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North Bay Business Journal

Monday, November 19, 2012, 6:55 am

Health insurers, companies, providers adapting rapidly to new law

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    NORTH BAY — Health care reform is here to stay and employers must adjust quickly in order to meet compliance with the complex law, whether they find it politically palatable or not.

    Providers, meanwhile, are themselves rapidly adjusting to new incentives and payments under the law, resulting in transformational changes that will begin to address, though not completely solve, some of the high cost curves seen over the last decade.

    That was the prevailing theme at the Business Journal’s Health Care Industry Conference, “What now? A post-election discussion of health care reform,”  held last week at the Hyatt Vineyard Creek in Santa Rosa. It featured a host of regional insurance experts and health care providers who detailed intricacies of the law after President Barack Obama’s re-election all but assured a new era of health care delivery, how it’s paid for and how employers will need to address benefits.

    Yet, while the Affordable Care Act is a reality, not all employers — and particularly smaller employers — have moved quickly enough to rethink their strategies on how or even if they pay for employee benefits in the very near future, brokers said.

    “It’s going to have a big impact on many aspects of society, but there is a lot of confusion,” said John Fradelizio, managing director of employee benefits for Wells Fargo Insurance Services in Petaluma.

    Added David Hodges, vice president of Santa Rosa-based Vantreo Insurance Brokerage: “It’s real and it’s serious. If you have 50 or more employees you need to talk with one of us.”

    For providers, there are some gains coupled with uncertainty.

    Despite lowered reimbursements for care from the federal government to the tune of 10 to 15 percent, hospital leaders said the bill’s shift to primary care — as opposed to specialty and emergency care and other high-cost treatments — will benefit both the industry’s bottom line and improve health outcomes, a point that was echoed by some brokers who touched on getting the population healthier in effort to curb utilization costs.

    “It’s a mutated form of health reform, but it’s nevertheless a model that allows us to care for people,” said Mike Purvis, chief administration officer of Sutter Medical Center of Santa Rosa.

    That view was echoed by other hospital and health plan representatives from Kaiser Permanente, Western Health Advantage and St. Joseph Health, who said the focus must now include integration between plans and providers to keep patients out of a hospital setting unless it’s truly warranted.

    Case in point: the recent alignment between Sacramento-based HMO Western Health Advantage and area hospitals, Memorial being the largest, that will provide employers more choice in providing benefits. It also coordinates care between Marin, Sonoma and Napa counties, with the help of Novato-based  600-member Meritage Medical Network in a manner that mimics Accountable Care Organizations encouraged under the ACA.  Such alignment is seen as a step toward better communication among providers, which in turn is aimed at better health outcomes, less hospitalization and less redundant procedures.

    “We’re growing expansively outside of the hospital in really preparing for health care reform,” said Todd Salnas, president of St. Joseph Health, Sonoma County, which operates Santa Rosa Memorial and Petaluma Valley hospitals, as well as numerous clinics and home care in the region.

    Both Mr. Salnas and Mr. Purvis, of Sutter Health, touched on the topic of home care and hospice, which they said will come more into the spotlight in an effort to address costs and utilization as the patient population gets older.

    Rick Heron, chief marketing and brand officer for Western Health Advantage, noted that the region and the state are in far better shape than elsewhere in the country, where partisan politics have prevented preparation in many instances.

    “California is ahead of the country in managed care,” Mr. Heron said.

    The region’s largest health care provider, Kaiser Permanente, in many ways served as a model for coordinated care with its three-pronged focus on the HMO, hospitals and clinics and technology. But it, too, has wrestled with reform and how it will evolve.

    “When the term Accountable Care Organization came about, we had a bit of an identity crisis. We didn’t know if we were an ACO or if were the super ACO,” said Dennis Lum, vice president of channel strategy, sale operations and performance for Kaiser Foundation Health Plan. “For us, an ACO is a transition to an integrated model where providers are held accountable for the result, not just for providing the care.”

    For employers, brokers said a host of new — and likely challenging — rules are coming quickly. Specifically, restaurants, hotels, wineries and other retail or service employers will need to look closely at how they classify full-time versus part-time employees, while other industries will have to tread carefully about who they deem independent contractors — all of which can determine who receives health benefits. The alternative for employers of more than 50 will mean paying a $2,000 fine for each full-time employee that does not receive benefits.  

    The verdict on looming health exchanges — where individuals and employers with 100 or fewer employees will be able to shop for health coverage beginning in 2014 — is still out, although it may help alleviate some of the pressures for small employers who don’t provide coverage.

    It will not, however, do anything to contain costs for employers, who can expect premium hikes to the tune of from 10 to 20 percent, insurance experts said.

    “I really can’t see anything in the bill that ideally will reduce costs that we’ve had to pass onto our clients,” said Michael Parr, an employee benefits agent with NorthWest Insurance Agency.

    While much of this sounds burdensome, perhaps even resulting in slower growth for some employers, no one should be nostalgic for the days of even larger premium hikes, experts said.

    “It wasn’t like the system was working well before the ACA,” said Victor McKnight, a principal with EPIC Insurance Brokers & Consultants in Petaluma. “It wasn’t sustainable.”

    Jim Settles, senior vice president and partner and the North Bay Benefits Practice Leader for Woodruff Sawyer & Co. in Novato, echoed that notion.

    “This pressure has been happening for a while. It’s going to be painful,” he said of ACA implementation. “You will see changes in health care but you will see some good.”

    It will also spur more competition, both regionally and nationally, which will help drive down costs, they said.

    “The Affordable Care Act has driven more competition. Not only more competition for (health insurance) carriers, but with providers as well,” Mr., McKnight said. “That is a silver lining on containing costs.”

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