for physical therapy.

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Surgical episodes provide an ideal opportunity to employ bundled payments for all treatment associated with a given procedure. Other creative iterations of value-based payments could be used as well, such as the Ohio BWC’s program for knee injuries.

While there is no fast-track to value-based care in workers’ compensation, there are certainly steps we can and should take today. With Medicare paving the way through proven models and successful outcomes, it’s time we bring what’s working elsewhere into our world.

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Vermont Report 2016

The Future Is Now

Mid-size employers transitioning from fully insured health care plans are intrigued by stop-loss captives.
By: | April 4, 2016 • 6 min read
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The relationship between captive insurance and health care is decades old. And it is very robust in the captive domicile of Vermont, which added seven health care captives in 2015 and now houses 96 health care captives overall.

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Now the domicile is poised to take advantage of its regulatory expertise to house medical stop-loss captives, for which some insurance professionals see a bright future.

One of them is Mark Tabler, executive director of Genesis Re, a segregated cell medical stop-loss captive, which redomesticated from Arizona to Vermont in 2015.
(Tabler also launched a separate medical professional liability risk retention group, Innovative Physician Solutions, of which he is COO.)

Tabler, the former president of the Arizona Captive Insurance Association, said he has found his calling.

“Once I got into the captive industry through this organization, it was just exciting,” he said. “I wouldn’t want to be in anything else.”

Stop-loss captives are, in essence, a type of reinsurance that kicks in to cover employee health care costs above a certain limit. And they have a number of advantages, according to Tabler.

Steve Gransbury, president, Accident & Health, QBE North America

Steve Gransbury, president, Accident & Health, QBE North America

That’s especially true of the one he operates, he said.

Genesis Re is owned by TPA and benefits company SIHO Insurance Services, which has its own book of business, as well as managing a large number of administrative services only (ASO) contracts, so the company has a good understanding of how to manage the health of large populations of people, Tabler said.

By setting up its own captive, it is able to apply that expertise to finance and control its exposures — and recoup any savings gained from loss control.

Steve Gransbury, president, accident and health for QBE North America, is another supporter of the captive stop-loss option.

The benefits of stop-loss captives are manifold, he said, but the primary ones are control and transparency.

“For a group captive, there is control in how to approach risk with economies of scale not available to mid-sized employers who don’t participate in a group captive,” he said.

“For a single-parent captive, there is control over financing or predictable risk internally versus the commercial market.”

Because captive premiums are treated as ordinary business expenses, he continued, there are incentives for “greater risk, claim and reserving control,” not to mention to keep underwriting profit and maintain stable prices.

Not Loved by All

Medical stop-loss captives aren’t without opposition though.

Some regulators perceive stop-loss captives as instruments for side-stepping the provisions of the Affordable Care Act.

State legislators in Minnesota and Rhode Island, for instance, considered putting floors on deductibles or increasing the attachment points for stop-loss captives — the dollar limit amount at which stop-loss would kick in above primary health insurance.

California passed a law that limited stop-loss captives to employers with 100 or more workers.

In July 2013, the captive regulator in Washington, D.C. took an even stronger stand. Dana Sheppard, associate commissioner of the district’s Department of Insurance, Securities and Banking, declared:

“Washington, D.C. is not in favor of allowing small employers located in D.C. to self-insure their health care risks, including the establishment of medical stop-loss captives, if their motivation for doing so would result in removing young and healthy persons from the exchange, leaving older and less healthy employees in the exchange.”

Tabler’s captive avoids these concerns by having a high attachment point at $500,000, too rich for small employers.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.” — Steve Gransbury, president, accident and health for QBE North America.

Another obstacle to stop-loss captive success, however, is how many employers, whether big or small, are actually interested in participating in them.

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The experience of one captive, the Central Coast Community Mutual Insurance Co., is cautionary.

Formed in 2011 by the Community Hospital of the Monterey Peninsula (CHMP), the group stop-loss captive has since been trying to recruit members — unsuccessfully.

As hospital CFO Laura Zehm admitted, the parent company is at a do-or-die point in 2016; if they still haven’t brought on additional employers (it currently just involves the hospital’s and one other employer’s employee populations), they will consider giving it up.

“We had interest, for sure,” she said of other employers’ attitudes to the stop-loss captive over the past few years. “We do get calls.”

But eventually employers are dissuaded by brokers who promise to find them cheaper coverage elsewhere. It does not help the captive’s case that the commercial stop-loss insurance market is “really soft.”

