Bargaining for Health Benefits CWA Staff Web Briefing March 15/17, 2011

2 What We will Cover Trends and Developments in Health Benefits Trends and Developments in Health Benefits A Framework for Bargaining Health Benefits A Framework for Bargaining Health Benefits Key Elements of Health Plans Key Elements of Health Plans New Approaches to Bargaining Health Benefits New Approaches to Bargaining Health Benefits Resources Resources

Trends and Developments in Health Benefits

4 Health Care System Failures: Costs Rise While Quality Lags Health care costs increase as economy shrinks Health care costs increase as economy shrinks Employer-sponsored health plan costs increased 6.0% in 2009, 6.9% in 2010, est. 8.8% in 2011 Employer-sponsored health plan costs increased 6.0% in 2009, 6.9% in 2010, est. 8.8% in 2011 Annually: 1.7 million hospital acquired infections causing 100,000 deaths [CDC, March 2007] Annually: 1.7 million hospital acquired infections causing 100,000 deaths [CDC, March 2007] 25% of all hospital patients end up back in the hospital within 2 years (2/3’s avoidable) [AHRQ] 25% of all hospital patients end up back in the hospital within 2 years (2/3’s avoidable) [AHRQ]

5 What is Behind these Failures? Why can’t our health plans control costs? Health benefit bargaining focuses on who pays not how care is delivered Health benefit bargaining focuses on who pays not how care is delivered Quantity rewarded, regardless of results Quantity rewarded, regardless of results Prevention is not integral to the system Prevention is not integral to the system Providers have no incentive to improve Providers have no incentive to improve Plans do not promote more efficient delivery of health care Plans do not promote more efficient delivery of health care

6 Health Care Reform Will Impact Health Plan Costs Some Elements of Reform May Add to Plan Costs Some Elements of Reform May Add to Plan Costs –Cover adult dependents to age 26 –Eliminate lifetime limits –Excise Tax on high value health plans –Auto-enrollment and reduced waiting periods

7 Health Care Reform Will Impact Health Plan Costs (Continued) Some Elements of Reform May Offer Cost Relief to Employer Plans Some Elements of Reform May Offer Cost Relief to Employer Plans –Gov’t reimbursement to employers for early retirees with very high health costs –Expanded coverage of uninsured through health exchanges and Medicaid –Improvements in Medicare: preventive care, prescription drug “donut hole”

A Framework for Bargaining for Health Benefits

9 CWA Approach to Health Care Bargaining There is no “one size fits all” strategy for bargaining health benefits There is no “one size fits all” strategy for bargaining health benefits Analyze health plan in comparison to other plans Analyze health plan in comparison to other plans Analyze health plan for true cost drivers Analyze health plan for true cost drivers Assess health care agreement in relation to total economic package Assess health care agreement in relation to total economic package

10 Our Guiding Principles in Bargaining for Health Benefits Assure coverage by quality, affordable health plans Assure coverage by quality, affordable health plans Assure access, affordability and fairness for workers at all wage levels Assure access, affordability and fairness for workers at all wage levels Assure access and affordability for those with chronic conditions Assure access and affordability for those with chronic conditions

11 What Determines Affordability The Cost of the Health Care The Cost of the Health Care Plan Design Plan Design Employee and Employer Contributions to Coverage Employee and Employer Contributions to Coverage

12 What Determines Health Care Costs Health Care Costs = Price of Health Care Services X Use of Health Care Services (Utilization)

13 Plan Design: Determines How Much of Health Care Costs are Covered by the Plan 1. Covered Benefits -- Which benefits are offered and/or services covered 1. Covered Benefits -- Which benefits are offered and/or services covered 2. Provider Reimbursement -- The level at which provider charges are reimbursed 2. Provider Reimbursement -- The level at which provider charges are reimbursed 3. Type of Plan -- How a participant can access care 3. Type of Plan -- How a participant can access care 4. Cost Sharing -- The amount of covered charges to be paid by plan and the amount to be paid by participants 4. Cost Sharing -- The amount of covered charges to be paid by plan and the amount to be paid by participants

14 1.Covered Benefits – Which benefits are offered; services covered Ambulatory Patient Services Ambulatory Patient Services Emergency Services Emergency Services Hospitalization Hospitalization Maternity and Newborn Care Maternity and Newborn Care Mental Health and Substance Abuse Treatment Mental Health and Substance Abuse Treatment Prescription Drugs Prescription Drugs Rehabilitative Services and Devices Rehabilitative Services and Devices Laboratory Services Laboratory Services Pediatric Services, including dental and vision care Pediatric Services, including dental and vision care Preventive and wellness services Preventive and wellness services Chronic Disease Management Chronic Disease Management The Affordable Care Act requires all plans to cover “essential benefits” by 2014.

15 2.Provider Reimbursement – The level at which provider charges are reimbursed The amount the plan will pay the provider (doctors, hospitals, other covered providers). Most common methods for determining provider payment: Reasonable and Customary The standard or usual rate charged by providers in the area for a service or procedure Network Discounted Rate The rate negotiated by the plan administrator with providers; usually a discount off of R&C. Resource Based Relative Value Scale Used for physician reimbursement; payments for services are based on the resource costs needed to provide them Pay for Performance Providers rewarded for meeting performance measures related to the delivery of quality health care services.

