Retiree Health Care Benefits Continue to Decline

Employer-based retirement health care insurance benefits continue to decline, according to recent industry reports.

Many retirees have been able to rely on private or state employer-based retirement health benefits for supplemental health care coverage while on Medicare in the past, but this is becoming less common.

Employer-based health-related benefits can provide important coverage for the gaps that exist in Medicare programs. Additional coverage benefits can alleviate the cost-sharing requirements and deductibles associated with Medicare. Caps on the amount that can be spent out-of-pocket, often associated with supplemental coverage, are also often helpful for retirees.

Overall, supplemental retiree health and medical benefits sponsored by a private or municipal employer have helped many retirees cope with high medical costs often incurred in retirement.

The Kaiser Family Foundation recently reported, however, that the number of large private employers-considered employers with 200 or more employees-offering retiree healthcare benefits has dropped from 66 percent in 1988 to 23 percent in 2015.

Companies that do continue to offer retiree health benefits have been making changes aimed at reducing the cost of benefits, including:

  • Instituting caps on the amount of the provider’s financial liability
  • Shifting from defined benefit to defined contribution plans
  • Offering retiree health care benefits through Medicare Advantage plan contracts
  • Creating benefit programs through private health insurance exchanges

State employers have also not been immune to the trend, but the type and level of coverage being offered by most states is significantly different than retirement health care coverage being offered by large companies.

Unlike many private employers, state governments continue to offer some level of retiree health care benefits to help attract and retain talented workers, according to a report titled “State Retiree Health Plan Spending,” published by The Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation in May, 2016.

With the exception of Idaho, all states currently offer newly-hired state employees some level of retirement health care benefits as part of their benefits package, according to the report. Of the states offering retiree medical benefits, 38 have made the commitment to contribute to health care premiums for the coverage being offered. State employers are, however, also making changes to the retirement health care insurance benefits they provide to state workers.

Significant among these changes for the states is at least one driving force-the Governmental Accounting Standards Board (GASB) now requires states to report liabilities for retirement benefits other than pensions in their financial statements. The changes were required from all states by the end of 2008. As a result, the increased financial transparency forced states to review the cost of their other post-employment benefits (OPEB) and address how they plan to pay for them.

Because retirement health care benefits account for the majority of the states’ OPEB obligations, many states have made policy changes to address the upcoming obligations. Factors such as date of hire, date of retirement or vesting eligibility, including minimum age and minimum service year requirements, are now being used by states to vary or limit retirement health care benefits.

Overall, from 2010 to 2013, the states saw their OPEB liabilities decrease by 10 percent from $627 billion after inflation adjustments. While this may sound contradictory, the declines are attributed to a slowdown in the growth of health care costs coupled with benefit modifications aimed at cost reductions.

To look at one state as an example, California’s recent budget revealed that health care benefits for retirees are costing the state more than $2 billion a year for an 80 percent increase over the prior 10 years. Although the situation recently changed, California was previously one of 18 states that had nothing set aside to cover its future retiree health care benefit costs of $80.3 billion.

It should be noted that retiree health care plans are typically funded by plan sponsors on a “pay as you go” basis, meaning that monies to pay current and future health care obligations are taken from current assets and not set aside in advance. This differs significantly from pension plans governed by ERISA, which are subject to funding guidelines.

In response to California’s unfunded OPEB liability, employees and the state are now paying into a fund for future retiree health care benefit costs. The state is also matching $88 million in employee contributions and paying an additional $240 million to prefund future retirement health care benefit costs. The changes are impacting retirees as well as state and private employers.

Overall, employer-based retirement health care benefits, once important for supplementing Medicare for retired seniors, continue to decline.

The Potential Impact of Eroding Employer-Based Health Care Retirement Benefits

Many baby boomers who are currently covered by retiree medical plans and plan to rely on future employer-paid medical benefits, are likely to be disappointed to learn that these benefit plans can be changed or terminated. ERISA-governed benefit plans typically contain a “reservation of rights” provision allowing the plan sponsor to change or terminate all or parts of the plan. Many private and state employers are reducing or terminating retiree health benefits due to the increasing cost of insurance premiums, rising health care costs, and increases in longevity.

