Author: Site Staff

Newly released federal estimates show how the recession has quickened the decline of employer-based health care benefits.

As soon as next year, public spending on health care will outstrip spending by employers and insurers for the first time. The trend toward greater spending on health care by the government has been long in the making, growing steadily as the U.S. population ages into Medicare coverage. Last year, however, researchers predicted that shift would happen in 2016, an estimate that has now been moved up to 2011 or 2012.

Private-sector job losses the past two years have sped up the shift to government payment. Last year, the number of people who received their insurance through the private market declined by 1.2 percent, despite generous federal subsidies in the stimulus bill to help laid-off workers continue their employer-based coverage.

The report by the Centers for Medicare and Medicaid Services, published Thursday, February 4, in the journal Health Affairs, said that national health care spending grew to a new high in 2009: $2.5 trillion.

The 5.7 percent year-over-year growth, combined with a projected decline in gross domestic product, means that more than 17 cents of every dollar of economic output is consumed by the health care sector, also a new high. In 2008, by contrast, health care spending grew 4.4 percent, which was the lowest rate in nearly 50 years.

“I think the slow erosion of employer-based health insurance has been underway since 1980,” Jon Gabel, senior fellow at the National Opinion Research Center, wrote in an e-mail. “When we have an economic recession, we show more dramatic decline.”

Government health care spending, meanwhile, grew 8.7 percent last year, compared with 2 percent among private health care payers. The increase was driven by growth in Medicaid enrollment as a result of unemployment. Increased government spending is expected to continue this year as subsidies to help laid-off workers stay on their employers’ health plans expire and as unemployment remains high.

Even if the recession had not occurred, public-sector health care spending was expected to be larger than private-sector spending—a consequence of the baby boomers becoming eligible for Medicare.

“No surprise there,” said Paul Fronstin, director of health research and education at the Employee Benefit Research Institute. Of greater consequence is the growth in Medicare spending, Fronstin said.

A year ago, the Medicare Board of Trustees sped up by two years its timetable for when the Medicare trust fund would become insolvent because of a drop in tax revenue due to job losses. The health care program for retirees is expected to run out of money in 2017.

Job losses and the shrinking market for private insurance have also increased premiums for enrollees, the report by the Centers for Medicare and Medicaid Services said. An improved job market, on the other hand, is likely to increase the number of people who get health insurance through their employers.

The report did not account for proposed changes in law contemplated as part of the Democrats’ stalled health reform legislation. The authors said they would write a new analysis if and when health care laws are reformed.

—Jeremy Smerd

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Kraft Foods Inc. failed to provide sufficient evidence of available alternative employment when it attempted to reduce a workers’ compensation claimant’s partial disability benefits, a Pennsylvania appeals court ruled Friday, January 29.

The Commonwealth Court of Pennsylvania in Kraft Foods Inc. and ESIS-Wilmington WC v. Workers’ Compensation Appeal Board  upheld an appeal board conclusion that evidence establishing a claimant’s earning power must consider the claimant’s capabilities and evidence of actual job listings.

The decision comes after a February 2004 accident in which claimant Leonard Anterola injured his right knee while employed by Kraft Foods as a utility worker. He received compensation benefits.

But in 2007, Kraft filed a petition seeking to modify those benefits alleging “work was generally available” for the claimant,” court records show. A workers’ compensation judge allowed the modification, but the employer appealed when the appeal board overturned the judge’s finding.

Kraft argued that under a Pennsylvania law requiring employers to provide evidence that jobs are available, it could rely on a testimony from a rehabilitation counselor that, in general, entry-level jobs were available in the labor market and that the claimant’s experience, education and sedentary restrictions qualified him for work paying $7 to $10 per hour.

The employer’s argument lacks merit because the law requires employers to show “existing actual jobs are open and available,” the appeals court ruled. That burden does not change when an employer relies upon a claimant’s own evidence, the court said.

Filed by Roberto Ceniceros of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Employers would no longer be permitted to require separate deductibles for mental health and medical treatment under new proposed parity rules issued last week by the departments of Health and Human Services, Labor and the Treasury.

Mental health and substance abuse treatment also must be equivalent to that provided for medical and surgical care within benefit classifications and coverage tiers, such as in- and out-of-network care, emergency care and prescription drugs, according to the rules, which implement the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act. That 2008 law requires group health care plans offered by employers with more than 50 employees to provide the same coverage for mental health care services as for other medical, surgical and substance abuse services.

In addition, employee assistance programs cannot serve as gatekeepers, restricting or directing mental health care, unless a similar form of medical management is applied to medical and surgical benefits, according to benefit consultants’ preliminary interpretations of the new regulations.

“If you don’t have to jump through those hoops for medical/surgical, these regulations would prohibit this requirement for mental health and substance abuse treatment,” says Sharon Cohen, an attorney with Towers Watson in Arlington, Virginia.

Employers also cannot require employees to exhaust EAP benefits before they can access mental health care if a similar requirement does not exist for accessing medical care.

The regulations also appear to prohibit charging higher “specialist” co-payments for mental health providers.

“Our interpretation is that mental health care providers are specialists, but that does not seem to be the case in these regulations,” says Kathy Mahieu, a senior consultant in Hewitt Associates Inc.’s health management consulting practice, based in Norwalk, Connecticut.

The new regulations give employers until the first plan year beginning on or after July 1, 2010, to meet the requirements. The law took effect October 3, 2009.

The extended effective date also could give plan administrators time to develop systems for tallying up the value of mental health and substance abuse treatment and medical/surgical treatment, something that is not always done when the two benefit programs are administered separately.

“There are issues around the timeliness of sharing information. If someone gets an [explanation of benefits] that says they haven’t met their deductible because it doesn’t include the mental health care used,” then the plan would not be in compliance, according to Cohen.

Although the parity rules were developed based on the three departments’ review of more than 400 public comments received, additional comments still are being sought on such areas as “nonquantitative” treatment limits, such as precertification and utilization review; and how coverage for prescription drugs is determined, such as whether step therapy can be required for prescription drugs used to treat mental health conditions.

Comments are due May 3.

Filed by Joanne Wojcik of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The Pension Benefit Guaranty Corp. said Thursday, January 28, that it will provide financial assistance to two insolvent multiemployer pension plans to ensure participants continue to receive benefits.

The PBGC will provide assistance to the Southern California, Arizona, Colorado and Southern Nevada Glaziers, Architectural Metal and Glass Workers Pension Plan in El Monte, California, which has about 5,200 participants. The agency sent an initial payment of $639,113 to ensure that the plan’s 1,500 retirees receive their guaranteed benefits. The PBGC estimates its total commitment to the plan at about $117 million.

The other plan receiving assistance is the United Food and Commercial Workers Local 1049 Pension Plan in Cedar Knolls, New Jersey. The PBGC has made an initial payment of $132,000 to ensure payment of benefits to 240 retirees. The PBGC estimates its total financial commitment will be $5.2 million.

The PBGC’s insurance program for multiemployer plans differs in several ways from its single-employer program. The PBGC actually takes over failed single-employer plans but does not take over insolvent multiemployer plans. Instead, the agency sends financial assistance to the plan to ensure that guaranteed benefits are paid.

The PBGC provides financial assistance to 40 insolvent multiemployer plans out of the roughly 1,500 multiemployer plans it insures. At the end of fiscal 2009, the PBGC had $1.5 billion in assets in its multiemployer insurance program to cover about $2.3 billion of financial assistance the PBGC expects to provide to the plans in the future.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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