Episode 21 – Checking in with Christian Moreno – Senior Vice President at Lockton Dunning Benefits

Mike Stull (0:09)

Hi everyone, this is Mike Stull and welcome to this month’s episode of the Employers Health HR Benecast, your source for expert commentary and insights on current health benefits-related news and strategies. It’s hard to believe it’s already November, which means it’s time for the Employers Health Annual Meeting. Register to hear from American Benefits Council President, Jim Klein, as he shares the results of the 2020 election and what implications they have for employers and their health benefit plans.

We’ll also announce at the annual meeting the winner of the 2020 Excellence in Benefits Award. Presented annually, this award seeks to recognize an individual who’s made a meaningful impact in the field and or delivery of employee benefits. Be sure to tune in to see who will join the outstanding class of our previous recipients.

Of course, it wouldn’t be 2020 if we didn’t mention coronavirus. And if you weren’t able to tune in to our Employers Health and Wealth Live series, I encourage you to view the recordings at employershealthco.com/webinar-recordings, or you can go to our events page and you can find a link there to hear from top experts on topics including trends impacting retirement plans, employment and employee benefits in light of the pandemic, and preparing for new employment issues raised by COVID-19. You can learn more and register for all upcoming Employers Health events at employershealthco.com/events. Again, that’s employershealthco.com/events.

So let’s get started with today’s guest. Christian Moreno is Senior Vice President at Lockton Dunning Benefits.

Christian specializes in designing health plans that are fully integrated with wellness solutions, helping employers manage the demand side of health care. His experiences include implementing consumer driven health plans and wellness solutions to employers in the large and mid-markets. And he’ll tell you a little bit more about where he has worked, a really interesting background.

He’s also been featured in the Dallas Business Journal and frequently speaks to benefits professionals about managing health care costs. We were actually introduced to Christian by having him speak at one of our annual conferences a number of years ago and have stayed in touch and now have a number of shared clients with Christian. So really excited to have him on the podcast today and I hope you enjoy the interview.

Christian, thanks for being with us. This might be a little bit of a loaded question, but maybe you could start by telling us a little bit about yourself.

Christian Moreno (2:58)

Absolutely, Mike.

Thank you first for having me. It’s a pleasure to join you and just talk about all thing’s employer sponsored health care. I’m thrilled.

As you said, my name is Christian Moreno. I’m a senior vice president with Lockton Dunning of Dallas, Texas. I’ve been with Lockton about 10 years.

Kind of an interesting background from a health care perspective. I spent about four years internationally in Singapore and South Africa in working with an actuarial consulting firm in consumer driven medical plans, kind of before they became popular here in the United States and then came back and spent some time with a consumer-based insurance company out of Chicago and then worked with Dr. Ken Cooper at the Cooper Clinic for about four years and then joined Lockton thereafter. So my background’s kind of ebbed and flowed a little bit between sort of wellness and the intersection of actuarial science and my time at Lockton has been interesting to say the least.

Mike Stull (3:56)

Okay, well, let’s start high level and talk about some of the broader trends in the marketplace and across the health care supply chain. What are you seeing out there?

Christian Moreno (4:04)

Yeah, that’s a great question. There’s a couple of interesting trends, one of which I believe is maybe more sort of COVID driven than not, and that is the mid-market employer plan sponsor is asking for management to cash as cash is maybe more king now than ever before and as a function or byproduct of that or potentially a driver to it is to work to reduce cash flow volatility or any volatility in the medical plan that we can either shift off or reinsure.

That’s been really the biggest single noticeable trend since we really ramped up into the sort of post-COVID world in March of 2020. And the second is more of a wave of change. It was initially with COVID, the question was around what is the disease? How do we test for it? Then it shifted very, very quickly to what is the actuarial assumptions of the cost of the disease inside of the medical plan? And then how do we budget or not for it? And then how much care shifted? So, it was very difficult as the tectonic plates were moving underneath the employer sponsored medical plans.

It was very clear the numbers were moving all over the board. And then that wave continued into what are our furlough options? What does that mean for employer sponsored medical plans to those furloughed employees? And then from there, it was leave questions. And now, more than ever, by a long shot, we are getting questions instead of pure wellness, we’re getting questions around well-being, mental health.

