Anticipating ACA Risks
As implementation of the Affordable Care Act rolls onward, many employers are still lagging in compliance due to the law’s complexity, according to a presentation at the annual RIMS conference held this week in New Orleans, La.
One reason could be is that the act itself is about 10,000 pages in length.
“People tell me they’ve read the whole thing. I don’t believe them,” said James Anelli, partner at LeClairRyan, a law firm that also provides business counsel.
The primary area of confusion, especially for smaller employers, is determining whether or not they are in fact covered by the ACA. Employers must offer “minimum-value” health care coverage if they have at least 50 full time – or “full time equivalent” – employees.
Full time equivalency is calculated by adding all part-timers’ service hours per month and dividing by 120. An average of 30 hours per week qualifies as full time. Employers with many part-time employees often get tripped up here, as “service hours” include actual work time, paid time off and vacation days.
Wellness plans present another challenge. Encouraged by the ACA as a method to create a healthier workforce and reduce costs long-term, wellness initiatives have come under heavy fire by the Equal Employment Opportunity Commission for violations of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).
The EEOC filed three lawsuits against employers in 2014, alleging that their wellness plans were not effectively “voluntary” due to severe penalties or withdrawal of incentives levied against employees who did not participate.
“If your company has not had a conversation with your D&O carrier, you’re a little behind on the times,” said Randy Jouben, director of risk management for Five Guy Enterprises, Inc.
“We know there will be claims,” and employers should know who will cover their defense costs.
“If there’s a section that plaintiff’s attorneys will latch onto, it’s the retaliation provision.” — Randy Jouben, director, risk management, Five Guys Enterprises, Inc.
The ACA’s non-discrimination provision with respect to benefits also makes employers vulnerable to litigation. Employers can’t offer advantages like free coverage or shorter waiting periods to highly compensated employees.
The penalty for doing so is an excise tax of $100 per day for each individual negatively affected. But the real penalty will be in the cost to defend against claims by employees that claim they were treated unfairly.
“If there’s a section that plaintiff’s attorneys will latch onto, it’s the retaliation provision,” Jouben said.
An employee who is terminated could potentially claim they were targeted for objecting to an action or practice by their employer that does not comply with the ACA.
“The standard of proof is incredibly low,” Anelli said. An employee would simply have to show that their objection was a contributing factor to their termination; then the burden of proof falls on the employer to show it was non-discriminatory.
The speakers reiterated that “litigation will occur because of the sheer complexity and uncertainty surrounding numerous issues relating to ACA implementation.” With a lack of regulatory guidance in place, court decisions will fill in the gaps, and are likely to vary widely from state to state. In essence, ACA mandates will be enforced by plaintiff’s attorneys, more so than the federal government.
“Litigation will occur because of the sheer complexity and uncertainty surrounding numerous issues relating to ACA implementation.”
In addition to lack of guidance, many companies lack the resources to update their systems and policies quickly and effectively.
According to Jouben, risk management, human resources, IT and legal departments all need to work together to identify compliance issues, because “no one group will fully understand it.”
“This screams for ERM,” he said.
“This is an opportunity for risk managers to be the heroes. They have to let people know who’s on the hook.”
New reporting requirements also present additional risks. Beginning in 2015, employers must report certifications for penalty exemptions and other details of the coverage they offer to the IRS.
“Many HR systems are not set up to capture this information,” Jouben said. Many may not distinguish, for example, between stand-alone dental and vision plans – which may not be covered by the ACA – and those that are rolled into full health care plans, which would be subject to ACA provisions.
Collecting and reporting more detailed health plan information also introduces greater cyber risk.
Employers should adopt “clean desk” policies, ensuring that physical documents are scanned into systems that can encrypt their information and are then shredded.
Thirty states so far have enacted laws to destroy personal identifiable information or otherwise render it undecipherable through encryption. Forty six states have legislation requiring notification of a breach to all affected parties.
