November 26, 2019

New Rules Aim for Hospital, Insurer Transparency

The Trump administration on Nov. 15 announced two rules that would require more transparency in hospital pricing and health insurance out-of-pocket costs for enrollees.

The final rule on hospital pricing will require hospitals to publish their standard fees both on-demand and online starting Jan. 1, 2021, as well as the rates they negotiate with insurers. The administration also proposed rules that would require health insurers to provide their enrollees instant, online access to an estimate of their out-of-pocket costs for various services. 

The latter are just proposed rules and will have to go through a comment period before final rules can be issued. 

The two sets of rules are part of the Trump administration’s efforts to bring more transparency into the health care and insurance industry. They are in response to more and more consumers’ stories of serious financial strife after receiving surprise bills from hospitals and other providers, particularly if they had to go to a non-network physician or hospital.

Both rules could benefit health plan enrollees by giving them more information on hospital services, particularly if they are in high-deductible plans and can shop around for a future procedure, such as a mammogram or knee replacement surgery.

Hospital pricing transparency

In the original proposed regulations, the administration had proposed the effective date of the hospital price transparency rule as Jan. 1, 2020, but health providers said they would need more time to ramp up.

The new rules, effective Jan. 1, 2021, will require hospitals to publish in a consumer-friendly manner their standard charges price list of at least 300 “shoppable services,” meaning services that can be scheduled in advance, such as a CAT scan or hip replacement surgery.

The list must include 70 services or procedures that are preselected by the Centers for Medicare and Medicaid Services. Hospitals will have to disclose what they’d be willing to accept if the patient pays cash. The information will be updated every year.

Hospitals will be required to publish their charges in a format that can be read online. This rule could pave the way for apps that patients can use to compare services between hospital systems.

Under the rule, hospitals will have to disclose the rates they negotiate with third party payers.

The new rules face some uncertainty, however. The health care trade press has reported that a number of trade groups such as the American Hospital Association and the Federation of American Hospitals, among others, announced in a joint statement that they would sue the government, alleging that the new rules exceed the bounds of the CMS’s authority.

Out-of-pocket transparency

The proposed rule would require insurers to provide their health plan enrollees with instant online access to estimates of their out-of-pocket costs.

The regulations would require health insurers to create online tools their policyholders can use to get a real-time personalized estimate of their out-of-pocket costs for all covered health care services and products, such as:

  • Hospitalization
  • Doctor visits
  • Lab tests
  • Surgeries
  • Pharmaceuticals.

They would also be required to disclose on a public website negotiated rates for their in-network providers, as well as the maximum amounts they would pay to an out-of-network doctor or hospital. 

The proposed regs would also let insurers share cost savings with their enrollees if the individuals shop around for services that cost less than at other providers. This would give enrollees an incentive to shop around.

This proposed rule is also certain to face push-back from the insurance industry.

These out-of-pocket transparency regs are just proposals, so they have to go through the standard rule-making procedure of soliciting public comments before eventually issuing the final rules.

November 19, 2019

How to Get the Benefits of Self-Funding without the Risks

There are typically two approaches to securing health coverage for your staff – group health insurance or self-funding.

Self-funding, however, can be costly and risky and is usually only done by larger organizations with thousands of employees. But there is a hybrid model that can help small and mid-sized employers provide their staff with affordable health coverage: partial self-insuring.

To understand how partial self-insuring works, we should start with the basics of what a self-insured plan is. In a fully self-insured plan, the employer bears the risk of all costs incurred under the plan for claims and administration.

In essence, the employer acts as the insurer and pays claims from a fund that it pays into along with employees, who pay their share of premiums into the fund.

Also, the employer will usually contract with a third-party administrator or an insurance company to process claims and provide access to a network of physicians and other health care providers.

How partial self-insuring works

Partially self-insured arrangements provide some of the benefits of being self-funded but without all the risks, while plans will have the same benefits as insured plans have. Here’s how they work:

  • Employers and their employees still pay premiums, a portion of which goes into an account that will be tapped to pay the first portion of claims that are filed. That means that the employer is acting as the insurer for those claims.
  • The other portion of the premium is paid to an insurance company. This is sometimes known as a stop-loss policy.
  • Plans have an aggregate deductible for all claims filed by employees, meaning that once that deductible is reached an insurer starts paying the claims instead.
  • Premiums are calculated to fund the claims to the aggregate deductible amount. In other words, the employer and employees are paying for the worst-case scenario in each policy year.
  • It is possible for the employer to get a refund at the end of the policy year if the total claims come in at a level that is less than expected. The employer can either be reimbursed for this amount or use those funds for the next policy year.

Lower risk than fully self-insured plan

Typically, an employer should have at least 25 workers if it is considering a partial self-funded arrangement, but we’ve seen plans with fewer enrollees.

Many employers will opt for a partially self-insured plan to save money, but these types of plans also allow an employer to design a more useful and valuable plan for its workers.

The key to making this work is cost control, without which claims can spiral and drive up premiums at renewal.

Knowing exactly how much to set aside for reserves and how much you should set your employees’ premiums, deductibles and other cost-sharing can be complicated.

But with the right mixture of benefits, plan design and education, you can control behavior, which drives claims, in order to keep renewal rates from increasing too much each year.

