Biotechnology Healthcare - November/December 2008 - (Page 25) “Biotech companies will have to sell their value propositions, just as they would when courting an MCO or a group of self-funded employers,” Goff believes. Michigan AFL-CIO, who spoke at a conference sponsored by the Michigan State Medical Society in April, was optimistic about the UAW VEBA, estimating that the VEBA would make a 9 percent annual ROI while healthcare costs would probably only grow by 5 percent a year. But Gaffney was countered at the conference by Thomas Simmer, MD, chief medical officer of Blue Cross Blue Shield of Michigan, who claimed the numbers would be “the other way around.” GAINING MOMENTUM The trend of companies transferring their healthcare liabilities is gaining momentum, in both the private and public sectors. “I am seeing a huge growth in the number of VEBAs,” says Lance Wallach, president of VEBA Plan LLC, a Plainview, N.Y.-based VEBA consulting firm. “In the public sector, municipalities, states, and other governmental entities are required to list their liabilities, including post retirement benefits that were promised to their workers. They now are finding that VEBAs are the least painful way to fund these liabilities, as well as probably the safest way.” As Wallach sees it, VEBAs are “definitely the future of healthcare.” One reason for their popularity with employees and retirees, he believes, is that the funds can’t be raided for other expenses. “It is very difficult for VEBA funds to be diverted, unlike a governmental entity or a corporation that can divert funds once earmarked for retiree healthcare to something else.” Unions responsible for holding the money that funds the healthcare of workers and retirees will be in a position similar to insurers, in terms of assessing value for payment and assessing products. “If you look within the union organizations, there is a spectrum of sophistication for performing the basic benefit techniques for risk management, insurance, and determining appropriateness,” explains Lyles, at the University of Baltimore. “Older plans, such as that of the United Mine Workers, have extensive experience with this and have applied research capabilities to provide information on appropriate use. However, the large settlements in the last few months in Detroit have created responsibilities and [roles] where the union will now need to backfill with a wide range of specific technical capabilities to discharge their responsibilities effectively.” With respect to biologics, Lyles says, there are additional challenges. “Because these products are, in some ways, less intuitive than traditional pharmaceutical products, there will likely be even less familiarity among the union managers about how to set policies to make benefit coverage decisions.” As Lyles sees it, unions need to educate their members about how to use their benefits and get them actively engaged in prevention and health maintenance. “Some programs like this have worked well,” he notes. But on a broad scale, he adds, the evidence suggests that people frequently don’t use the information they get. “The information itself is not strongly associated with the decisions that insured persons make or the actions that they take. There can be short-term responsiveness to price, without examining the benefits or tradeoffs.” That said, Lyles thinks some wellness programs, especially those that offer incentives, are promising. “Because unions tend to have a close relationship with their members, this offers them the opportunity to manage not just the financial side of the traditional insurance activity, but also to look at the underlying medical needs that drive the cost trend, and then take advantage of wellness and prevention activities, including health risk appraisals.” Wallach also sees challenges, especially those related to cost. “Cost issues are definitely a problem. It’s not just the unions that are becoming aggressive in trying to reduce benefit costs associated with VEBAs. Everyone involved in VEBAs is trying to reduce costs.” But union-run VEBAs, he thinks, represent a particular challenge because “many of the union-managed VEBAs start out underfunded. I think the UAW VEBA is grossly underfunded.” You’ll get a nod of agreement from Bradford Kirkman-Liff, PhD, a professor in the School of Health Management and Policy, at Arizona State University’s W.P. Carey School of Business. “I am concerned with the long-term financial viability of some of the unionrun VEBAs. With the dramatic events in the global financial sector, VEBAs may now have even more serious long-term financial problems if their financial assets have declined in recent weeks. “The long-range costs of health- NOVEMBER/DECEMBER 2008 · BIOTECHNOLOGY HEALTHCARE 25
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