Jouben and Anelli also addressed concerns that ACA implementation will drive up health care costs. Jouben pointed out that hospitals and health care providers have been a driving force in stabilizing rate increases, and Medicare reimbursement rates have actually decreased. However, it’s unclear if this trend will continue.
Regardless of its effectiveness in reducing health care costs thus far, the reality is that the ACA is here to stay for the foreseeable future, and employers must face its complexity head-on, utilizing resources from every department to find gaps in compliance.
More Accountable Care
More physicians are selling their practices and becoming employees of larger entities, as the Affordable Care Act encourages the creation of expanded accountable care organizations.
So far, underwriters are viewing the trend as a positive, with improved risk management practices and less “finger-pointing” between hospitals and doctors during the claims resolution process, as all parties are now covered under the employers’ professional liability policies (physicians working as employees typically no longer buy medical malpractice insurance.)
But as more patients are served under this model, experts said, certain issues need to be ironed out, such as whether health care organizations can meet new “pay-for-performance” metrics and whether they are buying as much limits as they should to adequately handle jury awards.
Berkshire Hathaway Specialty Insurance views the ongoing migration of physicians toward institutional employment as a favorable trend, both for the individual practitioner as well as for the institution employing them, said Leo Carroll, head of healthcare professional liability.
“Physicians are less distracted and burdened by some of the administrative responsibilities of running a practice, by handing that over to the institution to manage,” Carroll said.
Physicians benefit when they join an institution’s risk management program, in part by being able to use a common medical record system, usually electronic, to help to optimize technological efficiencies and promote consistent communication, he said.
Moreover, communication between physicians and institutions within the employment model generally is “a little tighter and more efficient,” as comprehensive treatment plans can be shared more effectively across a unified team.
Physicians are also integrated into a larger insurance program overseen by the institution, which allows them access to broader risk management training and promotes more time with patients, Carroll said.
Claims can also be resolved more efficiently because the “finger-pointing” between doctors and hospitals under separate insurance policies has been eliminated, and the cost of a coordinated defense using one law firm is typically much lower.
Still, a unified approach to resolving conflict “does come with compromise for all involved,” so that claims can be resolved in the best interests of all parties, Carroll said.
“The future is a pay-for-performance environment.” — Bob Allen, president, Pro-Praxis Insurance
“It’s really important for physicians to be open and well-informed about the culture of the institution they are joining,” he said.
“They need to make sure to understand that there may be differences in the way that care is delivered and what the expectations are of the physicians by the institutions.”
Medical specialists are also making the switch, said Mary Ursul, executive vice president at Coverys, a Boston-based provider of medical professional liability insurance.
In recent years, Coverys has seen instances where independent cardiologists in a community all become employed by a health system, Ursul said.
“Whether it is the push to upgrade equipment, implement electronic medical records, the uncertainty of future private payer and government reimbursement, or the predicted shortage of health care providers, the shift away from independence seems to be heavily weighted towards financial concerns,” she said.
The ACA’s call for more integrated care delivery is also prompting the move toward employment — as well as the increasing trend of hospitals and health care organizations to also acquire acute care, post-care, rehabilitation facilities and other entities across the health care delivery system, Ursul said.
As larger entities acquire physician practices, there are certain training protocols that should be considered to minimize risk exposure, she said.
“For example, something as simple but important as a new patient intake process within an unfamiliar electronic medical record can create situations where risk exposure can increase without sufficient training,” Ursul said.
“That could be a steep learning curve for staff in a physician’s medical office, therefore, time, training and appropriate resources are all important to make the transition smooth and to ensure that clinical information is handled appropriately so that risk can be reduced.”
While Coverys offers comprehensive clinical risk management services to its insured independent physicians, the carrier finds that not all physicians have access to such services, she said.
Coverys advises hospitals acquiring physician practices to conduct risk management assessments as soon as practical, a service that the carrier provides to insured hospitals.
“These assessments can provide a baseline of data on processes, possible gaps in best practices, and assist in determining what type of education and training staff may need,” Ursul said.
