As we launch MCNtalk, we are focusing on posting articles by others on health and medicine related topics. It is not our general intention to focus on MCN in these postings. This article is about all companies providing health coverage and all employees receiving these benefits.

The other day we received our initial rate quote for our health insurance for our new plan year starting in July 2010. By way of background, MCN has over 100 covered lives in a number of states, so we rely upon national carriers to quote and provide coverage options for our staff.

Our annual increases for equivalent coverage to the prior year have been consistently in excess of 10% for as long as I can remember. We have coped with this by reducing coverage through increased copays and deductible and passing on a portion of benefits costs to employees to the degree they exceed the level the company will cover.

I personally remain baffled at the resistance to addressing this significant problem and wonder what drives certain individuals to fight for a status quo that is an illusion given the history that every employer faces, not just MCN. No rational employer will passively accept these increases and the assumptions that underlie employer based health care is fragile and approaching a breaking point. This is not a theoretical issue but one that impacts every person. It is naive to count on continued employer coverage, as it is naive to assume that an individual will continue with a given employer. How would we respond to any other vendor or supplier who increased their rates at a consistent rate in excess of 10%?

The email below was written to the company. It has been edited slightly. I welcome your comments

Brian Grant, MD

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To:  MCN Employees

Re: MCN Health Insurance 2010

March 25, 2010

These messages are predictable and not fun to write. And they underscore the need for major systemic reform, which the recent national health bills don’t in my mind more than hit the surface of.

We received our initial fee proposal from our current carrier. As you may recall, our increase proposal last year from our prior carrier last year, was 54%. We moved our coverage and the final outcome was in increase of about 15%.

The current proposal is 17%. About 14% of this is so-called community related increases – basically the overall cost of all in the plan. About 3% is MCN related, such as a chronic condition, some expensive births, and some other expensive claims. But to my knowledge there is really nothing over the top in our group or something unusual in a group of over 100. I should note for anyone nervous at this observation, that we at the company do not have access to individual claims information nor would we want access. But we were told in general terms about some of our unique experiences as a company.

We are not done yet and there will likely be some but not a whole lot of improvement in the above number. MCN has agreed to l pay a small portion of the coverage increases for employees. The rest will fall upon the employee in the form of higher out of paycheck costs, and/or decreased benefits via higher co-pay, greater deductible, or your decision to go to the lower cost policy with less benefits, such as the health savings account option. MCN can’t justify absorbing the major blow of an out of control system and the collective decisions of all of us to consume too much health care, pay too much for it, allow healthy folks to opt out and otherwise place companies in the role of the provider of health care to begin with. I believe that a willingness to foot any increase beyond inflation, which is less than 3%, is generous. In any event, MCN is not alone in passing on increased costs to staff. This has become the norm in most businesses.

Now to be fair, there is not a whole lot that you can do as individuals to impact this, but collectively there is and I want to speak to that. We have a situation that in the world of economic theory is called the tragedy of the commons. This refers to the old English commons that belonged to all, so folks would graze their sheep till there was no grass left and it was worthless for all. There was no incentive for an individual to not graze, since others would and the self-sacrifice of the non-grazer would only benefit others. Similarly in the oceans, absent fishing regulations and treaties, there is no incentive or reason for a fisherman to not fish a species to extinction, since others will do it if he declines to fish and he only forgoes his portion of what is left. Similarly in health care we have a situation where the health care consumption by one of us, is charged off to the rest of us, to the degree that we don’t write our own checks. But it goes up for all and by and large in the current system an individual decision to not consume has little personal economic benefit.