The fine print

That said, there are some reasons partial self-insuring isn’t for all employers:

  • There is additional responsibility, as the employer basically becomes an insurer or sorts.
  • There is additional paperwork for these plans since the employer also becomes a payer.
  • There are compliance issues that the employer needs to consider (ERISA and the Affordable Care Act, for example).
  • There is some additional risk to the employer, as it is paying claims.
  • If you have too many claims, you could face a non-renewal by your stop-loss insurer. If you are cancelled, it may be difficult to seamlessly enter the insured market.
November 12, 2019

Average Family Plan Cost Hits $20,000 for First Time; What Can You Do to Cut Costs?

A new study has found that the average annual premium for a group family health plan has exceeded $20,000 for the first time in 2019, up 5% from 2018.

The average premium for single coverage plans in 2019 is $7,188, up 4% from the year prior, according to the Kaiser Family Foundation’s annual report on employer coverage.

The costs of high-deductible health plans are only slightly less than the average. The average premiums for covered workers in HDHPs with an attached health savings account are $6,412 for single coverage and $18,980 for family coverage.

Increasingly, workers are picking up a larger portion of the health care and insurance tab. In 2019, they are paying $6,015 on average in premiums for family coverage, or about 29% of the total tab. Workers with individual coverage contribute 17.3% toward the total premium.

Additionally, the average deductible for single coverage is $1,655 in 2019, which is unchanged from the year prior, however, the deductible is often higher for workers in small firms ($2,271) compared to large businesses ($1,412).

The average annual deductible among covered workers with a deductible has increased 36% over the last five years and 100% over the last 10 years, according to the report.

Also, 66% of workers have coinsurance and 14% have a copayment for hospital admissions. The average coinsurance rate for a hospital admission is 20%, and the average copayment is $326 per hospital admission.

Another survey by the Kaiser Family Foundation and the Los Angeles Times found that 40% of group health plan enrollees had difficulty affording health insurance or health care, or had problems paying medical bills.

And close to 50% said that they or a family member had skipped or postponed getting health care or prescriptions in the past year due to costs.

Easing the burden

There are steps you can take to ease the burden on both your company and your employees.

Consider plans with telemedicine – More and more employers (69% of firms with 50 or more workers) are offering health plans that cover the provision of health care services through telemedicine. Telemedicine can greatly reduce the cost of care in terms of price for medical visits, as well as the time involved for the employee to travel to the doctor.

Telemedicine can include video chat and remote monitoring.

Utilizing retail health clinics – More health plans will pay for services rendered by retail clinics, like those located in pharmacies, supermarkets and retail stores. These clinics are often staffed by nurse practitioners or physician assistants and treat minor illnesses and provide preventative services. They can greatly reduce the cost of care for these kinds of visits outside normal hospital systems.

Plans with narrow networks – If a health plan can contract with fewer doctors and specialists, there is often less outlay for care. At this point, the jury is still out on exactly how much can be saved, but there are also drawbacks such as:

  • Disruption of provider relationships
  • Employee backlash
  • Reduced access or convenience for employees
  • Lack of specialists.

Tiered or high-performance networks – These networks typically group providers in the network based on the cost, quality and/or efficiency of the care they deliver and use financial incentives to encourage enrollees to use providers on the preferred tier.

November 8, 2019

The ‘Cadillac Tax’ May Finally Be Repealed

The much-maligned “Cadillac tax,” which was supposed to be implemented as a tax on high-value group health plans with premiums above a certain level, may finally be seeing the end of the road.

Already the implementation of the tax, which was created by the passage of the Affordable Care Act, has been postponed twice. It was originally supposed to take effect in 2018 under the ACA. The tax was delayed two years by Congress in 2016, pushing implementation ahead to 2020. It was delayed again in 2018 and is currently scheduled to take effect in 2022.

But now the House has overwhelmingly voted to ditch it once and for all.

The Cadillac tax is an excise tax that applies to any group health policy that would cost more than $11,200 for an individual policy, or $30,150 for family coverage. Starting in 2022, a 40% tax would apply to any premium above those levels (so if an individual policy cost $12,000 a year, the tax would apply to the $800 excess over the $11,200 level).

Although the insurance company would have to pay the tax, it is widely believed that insurers would pass it on to the employer.

Widespread distaste for the tax

The tax was maligned by both employers and labor unions, many of which receive generous benefits packages that would have been subject to the tax. Labor disliked it because they felt that employers would cut benefits to avoid paying it or pass the tax on to employees. Employers disliked the tax because, well, it’s another tax – and a hefty one at that.

But supporters of the ACA said the tax was necessary to pay for the law’s nearly $1 trillion cost and help stem the use of what was seen as potentially unnecessary care.

While there is widespread support for repealing the tax, not everyone is on board. A group of economists and health experts wrote a letter to the Senate on July 29 in which they argued that the tax “will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount.”

The letter also pointed out that repealing the tax “would add directly to the federal budget deficit, an estimated $197 billion over the next decade, according to the Joint Committee on Taxation.”

This summer, the House of Representatives voted 419 to 6 to repeal the tax. Currently, a Senate companion bill has 61 co-sponsors, but the legislation has not yet come up for debate.

That said, most observers expect that the bill will soon be put up for a vote, meaning that the Cadillac tax will likely be sent to Cadillac ranch – having never seen the light of day.