One benefit to being acquired is often access to professional clinical risk management resources through the hospital’s risk management department.
“This may not actually be viewed as a benefit from the physician side of the transition as physician practices are largely unregulated, so the level of oversight may be viewed as burdensome,” she said.
As hospitals and health care organizations acquire more physician practices and other entities throughout the health care spectrum, the risk in maintaining “the health of the community” becomes the new issue, said Bob Allen, president of Pro-Praxis Insurance in New York.
The Importance of Care Coordination
To manage the health within a patient population, there has to be coordinated care across physicians, hospitals and rehab services, Allen said.
“For example, one entity says that it can take care of all of the diabetes cases in its region for x number of dollars, and so the ‘risk’ is being able to have the hospital and the doctors on the same page to be able to take care of those cases at or under that targeted dollar amount,” he said.
That exposure is also translated into the financial risk of taking a flat fee for a particular type of care, what is known in the industry as a “capitated risk,” Allen said.
If a health insurer agrees to give a hospital and its physician network a flat fee to treat 1 million people in its area, the insurer may pay for office visits, including annual checkups, but it likely won’t pay if the network provides poor quality of care.
Insurers are now measuring that by “quality indicators,” he said. Insurers are increasingly reviewing the number of surgical infections or falls during hospital stays that occurred due to poor quality treatment or follow-up after surgeries, and determining whether the rates are too low, high enough or whether not to pay.
“The future is a pay-for-performance environment,” Allen said.
“If the network doesn’t perform well, it doesn’t get paid for services rendered — that’s the risk. It’s more of a business risk than a typical malpractice risk.”
To mitigate this financial risk, hospitals and physicians have to be on the same page, have greater collaboration, and “probably” the best way to do that is within an employer/employee structure, he said. Historically physicians had hospital privileges as independent contractors, but now as employees, there is better management of making sure doctors do checklists before performing surgery.
“As an integrated group, there are resources and rules for who will do the follow-up calls after surgery to make sure stitches are not going to be ripped open,” Allen said.
Pro-Praxis offers a professional liability program that covers every entity within the network — hospital, physicians and other employees such as certified nurse assistants, as well as other entities that hospitals have been acquiring such as nursing homes and outpatient surgery centers, as part of providing a continuum of care, he said.
Professional liability has taken the place of medical malpractice for individual physicians, Allen added.
For example, a hospital may pay $1 million in premiums, but after it brought a physician group of five doctors who each used to pay $100,000 in premiums for medical malpractice insurance, the hospital would now pay a total of less than $1.1 million in premiums.
In addition to less “finger-pointing” with a joint defense, typically the new employer/employee structure can result in “behavioral changes.”
“That is not to say that physicians didn’t behave well before, but now the hospital can better manage treatment and follow-up, and the workflow of all of its employees,” he said.
For insurers, the biggest challenge with the new structure pertains to policy limits, Allen said. Under the traditional structure, hospitals typically have a $2 million limit for professional liability and physician groups have a $1 million limit for malpractice. If they were sued and the jury awarded $3 million, the two entities could cover it with their respective limits.
“But now that there is no more sharing and just one health system that has to pay that $3 million jury award, the hospital would now have to pay $1 million out of pocket because its limit is still $2 million,” he said.
“This hasn’t happened yet, but from an underwriter’s perspective, we are concerned about loss allocation.”
Some health care organizations have been buying more limits and have been paying more in premiums, so they won’t have to pay out-of-pocket, something the insurers are hoping more will do as their exposure to losses increases.
“They have to be careful now that they’ve brought on all of those physicians as employees,” Allen said.
“Our job is to figure the impact of losses on how much limits they should get, and there is no hard data on that, yet.”
The Tools of the Trade
Integrating medical management with pharmacy benefit management is the Holy Grail in workers’ compensation. But getting it right involves diligence, good team communication and robust controls over the costs of monitoring technology.
