Tuesday, August 07, 2007

Torinus Responds to Inquiries

I noted yesterday that I would post an update when John Torinus responded to my questions, but it seemed worthwhile to separate the responses into a follow-up post.

One of my questions stemmed from this line that appeared in the August 5 column by Torinus:
Health maintenance organizations, another grand scheme that is a form of what the Riemer plan proposes, has been roundly rejected by patients and doctors alike. Why? Because it limits choice, narrows competition and often defaults to rationing.
Since the Healthy Wisconsin plan actually would be based upon the coordinated system of managed care plans currently used by the state, I asked Torinus if he was aware of any instances of limited choices or rationing for state employees.

Torinus' response: "I am not aware of complaints in particular about the ETF plan; nor did I cite them in my column. I am aware that the backlash against HMOs in the late 1990s was enormous, and almost all the major health plans backed off the rationing, off the 'management.' That comes from the heads of the heads plans [sic] who I have talked with many times."

Fair enough. But the fact is the Healthy Wisconsin plan is modeled after the state health plan, which doesn't contain any issues with limited choice or rationing (remember, it's a Cadillac).

Another question of mine pertained to this paragraph from the August 5 column, which immediately followed the quote above about HMOs:
In sharp contrast, employees in consumer-empowered plans generally rate their health benefits as excellent. Why? They are in control. They are given health accounts. It's their money to spend or not spend. They make the choices. They collaborate with their doctors on decisions about treatments. Some large system isn't managing them.
I presented Torinus with some recent independent survey data (see here and here) that shows HDHPs actually have low satisfaction rates from participants, particularly in relation to comprehensive coverage plans, and I asked if he has any data that suggests the opposite.

Torinus' response: "My satisfaction readings come from companies I have visited in Wisconsin and from an employee survey at Serigraph. I take my stuff from the real world, up close and personal."

This answer doesn't quite seem to cut it. The independent surveys I cited for Torinus come from the real world, too, and they are undoubtedly more representative than an internal company survey from Serigraph and the undocumented visits that Torinus has made with some companies around the state (who did he meet?, what did he ask?, etc.).

In addition to those two main questions, I also followed-up with Torinus on the initial question I asked a couple of week ago about the total costs for a family policy at Serigraph, including all cost-sharing amounts. The question came in response to Torinus citing "$7400 per employee" costs at the company in one of his July columns.

Shortly after I sent him the question the first time, Torinus forwarded my request to a benefits specialist at Serigraph, but I never heard back from that person. In this latest email, I asked Torinus if he could ask that person again to send me the figures.

Torinus' response: "When I gave you the number of $7400 per covered employee, that was all charges. It comes off total net charges. So, the deductibles and co-insurance and co-pays are included. At Serigraph, the split works out to about 78% company and 22% employee."

This, of course, still doesn't answer my question. Furthermore, the discussion about "total net charges" suggests that Serigraph self-insures, which means it uses an employer-sponsored fund to pay medical expenses rather than contracting through an insurance company.

Since the "per covered employee" figure is coming off total net charges, that means $7400 is the total amount Serigraph and its employees have spent in health care -- premiums and cost sharing -- divided by the number of employees at the company. This invariably deflates the cost because it includes single policy people along with those who didn't ever use their coverage and therefore didn't add up any cost sharing charges.

What's more, since the company self-insures, that means it needs to contract on its own with health care providers to get discounted prices once the deductible is paid and benefits kick in. Based on the response by Torinus, the $7400 figure doesn't include the administrative costs associated with this task.

In a reply, I laid out these concerns for Torinus, explaining that the $7400 figure really doesn't answer my question. He emailed back to say this is "an unproductive dialog," and he asked that it not continue.

So that's that. I'm disappointed I wasn't able to get a figure for total costs of a family policy, including all cost sharing, at Serigraph. I think it's an important question, and it gains in importance each time the $7400 figure is cited on the second page of the Business section in Sunday Journal Sentinel.

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14 Comments:

Blogger Dad29 said...

It's well-known that self-insuring provides a number of cost benefits to employers (and employees), among them the reduction of "mandated bennies" costs.

August 07, 2007  
Blogger Seth Zlotocha said...

