Are we approaching the abyss?? (Answer: No.)
Historical perspective from SPBA President Fred Hunt - Jan. 2004
Dear SPBA Members and their Clients & Friends,
People often ask me, quietly, if the health care system, pricing, payment and expectations has gotten so gummed-up and bogged down that we are on the verge of collapse or falling into an abyss. The answer is a simple "No". Things have been worse prior to each boom in benefits.
>>In 1974, when ERISA was passed, I remember that about 95% of benefits experts predicted that employers would dump existing plans, and no fool would ever purposely start a self-funded plan and have to live under the draconian requirements of the new law (fiduciary & reporting). ERISA was seen as such a killer that it was scornfully called "Every Ridiculous Idea Since Adam". Instead, the "killer" gave birth to the biggest boom in employee benefit plans that the world has ever seen.
>> A quarter century ago, there was much moaning and prediction that only National Health Insurance could save us. (Yes, it is the same simplistic chant you hear today, despite the subsequent poor experience in other federal & state government programs and other nations, showing that government has more problems than the private sector in running a health plan efficiently…even when they exercise unfair tricks to cost-shift onto others.) In the '70's, health inflation over a 5 year period was 116%. Health premiums were rising at an annual rate of 20-30%, and hospital charges were rising 20% per year. Businesses were yelling that employee health coverage cost more than major portions of their product production. In other words, it was not a pretty scenario.
>>In those days, HMOs were the love child of government, instead of the whipping boy they are today. A law gave HMOs the power to force employers to sign on with the HMO. So, employers had the very real fear of the devastating anti-selection effect of healthy employees going to the HMO, leaving only the sickest to drag down the traditional health plan.
>>We, the general public, were then and remain today more a part of the problem than part of the solution. There were public pronouncements about savings & efficiencies, but people still wanted womb-to-tomb payment for any service anywhere anytime. Plan provisions to discourage unnecessary use of Emergency Rooms and other wasteful practices were resented, not cheered. We continue to be easily stampeded by media hype, and the rhetoric that health coverage is a "human right" instead of a kind consideration of the employer.
There have been no shortage of sure-fire "solutions"!
>In the 1960's, Uncle Sam decided that if everyone were in an HMO, their health would be "maintained", major medical problems would be avoided, and costs would shrink dramatically. (Ironically, "directing" patients care was considered a forward-thinking plus. Thirty years later, Uncle Sam was condemning "gatekeepers" as some evil scheme. Go figure!)
>In 1980, "Second Opinion" was the fad. Medical community, payors, and employers all patted themselves on the back that medical fraud, waste & abuse would be eliminated and better services would be provided if there was the double-check of two doctors' giving independent diagnosis & treatment judgement. Some actuaries & plans even lowered cost for coverage in preparation for the massive savings. Well…it turned out that patients were often too lazy to get second opinions, and, for various reasons, doctors did not achieve the independent double-check role. So, Second Opinion flopped quickly.
>In the early '80's, Wellness was the buzzword that was going to solve all the costs & problems. Wellness also quickly fizzled as a savior. Why? First, too many people (and vendors) decided that "wellness" was an excuse to try to have a swimming pool or hot tub installed at home as a "medical expense". Second, about the same time, reports were being issued from medical research groups about the number of unnecessary tests being given. Third, employers quietly figured out that the average longevity of employment in the US is about 2 years. So, why should today's employer pay to keep a person healthy for the next employer and/or why discover some potential future condition that needs expensive prescriptions paid by today's employer plan, when the person will be gone when the pay off of longevity comes.
>>The cost of Medical Malpractice insurance & claims…and subsequent (often expensive) "defensive medicine" has been a constant over the decades to fan the flames of medical cost. Despite empathetic rhetoric from governments and attempts at captive insurance companies for doctors, the problem rages on, with no sign of solution.
So, yesteryear was no nirvana. If anything, we were in more danger then, because we were all more naïve in those days. We did not comprehend the secret agendas that are the motivation of so many of the insolvable problems.
Over the years, government has added to the problem with a whole alphabet of new mines in the minefield (COBRA, ADA, MHPA, MSP, QDRO, QMSCO, EDI, PHI, etc. etc. etc.). However, I find that employee benefit professionals such as TPAs as well as employers and plan sponsors are smarter, more informed and more agile. We all used to be naïve. Now there is professionalism.
It also appears that we are at a watershed in employee health coverage history. Concepts like HSAs are not just bandaids (as Second Opinion was). It is a new concept and thought process. It will need some pieces to fall into place to be successful, but it opens a new thought process and gives both employers and TPAs a new tool and option in their customized plan design process.
So, yesteryear was not "the good old days" and now things are not on the verge of some abyss. No, instead, we are still in a jungle, with more and more trees and vines placed in our way. However, now we are smart, well-equipped, survivors.