Risk managers in workers’ compensation can feel good about the fact that opioid use is declining slightly. But experts who gathered for a pharmacy risk management roundtable in Philadelphia in June pointed to a number of reasons why workers’ compensation professionals have more than enough work cut out for them going forward.
For one, although opioid use is declining, its abuse and overuse in legacy workers’ compensation claims is still very much a problem. An epidemic rages nationally, with prescription drug overdose deaths outpacing those from the abuse of heroin and cocaine combined.
In addition, increased use of compound medications and unregulated physician dispensing are resulting in price gouging and poor medical outcomes.
Although individual states are attempting to address the problem of physician dispensing of prescriptions in workers’ comp, there is no national prohibition against it: That despite substantial evidence that the practice can result in ruinous workers’ compensation medical bills and poor patient outcomes.
“The issue is that there isn’t enough formal evidence to indicate improved outcomes from the use of compounds or physician dispensed drugs, and there are also legitimate concerns with patient safety,” said roundtable participant Jim Andrews, executive vice president, pharmacy, for Duluth, Ga.-based pharmacy benefit manager Healthcare Solutions.
Andrews’ concerns were echoed by another roundtable participant, Dr. Jennifer Dragoun, Philadelphia-based vice president and chief medical officer with AmeriHealth Casualty.
“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events,” Dr. Dragoun said.
Whereas two years ago, topical creams and other compounds with two to three medications in them were causing concern, now we’re seeing compounds with seven or more medicines in them.
How those medicines are interacting with one another, and in the case of a compound cream, how quickly they’re being absorbed by the patient, are unknowns that are creating undue health risks.
“These medicines haven’t been tested for that route of administration,” Dragoun said.
In other words, the compounds have not been reviewed or approved by the FDA.
Carol Valentic, vice president of cost containment and medical management with third-party administrator Broadspire, said her company’s approach to that issue is to send a letter to providers, through the company’s pharmacy benefit administrator, alerting them to the fact that compounds are not FDA-approved and could be dangerous.
Other roundtable participants said they employ utilization review of every prescribed compound medication. They’re finding that the inflation of the average wholesale price for prescriptions that pharmacy benefit managers are battling in the case of single medications is happening with compounds as well, to the surprise of probably no one.
“The cost of compounds is doubling every year,” Healthcare Solutions’ Andrews said.
Kim Clark, vice president of utilization management with Patriot Care Management Inc., a division of Patriot National, Inc., said Patriot has their own software, DecisionUR, and opioids as well as compound prescriptions can be directed from the PBM to Utilization Review.
In the area of new worries in workers’ compensation, and there are plenty of them, Dragoun also pointed to the introduction of extremely high cost, albeit extremely effective specialty medications, such as those being used to treat Hepatitis C. Treatments in this area can run into the hundreds of thousands of dollars.
Domestic drug manufacturers, pressed to pursue profits as their product lines mature and their margins level off, are jockeying for dominance in this area.
“This seems to be a route that a lot of drug makers are going after. Very narrow markets but with extremely high cost medications,” said Deborah Gleason, clinical resources manager, medical programs, with ESIS, the Philadelphia-based third-party administrator that is part of ACE Group.
Tools of the Trade
Given how substantially the use of prescriptions can balloon the cost of a workers’ compensation claim and undermine outcomes, a number of tools are in the market that can help risk managers rein in costs.
One is urine drug monitoring, which can catch cases of drug diversion, or instances where an injured worker is ingesting unprescribed substances. But the use of that test can create its own problems, namely overutilization.
Gleason, with ESIS, Inc., and others use urine drug monitoring. But when the test is overused, say by being conducted every month instead of quarterly as is recommended, the members of the Philadelphia roundtable said its costs can outrun its usefulness.
Test results are frequently inconsistent, signaling that the injured workers aren’t taking the prescribed medication or are taking something they shouldn’t be. Drug testing shouldn’t be used in isolation but rather as a component of integrated medical management.