I am personally irritated by the notion that we are impacted by claims experience in the company. This action creates an incentive for a company to engage in illegal discrimination, such as not hiring individuals with chronic conditions, not hiring young women likely who use pregnancy benefits and the like. MCN won’t discriminate based upon illegal criteria such as this. It would be wrong and illegal, but such discrimination likely does take place in many a business and is very difficult to prove – when an individual presents with visible evidence of a higher demographic likelihood to be a high medical user. All a hiring manager need do is select another candidate for other reasons, not stating the health cost concern that could be driving the decision. I also find myself wondering if any dependent coverage purchase decisions have been made by staff who have a dependent who needs costly care and is going to use more benefits while at the same time others are choosing to not cover dependents who do not have any obvious health risks and are less likely to use benefits? In our US system where coverage is optional, such decisions are rational and make a lot of economic sense, but the rest of us pay for these decisions. I don’t fault anyone for making smart and logical decisions on this or any other personal issue like health coverage when there are choices to be made.

Setting this issue aside, let’s reflect on what we can control and which also may be impacting our costs and experience at some small level, but which if other policy holders would be mindful of, would have a real impact.

We have no impact in our use on fees charged and paid for care. The carriers make that decision and shopping for price is likely not a viable option for us in America. But we can and should make utilization decisions – whether to receive care or not, the extent of such care, and the type of such care.

Much of health care is discretionary and palliative. Some care is worthless or harmful. Estimates suggest that as much as a quarter to a third of health care has no significant impact on one’s health. As individuals we make many choices. I want to suggest to us that we pretend for a moment that a health care decision was at our own cost and that we had the money available if we wanted it, but if we chose to, we could keep the funds and use them in other ways, or save it. If that were the case, rather than ‘insurance paying’ how would we behave differently?

Hopefully we would still pay for necessary preventive care, vaccinate our kids and get flu shots. But certainly some would choose to not pay for what is clearly necessary. And many other complex medical decisions may be beyond the scope of some to judge, but with expert guidelines, the Internet and the ability to ask good questions, I believe that many of us can and should make decisions on our care and not rely only upon the advice of caregivers.

Let me suggest some areas of potential savings. Far from complete but worth thinking about and expanding upon with your own examples:

–          How many sessions of physical therapy, chiropractic care, or regular office visits are adding value and are worth the added cost, if at all?

–          How many visits to the primary care doctor are for self-limiting matters such as viruses and could be avoided with good self-care, hydration and over the counter medications?

–          How many brand name drugs could easily and appropriately be replaced with generics and have minimal if any additional benefit?

–          How many unfinished prescriptions are in your medicine chest and prescriptions not complied with but paid for?

–          How many ER visits could be avoided by not waiting till the evening or weekend when one was feeling ill? How many of these visits could have been to a much less costly urgent care center?

–          How many of us have declined a recommended test that might be interesting but not critical. For example an MRI to confirm what is clinically obvious and which does not alter the treatment course? How many of us have asked if a test is necessary and why, or if it is optional. What if we asked the doctor if he or she would order it if we had to pay out-of-pocket with our own money? Would we be so uncritically accepting if we had to write our own check for a thousand dollars or more?

–          How many surgeries could be deferred, and C-sections be avoided? Studies have addressed the fact that many procedures could be avoided with a different clinical approach.

Our health care system is broken. So called reform has passed and days later we are given a predictable double-digit increase in our premiums. MCN ought not be in the business of providing health care to employees anymore than we are in the business of providing rent, children’s education or food for our staff. A company has no moral, legal or ethical obligation to provide health benefits. It only has an economic imperative and the reality that benefits are expected at certain levels of employment and that its ability to hire and retain quality staff is impacted by benefits and pay. But be assured that it is the rare company that is not shifting more and more of the cost  burden of healthcare to staff directly as we are, or indirectly by salary reductions and lower increases.

I am baffled by the loud protests by people like us, who rely upon fragile employee benefits for health care, have significant and increasing out-of-pocket costs, and are faced with impossibly high premiums for non-group policies, especially if they have pre-existing conditions – yet who somehow have constructed a fear of a government mandated alternative. As I have long said, doing nothing is not an option, since our carrier by imposing such increases, is doing something –  and we in turn will not be passive by not responding to it. It impacts each one of us and most other working individuals, if we are lucky enough to have a job and an employer who provides some level of decent health benefits – which many of our neighbors do not enjoy.

There is more to come and we will keep you updated as we work through this process. Thank you for your understanding and support as we engage in this annual challenge.

Brian