For 26 years, I have been writing these forecasts and reports on the TPA and related marketplace. These reports have earned a reputation for accuracy for the reasons explained below.
The credit for the uncanny accuracy goes to my sources. The SPBA staff & I talk to thousands of TPAs & Stop-Loss each year, not only hearing from them on their business & marketplace as a whole, but also thousands of real-world case situations & examples. We also have interaction with other associations & businesses, as well as employers, unions, and such that make up the client base for TPAs. We also have an ongoing very candid interchange with both government policy-shapers as well as the technical government attorneys & specialists who craft the actual regulations and interpretations. (While it is national sport to pick on "bureaucrats", we find that especially the issue-specific government regulatory officials are dedicated and fair. ) They enjoy speaking to the SPBA meetings, because our off-the-record candid style of member input gives them a window into the real-world. Many have never worked in the private sector and have certainly not met a payroll or faced the challenges of being an employer and plan sponsor.
This report & forecast for 2006 is being written in November 2005, at a time when many of the concerns about which we've warned before are starting to show. Many of the largest employers are saying that they cannot support & continue the level of ever-increasing cost of health coverage for retirees and employees.
Meanwhile, of course, Medicare, Medicaid, Veterans Administration, state programs, and government-sponsored plans in other countries are in even worse shape, with dire prospects. Sadly, many people and most media & politicians play self-deception. They realize that government & single-payer plans are headed for disaster, but at every hint of bad news for private employers, there are some who dream of some nirvana government-controlled health plan in which everyone lives happily ever after. That's not realistic.
Three big challenges facing the whole heath & benefits community:
(1). Medical pricing is like a virus that is spreading to infect the whole health system. Medicare's demand that it pay only a discounted amount of medical bills started the problem. It led to prices being increased in order to be "discounted". (Sadly, the least-protected patients are the ones crushed by the phony list prices.) The phony official price and Medicare discounts forced the private sector to invent all kinds of "discount" schemes and arrangements. The intent was good, but it has become chaotic with little or unrealistic true results as too many medical providers jiggle the list price on which the discount is based to come up with the amount they wanted in the first place. Consequently, some health coverage is advertised as having gigantic discountsÉ.but employers fail to ask to see actual dollar-paid comparisons. Bigger discount is often not less money paid out than "lower" discounts from a lower base price.
I predict that the house of cards of "discounts" will collapse. Probably not in 2006, but soon. Either some smart prosecutor will begin to investigate, or employers & patients will force change (especially with the growth of HSAs & HRAs), or some medical providers (many of whom are also confused & exasperated with the discount mess) will make private common-sense arrangements with payers. This latter will probably start at the local level, so TPAs are the best positioned to encourage this option by making overtures to the medical providers with whom they work. It would be a win-win-win (doctor, payer, patient).
As noted, many in the medical community are exasperated. It is not the medical profession they envisioned. Many feel that days are numbered until government regulation takes away much of the current freedom of pricing & practice. Some of these doctors seem to be taking a get-it-while-you-can strategy to make as much money as possible now, and then retire early or set up private boutique practices. Get-it-while-you-can usually means at the expense of the patient or payer. Ironically, this greedy attitude will probably hasten the end of medical freedoms.
(2). HIPPA privacy has become a dodge for ignorance, incompetence, and greed. The HIPPA Privacy law and regulations are clear and very accommodating for "treatment, payment, and healthcare operations". (Big kudos for this open-minded HHS approach go to SPBA's Anne Lennan, who kept ongoing contact with HHS reg-writers during the process so that they would understand real-world situations & needs. The reg-writers also had opportunities to meet and hear from SPBA members at Spring Meetings for a big dose of reality check.)
Unfortunately, most of the medical community, from clerical staff to senior attorneys, ignorantly seem to think HIPAA privacy means "just say no". Since ERISA plans & TPAs are subject to federal fiduciary requirements, sometimes lack of necessary data from the medical provider means that payments are delayed or denied. (Ironically, those same medical providers are the first to complain if there is a delay or rejection of the under-documented claim, so go figure!) In cases where the medical community is just ignorant about how broad and practical the law is about most transactions for which they invoke HIPPA privacy, they are hurting themselves and their patients by having only an overly-simplistic (and thus incorrect) understanding of the law.
Too often, HIPAA privacy has become a knee-jerk dodge or excuse for more unsavory reasons, ranging from fears of medical malpractice to trapping clients from getting second opinions or moving to another medical provider. For example: A patient in a cancer clinic was told that the cancer had caused him to need a non-cancer operation. The price they quoted seemed about 500% of what the patient was able to determine was a normal fee, and the inflated cost was mainly in the "facilities" portion. The patient, facing years of cancer treatments, feared that if he over-spent on this non-cancer operation, he would probably blow his lifetime maximum of benefits. He asked for his records in order to get a second opinion and determine the cost at another facility. The cancer clinic stalled and made the patient himself sign HIPPA privacy release forms three separate times to get his own records. Preventing patients from seeing their own records is certainly a perversion of the law. What makes this kind of situation more suspicious than mere ignorance is that the delays conveniently took all the time that the patient had to get a second opinion as his pain increased, so he will be trapped into having the surgery in the cancer clinic at a 500% mark-up. This kind of situation is becoming more common, and is an example of the get-it-while-you-can rip-off of the system. Since it is usually big bucks, it is causing an artificial inflation in the overall cost of health care to government, employers, and patients.
