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So we really need to focus education at a different level than we are now.
SPERRY: Can I ask a question? The ACA could drive employers to just completely outsource everything and say, “We’ll pay something, but we want everybody to get insurance on their own.” But it could also do the opposite and cause companies that can’t afford to do so to bring it in house and become ERISA plans, where before they were purchasing insurance products on the market. So I wonder whether you think there’s going to be that kind of shift as an outcome of the ACA as well.
HURST: Larger employers that might have been 100 to 250 in size that are fully insured today, many of those are looking at self-funding as an alternative. Because if they’re fully insured, they have to pay a health insurance tax of 2 percent. So that forces them to look at a self-funded ERISA type alternative. There are some plans that our carrier partners are now offering, what’s called partial self-funding, even now to a much smaller size employer, down to the 25, 35 level. So it will be interesting to see what type of uptake happens with those type of insurance products that are partially funded.
But actually those employers that are larger, maybe over 100 to 250 that might be fully insured today, self-funding definitely is something they should consider.
HOWARD: In that size group that you’re talking about that may want to look at self-funding now, the cool thing about that is that they can get data more readily. They can get their data every month and look at the things that are driving costs. All kinds of employers are really looking at wellness initiatives, looking at things that they can do to help employees be healthier and avoid the high-risk sicknesses that can cause these high claims that devastate them.
We can put wellness initiatives in these companies when you’re self-funded. You can really see the payoff and the return on those efforts. When you’re fully insured it’s just a little bit more that the insurance company will put in their account, and they’ll still get an increase in cost. So that will cut down the impact of ACA on them with taxation and will give them more ability to manage their care.
That’s been a real big shift. Otherwise employers would wait until they were over 500 to look at self-funding.
KLUGE: I’ve got a little different spin on that. What we have found is that sounds like a fantastic idea until you look at it. If you move to it, it’s a two- or three-year proposition. Here’s why. Groups that are in that 25 to 100 that try to go self-funding, maybe even a little bit larger than that, the expense ratios for reinsurance and administration that the insurance companies ask for is around 40 to 45 percent. It’s massive. So what that results in is that yes, you get reporting, but you can’t do anything with it because it’s not credible. It’s too small of data. You’re asking for data on a very small subset of people. But then you only have 55 or 60 percent of the premium that can go to pay claims if you’re looking at a 40 to 45 percent expense ratio. So we’ve found that while you get data, long term it hasn’t really panned out to where we thought it would.
Let’s talk about some of the optimistic things you see happening in the world of medicine and healthcare.
LANGELL: Traditionally you treated diseases with rather expensive means, medications being one of those. It takes a long time to get a medication to market. Average costs are up near $800 million to a billion dollars. And we’re starting to see that the technology that’s captivating our lives now—these apps and video games—the power of behavior change that comes along with them is a way to do similar things for disease processes at a much, much lower cost.
There has been a great deal of interest in video gaming. A lot of parents hate video gaming because they see their kids sitting in front of the television. But the power of behavior change there and how it affects the mind is been amazing. The DOD funded a game called Snowland. And Snowland was trialed on our soldiers coming back from the war zone who had amputations and severe burns and had chronic pain syndrome. They found that playing this video game that was designed to control chronic pain syndrome was as or more efficacious than narcotic pain medication. And it didn’t have any of the side effects.
If you take the top video games that are out there that cost $15 million to get to market and they have them right away, the FDA has just said now that unless it’s diagnostic, they’re no longer going to look at regulating it.
I don’t know if any of you use some of the apps that look at your fitness, and you can tie them into devices like the Fitbit. People are really engaged in this, and it’s creating behavior change. We need to do this in an academic way so that instead of just producing something and putting it out to market and people think it’s cool, we need to look at the science of behavior change, we need to do the studies on it, validate it, and actually put something out there that’s been shown to work.