16 3.Types of Health Plans – How a participant can access care Fee for Service (FFS) Unlimited choice of providers; includes deductible and coinsurance Preferred Provider Organization (PPO) Network & non-network providers covered; includes copays, deductibles, coinsurance Point of Service (POS) More restricted networks; includes copays rather than coinsurance and deductibles Health Maintenance Organization (HMO) Restricted networks -- HMO providers only; includes copays; no deductibles or coinsurance Consumer Driven Health Plan (CDHP) Can be network or FFS style; higher out of pocket costs than other plans High Deductible Health Plan CDHP-style plan; deductibles and out of pocket limits set by law; higher out of pocket costs than CDHP

17 4.Cost Sharing – The Amount of Covered Charges to be Paid by the Participant Deductible Dollar amount paid by participant before plan covers benefits Co-pay Flat dollar payment from participant before specified services. Co-insurance The percentage of covered charges split between plan and participant. Out-of-pocket maximum The maximum amount of a participant must pay for covered services in a year. Premium/Co-premium Monthly payment made for insurance coverage, usually based on the cost of the plan.

18 Requesting Data About Plan Costs Check out Health Care Data Request at Check out Health Care Data Request at Look for trends: Look for trends: –Changes in total costs –Changes in enrollment –Changes in per employee costs Identify Cost Drivers: Identify Cost Drivers: –Number and dollar amount of high cost cases –Number and dollar amount of prevalent diagnoses

19 Requesting Data about Cost Sharing Understand the true cost burden for employees and true plan costs Understand the true cost burden for employees and true plan costs –Some claims not covered –Some charges paid by employees/participant –Savings generated by Coordination of Benefits (COB), discounts, etc. With response to data request, calculate cost share percentage With response to data request, calculate cost share percentage

20 Assessing Affordability What percentage of income should be devoted to health care? What percentage of income should be devoted to health care? –Affordable Care Act sets a guideline of 8%; consider this a maximum Are flat dollar premium contributions and out of pocket expense requirements fair? Are flat dollar premium contributions and out of pocket expense requirements fair? –Does the plan cover high wage and management employees as well as low and middle income bargaining unit members?

New Approaches to Health Benefits Bargaining

22 A Strategic Plan to Change the Course of Health Benefit Bargaining Analyze current health plan for true cost drivers; with employer, engage in thorough data analysis Analyze current health plan for true cost drivers; with employer, engage in thorough data analysis Analyze health plan in light of cost drivers – what changes in plan design could promote quality and achieve cost efficiencies Analyze health plan in light of cost drivers – what changes in plan design could promote quality and achieve cost efficiencies Review developments in plan design and health care delivery and assess feasibility for our plan and contract Review developments in plan design and health care delivery and assess feasibility for our plan and contract Consider approaches that reach outside plan design to work with providers and other plans, employers, unions, purchasers Consider approaches that reach outside plan design to work with providers and other plans, employers, unions, purchasers

23 Strategies to Increase Quality, Control Costs and Instill Fairness/Affordability Promote Preventive Care and Wellness Promote Preventive Care and Wellness –Reduce risk of preventable disease –Approaches  Health Risk Assessments  Health coach, risk reduction plan  Diet, exercise, on-site clinics Improve Chronic Disease Management Improve Chronic Disease Management –Deliver proven treatment to the 20% of patients who incur 80% of costs –Prevent chronic illness from getting worse –Direct engagement with physicians and facilities –Reduce co-pays for maintenance drugs and preventive services

24 More Strategies to Increase Quality, Control Costs and Instill Fairness/Affordability Eliminate Regressive Cost Sharing Eliminate Regressive Cost Sharing –Assess plan costs versus wages of bargaining unit members –Regressive Cost Sharing: Lower-wage workers contribute a greater portion of their income to coverage costs than higher-paid workers. –Progressive rates ensure affordability and allow the lowest earners money to pay for other essentials. –In 2014, when ACA requires coverage, employees must be able to find affordable coverage through their employer, or go to the new health exchange.

25 More Strategies to Increase Quality, Control Costs and Instill Fairness/Affordability Encourage Electronic Medical Records Systems Encourage Electronic Medical Records Systems –Modern technologies streamline administration and reduce waste –Promote quality with accurate, efficient records and access to information about best practices Press for Provider Payment Reform Press for Provider Payment Reform –Incentives for providers to promote quality, comply with standards, coordinate care with others –Work with other employers, Medicare and Medicaid to tie payment approaches to quality care

Resources for Health Benefits Bargaining

27 Important Plan Documents Summary Plan Description (SPD) Summary Plan Description (SPD) Plan Document Plan Document 60-days notice of material modifications (ACA; effective 2012) 60-days notice of material modifications (ACA; effective 2012) Annual summary plan description (ACA; effective 2012) Annual summary plan description (ACA; effective 2012)

28 External Resources For good, unbiased information about employer health plans – costs and design: For good, unbiased information about employer health plans – costs and design: –Kaiser Family Foundation Employer Health Benefits Survey: For good analysis of trends and developments in employer health plans with a business bias: For good analysis of trends and developments in employer health plans with a business bias: –Towers Watson: For extensive information about health care reform and the Accountable Care Act: For extensive information about health care reform and the Accountable Care Act: –

29 CWA Resources Information and tools on health care reform: Information and tools on health care reform: –cwa-union.org/healthcare Sample data requests: Sample data requests: –cwa-union.org/intranet –(click on Bargaining & Organizing tools, then Data Requests) This powerpoint and other webinar info: This powerpoint and other webinar info: –cwa-union.org/cbtraining