As health care reform creates questions for business, Dr. Dean Gruner of ThedaCare and other industry leaders look for answers.
Health care reform.
It’s the No. 1 topic for business leaders, from entrepreneurs to chief executive officers with thousands of employees.
Dr. Dean Gruner, chief executive officer of ThedaCare, finds himself in the crosshairs of all discussions. He’s not only CEO of the region’s largest employer – ThedaCare employs more than 6,000 – but also the head of the health care organization that runs five hospitals and dozens of clinics. Gruner sees the effects from all sides of the nation’s largest health care legislation overhaul since the creation of Medicare and Medicaid in 1965.
The Affordable Care Act (ACA), passed by Congress and signed by President Barack Obama into law in 2011, presents changes and challenges to employers and health care providers alike. For health care organizations it means the loss of millions in reimbursements from Medicare, the nation’s largest insurer.
But change was inevitable, says Gruner, who worked as a family practice physician in a clinic for 17 years before becoming a member of ThedaCare’s administration team and CEO in 2008.
“When I was in medical school, we learned that if something didn’t work for a patient, you tried something else,” says Gruner, sitting in his office at ThedaCare’s corporate headquarters in downtown Appleton. “That’s what we’re doing right now with the current health care payment system. What we have now isn’t working.”
Gruner says the challenges facing ThedaCare mirror those facing all businesses. He hopes the work done by ThedaCare, especially in lean management, will benefit area businesses and serve as a national model for other health care systems to provide high quality care at the lowest cost.
Last year, ThedaCare and Bellin Health in Green Bay, along with the independent doctors of both organizations, teamed up to be one of 32 systems in the nation (and the only one in Wisconsin) to participate in a pilot Medicare program that moves away from the fee-for-service model to one that rewards health-care providers for keeping patients healthy.
“We need to change the way doctors are paid. We need to figure out a better way – and I think we’ll look back in five years and realize we’ve learned a lot,” Gruner says. “It’s a huge change in the way of doing things.”
And it’s one that many people in the health care industry are watching closely.
With more than 900 pages, the ACA – also known as Obamacare (even by the president) – has a long, mind-blowing list of rules and regulations that businesses must follow. That has left many business owners unsure about what they need to do as well as concerned about how those new rules may impact the bottom line, says Tom Doney, president of Cypress Benefit Administrators, a third-party administrator headquartered in Appleton that processes insurance claims and certain employee benefit plans for other organizations.
“It’s confusing for businesses. No one really knows what they are supposed to be doing. The law is so large and complex, it’s gotten to a point that it’s almost paralyzing,” he says. “The bottom line is if you’re an employer of more than 50 workers, you have to offer coverage. It may be an unintended consequence, but some employers may trim hours or workers if they are close to that limit so they can squeeze under. Businesses are also wondering what the better investment is: Cut coverage and pay the penalty or continue to offer insurance to your employees?”
Kelly Kuglitsch, an attorney with Davis & Kuelthau and an expert on employee benefits, says the new rules require employers with more than 50 workers to offer an affordable insurance plan or risk paying a penalty of $2,000 per person. In many cases, that may be less than the cost of a bare-bones insurance plan, which has led some to believe that companies with insurance plans already in place may drop coverage, she says.
“Some smaller employers are doing the calculation and seeing if they would wind up paying less if they just paid the fine per employee instead of offering insurance,” Kuglitsch says. “But the math isn’t always straightforward – what are the standard offerings in your industry? Will you lose employees or prospective employees because you don’t offer insurance?”
No one knows yet how many businesses may opt out of offering insurance and pay the penalty, but Dr. John Toussaint, CEO of the Appleton-based ThedaCare Center for HealthCare Value and Gruner’s predecessor at ThedaCare, says the percentage could be anywhere from 10 percent to 30 percent.
“It’s very difficult to say anything about how this will affect insurance pricing. There is still a lot of uncertainty and will probably be that way for some time; 2013 will be about putting the exchanges together. You can’t predict what employers will do until more information is known,” he says.
The “exchanges” that Toussaint mentions are the insurance exchanges that the law mandates to be set up in each state. It’s basically a marketplace where an individual can go and seek out insurance. The thinking is that with a large pool of participants and competition to serve those people, they will keep costs low. In Wisconsin, Gov. Scott Walker decided to not form a state exchange and instead use the one being put together by the federal government (an option included in the ACA).
Kuglitsch says if the insurance plan offered to employees is too expensive – which is defined by the government as more than 9.5 percent of a worker’s wages – the worker can either pay for the plan offered by the business or go to the exchange and purchase insurance. If that employee qualifies for a government subsidy to help pay for the insurance plan, the business will be charged a penalty.
