August 20, 2019

New Rule Allows Employers to Pay Workers to Buy Their Own Health Coverage

The Trump administration has issued new rules that would allow employers to provide workers with funds in health reimbursement accounts (HRAs) that can be used to purchase health insurance on the individual market.

The rule reverses a long-standing part of the Affordable Care Act that carried hefty fines of up to $36,500 a year per employee for applicable large employers that are caught providing funds to workers so they can buy insurance.

The rule was put in place to keep employers from shunting unhealthy or older workers from their group health plans into private insurance and government-run marketplaces.

Under the rules issued by the Departments of Health and Human Services, Labor and Treasury, employers would be authorized to fund, on a pre-tax basis, health reimbursement funds that to buy ACA-compliant plans. The new rules take effect Jan. 1, 2020.

With the final rules written in a way to keep employers from trying to reduce their group benefit costs by sending sicker and older workers into the individual market, HHS noted in a press release announcing the rule that it would closely monitor employers to make sure this type of adverse selection doesn’t occur.

Typically, HRAs have only been allowed to be used to reimburse workers for out-of-pocket medical expenses. This rule allows them to also be used to pay for health insurance premiums for coverage that a worker may secure on their own.

’Integration’ conditions

The regulation permits an HRA to be “integrated” with certain qualifying individual health plan coverage. In order to be integrated with individual market coverage, the HRA must meet several conditions:

  • Any individual covered by the HRA must be enrolled in health insurance coverage purchased in the individual market, and must substantiate and verify that they have such coverage;
  • The employer may not offer the same class of individuals both an HRA and a “traditional group health plan”;
  • The employer must offer the HRA on the same terms to all employees in a “class”;
  • Employees must have the ability to opt out of receiving the HRA;
  • Employers must provide a detailed notice to employees on how the HRAs work;
  • Employers may not create a class of employees younger than age 25, whom they might want to keep in their group plan because they’re healthier.
  • For employers with one to 100 employees, a class cannot have less than 10 employees; for employers with 100 to 200 employees, the minimum class size is 10% of the workforce; and for employers with 200 or more employees, the minimum class size is 20 employees.

While the HRA money can be used mostly for buying plans that meet ACA requirements, employers under the rule can establish a special type of “excepted benefit” HRA for employees who want to buy less expensive short-term plans that do not comply with the ACA.  The contribution for such plans would be capped at $1,800 a year.

Under the ACA, employers with 50 or more full-time workers (applicable large employers) must provide their employees with health insurance that covers 10 essential minimum benefits and must be “affordable.”

Under the new rule, an applicable large employer could meet their obligation if they provide adequate HRA contributions for employees to buy individual coverage.

August 13, 2019

New Cost-Sharing Limits Set for ACA-Compliant Plans

The Department of Health and Human Services has released the 2020 cost-sharing limits for non-grandfathered plans that comply with the Affordable Care Act.

HHS is charged with setting the premium adjustment percentage, and it changed the formula for calculating cost-sharing limits this year. The agency says this will result in a higher maximum annual limitation on cost-sharing – and possibly higher employer shared responsibility penalties. The latter amounts have to be approved by the IRS.

The final 2020 maximum cost-sharing values are:

  • $8,150 for self-only coverage, up from $7,900 this year, and
  • $16,300 for other than self-only coverage, up from $15,800 this year.

Penalties

As you will know, the ACA also includes a provision called the “Employer Shared Responsibility” penalty, which is levied on applicable large employers who fail to offer coverage to a sufficient amount of their workers or fail to offer coverage that does not provide minimum value or is not affordable, as per ACA regulations.

The penalties proposed for 2020 are as follows:

  • $2,570 per full-time employee (minus the first 30) for failing to offer coverage to a sufficient number of full-time employees.
  • $3,860 per full time employee if the employer offers coverage to a sufficient number of full-time employees, but the coverage either doesn’t provide minimum value or is not affordable.

The latter penalty only applies to full-time employees who have received a premium tax credit for health insurance they have purchased on a government-run health insurance exchange.

Please note that these amounts have not yet been finalized. The IRS must approve the new penalty levels before they take effect.

August 8, 2019

The Costliest Claims for Catastrophic Conditions and the Drugs Used to Treat Them

A new report by Sun Life Insurance Co. highlights the top high-cost claim conditions that plague the U.S. health care system and account for more than half of all catastrophic or unpredictable claims costs.

The top 10 costliest claim conditions comprised over half (51.8%) of the $3 billion that Sun Life reimbursed to stop-loss policyholders from 2014 to 2017.

Stop-loss insurance (also known as excess insurance) is a product that provides protection against high-cost claims. It is purchased by employers that self-fund their own health plans, but do not want to assume 100% of the liability for losses arising from the plans.

The “2018 Stop-Loss Research Report,” which Sun Life has been publishing annually for the past six years, provides a glimpse into the kinds of claims that can have an outsized effect on both insured and self-insured employers’ health plans, and can drive overall expenditures.

Here are some of the other main highlights from the study:

  • Cancer treatment costs comprised 27% of all stop-loss claim reimbursements between 2014 and 2017.
  • The number of health plan enrollees that had claims costing more than $1 million increased by 87% during the four-year study period. In 2017, this group comprised 2.1% of claims but accounted for 20% of all stop-loss claims reimbursements.
  • The aggregate costs of injectable drugs that were part of claims that cost more than $1 million grew 80% from 2014 to 2017.

The most expensive catastrophic claims and the amounts Sun Life paid out in the aggregate between 2014 and 2017 are as follows:

  • Malignant neoplasm (cancer) – Total paid out: $564 million (a portion of total catastrophic claims: 19%)
  • Leukemia, lymphoma, and/or multiple myeloma (cancers) – $235 million (8%)
  • Chronic/end-stage renal disease (kidneys) – $153 million (5%)
  • Congenital anomalies (conditions present at birth) – $115 million (4%)
  • Transplant – $103 million (3.5%)
  • Septicemia (infection) – $88.5 million (3%)
  • Complications of surgical and medical care – $78 million (2.5%)
  • Disorders relating to short gestation and low birth weight (premature birth) – $74 million (2.5%)
  • Liveborn (short gestation/low birth rate, and congenital anomalies) – $69 million (2%)
  • Hemophilia/bleeding disorder – $68 million (2%)

Injectable drug costs

Injectable drugs (which include those delivered by IV or that are self-administered injectable medications) accounted for 8.5% of the total paid out for high-cost claims.

But that’s just the average for the four-year period. Injectable drugs are accounting for a greater share of overall catastrophic claims costs, reaching 9.3% in 2017.

In 2017 alone, 418 drugs contributed to the total $186.3 million that was spent on injectable medications for high-cost claims. But, 62% (or $114.7 million) of the cost was attributed to the top 20. The top five medications accounted for nearly 30%.

Please note that the injectable drugs on the high-cost list are there for different reasons. Some are on the list because of the frequency (how often they are used and how many patients are given the drugs) that they are administered, and others are there because their cost is extremely high.

As an example, the report points to the two top injectable treatments – cancer drugs Yervoy and Neulasta.

Neulasta (used to reduce the chance of infection in patients undergoing chemotherapy) was administered to 354 patients and cost on average $33,800 per dose.

On the other hand, Yervoy, used to treat melanoma that has spread or cannot be removed by surgery, was administered to just 43 patients, but the cost per dose was $323,000.