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By JULIE LIEDMAN, a freelance writer based in Philadelphia. DAN REYNOLDS, senior editor of Risk & Insurance®, contributed to this article.

With the signing of healthcare reform legislation into law, insurance brokers are scrambling to educate their clients about what they need to do and when they need to do it.

According to the CEO of a major insurance and benefits brokerage, the questions raised by the healthcare reform bill passed by Congress and signed into law by President Obama outweigh any resolutions the law may end up producing.

"As a result, this legislation, which our congressional and senatorial folks acknowledge has not been very well read or very well digested, has created more than 4,000 unanswered questions which will need to be addressed by shapers of the law," said John Lumelleau, president and CEO of Kansas City-based insurance broker Lockton LLC.

Since last August, Lockton has been rolling out a new team, dubbed its Health Reform Advisory Practice; it's leading the massive educational and consulting effort Lumelleau said is going to be necessary for business owners and executives to make sense of the sea change that just occurred.

"Regardless of what side of the spectrum you are on with regard to this bill becoming law, there is now over the next couple of years huge information needs on the part of the buying public, whether they are major corporations in the Fortune 50 or whether they are employers of 75 to 500 people," Lumelleau said.

This Health Reform Advisory Practice, which will operate within the Lockton Benefit Group, is sure to become a draw of talent over the next couple of years, Lumelleau said.

Dean Davison, a Lockton spokesman, said the new group is analyzing the healthcare law and doing weekly updates for clients. Lockton also held two webinars in May to further disseminate some of the intellectual capital.

Lumelleau said as a citizen and a taxpayer the scope of the new healthcare law frightens him. As a businessman he said it could offer worlds of opportunity to those companies that can spend the resources to get ahead of their customers with the best information.

"Certainly, one healthy part of our capitalist society is that talent will go to where opportunity exists and there is a lot of opportunity here," said Lumelleau, in an interview with Risk & Insurance® during the Risk and Insurance Management Society Inc. conference in April.

For now, Lumelleau said, "Confusion reigns."

What is clear is that the health benefits business as usual will take on a whole new meaning in the months and years ahead.

Among the provisions that go into effect for the 2011 plan year are requirements to cover employees' children up to age 26.

Paul Fronstin, senior research associate at the Employee Benefit Research Institute (EBRI) in Washington, D.C., said most of the major insurance companies are allowing this year's college graduating seniors to obtain coverage after they are out of school, which usually is the time they are cut from their parents' plans as a way of maintaining a healthy risk pool.

Meanwhile, as employers work to understand how the new legislation applies to them, brokers are looking for ways to help their clients get the most bang for their health benefits buck.

"The trend right now," Fronstin said, "is for employers to try to use benefits packages more strategically, not necessarily because of health reform but just in general. We're seeing a renewed emphasis on the promotion of wellness--things like healthy choices in the cafeteria, follow-up calls from nurses and so on.

"Employers are trying not to increase co-payments and deductibles; they're trying to get more value out of what they offer," he said.

MORE BANG FOR THE BUCK

"The idea of 'value-based benefit design' is rather new, but employers are starting to carve out ways to [engage employees],'' he said. "For instance, some employers have found that when they eliminate co-payments for things like asthma and other chronic illnesses, compliance goes up and costs go down."

To that end, for instance, IBM has eliminated co-payments for primary care visits, while at the same time increasing co-payments for specialists, he said.

It's called "patient-centered primary care" or the "medical home" model and it gets at the high cost/low usage conundrum facing employer purchasers of healthcare today. The idea is for the primary care physician to coordinate patients' treatment.

Proponents say this can improve care, prevent unnecessary visits to the emergency room, reduce hospitalizations and reduce overall medical spending. IBM's move in that direction led to the creation of the Patient-Centered Primary Care Collaborative (PCPCC), a coalition of employers representing millions of workers across the country, and physician groups representing hundreds of thousands of medical doctors, consumer groups and several of the top health-benefits companies in the country.

