- Cannot afford ACA coverage purchased on exchanges,
- Are between jobs and need temporary coverage that’s cheaper than COBRA, or
- Have doctors who are not included in plans offered on public exchanges.
With multiple generations working side-by-side in this economy, the needs of your staff in terms of employee benefits will vary greatly depending on their age.
You may have baby boomers who are nearing retirement and have health issues, working with staff in their 30s who are newly married and have had their first kids. And those who are just entering the workforce have a different mindset about work and life than the generations before them.
Because of this, employers have to be crafty in how they set up their benefits packages so that they address these various needs.
But don’t fret, getting something that everyone likes into your package is not too expensive, particularly if you are offering voluntary benefits to which you may or may not contribute as an employer.
Think about the multi-generational workforce:
Baby boomers – These oldest workers are preparing to retire and they likely have long-standing relationships with their doctors.
Generation X – These workers, who are trailing the baby boomers into retirement, are often either raising families or on the verge of becoming empty-nesters. They may have more health care needs and different financial priorities than their older colleagues.
Millennials and Generation Z – These workers may not be so concerned about the strength of their health plans and may have other priorities, like paying off student loans and starting to make plans for retirement savings.
Working out a benefits strategy
If you have a multi-generational workforce, you may want to consider sitting down and talking to us about a benefits strategy that keeps costs as low as possible while being useful to employees. This is crucial for any company that is competing for talent with other employers in a tight job market.
While we will assume that you are already providing your workers with the main employee benefit – health insurance – we will look at some voluntary benefits that you should consider for your staff:
Baby boomers – Baby boomers look heavily to retirement savings plans and incentives, health savings plans, and voluntary insurance (like long-term care and critical illness coverage) to protect them in the event of a serious illness or accident.
You may also want to consider additional paid time off for doctor’s appointments, as many of these workers may have regular checkups for medical conditions they have (64% of baby boomers have at least one chronic condition, like heart disease or diabetes).
Generation X – This is the time of life when people often get divorced and their kids start going to college. Additionally, this generation arguably suffered more than any other during the financial crisis that hit in 2008. You can offer voluntary benefits such as legal and financial planning services to help these workers.
Millennials and Generation Z – Some employee benefits specialists suggest offering these youngest workers programs to help them save for their first home or additional time off to bond with their child after birth.
Also, financially friendly benefits options, such as voluntary insurance and wellness initiatives, are two to think about including in an overall benefits package.
Voluntary insurance, which helps cover the costs that major medical policies were never intended to cover, and wellness benefits, including company-sponsored sports teams or gym membership reimbursements, are both appealing to millennials and can often be implemented with little to no cost to you.
In recent years, employers and self-employed Americans have been migrating to high-deductible health plans (HDHPs) but, if they are not attached to a health savings account (HSA), they can end up costing the plan participant more than they can afford and create health problems for them down the road.
HDHPs typically have reduced premiums in exchange for the employee taking on a higher deductible for health care expenditures. The average person enrolled in an HDHP saves 42% in annual premiums, compared to those enrolled in preferred provider organization plans, according to research from BenefitFocus.
But in order to afford paying those deductibles, an attached HSA can help them sock away funds pre-tax to ease the burden.
That’s because HDHPs may leave families facing at least $2,700 in potential deductibles, and up to $13,500 in out-of-pocket medical expenses per year. In 2018, the average HDHP deductible was $4,133 per year for family coverage and $2,166 for single coverage.
For some people, this can pose a problem because:
- 60% of Americans don’t have $1,000 in emergency savings.
- 44% would have trouble meeting an unexpected $400 expense.
As a result, many HDHP beneficiaries find themselves putting off care, rationing their medications, or going without altogether. But this often leads to even greater expenses down the road, lost work, productivity losses – and even disability and death. Besides the toll it takes on the employee, their work for you can also suffer.
You can do your part to help your workers avoid this situation by providing an attached HSA, which can be crucial in helping them meet their medical bills.