I don't doubt that self-insuring could provide cost-savings, at least in some situations. Large employers probably would have an easier time of it than smaller employers. If nothing else, there's no insurer profit to worry about, although that doesn't mean it's free from administrative costs. The employer still would be responsible for contracting with area health care providers every year, unless it wants to pay list prices, which would probably probably be more expensive than paying the administrative costs necessary to secure a discount.

And, in addition to avoiding "mandated bennies," self-insuring also avoids the need for safeguards that ensure provided benefits are adequate -- e.g., if diabetes benefits are offered, the cost of equipment for treatment is also included -- which is what state mandates do. See here for more. In the end, avoiding "mandated bennies" is just shorthand for reducing benefits.

And the bottom line is that Torinus isn't being completely forthright about the total costs of his company's health care policy, and his last comment suggests he really doesn't want to be.

August 07, 2007  
Blogger krshorewood said...

I heard John Torinus at a meeting of IBA once state that he himself spends a lot of hours shopping for plans and evaluating vendors -- not to mention issues around his personal health care.

I recall at another meeting at UWM a business owner talking about spending about 20 hours evaluating breast cancer testing services.

I'm self employed and I know well time is money.

As for the cost of health care at Serigraph, with employees paying 22% of $7,400 that comes out to an average of $1,600 a year -- though of course some pay more and some pay a lot less. But consider that those who pay more probably from year to year that saddles them with a rather high cost.

If he is paying an average of $40,000 in salary, Heathy Wisconsin breaks out about even for both Serigraph and the employee, except Serigraphy could forego the administrative costs. Serigraph will also be able to be able to hire who ever they want without the worry that the hiree could get on the insurance despite pre-existing conditions.

The employee can have the security of knowing that no matter what their condition is, coverage will not be declined.

August 07, 2007  
Blogger John Foust said...

And did he explain his example of KI? Their web site says they have 3,000 employees, but Torinus said there's only 1,429 in the plan. Who gets offered health care and who doesn't? Who gets surveyed? If a company doesn't offer health care to a category of workers, is that a savings?

I'd also love to know whether Serigraph and KI offer different health care plans to their exec teams. After all, I think it's fair to talk about the way that extra health care can be used to lure and retain employees. It would also be fair to consider whether the state plan would increase or decrease those administrative costs of handling health insurance.

As for the unproductive dialog - I think many employers look at health care as a cost of doing business that needs to be minimized by the HR department. If an employee is paying a deductible, that really has nothing to do with his bottom line. It's not on his radar unless the employees squeal loud enough. The perceived value of their health care plan only matters to the extent that it affects their labor pool. If the plan gets too bare-bones, employees might leave. If the company thinks it has a good plan, they can use it to attract workers.

Apart from all the free-market talk about using health care to lure workers, though, let's not forget that most people aren't given a detailed view of the health care plan when they're offered a job. You take what they give, or not.

As Torinus says, the best way to get answers would be "up close and personal." You're to the point where you want to track down employees and ask them what they really think, aren't you? :-)

August 07, 2007  
Blogger Seth Zlotocha said...

Keith,

You're definitely right about about the administrative costs of shopping around for health plans each year, let alone the costs of contracting with various health providers in the case of self-insurance. Those are costs that should be included more often in the health care debate, but, unfortunately, the fact that they're difficult to quantify means they're often left out.

And your point about security is really the bottom line, and that goes for employees and employers. It's chronic conditions and major treatments -- which are often not the fault of the patient -- that cost all of the money, and a go-it-alone answer for either employers or employees just isn't sustainable. If a Serigraph employee or, worse, a number of Serigraph employees develop a chronic condition like cancer, for instance, costs are going to dramatically jump for those employees and the employer. The only way to affordably sustain coverage is to spread that cost -- and risk -- out amongst the widest population possible, which is exactly what fundamental reform aims to do.

John,

I didn't ask Torinus about KI -- I wanted to keep my inquiries as focused as possible -- but Jo Egelhoff tells me that she does have some specific figures from the KI benefits manager. It looks like I'll be meeting with Jo on Friday, and I plan to talk with her about it at that time.

And you're definitely right that most employees don't get the details on health coverage prior to taking a job. That's why it's interesting that a Kaiser Family Foundation survey found that when employees are given an option between comprehensive coverage with higher monthly premiums and a HDHP with lower monthly premiums, over 80 percent opt for the comprehensive coverage.