Since the early 1990s there have been many cases where unexpected changes to post-employment pension and medical benefits have resulted in lawsuits. Typically, the key issue is the reservation of rights language and/or collective bargaining agreement language for employees who were covered by a union contract which referenced retiree medical benefits.

Beneficiaries who have questions about their retiree medical benefits should speak with their plan sponsor to learn about the specific benefits available to them and have a contingency plan for bridging their medical coverage to Medicare, if they are considering early retirement or want to better understand future benefits.

May, 2016

Why the Current American Health Care System Does Not Work and Why It Should Be Changed

The preference for minimal government oversight and ideas of individualism are responsible for the way American health care system is structured. However, access to health insurance and health care has been a pressing issue in this nation for a long time; rated by the WHO as one of the worst among industrialized countries, the United States’ health care system is too costly and fails to cover everybody. Despite president Obama’s attempt to bring about change, many continue to question the effectiveness of the Patient Protection and Affordable Care Act the concerning both costs and overall coverage. The issues regarding health care reform directly affect the feasibility of the American Dream because adequate health care and insurance are necessary to full citizen participation and it is the government’s responsibility to provide access. I believe that given this nation’s strong anti-statist values it will be difficult to implement a federal health care policy; therefore it is more feasible for states to create health reforms like the one in Massachusetts and ensure universal health care.

In 2007, the US health system presented many problems concerning the amount of people who were both uninsured and underinsured and the fast rise of insurance premiums causing many Americans to report debts and problems due to medical bills (Commonwealth Fund Commission, 232). The cost of American health care is inarguably one of the major setbacks of the system; it is the highest amongst those of other industrialized nations but not necessarily more effective. For instance, a case study in the town of McAllen, Texas, shows how the overuse of medicine and the “fee for service” incentives available to doctors can really drive up the cost of medicine. McAllen is one of the most expensive health care markets in the country where most doctors focus less on preventive care and more on running extra tests, services and procedures out of fear of malpractice, influenced by differences in training, or simply to make a few extra dollars. (Gawande, 340-342). Although the situation in McAllen might be an extreme example, it does not fail to explain how the “culture of money” partly affects the cost of health care system. Unlike systems such as Canada and Japan, the American government plays a minimal role in bargaining down prices or setting price standards, this lack of control allows doctors and medical institutions to often purchase the latest technology, but not the most efficient (Klein, 256). Nevertheless, doctors are not to be labeled as the villains because private insurance companies add to the problem by expending a quarter and a third of their revenues on administrative costs (Weissert and Weissert, 350).

The high number of uninsured Americans (45 million in 2007), is another disconcerting fact regarding the downfalls of the American health care system; it is unfortunate that in an industrialized nation, once considered the most powerful in the world, people are often forced to put their career dreams on hold in order to gain access to employer based insurance. This has a negative impact on the nation’s economic and political development because people who could create the latest technological innovations are “locked” at Wal-marts and the likes. Low income uninsured families like Greg and Loretta, who struggle to keep their children healthy, lose all faith in the American dream and essentially become a burden for the rest of society. Some argue that good health is a personal responsibility, and yes eating a burger everyday will obviously have negative impacts on a person’s health and they should be held accountable for those poor choices. Consequently, some would blame Greg and Loretta for their unfortunate condition, but the question is; how can their children be expected to become productive citizens if they lack basic health care? The American Dream encourages individualism, but individuals cannot perform to the best of their abilities if they lack the necessary tools to do so.