As this has gone on for many months, the toll is evident not only in what we see in terms of the data, but in just in terms of the requests from CHROs and heads of comp and benefits throughout the United States. It’s a top-of-mind question. And those two themes really, they play neither second fiddle to the either, they are both major themes in almost every conversation we have.

Mike Stull (6:07)

Yeah, and I know with mental health, we’ve been doing mental health in the workplace now for eight years with our Right Direction Initiative. And we continue to see more and more interest in the resources that are part of that. The other piece that I know is at least a problem here, and I’m sure it’s a problem in a lot of other places, is just the availability of professionals to help treat people with mental health conditions.

One of the things that I’ve seen is this uptick in telepsychiatry. And I’m sure that that is being amplified by COVID. And obviously, it falls into the trend of telehealth in general.

So, curious what you’re seeing just from a telehealth perspective.

Christian Moreno (7:01)

That’s interesting. Yeah, you have at Employers Health Coalition, a unique prism lens through to the employer market.

We’re picking up the same trend. I think when Medicare CMS decided to allow for the reimbursement of telehealth as a covered charge, commercial plans were then drafted and pulled into that. There was a lot of slack in the line and availability in that supply chain.

And that allowed for members and their dependents to seek care virtually and for medical plans to reimburse for said care. And it went better than anyone thought it would. It’s allowed for people to receive care, both for chronic conditions, as well as acute care that they likely wouldn’t have been able to seek.

On the mental health front, to be sure, when you talk about the availability of mental health visits, without a doubt, in particular, in the early days of the shutdown, that telehealth platform, I don’t think there was an employer that we worked with that didn’t ask, how do we facilitate this? And how do we reposition our total rewards program to emphasize our offering? So, what was maybe fourth or fifth on the list in January of 2020 moved to number one very quickly. I think, to your point, I’d be interested to hear your take on this as well, Mike. The question that I have as we go through this is how sticky will the change be, right? How long will we allow the telehealth, the virtual care, the virtual medicine to go on, whether it be for chronic illness, whether it be for pharmacotherapy, for obesity, or whatever treatment protocol the employee is seeking? It’s interesting.

I’d be interested to hear your take as to whether you think it’ll stay with us or not.

Mike Stull (8:53)

Yeah, I think it’s interesting to watch provider groups get into the whole virtual visit piece out of necessity. And so, it’s not just the teledocs of the world.

We see locally here, and I know even regionally or statewide, we’ve seen provider groups get into this telehealth business. For me, personally, I know one of my recent doctor visit was a televisit, and that’s with my doctor, where they had invested in the technology to be able to do the virtual visit right through their secure patient website. So, I think they’ve made the investments, and so, and definitely in the short term, I think it’s sticking with us.

You know, there’s obviously some things that you have to go in and you have to be looked at in person, but with all the new devices, the blood pressure cuffs, the other testing and diagnostic tools that are out there that connect right to the internet and can send a reading real-time over to a physician, I think we’ll continue to see this stick. And I think the same thing is going to go for, you know, it transcends health. It’s now work from home.

So, is work from home going to stick with us more and more? Virtual learning, how much is that going to stick with us? So, I would say health falls right in line with that, but definitely seen some investments, at least in our area, in terms of providers that are, you know, gotten on board.

Christian Moreno (10:31)

Now, that’s insightful. I think, you know, the whole digital health sort of revolution, I think where the gears are catching, we’re reaching a tipping point.

You know, when you talk about digital mediums, when you talk about the ability for medical data to be accessible digitally for physicians to see that data, one of the interesting underdevelopments over the last two months is Google and Alphabet entering into the stop-loss market under the Verily brand with an investment from Swiss Re. So, you’ve got this Swiss Re, this old kind of stodgy reinsurance company partnering with a pretty forward-leaning data company that says they want to get into the health risk business. And they believe they can get better at managing that risk for employers.

And that’s basically almost completely based on digital health and the data available through it. And so, I think we’re going to come with some interesting questions, both ethical as well as personal health information as to what we are willing to allow to be accessed by reinsurers, in particular, with all the news that’s been going on around Google and Alphabet in this arena.

