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The Ted Almon BlogArticles on Healthcare ReformTuesday, January 22, 2008 Posted Jan. 21, 2008 Opinion Health insurance may make small business buy as one Guest Column: Ted Almon What is an MEWA and can it help us with the cost of health insurance? The Employers Association - a century-old but rather low-profile trade group - has been holding meetings around the state recently to introduce smaller businesses to the concept of a Multiple Employer Welfare Association, or MEWA, which it touts as a potential alternative to traditional employer-sponsored health plans. As the name implies, an MEWA starts out like a group purchasing plan. If successful, the program should evolve into a self-funded group - managed in much the same way the most sophisticated large employers manage this key expense. The large company's human resources staff is replaced by an outsourced contract with a consulting firm having this specific expertise, and the expenses associated with the MEWA are presumably assessed to participating companies on a pro-rata basis. Naturally, the expenses are expected to be dwarfed by the savings benefit of participation. If you were to assume that our current employer-sponsored, insurance-funded system of health coverage is the only alternative, and that government-sponsored reform is unlikely or undesirable, then the MEWA idea has much merit. A large self-insured, skillfully managed health plan in which smaller companies could participate is surely an attractive option. Lacking both the resources and expertise to manage health expenses, not to mention the claims data that would make management possible, small employers are essentially powerless to influence this key expense except by shifting costs onto their employees. In much larger firms, a more rational and organized approach to health care costs is possible. By identifying and managing the relatively small percentage of workers who represent the preponderance of claims expense, effective self insurers can and have achieved dramatic savings results. At the same time they can have a most positive impact on the health and welfare of the work force, improving productivity and worker satisfaction. So why haven't you heard about the MEWA option before? Perhaps the easiest answer is found on the U.S. Department of Labor fact sheet (available at http://www.dol.gov/ebsa/newsroom/fsMEWAenforcement.html) on the subject. "The Department has devoted significant resources to investigating and litigating issues connected with abusive MEWAs created by unscrupulous promoters who sell the promise of inexpensive health benefit insurance, but default on their obligations," the Labor Department says. Still, the Employers Association and its proposed consultant are recognized and reputable organizations. And MEWAs would be subject to regulation by the R.I. Office of the Health Insurance Commissioner, and presumably would be required to establish appropriate reserves in the event of insolvency or lawsuits. The preliminary but necessary transitional phase - during which the MEWA operates essentially like an Association Health Plan (AHP) - is also potentially problematic. Group purchasing of this type, although still practiced in some areas, has largely fallen victim to cherry-picking by insurers and subsequent adverse selection. Employer participants might shift to lower-cost alternatives, subjecting the plans to constantly shifting risk profiles. To its credit, The Employers Association was quite forthright in stating clearly that MEWAs are not intended to reform the health care system. Properly executed, however, they could improve the lot of some small businesses. Unfortunately, perhaps, it seemed to me and some others in the audience that the death spiral of our present system had gone too far already to be saved by MEWAs. In health care, we have reached a point where we cannot solve anyone's problem unless we solve everyone's problem. The principles of a well-managed MEWA, however, are clearly part of that solution. In fact, perhaps the State of Rhode Island should consider setting up a large MEWA for all its citizens. Thursday, January 10, 2008Community Hospital Task Force
January 7, 2008
Public comment on the Preliminary Draft Report of the Community Hospital Task Force by Ted Almon Let me start with full disclosure. My regular attendance at the meetings of the task force has not been entirely a humanitarian gesture. I truly believe the hospitals are an important element of the social fabric of the community and that they should be preserved, BUT, they are also customers of my company and we have millions of dollars invested in accounts receivable from them at any given time. So let's just say my interest in them isn't entirely social idealism, there's a healthy dose of pragmatic business sense involved too. With all due respect to the volunteer members of the group, I would have to say that from either perspective I have found the proceedings rather disappointing. Upon more serious reflection, I believe the group has never really come to grips with the gravity of the situation they face, or with the consequences of ineffectual or pusillanimous remedies. By any objective business standard, more than a few of the community hospitals are failing businesses; at least one is unlikely to survive on its own even in the near term. Nothing I have heard in the discussions of the group has any chance of changing that. Back in July when the group formed I wrote a rather hopeful Op-Ed piece that assessed the challenge as rather straightforward. The hospitals lack pricing leverage in a market that is payer-centric. Together they lost about $15MM in 2006 while the insurers made more than $75MM in profits. We are putting more than enough dollars into health insurance, but too few are making it to actual health care. How difficult can this be? Of course, if this really were the stark world of business in which many of us survive, some of the hospitals would simply perish. The Task Force exists because of the prospect that pure Darwinian competition is unlikely to leave the community with a provider network that matches the health needs of our communities. It is hardly coincidence that the forces of competition took the former St. Joseph site, in the heart of perhaps our most vulnerable population as an early victim. In fact I have been surprised that a more overt recognition has not arisen from the discussion that the competitive model for our hospitals is simply not working. I know there are members who know this as an incontrovertible fact. The Op-Ed concluded that in order for the Community Hospitals to survive there were only two possible solutions at which the Task Force could arrive. Allow the hospitals to band together into a network such that the pricing leverage swings to their advantage over the payers, or recommend a rate setting commission to regulate an equitable distribution of the more than adequate revenue that is already in the system. I have heard neither discussed. We must recognize that the hospital network is a public utility and regulate it accordingly, or we should get out of the way and let the mergers proceed. Either way is fine with me, but caviling over the vagaries of case based reimbursement for Medicaid, a Trojan horse for even further cost shifting onto the private sector by the State if I ever saw one, is just such a waste of time. I believe the acute care infrastructure in our State could be re-engineered to produce dramatic savings while improving both quality and access for all Rhode Islanders. The model I envision is called "Centers of Excellence" where essential, non-redundant programs and services are distributed according to the core competencies of the institutions and the needs of the geography and population they serve. These changes can only result from coordinated planning and collaboration among the hospitals, payers, and regulators. Competition will never get us there because the foundation of the competitive model is fundamentally flawed. Insurers compete not on rates but to insure only the healthiest groups, while providers compete to provide even more of the most remunerative procedures, regardless of the needs of the population or its health status. It simply will not fix itself. I realize this is a critical assessment and that the volunteer members deserve our appreciation and respect for their efforts. I hope it is clear that I am finding fault with the process and the apparent direction of the outcome to this point, while recognizing the earnest effort and at times striking insight of the participants. Thank you for the opportunity to share these thoughts, Ted Almon President, CEO Claflin Company 401-739-4150 X8237 tedalmon@claflin.com ArchivesNovember 2005 February 2006 October 2006 December 2006 February 2007 July 2007 October 2007 December 2007 January 2008
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