How HSAs work
HSAs are one of the most tax-efficient savings vehicles in the tax code, and a potent tool for both insurance planning and retirement planning.
These tax-advantaged savings accounts are specifically designed to help people pay their health insurance deductible.
- Contributions are tax-deductible. What’s more, if you offer the benefit via a Section 125 cafeteria plan, HSA contributions aren’t subject to Social Security and Medicare payroll taxes.
- Balances accrue tax-deferred. And if participants don’t need to tap their HSA money for health care expenses, once they turn age 65, they can withdraw that money for any reason, penalty-free. All they pay is income tax.
- Withdrawals to cover qualified medical expenses are tax-free.
What to do
Employers and plan sponsors should work to bridge the gap between deductibles and what employees can actually afford. Otherwise, the short-term saving is likely to be overwhelmed by absenteeism, presenteeism and future medical costs. You should:
- Consider contributing to or matching employee contributions to health savings accounts.
- Beef up flexible spending account benefits to help workers with current health issues, and to fund preventative care such as eye exams – which can help detect diabetes.
- Offer critical illness insurance.
- Implement or expand workplace wellness programs. A study from Health Affairs found that well-executed wellness programs generate a return of $3.27 per dollar invested.
- Invest in worksite vaccination and screening programs.
- Speak with your health insurance carrier or us about using wellness dollars designed to help employees reduce long-term medical costs.
As the job market tightens and competition for workers becomes fiercer, a majority of employers are boosting their employee benefits offerings and are paying less attention to reducing associated costs, according to a new study.
The changes reflect the shifting priorities of the workforce and the newest generation to enter the job market. The challenge for employers is controlling benefit costs, while at the same time being able to attract and retain talent as competition for workers increases.
The “2018 Benefits Strategy & Benchmarking Survey” by Gallagher Benefits found that U.S. employers were most concerned with:
- Attracting and retaining talent. This was the number one operational priority for 60% of employers.
- Controlling benefit costs. This was the top priority for another 37%.
The study authors said they are noticing a “clear shift in the market” because employers are having to compete so fiercely for workers and because the workforce comprises five generations, all of which have very different priorities and needs. Besides beefing up their health insurance offerings, they are also boosting other employee benefits.
Employers are also adopting new strategies to help their employees get the health care services they need. The survey found that:
- 45% of employers have increased employee cost-sharing of health care benefits.
- 55% of employers provide telemedicine services that allow employees to speak remotely with medical professionals.
- More employers are focused on helping their employees reduce their medical expenses with wellness programs and prevention services. The most popular offerings include:
- Flu shots
- Tobacco cessation programs
- Health risk assessments
- Biometric screenings
- Financial wellness programs are gaining popularity, with 62% of employers providing access to financial advisors.
- 89% of employers offer employees life insurance
- 70% of employers provide access to employee assistance programs.
- 47% of employers offer financial-literacy education to help employees better manage their money.
- 22% of employers offer employees three medical insurance plans to choose from (another 13% offer four or more).
- 46% of employers offer tuition reimbursement.
An audit carried out for Ohio Medicaid found that large pharmacy benefit managers that contract with the state’s Medicaid program have been pocketing a larger and larger share of drug pricing.
In fact, PBMs charged Ohio Medicaid plans 31% more for generic prescriptions than the amount they paid pharmacists for the drugs, the audit found, shedding light on a practice that observers say is being mirrored throughout the country.
The auditor found that the two largest PBMs operating in the state billed Medicaid managed-care plans $223.7 million more for prescription drugs than they paid pharmacy providers in 2017.
The report comes as pressure grows on PBMs to be more transparent about their pricing and costs amid complaints by pharmacies that are barely breaking even or losing money due to the tough contracts they have to enter into with PBMs. Many critics say that PBMs are not passing on the savings to payers when they negotiate lower contracts with pharmacies.
“We know that Ohio is not alone,” Ernie Boy, executive director of the Ohio Pharmacy Association, said in a prepared statement. “Every state and every payer in the country is grappling with these overinflated costs.”