Giving patients a so-called "medical home" is designed to improve some of the problems with the way healthcare is delivered and paid for in this country, and thereby alter the business model used today.

Most insurers now usually reward doctors for how much they do--that is, how many tests or procedures they perform--and not for how effective their care is, proponents say. Doctors are not paid to help their patients connect with specialists, and no one really is held accountable for making sure that patients get the care they need.

Another measure, which has been around longer than the patient-centered model and has been growing in popularity in recent years, is consumer-driven healthcare. With that, routine claims are paid using a consumer-controlled account versus a fixed health insurance benefit.

It is designed to give patients greater control over their own health budgets. According to proponents, when consumers make the primary decisions regarding the healthcare they receive, they are more likely to ask about cost, to choose a less expensive treatment option and to make healthier lifestyle choices; and chronic patients are more likely to follow treatment regimes.

That certainly has been the case at Las Vegas-based Boyd Gaming, which operates gaming entertainment properties in six states. Boyd has focused a lot of energy on engaging employees in, and evaluating, the company's consumer-driven plans. Two-thirds of its 25,000 employees are in a consumer-driven plan.

"It's been very intense over the last couple years," said Bob Bergland, vice president of benefits at Boyd Gaming, "and very successful. We extensively survey our employees and do a lot of biometric testing, and everything has been significantly positive. We get a lot of responses from employees who understand and appreciate their benefits.

"We have managed to engage a great many of our employees and reduced our health care costs," Bergland added. "You can't ask for more in this environment."

Indeed, wellness is at the heart of many employers' thinking when it comes to health benefits and how to manage healthcare costs. The goal, usually, is to use behavior modification and increased compliance to reduce overall costs, claims and diseases.

"Three years ago, we began to look into a self-insurance plan," said Susan Kuruvilla, president and chief financial officer of Clark Security Products, a San Diego-based national independent wholesale distributor of security products and services.

With a self-insurance plan, or a self-funded plan as it is often called, the employer assumes the financial risk for providing healthcare benefits to its employees. Typically, a self-insured employer will set up a special trust fund with money, corporate and employee contributions, for example, to pay claims.

As a result of her investigation, Kuruvilla said she has come to understand all of the levers that influence the cost of health insurance--including wellness programs, which her company never had considered before. Clark Security still is considering switching to a self-insured plan.

The investigation into a self-funded plan actually changed her perception of the importance of wellness--and employee behavior, too. Kuruvilla leads the company's wellness initiative, in which more than three quarters of the company's employees participate, motivating them to lead healthy, active lives. Behavior modification and increased compliance has reduced overall costs, claims and diseases, she said.

"We have three years of biometric data. Three years ago, physical inactivity was one of the top five risk factors. Now, it's gone," Kuruvilla said. "We got them moving!"

Another top risk factor in the first two years was the use of sleep medication. Now it's dramatically down. "If people are more physically active, they sleep better," she said. "It just makes sense."

"We really came to understand the business reason for wellness and the connection between health and productivity," she said. "We're rock stars now when it comes to wellness.

"The bottom line is that we got our first refund. We had lower healthcare expenses in 2009 than we had paid for."

That may be true for her and for other innovators who can control costs in this environment.

But the short-term, macro-view from the spending side isn't pretty, according to a report issued by an actuary for the Centers for Medicare and Medicaid Services. The report, issued April 23, said the nationwide cost savings under the new healthcare law won't kick in until at least 2020. In the short-term, 34 million more people getting coverage means more expense for almost everyone over the next 10 years.

The CMMS study put the cost to the federal government over the next 10 years at some $251.3 billion. That's on top of a government budget that is currently drowning in red ink.

As Lockton's Lumelleau put it, government in this case has gone ahead and done what it tends to do, start a new program on top of existing programs that are ill or in need of serious repair.

"What we have done with this (president's) signature on a piece of paper and all of the fury that took place over the last 12 to 15 months is now layer upon three broken programs, (Medicare, Medicaid and Social Security) a fourth unknown," Lumelleau said.

June 1, 2010

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