If a business has fewer than 50 employees, it’s under no obligation to offer insurance.
“When you think of small businesses – locally owned restaurants, stores or service companies – most fall in that category,” says Kuglitsch, who recently did a seminar on the law and what it means for members of the Green Bay Area Chamber of Commerce. “There’s lots of tricky math and caveats for businesses to keep in mind.”
Since the Supreme Court upheld the ACA as constitutional last summer, the HR staff at Menasha-based Faith Technologies, which employs 1,500 nationwide, has taken a long look at what all the changes mean and figured out how to convey it to workers.
Self-insured like many other large businesses, Faith was used to having a firm hand when it came to insurance offerings. Now, the company must comply with the national standards, such as offering coverage to dependents up to age 26, says Stephanie Guin, vice president of human resources at Faith Technologies. “Being self-funded, we are used to being in control and this takes some of that away. It’s frustrating since we can’t plan like we are used to,” she says.
Rising costs are a major concern for Guin. “How are the mandates going to change what we offer our employees? We feel we have a very nice package right now, but will that become cost prohibitive to keep offering?”
For a small business like Gardan Inc., a contract assembling and packaging company in Hortonville which hovers right about the 50-employee mark, the health care law changes bring something that most businesses don’t like: uncertainty.
“We offer insurance and plan to continue to do so, but there is a lot we don’t know about cost,” says Gardan President John Dennis, who adds that offering insurance is one way to attract and retain employees.
While most business owners are concerned about what the reform may mean to their bottom line, Lisa Johnson, vice president of entrepreneurship and innovation at the Wisconsin Economic Development Corporation, says there is one group looking forward to the new insurance exchanges: entrepreneurs and very small business owners who have struggled to find affordable coverage. The exchange now makes it possible that an owner of a business with just one or two employees can get the same pricing as a business 10 times its size – if the exchanges work as designed, she says.
And despite the concern, a recent survey found that most businesses plan to continue to offer insurance.
The International Foundation of Employee Benefit Plans in Pewaukee conducted a survey after the November election asking employers if they plan to change what they do regarding health insurance once the health insurance exchanges open in January 2014. Eighty-four percent of U.S. employers say they are very likely or definitely will continue to provide employer-sponsored health insurance for full-time employees. The top reasons employers gave to continue coverage? To maintain or increase employee satisfaction and loyalty; retain current employees; and satisfy collective bargaining agreements.
As an employer and a health care provider, the ACA affects ThedaCare on multiple fronts. As an employer, ThedaCare needs to make sure it complies with the new rules set down in the ACA while at the same time it faces a loss in federal funding.
“Like other employers, we’re concerned about health costs,” says Gruner, adding the organization has been very proactive in getting its workers healthier, which will lead to lower costs. “By improving our employees’ health – which we’ve been able to measure through their health risk assessment results – we have been able to lower costs.”
ThedaCare launched a wellness value stream four years ago to come up with a variety of ways to create a healthier workforce. For example, health coaches are available to work with employees on reforming some of their unhealthier habits and there’s also more awareness. “A few years ago, there were donuts out in the office a couple times a week. Now, you don’t see that any more. We do things like salad days and other things to promote healthier habits,” Gruner says.
As a health care provider, the biggest change ThedaCare will see as a result of the ACA is financial. As part of the ACA, the reimbursement rate for Medicare patients will decline. This is in addition to spending cuts agreed to in the summer of 2011 for the program. Add those up and ThedaCare looks to lose about $4 million in Medicare funding this year.
With that in mind, some health care systems have panicked and began slashing their workforces to keep their costs down, Gruner says. ThedaCare, which has a no-layoff policy, does things differently. To control costs, the organization has a vibrant continuous improvement and lean culture in place that has helped it save more than $20 million since starting its lean journey in the early 2000s.
ThedaCare, along with Bellin and their independent physician partners, are participating in the Pioneer ACO, a Medicare experiment that looks at paying doctors differently, rewarding them for quality and outcomes rather than the services provided. Gruner says participating in the program is a financial risk since they may lose money from Medicare if the quality of care isn’t there, but one worth taking. “We need to start looking at other possibilities of how to be paid (for providing medical service). We’ve got to figure it out,” he says.
Changes Already in Place
Businesses are already dealing with two key pieces of the ACA. As of Jan. 31, 2013, employers with 250 or more employees needed to include on their workers’ W-2s how much they pay towards that employee’s health insurance coverage.
“On one hand, it increases awareness among employees about what their employer is spending but will also allow the IRS another tool to keep track of employers who pay for insurance and those who don’t,” Kuglitsch says.
At Faith Technologies, the HR staff has met regularly and in person with employees to keep them updated on changes, such as the $2,500 cap now imposed on flexible spending health accounts, says HR manager Amy Dempsey.