What’s going on
Medicaid doesn’t directly pay pharmacists. Ohio Medicaid pays five private insurance companies to manage Medicaid plans for the state. The insurance companies contract out pharmacy benefits to middlemen, which pay pharmacists to fill prescriptions.
Medicaid and most health plans contract with PBMs to essentially run the drug portion of the health insurance equation. They are supposed to negotiate volume discounts with drug-makers and rates with pharmacies to reduce the overall drug spend by the payers.
PBMs make a good deal of their money from a growing “spread” between what the PBM pays pharmacies and what it charges payers (in this case, the state Medicaid program). The PBM keeps the spread, but most PBMs are not transparent about how much the spread is, leaving both the pharmacies and the payers in the dark.
According to the report, the overall spread in 2017 in Ohio was $224.8 million – with an average spread of 8.9% per prescription. Generic drugs, which comprise 86% of Medicaid prescriptions in Ohio and for which pricing is most opaque, accounted for an overwhelming majority of the spread.
The report found that during the entire study period:
- The average spread was $5.71 per prescription.
- The average spread for brand-name prescriptions was $1.85.
- The average spread for generic prescriptions was $6.14.
- The average spread for specialty drugs was $33.49.
Generic drugs account for 86% of Medicaid prescription claims in Ohio.
The auditor stated in its report that PBMs’ administrative fees typically range from $0.95 to $1.90 per prescription.
“Although this figure may not include all of services performed by a (pharmacy benefit manager), it suggests Ohio’s current spread may be excessive and warrants the state taking further action to mitigate the impact on the Medicaid program,” the report stated.
As part of its findings, the auditor noted that pharmacies in Ohio have been shuttering at a brisk pace since Medicaid PBMs have been cutting how much they reimburse them for medications.
Between 2013 and 2017, some 371 pharmacies closed in Ohio, coinciding with significant reimbursement reductions in their PBM contracts. The majority of those closures have taken place since 2016.
As a result of the audit, Ohio’s Medicaid department directed its managed-care organizations to quit their contracts with PBMs, citing the opaque pricing practices.
The state’s five managed-care plans were required to enter into new contracts with companies that were able to manage pharmacy services using a more transparent pricing model by the start of 2019.
The IRS has proposed new regulations that could let employers avoid Affordable Care Act employer mandate-related penalties by allowing them to reimburse employees for insurance they purchase on health insurance exchanges or the open market.
The regulations are not yet finalized, but the IRS has issued a notice explaining how applicable large employers, instead of purchasing health coverage for their workers, would be able to fund health reimbursement accounts (HRAs) to employees who purchase their own plans.
Under current ACA regulations, employers can be penalized up to $36,500 a year per employee for reimbursing employees for health insurance they purchase on their own.
Employer mandate refresher
Applicable large employers (ALEs) – employers with 50 or more full-time employees or full-time equivalents – must offer health coverage to at least 95% of full-time employees that includes:
- Minimum essential coverage: The plan must cover 10 essential benefits.
- Minimum value: The plan must pay at least 60% of the costs of benefits.
- Affordable coverage: A plan is considered affordable if the employee’s required contribution does not exceed 9.56% (this amount is adjusted annually based on the federal poverty line; 9.86% will be the 2019 affordability percentage).
ALEs that fail to offer coverage are subject to paying a fine (called the responsibility payment) to the IRS.
How the new rule would work
The IRS is developing guidance on how HRAs could be used to satisfy the employer mandate.
In its recent notice, the agency addressed how the regulation will play out, as follows:
Requirement that ALEs offer coverage to 95% of their employees, and dependents if they have them – Under the proposed regs and the notice, an employer could satisfy the 95% test by making all of its full-time employees and dependents eligible for the individual coverage HRA plan.
Affordability – The employer would have to contribute an amount into each individual account so that the remaining out-of-pocket premium cost for each employee does not exceed 9.86% (for 2019, as adjusted) of the employee’s household income.
This could be a logistical nightmare for employers, and the IRS noted that employers would be able to use current affordability-test safe harbors already in place in regulations.