Mike Stull (11:45)

Yeah, that is certainly to be a topic that will be debated for a long time in terms of people willing to give up some of their privacy rights.

Christian Moreno (12:20)

You mentioned stop-loss a couple times now. We talk a lot with employers about managing risk, and you mentioned risk volatility earlier. Curious what you’ve seen in terms of the stop-loss market responding to some of these changes in primarily the risk tolerance, but also that volatility that you talked about.

Yeah, I think the stop-loss market is responding in a couple of ways. First, there’s a softening of the rates in the market, to be sure. The loss ratios are lower than they have been, and I think now is the time to be in the market for 2021 and potentially rate guarantees into 2022 if you’re a mid-market employer-sponsored medical plan.

What those loss ratios will look like in 2021 and into 2022 is anyone’s guess because of the shifting in medical spend, potentially, from 2020 into those future years. Then second, I think there’s a trend that is interesting. It’s been brewing for a while in certain industries, but for the smaller end of the middle market and the larger end of the small market, say under 1,000 employees on a medical plan, the advent and proliferation of seller or rental captives appears to just be popping up all over the place.

The discussions of using these as a two- to three-year risk and volatility-stabilizing vehicle is pitched quite a bit. There’s some validity to this depending on the group, depending on the capitalization, depending on all of the T’s and C’s of the contract. There’s some pitfalls in these in that they have a lot of really fun and cool-sounding words like tranche and pooling and dividends.

They have all these fun phrases that everybody loves to talk about, but the devils in the details here. I think we’re looking actively into proof of concept, but they could be a very effective medium for risk transference for that smaller end of the self-insured market. I think it’s going to be interesting to see how they play out and what role they play over the next two, three years.

Mike Stull (14:08)

Yeah, I think anything, you know, and we see this even with some of these new specialty drug therapies that are coming out and are in the pipeline, even the larger clients are trying to figure out, okay, how do I spread this risk out? And we’ve seen that, you know, Cigna launched its Embark program this past year or, you know, clients of all sizes to unload some of that risk as it relates to some of these, what they call CAR T therapies. So, yeah, I think risk mitigation, spreading the risk, those things are very popular, becoming more popular. Captives, we’ve heard a lot about.

I remember probably 10 years, maybe even longer ago, we looked here at Employers Health around starting our own stop-loss captive, but getting the employers to put up collateral right in the beginning was the problem. But now that you can rent cells, there’s so many different ways to do it. I know my dad is a CEO of one of those kind of small self-funded companies.

He always gets nervous with the word captive. So, they’ve got really cool words to talk about with their model. Maybe they just need to find a new term besides a captive because he always says, I don’t want to be a prisoner.

Christian Moreno (15:29)

Yeah, yeah. There’s such a thing as a single parent insurance captive that has its own merit on a standalone basis, generally for certain business lines of insurance where there’s either tax or future liability efficiencies in allowing the single parent captive to take those in. There’s also manageable risks within that.

So, if you take, for example, general liability or workers’ compensation, or you can actually put a safety program out to directly influence that, you either have an OSHA recordable or you don’t. On the medical side, and you bring up an interesting point you take, and I’m careful when I talk to you about pharmacy given how much you know. So, I’m going to use broad-based words that I don’t make any serious mistakes when I’m on the phone with Employers Health Coalition, in particular you, Mike.

I think the specialty pharma world introduces an asymmetrical and disproportionate risk to the smaller mid-sized employer-sponsored medical plan. Because, you know, in any very, very large medical plan, they can sustain larger swings, although it adds significant costs to be sure there’s a larger membership base over which to spread that risk and cost. But for the groups that have, you know, head counts anywhere between 500 to 2,000, this presents a very significant financial risk and volatility because oftentimes they’re very hard to predict when they will hit, and more appropriately, when they’ll go away.

So, I think we all have work to do. I know Lockton, this is an area of not only focus with our internal team and Excelsior Solutions but also working with you and your leadership on how do we help spread this risk, how do we help finance this risk, and how do we help get maybe a clearer heads up when it’s coming and maybe build it into the budget. That’s been a big push at Lockton over the last 24 months.