In 2006, the state of Massachusetts passed an “ambitious” health care reform that improved access to care and lowered the rate of uninsured working age adults; in spite of its high costs, this plan exemplifies how reforms at the state level can perhaps be easier to implement and regulate, consequently having successful results. The plan is essentially composed of three parts: expansion of the state’s Medicaid progress (establishing income-related subsidies), creating new private insurance plan open to individuals, and lastly it requires that both individuals and employers participate in the health insurance system or pay a fine. Furthermore, it provides individuals with the alternative to buy from private insurers if they do not have access through an employer (Long, 321). Mixing public and private markets achieves near-universal and gives citizens options.

Two of the most important elements of this reform are the certainty of having access to coverage in the case of unexpected unemployment and not having to worry about rejection due to pre-existing conditions (Kaiser Family Foundation, 325). The economic downturn has and continues to hurt many families, many jobs are uncertain and health insurance is no longer secure, therefore by making sure citizens continue to have access to health coverage, the state of Massachusetts is essentially contributing to the overall development of the nation’s economy. When people are not worried about paying astronomical medical bills, they have more time and money to spend on purchasing houses, cars, etc which ultimately results in consumerism and more profits. Lastly, the Massachusetts provides citizens with high quality care that allows them to make regular doctor visits and access specialists, tests and medications as needed (Kaiser Family Foundation, 328). This approach is similar to the preventive care practiced in countries like Great Britain; essentially it is more beneficial for both the doctor and the patient to treat any conditions before they get out of hand.

Although the Massachusetts health care reform has proved to make significant improvements, like any other reform it has its downsides which may lead people to focus on the inequities and overlook the success. For instance many Massachusetts residents believe that more education about key aspects of the health reform would help better understand how the programs work. Residents are specifically interested in income limits to qualify and how to apply for coverage (Kaiser Family Foundation, 331). It is expected that citizens have questions about newly implemented programs and that they may not understand specific medical, political or economic jargon, but this is not a major concern because education can be easily provided. On the other hand, some would argue that the high cost of this plan is indeed a significant problem which must be addressed; nevertheless Massachusetts legislators are aware of the cost and are working to stabilize the finances. Firstly, they want a new payment of method that rewards prevention and effective control of chronic disease instead of paying according to the quantity of care provided. Secondly, the commission is looking to reimburse physicians for episodes of care rather than individual visits. Health experts agree that if Massachusetts is able to implement this changes, it will be as “audacious an achievement as universal healthcare” (Sack, 334-336).

Today, the future of president Obama’s Patient Protection and Affordable Care Act is somewhat uncertain. Republicans want to repeal it and skeptics argue that it is not going to solve the existing problems. Although this reform promises desirable aspects like overall coverage and cost reductions, the results are solely based on projection, making it difficult to guarantee that it is going to be successful. The Massachusetts health care plan has already been implemented and proved to create significant improvement. Essentially this model presents an effective alternative for health care reform and it celebrates the values of anti-statism by allowing states to make their own decisions.

Works Cited
Commonwealth Fund, “Why not the Best: Results from the National Scorecard on US Health Performance”. July 2008
Gawande, Atul. “The Cost Conundrum”: What a Texas town can teach us about health care. The New Yorker 1 June 2009
Kaiser Family Foundation, “The Uninsured: A Primer”. October 2008
Klein, Ezra. “The Health Nations: How Europe, Canada, and Our Own VA Do Health Care Better”. The American Prospect. 7 May 2007
Long, Sharon K. “On the Road to Universal Coverage: Impacts of Reform in Massachusetts at one year”. The Commonwealth Fund. June 2008
Sack, Kevin. “Massachusetts Faces Costs of Big Health Care Plan”. The New York Times. 16 March 2009

Hospital Leadership, Strategy, And Culture In The Age of Health Care Reform

With just eleven months to go before the Value-Based Purchasing component of the Affordable Care Act is scheduled to go into effect, it is an auspicious time to consider how health care providers, and hospitals specifically, plan to successfully navigate the adaptive change to come. The delivery of health care is unique, complex, and currently fragmented. Over the past thirty years, no other industry has experienced such a massive infusion of technological advances while at the same time functioning within a culture that has slowly and methodically evolved over the past century. The evolutionary pace of health care culture is about to be shocked into a mandated reality. One that will inevitably require health care leadership to adopt a new, innovative perspective into the delivery of their services in order to meet the emerging requirements.