Minimum value requirement – The notice explains that an individual coverage HRA that is affordable will be treated as providing minimum value for employer mandate purposes.
What you should do
At this point, employers should not act on these regulations. The IRS is aiming for the regs to take effect on Jan. 1, 2020.
The final regulations have yet to be written, so they could change before they are promulgated. We will keep you informed of developments.
A new study has found that people enrolled in high-deductible health plans (HDHPs) actually are more likely to consider costs and quality when considering non-emergency care.
The 14th annual “Consumer Engagement in Health Care” study by the Employee Benefits Research Institute and market research firm Greenwald & Associates surveyed 2,100 adults, most of whom receive health coverage via their employers.
The survey found that people enrolled in health plans with a deductible of at least $1,350 for self only, and $2,700 for families, were more likely to take costs into account when making health care decisions.
Evidence of cost-conscious behavior:
- 55% of HDHP enrollees said they checked whether their health plan would cover their care or medication prior to purchase, compared to 41% in traditional health plans.
- 41% of HDHP enrollees said they checked the quality rating of a doctor or hospital before receiving care, compared to 33% of those in traditional plans.
- 41% of HDHP enrollees asked for a generic drug instead of a brand name drug, compared to 32% of traditional plan enrollees.
- 40% of HDHP enrollees talked to their doctor about prescription options and costs, compared to 29% of traditional plan participants.
- 25% of HDHP enrollees used online cost-tracking tools provided by their health plans to manage their health expenses, compared to 14% of people in traditional plans.
- HDHP enrollees also were more likely to take preventive measures to preserve health, including enrolling in wellness programs.
That said, the study did find some negative behavior among HDHP enrollees as well, including that 30% of HDHP enrollees said they had delayed health care in the past year because of costs, compared to 18% of traditional plan participants.
What you can do
In order to help HDHP enrollees get the most out of their plans, it’s recommended that their employers also offer health savings accounts.
This can help them pay for services that are not covered until they meet their deductible. Employers can help by matching (fully or in part) employees’ HSA contributions. This encourages them to participate.
Employers should also push preventative care. The Affordable Care Act requires all plans to cover a set of preventative care services outside of the plan deductible. Unfortunately, many people don’t know that these services must be covered by insurance with no out-of-pocket expenses for the enrollees.
Some employee benefits experts are recommending that employers tie the amount of premiums employees are required to contribute to how well they comply with preventative guidelines.
Non-enrollment in HSAs
These are the reasons employees cite for not enrolling in their company’s HSA:
- Do not see any advantages: 57%
- Do not have enough money to contribute to the account: 24%
- Their employer doesn’t contribute to the account: 10%
- Did not take the time to enroll: 8%
- Do not understand what the HSA is for: 6%
The key to getting your staff to take advantage of the tax-savings feature of HSAs is education. You should make sure all of your eligible staff understand how they work.
And if you are not currently contributing some funds to their HSAs, now might be the time to consider doing that.
A ruling by a U.S. District Court judge in December 2018 that the Affordable Care Act is unconstitutional is not expected to stand but, if it does, the moves that have been made in the health insurance space to reduce costs, deliver better care outcomes and make the system more efficient would be expected to stay.
For those employers that were offering health coverage to their employees before the ACA and have continued since, the marketplace dynamics would likely not change much if the ruling were not overturned on appeal.
Additionally, since there has been some success in the employer-sponsored health care space in keeping cost inflation relatively tame, there would likely be no incentive for health insurers and providers to abandon those efforts.
The more likely outcome is that a higher court (and eventually likely the U.S. Supreme Court) overturns U.S. District Judge Reed O’Connor’s ruling that because Congress eliminated the individual mandate portion of the ACA, the rest of the law is also invalid and cannot stand. That means all aspects of the law, including health care exchanges, the employer mandate, and the requirement that policies cover 10 essential benefits, and much more. The individual mandate was repealed at the end of 2017.