The CHMP captive has so much to offer beyond just its coverages though. As part of the captive’s offering, members can tap into the hospital’s physician networks.

Laura Zehm, CFO, Community Hospital of the Monterey Peninsula

Laura Zehm, CFO, Community Hospital of the Monterey Peninsula

Zehm’s captive has its own TPA, which collects data from claims and then analyzes the information and applies it for better patient care.

For instance, through data, they can spot when a patient would benefit from six months of physical therapy before having to get his back or neck operated on. Or maybe never have that surgery.

For its all-in effort this year, Zehm said, the captive also made improvements. It partnered with the brokerage Alliant to gain the broker’s buy-side understanding. Zehm asked Alliant: If we don’t have anything worth selling, let us know.

Alliant didn’t reject them but instead offered ways to better the captives’ offerings.

Since then, the captive lowered costs within its physician network and incentivized physicians to keep member employees healthy.

“We continue to learn how to do this,” Zehm said. “We’re fixing everything that might be a barrier.”

High Interest in Stop-Loss Captives

While Zehm and Tabler provide an on-the-ground perspective of the benefits and challenges of stop-loss captives, the 30,000-foot perspective is one of optimism.

“While interest still remains very high, we’re actually seeing more deals get done over the last couple of years. In particular, with mid-sized employers that are looking at transitioning to self-insurance from fully insured health plans,” said QBE’s Gransbury.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.”

Gransbury said that post-ACA and the removal of annual and lifetime benefit maximums, large employers are buying stop-loss coverage with unlimited reimbursement benefits and using existing single-parent captives to finance certain layers.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.” — Steve Gransbury, president, Accident & Health, QBE North America

Then again, with every Republican presidential candidate since the beginning of the 2016 election season declaring that he or she would repeal the ACA if elected, perhaps the issue of how employers can best finance their employee health care benefits is far from moot.

It’s going on eight years that we have heard about uncertainty around health care, but Tabler said people are still waiting to see what will happen to the ACA before they feel totally settled and comfortable in their health care benefits arrangement.

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Whatever happens this November, employers can rest assured that Vermont will continue to be a home for health-care-related captives.

On the whole, captive insurance will continue to serve as an alternative and extremely innovative approach, whether it’s for professional liability, stop-loss coverage or another health care-related exposure. &

The R&I Editorial Team may be reached at [email protected]
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Sponsored: Liberty Mutual Insurance

Commercial Auto Warning: Emerging Frequency and Severity Trends Threaten Policyholders

Commercial auto policyholders should consider utilizing a consultative approach and tools to better manage their transportation exposures.
By: | June 1, 2016 • 6 min read

The slow but steady climb out of the Great Recession means businesses can finally transition out of survival mode and set their sights on growth and expansion.

The construction, retail and energy sectors in particular are enjoying an influx of business — but getting back on their feet doesn’t come free of challenges.

Increasingly, expensive commercial auto losses hamper the upward trend. From 2012 to 2015, auto loss costs increased a cumulative 20 percent, according to the Insurance Services Office.

“Since the recession ended, commercial auto losses have challenged businesses trying to grow,” said David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty at Liberty Mutual Insurance. “As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”

For companies with transportation exposure, costly auto losses can hinder continued growth. Buyers who partner closely with their insurance brokers and carriers to understand these risks – and the consultative support and tools available to manage them – are better positioned to protect their employees, fleets, and businesses.

Liberty Mutual’s David Blessing discusses key challenges in the commercial auto market.

LM_SponsoredContent“Since the recession ended, commercial auto losses have challenged businesses trying to grow. As the economy improves and businesses expand, it means there are more vehicles on the road covering more miles. That is pushing up the frequency of auto accidents.”
–David Blessing, SVP and Chief Underwriting Officer for National Insurance Casualty, Liberty Mutual Insurance

More Accidents, More Dollars

Rising claims costs typically stem from either increased frequency or severity — but in the case of commercial auto, it’s both. This presents risk managers with the unique challenge of blunting a double-edged sword.

Cumulative miles driven in February, 2016, were up 5.6 percent compared to February, 2015, Blessing said. Unfortunately, inexperienced drivers are at the helm for a good portion of those miles.

A severe shortage of experienced commercial drivers — nearing 50,000 by the end of 2015, according to the American Trucking Association — means a limited pool to choose from. Drivers completing unfamiliar routes or lacking practice behind the wheel translate into more accidents, but companies facing intense competition for experienced drivers with good driving records may be tempted to let risk management best practices slip, like proper driver screening and training.