Mike Stull (17:23)

Yeah, you know, it’s one of the things that challenges us as a coalition of employers, and it challenges the big PBMs as well because they’re so used to managing a group health plan, and so everything’s managed at the group level. It’s been a challenge to start to think about this more in individual terms. I mean, your example of 500 employees, there are five individuals on average that are taking a specialty drug, right? It’s about 1%.

So, we’ll say 5 to 10 individuals on that plan that are pushing 50% of the drug spend or more if it’s a small plan and they have a lot of generic usage and all that good stuff. So, you can’t think about it as, you know, managing the group. You got to really drill down into how do we manage those five individuals.

And obviously, from a group level, you know, we can talk about the reinsurance and those types of scenarios, but at the end of the day, when we’re really getting into what’s going to solve the problem, it has to be at an individual level. It has to be much more precision, much more precision involved than historically. You can’t just say, well, put a step therapy in and, you know, that’ll save you X number of dollars.

Christian Moreno (18:51)

That’s usually my solution. I just say, throw a step therapy at it. We’ll see if that works.

I’m just kidding. I’m interested to hear your take. You know, one of the trends we’ve been running into, and, you know, it seems like every year or two, we bump up against the, you know, the big PBM trends.

Where are the chips being moved on the metaphorical poker table today? And it seems like we’re bumping up against a lot of, you know, the specialty pharma carve out. We want to carve this out. We want to carve this out. We want to carve this out. The PBMs are pushing back on this in terms of contractual allowances or lack thereof. So do you see a trend where this will push other players than the big two or three PBMs into the RFP mix? What’s your read, Mike, on how this will play out in future years?

Mike Stull (19:44)

Yeah, I think historically, you know, the big PBMs have been able to dictate terms because they’re the ones that have the pricing.

They’re the ones that have the pricing in the marketplace. In particular, it’s rebates. You know, they have used that to their advantage in terms of, you know, well, if you want these great rebates, then you got to stick with us.

And the problem that we’re running into or that they’re running into, I should say, is that no rebate is going to make up for a drug that doesn’t get dispensed because you have more aggressive clinical criteria in place that, you know, directs a participant to try something else before they try the specialty drug. Or with these co-pay coupon programs, nothing’s going to take the place of, you know, getting the drug paid for by these co-pay assistance programs. So that becomes the issue, especially for the small to mid-sized clients that only have a handful of people.

Once you get to larger employers, it becomes a little bit more difficult, I think, in terms of making the math work. But for the small to mid-sized employers, there’s certainly a case to be had. The big PBMs have done a good job of coming up with the patient assistance programs.

Express Scripts has its SaveOn program. CVS has PrudenRx. And I tell you what, we’ve got groups in there, and they are certainly saving money from those co-pay assistance programs.

So they definitely work. The question is, how long are they going to work? And so I think that, you know, when we talk about risk, I think that’s the big risk for these groups that want to move away from some of the big PBMs is if the manufacturers decide, you know what, we’re giving away a lot of money, and we’re not going to do this anymore, then they’re left with a really bad PBM deal. And in most cases, they’re stuck in it.

So it’s a real delicate balance from what we’ve seen in terms of do you move away from them and risk it? Or do you stay put and continue to look at it on more of a holistic basis?

Christian Moreno (22:13)

You know, you hit some points there that as I was listening to you, it draws my mind to why wellness programs have been harder and harder to talk about beyond a certain point over the last few years. As I mentioned before, there’s an asymmetry to some of this risk, right? It presents a disproportionate risk, much more so than at any time in the medical plan’s history. It’s absorbing a larger risk today financially relative to the contribution than it did in, you know, certainly 2000, if not even 2005 and 2010.

In that arena, it’s difficult to talk about, well, can we use biometric screenings to help improve your health and drop, you know, a couple of uncontrolled diabetics to more controlled and shave off $8,000 to $10,000? I think the larger financial risks posed by specialty pharma and some on the medical claim side as well, sort of takes the oxygen out of the room sometimes. And it’s up to us as consultants to try and reconcile how do we make those two things still both part of the conversation. But it’s just in listening to you talk about the complexities involved in that, it dawned on me that’s just, it’s the same when we’re in the room with plan sponsors and CHROs and comp and ben specialists.