“It’s essential to have that communication in place so employees know what’s happening and to let them know where these changes are coming from. This isn’t Faith deciding to limit your flexible spending account, but the government,” she says.
Insurance companies are working frantically to stay up to date on changes and keep their clients informed. WPS Health Insurance is investing in new technology to better handle the coming changes and looking at different product offerings for both the commercial market as well as the exchange, says Tim Olson, senior vice president of sales and marketing.
While Olson and others in the insurance industry have no idea what the new exchanges will look like, insurance providers have already made some changes in their offerings to meet some of the new rules, including covering dependents up to age 26 and offering comprehensive women’s health coverage, including birth control.
“It’s the Wild West and fast and furious as we head towards 2014 with the exchanges. No one is sure what they will bring,” Olson says.
Menasha’s Network Health is also getting ready for the exchanges and the mandate that everyone carry health insurance. President Sheila Jenkins says Network has developed new family and individual insurance policies for the first time to reach this market.
“As we anticipate many more small business owners seeking insurance options for their employees, we will continue to work hard to provide affordable health plan options which will meet their individual needs,” she says.
For Gruner, it all comes back to meeting the needs of the patients. “It’s not worthwhile for doctors and nurses to be worried about how they get paid. That’s for us in administration. I just want them to focus on what they do best and take care of patients and provide them with the best care possible,” he says.
THEDACARE: A CLOSER LOOK
Headquartered in Appleton, ThedaCare is a community-owned health system that includes five hospitals (Appleton Medical Center, Theda Clark Medical Center in Neenah, New London Medical Center, Riverside Medical Center in Waupaca and Shawano Medical Center) and dozens of clinics and other health care services.
> Employees: 6,175
> CEO: Dr. Dean Gruner
> On the web: www.thedacare.org
TERMS TO KNOW
When talking about health care reform, it sometimes feels like alphabet soup with all of the acronyms plus some hard-to-decipher terms. Here’s a quick primer:
ACA | This is short for the Affordable Care Act, the official name given to the health care reform legislation passed by Congress and signed into law by President Barack Obama in 2011. Also known as Obamacare.
ACO | Stands for Accountable Care Organization. In English, that means a health care organization that uses a payment and care delivery model that tries to tie provider reimbursement to quality metrics and reductions in the total cost of care for a targeted population group. In the New North, the Bellin-ThedaCare Healthcare Partners (a joint program between Bellin Health of Green Bay, ThedaCare health system of Appleton and their independent providers) is participating in the Pioneer ACO pilot program for Medicare patients.
The Exchange | This refers to a marketplace where individuals and businesses can go to purchase insurance from a variety of providers. Since the customer pool is very large, the thinking is that the overall rates will be lower. Under the ACA, states had the option of setting up their own exchange or defer to the federal government’s exchange. Gov. Scott Walker has said Wisconsin will use the federal exchange. According to the ACA, all exchanges must be ready to do business on Jan. 1, 2014.
Self-insured | Many large employers are self-insured, which means the organization decides to insure itself rather than purchase health insurance through a commercial insurance company. The company is able to save money on administrative costs that a commercial provider would have charged.
TPA | Stands for third-party administrators. These companies process insurance claims and handle certain aspects of employee benefit plans for businesses and organizations.
WHAT THE AFFORDABLE CARE ACT MEANS TO:
Companies with more than 50 workers who average more than 30 hours a week: Must offer a bare-bones insurance plan starting in 2014. Employers who don’t comply will end up paying a fine (or tax) of $2,000 per employee, less the first 30 workers. In other words, if Company A has 51 employees who average 30 hours a week or more and leaders decide not to offer insurance, the business would have to pay the $2,000 fine for each of 21 employees.
Companies with fewer than 50 employees: Not mandated to offer insurance to employees, but can join a healthcare exchange to purchase insurance. Employers with fewer than 25 employees are eligible for tax credits to help provide their employees with insurance. Credits are available on a sliding scale, but employers can receive up to 35 percent of their total contribution to an insurance plan in tax credits.
Individuals (including entrepreneurs): Can purchase insurance through the insurance exchange. After Jan. 1, 2014, if an individual does not purchase insurance, they will pay a penalty up to about $2,000 per family depending on their income.
WANT MORE INFORMATION?
Health care reform and its impact on employers is the topic of the March 26 St. Norbert CEO Breakfast & Strategy Series event. Jerry Ganoni, president of small business and specialty benefits at Humana, and Mark Wernicke, Humana vice president, will lead the discussion, which starts at 7:30 a.m. at the F.K. Bemis International Center at the college campus in De Pere.
To register, visit https://tickets.snc.edu/tickets/events.php?domain=CEO.