Several states such as Massachusetts, New York and California have since intervened to defend the law. They argue that, if Congress wanted to repeal it, it would have done so. The Congressional record makes it clear Congress was voting only to eliminate the individual mandate penalty in 2019; it indicates that they did not intend to strike down the entire ACA.
The original lawsuit against the ACA was brought by 20 attorneys general from Republican states, and now 17 attorneys general led by California’s Xavier Becerra have filed a notice of appeal with the 5th U.S. Circuit Court of Appeals in New Orleans.
Interestingly, the Trump administration filed a brief early in 2018 encouraging the court to uphold the ACA but strike down the provisions relating to guaranteed issue and community rating.
There have been more than 70 attempts to invalidate the ACA in courts across the country, and two of those cases made it to the Supreme Court. The last time the ACA was upheld was in 2012 and all five justices who voted at that time to uphold the law are still on the bench today.
Additionally, the ACA is an extremely expansive piece of legislation, which has been on the books since 2010. Legal pundits say it’s unlikely the Supreme Court would want to strike down a law that affects millions of people in the country. In fact, because of this the court may decide not even to take up the case if the 5th Circuit has overturned O’Connor’s ruling.
While this case is under appeal the law will stand, meaning that all parts of it, except the individual mandate, will remain. That means all employers who are considered “applicable large employers” under the ACA, will be required to continue offering health insurance to their workers.
If you are one of them, you need to continue complying with the law of the land as it stands. And remember, while Congress eliminated the penalties associated with not complying with the individual mandate, the penalties for not complying with the employer mandate are still very much in place. Fines can be severe for non-compliance.
This ruling is not expected to affect those penalties, reporting requirements, or any other applicable ACA requirement at this time.
In 2017, spending on prescription drugs grew 11%, faster than any other category of health care spending, according to the U.S. Centers for Medicare and Medicaid Services.
The report cited increased use of new medicines, price increases for existing ones, and more spending on generic drugs as the reasons for this growth. Increasingly, though, observers of the health care system point to one player – the pharmacy benefit manager.
PBMs are intermediaries, acting as go-betweens for insurance companies, self-insured employers, drug manufacturers and pharmacies. They can handle prescription claims administration for insurers and employers, facilitate mail-order drug delivery, market drugs to pharmacies, and manage formularies (lists of drugs for which health plans will reimburse patients.)
A PBM typically has contracts with both insurers and pharmacies. It charges health plans fees for administering their prescription drug claims, and also negotiates the amounts that plans pay for each of the drugs.
At the same time, it creates the formularies that spell out the prices pharmacies receive for each drug on the lists. Commonly, the price the plan pays for a drug is more than the pharmacy receives for it. The PBM collects the difference between the two prices.
It can do this because the health plan does not know what the PBM’s arrangement is with the pharmacy, and vice versa. Also, a health plan does not know the details of the PBM’s arrangements with its competitors.
A PBM could charge one plan $200 for a month’s supply of an antidepressant, charge another plan $190 for the same drug, and pay the pharmacy $160. None of the three parties knows what the other parties are paying or receiving.
In addition, drug manufacturers, who recognize the influence PBM’s have over the market, offer them rebates off the prices of their products.
In theory, the PBMs pass these rebates back to the health plans, who use them to moderate premium increases. However, because these arrangements are also confidential, the extent to which these savings are passed back to health plans is unknown. Many observers believe that PBMs are keeping all or most of the rebates.
To fund the rebates, drug manufacturers may increase their prices. The CEO of drug-maker Mylan testified before Congress in 2016 that more than half the $600 priceof an anti-allergy drug used in emergencies went to intermediaries.
The PBMs argue that they help hold down drug prices by promoting the use of generic drugs and by passing on the savings from rebates to health plans and consumers.
They reject the notion that they are somehow taking advantage of health plans and pharmacies, pointing out that they are “sophisticated buyers” of their services. They also argue that revealing the details of their contracts would harm their ability to compete and keep prices low.
Nevertheless, PBMs are now attracting scrutiny from Congress, health plans and employers. At least one major insurer has sued its PBM for allegedly failing to negotiate new pricing concessions in good faith.