It’s how do we manage the big dollar items, but also when we look at, you know, sort of the health risk, chronic disease, metabolic syndrome, driving a significant amount of what I would call frictional cost, how do we make sure we’re still addressing those, even though the most of the oxygen in the room is, as I said, being taken up by those larger financial risks? Just a, my two cents after listening to your expert explanation there.

Mike Stull (24:00)

Yeah, I think, you know, at the end of the day, you know, from a specialty drug perspective, the question is, can you manage it more tightly? And I think at least up front, there are probably ways outside of the big three PBMs that you can manage more tightly. We are starting to introduce some third-party concurrent reviews of the big PBMs to make sure that they’re following even their own criteria.

The other question is, if you deny a claim up front, what’s the likelihood that it’s ultimately going to get filled? And for a lot of these specialty drugs, there’s not a whole lot of other options. So for these patients, so your ability to deny claims and have people or redirect patients to try other things is quite small. But we’ve also acknowledged that for some of these, you know, small to mid-sized employers, it only takes one to make it worth it.

So, I think that’s, you know, one reason why groups would look elsewhere. And I think the PBMs are starting to do a better job of recognizing that they do need to get a little bit more or at least make an option to have a more tightly managed prior auth process. On the pricing side, you’re just not going to get away from the big guys.

You know, all three of the big PBMs have three of the biggest specialty pharmacies, and then you throw Walgreens in the mix as the fourth. And, you know, just the way specialty drugs are distributed around the country, you’re just, ultimately you can run away, but you’re not going to get away from those four being involved in some way. So from a pricing perspective, not going to get away from them.

And then from the couponing piece, and being able to administer those, they’ve come a long way in terms of being able to do that, still providing you the big rebates that they have market differentiation on. And then you couple the administrative challenges with introducing another vendor, especially when it comes to high deductible plans. And these whole accumulators, I’ve learned more about accumulators over the past several years than I ever wanted to know.

It just adds another layer of complexity. So it’ll be interesting to see. I think, you know, there are, like we said, small and mid-sized employers that have said, we can’t do this anymore.

Christian Moreno (26:30)

Well, and you think about the value proposition that Employers Health brings, scale, size, Lockton Excelsior Solutions working in partnership with you now for several years. What’s obvious to me is just the level of expertise on the consultative side and on the purchasing side, the necessary scale in order to achieve the best possible pricing with the best possible outcome with the best possible rebate structure and so on and so on is more important than it ever was before, in our opinion. And it’s COVID aside, while other claims have seemed to sort of reduce in frequency and severity because of the avoidance of care, certainly pharmacy has not necessarily.

It’s still ever present.

Mike Stull (27:17)

Yeah. And I think that’s a good point.

You know, we see so many opportunities just to save money on the basics of PBM contracting. I mean, there are just so many employers out there that just have bad deals. There’s so much opportunity to save dollars on, you know, having a better contract and having some scale to go with it that, you know, that really should be the first step is making sure you’re in that right contract.

Once you get that, then you can start to look at some of the other more creative things. But taking that step and taking the unnecessary risks associated with it as your first step is somewhat maybe out of order. You know, as we talk about COVID, I think it would probably be bad if we didn’t talk about folks that aren’t going and getting the services that they need, aren’t getting the testing that they need, aren’t going out getting the exercise that they need.

I think it’s the unintended consequences of these lockdowns is that, you know, we’re missing cancer screenings. We’re missing the opportunity to go out and get exercise on a daily basis. And as we talked about some of the mental and social well-being issues that go along with being in lockdown as well.

So curious what you’re hearing from employers or seeing in terms of efforts to make sure that people are still getting those preventative tests that they should and making sure that they’re still, you know, living a holistic lifestyle as much as they can.

Christian Moreno (28:55)

That’s a good question. And I think one of the themes over the course of my career that I’ve noticed is just what are the unintended consequences of any particular event or variable.