First, a bit on the details of the coming changes. The concept of Value-Based Purchasing is that the buyers of health care services (i.e. Medicare, Medicaid, and inevitably following the government’s lead, private insurers) hold the providers of health care services accountable for both cost and quality of care. While this may sound practical, pragmatic, and sensible, it effectively shifts the entire reimbursement landscape from diagnosis/procedure driven compensation to one that includes quality measures in five key areas of patient care. To support and drive this unprecedented change, the Department of Health and Human Services (HHS), is also incentivizing the voluntary formation of Accountable Care Organizations to reward providers that, through coordination, collaboration, and communication, cost-effectively deliver optimum patient outcomes throughout the continuum of the health care delivery system.

The proposed reimbursement system would hold providers accountable for both cost and quality of care from three days prior to hospital admittance to ninety days post hospital discharge. To get an idea of the complexity of variables, in terms of patient handoffs to the next responsible party in the continuum of care, I process mapped a patient entering a hospital for a surgical procedure. It is not atypical for a patient to be tested, diagnosed, nursed, supported, and cared for by as many as thirty individual, functional units both within and outside of the hospital. Units that function and communicate both internally and externally with teams of professionals focused on optimizing care. With each handoff and with each individual in each team or unit, variables of care and communication are introduced to the system.

Historically, quality systems from other industries (i.e. Six Sigma, Total Quality Management) have focused on wringing out the potential for variability within their value creation process. The fewer variables that can affect consistency, the greater the quality of outcomes. While this approach has proven effective in manufacturing industries, health care presents a collection of challenges that go well beyond such controlled environments. Health care also introduces the single most unpredictable variable of them all; each individual patient.

Another critical factor that cannot be ignored is the highly charged emotional landscape in which health care is delivered. The implications of failure go well beyond missing a quarterly sales quota or a monthly shipping target, and clinicians carry this heavy, emotional burden of responsibility with them, day-in and day-out. Add to this the chronic nursing shortage (which has been exacerbated by layoffs during the recession), the anxiety that comes with the ambiguity of unprecedented change, the layering of one new technology over another (which creates more information and the need for more monitoring), and an industry culture that has deep roots in a bygone era and the challenge before us comes into greater focus.

Which brings us to the question; what approach should leadership adopt in order to successfully migrate the delivery system through the inflection point where quality of care and cost containment intersect? How will this collection of independent contractors and institutions coordinate care and meet the new quality metrics proposed by HHS? The fact of the matter is, health care is the most human of our national industries and reforming it to meet the shifting demographic needs and economic constraints of our society may prompt leadership to revisit how they choose to engage and integrate the human element within the system.

In contemplating this approach, a canvasing of the peer-reviewed research into both quality of care and cost containment issues points to a possible solution; the cultivation of emotional intelligence in health care workers. After reviewing more than three dozen published studies, all of which confirmed the positive impact cultivating emotional intelligence has in clinical settings, I believe contemplating this approach warrants further exploration.

Emotional intelligence is a skill as much as an attribute. It is comprised by a set of competencies in Self-Awareness, Self Management, Social Awareness, and Relationship Management, all leading to Self Mastery. Fortunately, these are skills that can be developed and enhanced over the course of one’s lifetime.

Keeping the number of handoffs and individuals involved in delivering the continuum of care, let’s examine how emotional intelligence factors into the proposed quality measures the Department of Health and Human Services will be using come October, 2012:

1.) Patient/Caregiver Experience of Care – This factor really comes down to a patient’s perception of care. Perceptions of care are heavily shaded by emotions. Patients consistently rate less skilled surgeons that have a greater bedside manner as better than maestro surgeons that lack, or choose not to display, these softer skills. Additional research into why people sue over malpractice also indicates how perceptions of care are formed. People don’t sue over a medical mistake in and of itself. People sue because of how they felt they were treated after the error occurred. From the patient’s perspective (and often their family’s) there’s a difference between being cured and being healed. The difference often can be found in the expression of authentic empathy through healthy, professional boundaries.