In addition, businesses such as Amazon are considering getting into the PBM business. Walmart is already selling vials of insulin at relatively inexpensive prices.
PBMs earn billions of dollars in profits each year. With the increased attention those profits have brought, it is uncertain how long that will continue.
As the number of employers offering high-deductible health plans continues growing, the spotlight recently has highlighted an inconvenient truth: some employees are going broke and filing bankruptcy because they cannot afford all of the out-of-pocket expenses and deductibles they must pay in these plans – just like the bad old days in the 1990s and 2000s.
Besides being in plans with high deductibles, many employees are also paying more for coverage as employers have shifted more and more of the premium burden to their staff.
Making matters worse, studies are showing that many people with HDHPs are forgoing necessary treatment and not taking the recommended dosages of medicines because they can’t afford the extra costs.
- Enrollment in HDHP plans grew to 21.8 million in 2017, up from 20.2 million the year prior, and 5.4 million in 2007, according to a report by America’s Health Insurance Plans.
- Nearly 40% of large employers offered only high-deductible plans in 2018, up from 7% in 2009, according to a survey by the National Business Group on Health.
- 50% of all workers had health insurance with a deductible of at least $1,000 for an individual in 2018, up from 22% in 2009, according to the Kaiser Family Foundation.
Despite that, a 2017 report by the Centers for Disease Control and Prevention found that 15.4% of adults in HDHPs in 2016 had issues paying bills, compared to 9% of those with other types of insurance. And there have been a number of news reports about the deep financial toll on HDHP enrollees that have suddenly been hit by serious maladies.
Meanwhile, the average deductible for a family had risen to an average of $4,500 in 2017 from $3,500 in 2006, according to the Kaiser-HRET 2017 survey of employer-sponsored health plans.
As a result, some employers are rethinking their use of these HDHPs and trying to reduce the burden on their workers, according to news reports.
Skimping on care
Studies show that many put off routine care or skip medication to save money. That can mean illnesses that might have been caught early can go undiagnosed, becoming potentially life-threatening and enormously costly for the medical system.
A study by economists at University of California, Berkeley and Harvard Research, published in the Journal of Clinical Oncology
Findings: When one large employer switched all its employees to high-deductible plans, medical spending dropped by about 13%. That was not because the workers were shopping around for less expensive treatments, but rather because they had reduced the amount of medical care they used, including preventative care.
The study found that women in HDHPs were more likely to delay follow-up tests after mammograms, including imaging, biopsies and early-stage diagnoses that could detect tumors when they’re easiest to treat.
A report by the Robert Graham Center for Policy Studies in Family Medicine and Primary Care, published in Translational Behavioral Medicine
Findings: People with HDHPs but no health savings accounts are less likely to see primary care physicians, receive preventive care or seek subspecialty services. Compared to individuals with no deductibles, those enrolled in HDHPs without HSAs were 7% less likely to be screened for breast cancer and 4% less likely to be screened for hypertension, and had 8% lower rates of flu vaccination.
The study authors noted that although more individuals have health insurance under the Affordable Care Act, premiums and deductibles have increased, leaving many Americans unable to afford these costs.
Oddly, many people in HDHPs are also forgoing preventative care services, even though they are exempted from out-of-pocket charges, including the deductible under the ACA. This is likely because most people don’t know that the ACA covers preventive care office visits, screening tests, immunizations and counseling with no out-of-pocket charges. As a result, they do not benefit from preventive care services and recommendations.
Companies with second thoughts
A few large employers – including JPMorgan Chase & Co. and CVS Health Corp. – recently announced that they would reduce deductibles in the health plans they offer their employees or cover more care before workers are exposed to costs.
CVS Pharmacy, part of CVS Health Corp., in 2013 had moved all of its 200,000 employees and families into HDHPs. During routine questionnaires, CVS later found that some of its employees had stopped taking their medications because of costs. The company, in response, expanded the list of generic drugs its employees could buy for free to include some brand-name medications, as well as insulins.
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