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Published: March, 2006; Vol 2, Num 10

Tri-Fund Conference Focus on Health Costs

The soaring cost of health care and workers’ compensation were the focus, respectively, of two LHSFNA workshop tracks at the 2006 LIUNA Tri-Fund Conference held in Los Angeles last month. In each track, the Fund arranged for speakers who could offer practical means to lessen the crisis.

“Rising health care costs are among the most serious problems facing Laborers’ health and welfare funds and our signatory employers,” says LIUNA General Secretary Treasurer and LHSFNA Labor Co-Chairman Armand E. Sabitoni. “While only the government can devise a permanent, comprehensive solution, we have to be proactive in finding our own ways to contain these costs. In this regard, our Fund’s Health Promotion Division has taken the lead.”

The health care cost track was preceded by an Administrators’ Forum, designed specifically for LIUNA health and welfare fund administrators who were attending the conference (for a report on the workers’ compensation track, see Making Workers’ Compensation Work).

Administrators’ Forum

Opening the forum, the Fund’s national health care consultant Jim Conlon, from Milliman, presented an overview of evolving trends in health care. He reported that while the rate of increase in overall health care spending declined somewhat in 2004 (the latest year for which data is available), it still rose three times faster than the rate of inflation. He suggested that increased hospital charges may be the chief instigator of higher costs over the next few years. He also cited national data that shows that employees are being forced to accept a greater share of their health care costs – 29 percent in 2005 compared to just six percent in 2003. Unfortunately, he concluded, this cost-shifting is the trend of the future.

Following up on Conlon’s presentation, Alan Spielman – President and CEO of URAC, an organization that accredits health care providers – explained the accreditation process and its importance in assessing the quality of providers. His bottom line was that accreditation helps empower health care consumers.

Barry McAnarney, Executive Director of the Central Laborer’s Welfare Fund, addressed the importance of wellness programs, saying, “Don’t let your ‘health’ fund become a ‘wait until you’re sick’ fund.” Stressing the value of prevention, he discussed a number of programs and incentives that local funds may use to encourage their participants to use wellness benefits such as an annual physical examination.

Finally, Mary Kay Breitenach – Certified Senior Account Director at Express Scripts, the prescription benefits manager (PBM) behind LaboreRx – explained a number of issues in prescription drug coverage, including specialty drugs, therapeutic equivalents, mental health medications, step therapy and benefit designs that encourage broader use of generic drugs.

Health Care Track

In the first health care costs workshop, Colleen Savoie, the health care consultant for the Alaska Laborers' Health and Welfare Fund and Vice President at Willis of Alaska, reviewed the history and accomplishments of the Health Care Cost Management Corporation of Alaska (HCCMC). The corporation, established in 1994, pools the purchasing power of 18 health benefit plans – including Taft-Hartley and public sector trust funds and government and private employee plans – and has succeeded in winning significant cost concessions from one of the two major hospitals in the area.

In the second workshop, Executive Director Sally Covington of the California Health Care Coalition summarized the coalition's progress in that state. She stressed the role of hospital consolidation, rather than new technology or an aging population, in the escalation of health care costs. As hospitals acquire more market share and monopolize power in a given area, prices go up. Not only did the coalition find very high prices, it also found tremendous variation in prices, utilization and quality. Moreover, according to Covington, the industry makes every effort to keep prices and outcomes secret. She urged health care purchasers to shift their focus from plan design changes – and the battle over who will pay for cost increases – to the system’s inefficiencies and excessive profit-taking. She cited a number of examples in California of coalitions that were able to negotiate successfully with hospitals over price and quality issues.

In contrast, however, Dennis Sarnowski, Administrator, Laborers’ Combined Funds of Western Pennsylvania, noted that in many areas – his being one – large insurers will not cooperate with the funds’ efforts to gather and analyze claims data. Without such large databases, it is impossible to pinpoint problem providers. More pressure will have to be mounted to make breakthroughs in these areas.

In the third workshop, Elizabeth Gilbertson, Director of Strategic Planning for the HEREIU Fund in Las Vegas, reported on the success that fund has had in saving money by eliminating a small number of costly providers from its network. Saying that “practice patterns are much more significant than rates,” she urged funds to go beyond the mere price of particular services to examine the typical costs of an entire health episode. She pointed out that different doctors will react differently to patients with the same symptoms, one taking a cautious approach and ordering several tests and treatments while another simply orders rest and a follow-up visit in a few days. An examination of claims data in Las Vegas revealed a handful of doctors whose costs consistently and substantially exceeded the average. Once these providers were removed from the preferred provider list, the fund’s overall costs fell significantly, saving $67 million over two years.

Conlon concluded the sessions by acknowledging the difficulties ahead for the trustees who have fiduciary responsibility for LIUNA’s health and welfare funds. Getting bigger is important, he said, and he urged small funds to consider mergers. He also urged funds to join or create coalitions, though he stressed that these require hard work and resources to succeed. He said that funds need to get to ten to 20 percent of local market share if they hope to have significant impact in the face of rising costs.

All the speakers stressed the importance of effective communications between the funds and their participants. This is vital to ensure that participants understand everything from changes in prescription drug benefits to changes in preferred provider lists to wellness options of which they should take advantage. On the last point, Conlon noted that “no one is better postured to deploy lifestyle and wellness programs than unions because, unlike other situations, our participants tend to be with us for the long-term.”