Distracted driving, whether it’s as a result of using a phone, eating, or reading directions, is another factor contributing to the number of accidents on the road. Recent findings from the National Safety Council indicate that as much as 27% of crashes involved drivers talking or texting on cell phones.

The factors driving increased frequency in the commercial auto market.

In addition to increased frequency, a variety of other factors are driving up claim severity, resulting in higher payments for both bodily injury and property damage.

Treating those injured in a commercial auto accident is more expensive than ever as medical costs rise at a faster rate than the overall Consumer Price Index.

“Medical inflation continues to go up by about three percent, whereas the core CPI is closer to two percent,” Blessing said.

Changing physical medicine fee schedules in some states also drive up commercial auto claim costs. California, for example, increased the cost of physical medicine by 38 percent over the past two years and will increase it by a total of 64 percent by the end of 2017.

And then there is the cost of repairing and replacing damaged vehicles.

“There are a lot of new vehicles on the road, and those cost more to repair and replace,” Blessing said. “In the last few years, heavy truck sales have increased at double digit rates — 15 percent in 2014, followed by an additional 11 percent in 2015.”

The impact is seen in the industry-wide combined ratio for commercial auto coverage, which per Conning, increased from 103 in 2014 to 105 for 2015, and is forecast to grow to nearly 110 by 2018.

None of these trends show signs of slowing or reversing, especially as the advent of driverless technology introduces its own risks and makes new vehicles all the more valuable. Now is the time to reign in auto exposure, before the cost of claims balloons even further.

The factors driving up commercial auto claims severity.

Data Opens Window to Driver Behavior

To better manage the total cost of commercial auto insurance, Blessing believes risk management should focus on the driver, not just the vehicle. In this journey, fleet telematics data plays a key role, unlocking insight on the driver behavior that contributes to accidents.

“Roughly half of large fleets have telematics built into their trucks,” Blessing said. “Traditionally, they are used to improve business performance by managing maintenance and routing to better control fuel costs. But we see opportunity there to improve driver performance, and so do risk managers.”

Liberty Mutual’s Managing Vital Driver Performance tool helps clients parse through data provided by telematics vendors and apply it toward cultivating safer driving habits.

“Risk managers can get overwhelmed with all of the data coming out of telematics. They may not know how to set the right parameters, or they get too many alerts from the provider,” Blessing said.

“We can help take that data and turn it into a concrete plan of action the customer can use to build a better risk management program by monitoring driver behavior, identifying the root causes of poor driving performance and developing training and other approaches to improve performance.”

Actions risk managers can take to better manage commercial auto frequency and severity trends.

Rather than focusing on the vehicle, the Managing Vital Driver Performance tool focuses on the driver, looking for indicators of aggressive driving that may lead to accidents, such as speeding, sharp turns and hard or sudden braking.

The tool helps a risk manager see if drivers consistently exhibit any of these behaviors, and take actions to improve driving performance before an accident happens. Liberty’s risk control consultants can also interview drivers to drill deeper into the data and find out what causes those behaviors in the first place.

Sometimes patterns of unsafe driving reveal issues at the management level.

“Our behavior-based program is also for supervisors and managers, not just drivers,” Blessing said. “This is where we help them set the tone and expectations with their drivers.”

For example, if data analysis and interviews reveal that fatigue factors into poor driving performance, management can identify ways to address that fatigue, including changing assigned work levels and requirements.  Are drivers expected to make too many deliveries in a single shift, or are they required to interact with dispatch while driving?

“Management support of safety is so important, and work levels and expectations should be realistic,” Blessing said.

A Consultative Approach

In addition to its Managing Vital Driver Performance tool, Liberty’s team of risk control consultants helps commercial auto policyholders establish screening criteria for new drivers, creating a “driver scorecard” to reflect a potential new hire’s driving record, any Motor Vehicle Reports, years of experience, and familiarity with the type of vehicle that a company uses.

“Our whole approach is consultative,” Blessing said. “We probe and listen and try to understand a client’s strengths and challenges, and then make recommendations to help them establish the best practices they need.”

“With our approach and tools, we do something no one else in the industry does, which is perform the root cause analysis to help prevent accidents, better protecting a commercial auto policyholder’s employees and bottom line.”

To learn more, visit https://business.libertymutualgroup.com/business-insurance/coverages/commercial-auto-insurance-policy.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.


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Liberty Mutual Insurance offers a wide range of insurance products and services, including general liability, property, commercial automobile, excess casualty, workers compensation and group benefits.
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