This is a key driver in patient decision-making as well. Patients tend to choose a hospital based upon one or two criteria; the recommendation of their primary care physician (with whom they have an established relationship) and/or upon the recommendations from family members or friends that have experienced care in a particular hospital or an individual surgeon. A quick look into the field of Applied Behavioral Economics supports this finding. Economic decision making is 70% emotionally driven with the remaining 30% based in rational thought. In many instances, it would appear that a lot of hospital marketing initiatives don’t seem to reflect an understanding of this phenomena. Waiting room times in Emergency Rooms have little to do with why patients choose a hospital, yet we see billboards everywhere that have the actual E.R. wait times electronically flashing along the roadside.

A patient’s experience (and perception) of care can be highly impacted at the handoff points within the continuum of care. Any new model of care will require exceptional cross-organizational communications to emerge. This requires a high level of engagement and commitment to the new vision at every patient touch-point.

This metric also addresses the caregivers’ experience of care. This speaks largely to the experience of nurses that are delivering that care. The research related to the impact of cultivating emotional intelligence in nurses clearly demonstrates a reduction in stress, improved communication skills, improved leadership and retention, the ability to quickly connect and engage patients, as well as a reduction in nurse burnout (which leads to turnover and additional stress amongst the remaining staff).

2.) Care Co-ordination – Again, this will require optimal engagement and pro-active communication intra-organizationally and cross-organizationally. Each handoff introduces opportunities for variable care to emerge that must be seamlessly co-ordinated. Poor co-ordination also introduces the risk of eroding the quality of the patient’s experience.

3.) Patient Safety – Research shows that the cultivation of emotional intelligence competencies in nursing contributes to positive patient outcomes, lowers the risk of adverse events, lowers costs at discharge, and reduces medication errors, all while lowering nurse stress, burnout, and turnover. Each time a nurse resigns it adds to the nursing shortage on the floor, requires additional hours from other nurses, and costs the hospital approximately $64,000, on average, to backfill the open position. Improving how an institution cares for its nurses improves the level of patient care and safety as well. In many institutions, this will require a shift in leadership’s perspective in order to support a culture that embraces and values the critical role nurses play in maintaining patient safety.

4.) Preventive Health – Elevating Self-Awareness and Social Awareness in clinicians helps them quickly connect and effectively communicate with patients. Subtle, non-verbal cues become more readily apparent, helping clinicians understand the fears and emotions of their patients. Self Management and Relationship Management helps clinicians communicate appropriately and supports the expression of authentic empathy through healthy, professional boundaries. All of these factors come into play when speaking with patients about lifestyle choices, course of treatment, and preventive health care.

From our own personal lives we’ve all learned we cannot “fix” other peoples’ behaviors. We can, however, be in relationship and help support healthy changes they’re ready to embrace. Pro-actively moving to improve preventive health will require deeper, more authentic relationships to emerge between front-line health care providers and patients.

5.) At-Risk Population/Frail Elderly Health – Like preventive health, being measured on the care of the community’s at-risk population and elderly will require an innovative approach to community outreach and pro-active communication. These are not populations that can be easily reached via Facebook or Twitter. Building effective relationships with these demographics will require trustful, human contact and deep engagement with each population, both of which are supported through the development of a mindful approach (i.e. emotionally intelligent) to the challenges at hand.

It will be interesting to see how reform unfolds and how leadership within the health care delivery system chooses to respond to the challenges that lie ahead. Systems and hospitals that choose to take an honest, evidence-based look at how they choose to lead, how they create and execute strategy, and the organizational culture they’re cultivating will be well served in preparing to successfully navigate this unprecedented change.

© 2011, Terry Murray.