And I'm actually content to leave well enough alone with Serigraph. I never intended to be a thorn in Torinus' side. I just wanted to find out what his numbers truly represent. And if they truly represented the total costs of a family policy, then I'd honestly be glad to write up a positive post about it that recommends the state adopt a similar set of plans. But my better judgement always figured there was something to it -- as you pointed out before, there are no magic beans of low cost health care. To be honest, I'm a little surprised Torinus got as defensive as he did. But, then again, being defensive with me doesn't really hurt him. I'm a blogger with a readership of about 100 a day, and probably only a portion of that actually cares at all about Torinus' figures. Next Sunday, Torinus will be reaching hundreds more readers in a day than I get in a week.

August 07, 2007  
Anonymous M.Z. Forrest said...

An easier way for future reference would be to ask what the COBRA premiums are for the respective classes. This would give you employer and employee costs.

As for the self-funded, they all buy into networks. WPPN, Alliance, Prevea. There is an Aurora one too IIRC. I think my company administered plans on 100 or so different networks in Wisconsin. In regards to savings, it all has to do with risk side of the equation. There are also some cashflow things that aren't priced. For example, having to expend 30% of your yearly heath dollars in a single month is something that can occur in self-funded that requires a company to have greater liquidity.

August 07, 2007  
Blogger Seth Zlotocha said...

Thanks for your comment, M.Z. I'll keep that in mind in the future.

August 07, 2007  
Blogger Jack Lohman said...

Yes, shoving an HMO or health care network down the throats of employees is wrong, but Healthy Wisconsin DOES NOT DO THAT! It allows employees to choose an HCN or FFS provider without regard for whether the employer, other employees, or even other family members so choose. I'm not a fan of HCNs, by I am a fan of the choice Healthy Wisconsin provides. Both HCNs and FFS providers have their advantages and disadvantages, but putting the choice in the hands of the consumer will shine a bright light on both of them, and their quality should improve as a result.

Importantly, under HW employers don't have to negotiate or contract with anybody. Or answer to disenchanted employees or anything else. They have virtually zero administrative costs outside of paying their taxes. They'll have the same relationship that they do today with the employee's homeowners and car insurance; none.

Healthy Wisconsin is the right thing to do for our state's population, its people, its economy and, especially, for the businesses who can no longer afford to pay runaway healthcare costs.

August 07, 2007  
Blogger Seth Zlotocha said...

Good point, Jack. The FFS option is always there for people who feel a managed care plan would be too constrictive.

August 07, 2007  
Blogger Zach W. said...

As someone who's a member of the state employees health care plan, I simply can't see how anyone would be opposed to using it as a model for universal health care in Wisconsin. I know conservatives love to scream about how universal health care would take away the ability of people to make their own decisions about universal health care, and that's actually the beauty of the state plan. We get to choose our own health care provider (from a list of approved companies), and then from there we get to choose our own doctors, hospitals, etc, as long as they're covered by the provider we've chosen.

The state employees plan is all about choice, and I can't think of one employee I've talked to that's had complaints about the lack of choice. This is a great program to use as a model; I just wish conservatives would look past the stigma of "universal coverage" and see the plan for what it really is.

August 08, 2007  
Blogger Seth Zlotocha said...

Thanks for your comment, Zach. I'm a member of the state employee health plan, as well, and I agree completely.

August 08, 2007  
Anonymous Anonymous said...

The stigma isn't universal coverage. The stigma is government-run. You can slice it, you can dice it, you can spin it and dream about it, but in the end, it is a government-run health care system and for that reason, it will fail.

It will never be properly financed and it's promises will never be realized.

August 08, 2007  
Blogger Seth Zlotocha said...

The privately-run health system we currently have has failed to provide hundreds of thousands of Wisconsinites and millions of Americans with health coverage (not to mention the thousands and millions more who are under-insured), Anon.

Healthy WI is a public-private hybrid in which government ensures everyone has affordable coverage, pools participants to distribute risk and incrase purchasing power, and streamlines administrative functions to lower overall costs, while private entities still operate as the payers and the providers of health care. The fact that you can only see "government run" out of that set-up just shows that you're after an ideology, not a solution for a system that's failing.

August 08, 2007  
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January 26, 2012  

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