November 17, 2020

Uncertainty Weighs on Group Plan Cost Expectations

U.S. employers are expecting their group health insurance costs to climb 4.4% in 2021, despite the ravages of pandemic and a likely uptick in health care usage next year, according to a new survey.

The expected rate increases are on par with much of the last few years when insurance premium inflation has hovered between 3% and 4%. Despite the expected increase, employers do not plan to cut back on benefits for their employees, according to the Mercer “National Survey of Employer-Sponsored Health Plans 2020.”

The COVID-19 pandemic has injected a large dose of uncertainty into the marketplace. Overall, health care expenditures have plummeted since the pandemic started, which at first seems counterintuitive. But many hospitals postponed elective and non-emergency surgeries and procedures, while fewer individuals were seeking care either out of fear of going in for it or because they could not get appointments.

For example, the first three months after the pandemic had gotten a foothold in the U.S., according to the Willis Towers Watson “2020 Health Care Financial Benchmarks Survey,” monthly paid claims per employee dropped as follows:

  • April: 21%
  • May: 29%
  • June: 14%

“So far, the additional medical costs associated with the testing and treatment of COVID-19 have been more than offset by significant reductions in utilization across many service categories,” the insurance industry research firm recently wrote in its report.

Additionally, the Mercer report predicts that a significant portion of the deferred care will never be realized. And, for those people who have deferred care, when they eventually decide to come for the care will also depend on the course of the pandemic, hospital capacity and whether people feel safe to go in for the treatment.

“Different assumptions about cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care, are driving wide variations in cost projections for next year,” Tracy Watts, a senior consultant with Mercer, said.

Employer reactions

Despite the expected cost increases, Mercer found that few employers plan to make any changes to their benefits this year, as they seek to keep things stable for their staff. The survey found that:

  • 57% will make no changes at all to reduce cost in their 2021 medical plans (up from 47% in the prior year’s survey).
  • 18% will take cost-saving measures that shift more health care expenses to their employees, including raising deductibles and copays.

Employers are also adding benefits, some of them prompted by the pandemic and shifts in how health care is accessed. For example:

  • 27% are adding or improving their telemedicine services (telemedicine for episodic care, artificial-intelligence-based symptoms triage, ‘text a doctor’ apps, and virtual office visits with a patient’s own primary care doctor).
  • 22% are adding or improving their voluntary benefits (critical illness insurance or a hospital indemnity plan).20% are boosting their mental health services coverage.
  • 12% are offering targeted health services, like for diabetes and other chronic conditions.
  • 9% are offering more support for complex cases.
  • 4% are offering services to limit surprise billing.

The takeaway

Mercer noted the following trends going into 2021:

Keeping the status quo – A majority of employers surveyed are avoiding making any changes to their health plans, including increasing employee cost-sharing, even if premiums increase. Instead, they are focused on providing a stable source of health insurance for their staff and supporting their workers as they deal with stress and effects of the pandemic.

Digital migration – More employers are offering digital health resources like telemedicine, telehealth apps, and virtual office visits, for their convenience, safety, efficiency, and cost-effectiveness.

Costs uncertain – Due to the effects of the COVID-19 pandemic, cost projections are uncertain at best. The avoidance of medical care could translate into a higher utilization in 2021 and hospitals may start charging more to recoup lost revenues from 2020. Or people may have forgone a lot of that care forever. It’s too early to tell.

March 24, 2020

New Accumulator Programs Can Surprise Employees at Pharmacy Counter

An ongoing tense relationship between insurers and drug companies is spilling over and hitting enrollees in group health plans, by saddling them with additional out-of-pocket expenses.

Some insurers have started adopting copay accumulator programs — sometimes called accumulator adjustment programs — that change the way a patient’s out-of-pocket medication costs are added up (accumulated) when there is some type of drug company financial assistance for the health plan enrollee. 

These accumulator programs do not count the drug company assistance (in the form of coupons or copay cards) that defray the employee’s out-of-pocket expenses.

Unfortunately, many group plan enrollees often do not know that their group health plan has changed its policy to be an accumulator program. This is because they did not read the plan summary when they renewed their policy during open enrollment, or they read about it and didn’t understand how it works.

For most employees, the change will not make much of a difference, if any at all, if they are low users of their health benefits and rarely need prescription medications.

But, for heavy users and those with chronic health problems, the change could mean hundreds, if not thousands of dollars more out of pocket for their medicines. For patients who need expensive medications, drug makers will often provide copay assistance in the form of coupons or copay cards, which the enrollee shows the pharmacy when buying the drugs.

Essentially, accumulator programs block patients from using any third party monies toward their deductibles and out-of-pocket maximums.

How it works

To understand how an accumulator program works and how it may affect your employees, take the example of a patient who needs $15,000 worth of medications a year with a pharmaceutical out-of-pocket maximum of $7,000 on their health plan:

  • Traditional plan with no copay assistance: Employee pays $7,000 and the insurer pays $8,000.
  • Typical plan that allows copay assistance: Employee pays $4,000, copay assistance pays $3,000 and insurer pays $8,000.
  • Plan with copay accumulator: Employee pays $7,000, copay assistance pays $3,000 and insurer pays $5,000.

Insurers that have instituted the practice say they did so because they want to steer health plan enrollees toward generic medicines and away from pricier brand-name drugs.

They say that these copay cards and coupons are an incentive for pharmaceutical companies to inflate list prices for drugs, then offer copay assistance that spares the patient, but shifts more of the costs to the insurer.

Lawmakers in a number of states have taken note and are trying to address the practice legislatively. They have introduced legislation that would ban insurers from using accumulator policies when there’s no generic version of the drug available.

However, the Centers for Medicare and Medicaid Services in February 2020 proposed a rule allowing insurers to impose copay accumulator policies.  

What you can do

Many health plan enrollees do not know that their health plan has a copay accumulator program until they get to the pharmacy counter after they think they’ve reached their out-of-pocket limit and still have to pay for their medications. 

If they haven’t had this experience in the past with their plan, it’s maybe because they didn’t realize that it had switched to an accumulator program.

Come your company’s next open enrollment, you should stress to your staff that if any of them are large users of prescription medications, they need to carefully read their current plan’s summary of benefits as well as other plan documents.

If you have concerns that any of your staff might run into issues, you can call us to go over your current plans to identify those with or without accumulator programs.

This is especially important during open enrollment, as those enrollees that require expensive prescriptions should be given options, including at least one plan that does not use an accumulator program.