“What’s emerging today, and in some companies more prevalently, is the integration of managed care with pharmacy benefit management,” roundtable participant Valentic said.
“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events.”
— Dr. Jennifer Dragoun, Vice President and Chief Medical Officer, AmeriHealth Casualty
In other words, it’s not enough to flag a script or pick up a urine drug monitoring test result. There needs to be a plan or a system in place that says what action should be taken with the patient once that information has been received.
Identifying a potential problem early and taking action on it is key, said ESIS’ Gleason. She added that the patient’s psychological state, including how they react to and perceive pain, is something that more risk practitioners should consider.
Obstacles to assessing someone’s psychological or psychosocial state, according to roundtable members, include a lack of awareness or acceptance of its possible advantages on the part of patients and physicians. After all, we’re talking about an assessment, a list of questions, that should take no more than 15 minutes to carry out.
If a treating physician or case manager doesn‘t conduct a psychological test but is still concerned about the potential for pain medication abuse, there is one key question they can ask an injured worker, according to AmeriHealth Casualty’s Dragoun.
“There is one question that predicts far more than any other attribute of a patient whether they are likely to abuse narcotics, and that is if they have a personal or family history of substance abuse,” Dragoun said.
“You know they may ask that about the patient, but I don’t know how many ask it about the family,” Patriot Care Management’s Kim Clark said.
Pharmacogenetic testing, that is testing an individual for how they might react to certain drugs or combinations of drugs, and not — let’s be clear about this — whether they are predisposed to addiction, is also entering the market.
But as is the case with urine drug monitoring, the use of pharmacogenetic testing is no cure-all and the cost of it needs to be carefully managed.
Some vendors are pitching that it be applied to every case in a payer’s portfolio. The roundtable participants in Philadelphia agreed that it should be used with far more discretion than that.
Regulating the Regulators
It’s a given in the insurance business and in workers’ compensation that regulators in all 50 states call the shots. There are few national laws that regulate the hazards faced by workers’ compensation risk managers and injured workers.
Having said that, is it really such a pipe dream to think that the federal government could step in and provide leadership in an area that is so prone to confusion, risk and self-serving behavior on the part of some vendors and medical practitioners?
If the Philadelphia roundtable as a group could point to one place where federal regulators could do some good it would be in the area of physician dispensing. Many states have enacted legislation to curb the practice, as there is no data to prove better outcomes, and regulation by the federal government would be of benefit, the Philadelphia roundtable concluded.
Another area would be to require FDA oversight for compounds.
“The minute you need to have FDA approval of a compound, that’s going to stop it,” Broadspire’s Valentic said.
It’s a notion worth considering. After all, lives are at stake here.
Given the lack of oversight from the federal government, the roundtable participants pointed to measures in a number of states that are worth emulating. The Texas closed formulary, which limits the range of medications that can be prescribed, is one example.
The requirement in the State of New York that a prescribing physician check a state registry — what’s known as a prescription drug monitoring program — to check whether a patient is already taking or has a prescription for a controlled substance, is another good example of a state government stepping in to ensure the safety of its residents.
“The minute you need to have FDA approval of a compound, that’s going to stop it.”
— Carol Valentic, Vice President of Cost Containment, Medical Management, Broadspire
Pennsylvania also earned praise from the roundtable for recently passing a measure limiting the amount of medication that a physician can dispense to an initial supply.
With different regulations in every state and with the average wholesale cost of prescriptions constantly on the rise, pharmacy benefit management is an art requiring constant vigilance.
“It’s not an original thought, but if you stop and think about all the things that are happening in society with the addictions and the costs, the cost of doing nothing is greater than the cost of doing something.
I think that’s why everybody is doing something,” Healthcare Solutions’ Andrews said.
For more information about Healthcare Solutions, please visit www.healthcaresolutions.com.
Opinions of the roundtable participants are the opinions of each individual contributor and are not necessarily reflective of their respective companies.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.