Just as too many medical providers use HIPAA privacy as a sour grapes excuse to avoid losing a customer, too many insurers inaccurately yell "HIPPA Privacy" as an (inaccurate) excuse for not letting customers have access to their own records in order to consider if a change in coverage or administration would better fit their needs. Just like the patient in the example above, the customer is trapped by an uninformed (but pompously proclaimed) claim of HIPAA Privacy. It is sad and a disservice. Some prosecutor's investigations will probably bring this entrapment of customers to an end. Some State Insurance commissioners have already issues letter to insurance companies & HMOs instructing them to cooperate.
(3). Mandated benefits, coverages, and red tape are an expensively punitive load on employers. It is almost as if government policy and public opinion was thinking of ways to punish the good deed of employers providing health coverage to their workers. It is a testimony to the devotion of employers to their workers that they haven't said "to hell with it". There is no penalty for bailing out.
However, it is not a scheme to kill employee benefits. No, it is an example of the old expression, "The road to hell is paved with good intentions." Everyone likes to play Santa Claus and take credit for providing for the coverage of some illness or condition. However, just like the Santa Claus in most households, it is the parents (employers, in this case), not Santa, paying the bill for Santa's generosity. No one thanks employers for stepping up to the plate to not only pay for more and more requirements, but the employers must spend even more for the administrative compliance with the programs.
I guess SPBA shouldn't complain, since SPBA TPAs have earned respect and reputation as the most skilled in blending compliance with all of the requirements, which cross normal boundaries of specialties of law and other professions. In fact, government compliance has probably become the biggest service which SPBA's TPAs bring to clients. It is a major cost to provide. Most of the laws are technically requirements of the employer/plan sponsor. Consequently, many insurance companies, HMOs, and less-attentive TPAs pay only lip-service to government compliance and working with clients when new laws & rules are evolving. Sadly, too many prospective clients have no idea that the low-cost minimal-compliance approach is leaving them with a huge potential liability. We get lots of calls from SPBA members who have a new client with years of non-compliance, which the new TPA needs to try to correct. SPBA TPAs tend to have a close and ongoing caring relationship with clients. (Funny example: During conversations with government officials at SPBA meetings, TPAs often use the word "we" in describing the impact of some new law or rule. The government officials sometimes say, "Hey, wait a minute. As a TPA, you'll make money doing the administration for clients for these new requirements, so why are you complaining?!?" The reason is that SPBA TPAs tend to think from the perspective of the client employer/plan. It's "we".) Actually, the sales pitch for SPBA TPAs should be, "How much is it worth to keep you out of jail or from huge legal liability??
Impacts of Tax reform?
This is written, on the day the tax reform proposal from the bipartisan President's Advisory Panel on Federal Tax Reform is being officially presented, so the reaction from the President and Congress is not yet known. A review of the vague initial proposals indicates that the biggest threat to employee benefits has not been included (but could reappear as the proposal journeys to the Secretary of Treasury, the President, and then through the mixmash of the legislative process in Congress. That big threat was (is?) denying employers all or some of the tax deduction for providing a health benefit plan. Yes, it is the largest "revenue loss" (what they'd like to collect in taxes). However, with Medicaid, Medicare, Veterans Administration and most State programs already staggering, it would be idiocy to add further disincentive to the only thing that is keeping America from a medical disaster. It will be politically tempting....a huge chunk of new tax money Congress could spend. Employers, TPAs, and all people who understand real-world economics & psychology of incentives need to continue to educate Congress on the hell they could unthinkingly cause.
The President's Advisory Panel does suggest making the "premium value" of health coverage taxable to individuals, above possibly $5,000 individual & $11,500 family coverage, (which is the estimated cost of Congressional staff coverage.) This higher amount avoids the anti-selection risk about which SPBA had warned, of a possible exodus from coverage of young & healthy workers who don't want to pay taxes on coverage for which they do not see immediate value.
The Panel's proposal also does some combining & enlarging in the area of CDHPs and defined contribution retirement savings, so there may be some new services for TPAs to offer. While we are pleased upon this first reading, this will be an extremely long bumpy road before anything is actually law and regulatory language for the tax code.
What's the marketplace like as we enter 2006? As always, it is mixed. Some members in some markets are thriving. Others are feeling smothered by competitors peddling the phony discounts, or medical mischief, as described above. However, as described above, changes seem to be on the horizon, and TPAs are the champs at quickly finding new opportunities. Also, the keynote of TPAs is personalization personalization personalization. Personalized customer service always has a market.
HSAs, HRAs, and Consumer-Directed Health Plans (CDHP) are a bright spot for many SPBA members, and the President's Advisory Panel on Tax Reform suggests an expansion to also include savings for education, first-time home-buying, etc. Though individual-focus coverage was originally envisioned as a way to wean people off of employer-sponsored health plans, SPBA had the opportunity to be in on the ground floor of shifting them to become a new market for employee benefits & TPAs. Yes, it is a new concept for both bosses & workers, but TPAs who have made the effort are having good sales results. Also, patient satisfaction surveys are showing popularity among the individuals...and it is incentivizing covered individuals towards long-sought habits of better health and being a smarter consumer of health services. The CDHP concept will help to clean up many of the problems noted at the start of this report.
So, what is the status of the TPA employee benefits profession and forecast for 2006? The whole health & payment system is facing some problems that have been festering. We've overcome larger and more challenging situations in our history. There will probably be significant change within a couple of years, and that's the kind of environment in which TPAs blossom. The key will be for TPAs to maintain their spirit, energy, as well as focus on personalized service and expertise in government compliance as the new market evolves.
Again, thanks & credit for these insights go to my colleagues on the SPBA staff and to the TPAs & Stop-Loss who share their insights so generously and candidly. Have a happy & successful 2006.