When we look at COVID, even in the last few months, there was the COVID fatigue, everyone’s tired talking about it. Nobody wants to hear about it. But I think we’ve almost moved past that into a place of how do we live with this? And there is no question in the data that there is a delay in seeking preventative care and measures for treatments that they would have otherwise sought care for.

We can see it in the actuarial and in the claims data as clear as day. From a mental health standpoint, we’re seeing utilization go up so dramatically that it’s almost you want to double-check the data.

I think one of the unintended consequences of this and an area that’s of great concern is how much are people seeking the preventive care measures. We’ll use something just as simple as on-site biometric screenings for employers that were a foregone conclusion in 2019, but in 2020 most employers are not offering them. And do I think in my experience and expertise that a person who may have three or four risk factors that were emerging in 2019, do I believe that they are going to walk into a walk-in clinic to get their biometric screenings done right now No, I don’t believe so.

And most wellness programs, by the way, are allowing for that maneuvering for most people to suspend any of the punitive contribution-based financial triggers on wellness programs because I think there’s going to be a period of paying the piper down the road. And I know when we talk to our actuaries pretty frequently about this, it’s getting harder and harder to figure out when those claims will hit and what they will look like. If we take someone who was pre-diabetic in 2019 and then move into 2021 and now, they’re into fully uncontrolled type 2 diabetes, that could be serious not only from a health outcome standpoint, from a cost standpoint to the medical plan.

But you bring up a good point. There’s pieces of this that we’re going to have to learn from later. I think some of this is with us for a while.

Mike Stull (31:20)

Good. I agree. And I think we’re certainly seeing employers that are making it a priority as they communicate around open enrollment to at least encourage people to make sure that they’re getting those recommended screenings, preventative care for those people with diabetes, making sure that they’re going out and getting the recommended evidence-based care that they should be getting.

Christian Moreno (31:43)

Exercise, to your point, is another area that I think as we move into the winter for a good third to half of the United States is going to get harder and harder and harder as the fitness industry has been just hammered by this. Indoor exercise is harder than outdoor exercise for most people. And I think we’ve yet to see the full toll from a physical and mental health standpoint.

And I think it’s important for people to try and find alternatives and for employers to continue to offer those through the employee benefits chassis as best they can.

Mike Stull (32:15)

Well, I know I don’t look like it, but I was definitely excited when the local Y opened back up after lockdowns. That first Tuesday it was open, I was there and have been there, if nothing else, just for some sanity’s sake to get back to some part of normal. And they’ve done a nice job of keeping people spread out while they’re there.

Christian Moreno (32:38)

This one thing I think is for sure, there is a level of mental gymnastics in working from home and staring at the same four walls for several months that I would have under clubbed and wildly misunderstood seven or eight months ago. And now I’ve got a little bit more of my arms around what it looks and feels like.

Mike Stull (32:57)

Yeah. All right. Well, I think we’ve covered a lot of area today.

So certainly, appreciate you taking time to be with us and share some of your observations, experience, expertise on the marketplace. So really appreciate it, Christian.

Christian Moreno (33:12)

Mike, it’s a pleasure and an honor to talk to you as always. And thank you for having me.

Mike Stull (33:17)

Thanks again to Christian for his time. It was great to hear what he and his colleagues at Lockton are seeing in the industry. And I hope you can tell they are definitely a group of great advocates for Planned Sponsors and their employees.

Before we end today, I want to make sure that I share this month’s keyword for our $50 Visa gift card giveaway. This month’s keyword is innovation.

So be sure to submit the keyword, again, innovation on the landing page to be entered into this month’s drawing.

There’s always something new happening here at Employers Health. So be sure to follow us on our social media platforms, including LinkedIn and Twitter to stay up to date.

Again, don’t forget to submit your questions by completing the field on the landing page or clicking the link titled submit your questions here, and then be sure to tune in to an upcoming episode to hear the answers to those questions.

That’ll conclude this month’s episode. Thank you again to Christian for sharing his insights and expertise.

And thank you for taking the time to listen. But more importantly, thank you for your continued membership, continued interest in Employers Health. We wish you all a happy and safe Thanksgiving.

Be well, and we’ll see you soon.