June 17, 2022

Many Employees Choosing the Wrong Health Plans

A new study  has found that many people in employer-sponsored health plans are enrolling in plans that are costing them more than they ought to be paying.

Many employees choose pricey plans with low deductibles, which force them to spend more up front on premiums to save just a few hundred dollars on their deductible.

As result, many employees are spending hundreds, if not thousands of dollars more on their health care/health coverage than they need to.

Study 1: The deductible angle

A study by Benjamin Handel, a U.C. Berkeley economics professor, found that the majority of employees at one company he studied were in the highest-premium, lowest-deductible plan ($250 a year) their employer offered.

This resulted in them spending about $4,500 a year on health care, compared to only $2,032 had they gone with the cheaper plan (which had a $500 annual deductible) and received exactly the same care.

Study 2: Too many choices?

Additionally, the research paper “Choose to Lose: Health Plan Choices from a Menu with Dominated Options,” published in the Quarterly Journal of Economics, found that more choices also didn’t yield more savings for individuals in employer-sponsored plans.

The study examined the health plan choices that 23,894 employees at one large U.S. employer made. They were able to choose from 48 different combinations of deductibles, pharmaceutical copayments, co-insurance and maximum out-of-pocket expenses. All of the plans offered the same network of doctors and hospitals.

As a result, workers paid an extra $528 in premiums for the year to keep their deductible at $750 instead of $1,000. In other words, they paid $528 to save $250.

For nearly every plan with a deductible of $1,000 (the highest deductible available for those seeking single coverage), the additional premiums required to reduce the deductible, with all other plan attributes fixed, exceeded the maximum possible out-of-pocket savings provided by the lower deductible.

The study also found that the lowest-paid workers were significantly more likely to choose dominated plans (the most expensive).

Both of the studies above looked at plan options with relatively low deductibles when compared with high-deductible health plans, which have become more popular with time.

In 2018, the minimum deductible for an HDHP is $1,350 for an individual and $2,700 for a family. But, under current regulations, total out-of-pocket expenses are limited to $6,650 for an individual and $13,300 for a family with a HDHP.

While these plans have gotten a bad rap lately, a study published by the National Bureau of Economic Research found they are often cheaper for employees, as well.

The authors, both from the University of Wisconsin-Madison, found in a study of 331 companies, that at firms offering both a HDHP and a low-deductible plan, selecting the HDHP typically saves more than $500 a year.

Strategies

To help offset the cost of a HDHP, you can offer your staff health savings accounts (HSAs), which offer a tax-advantaged way to save for health care costs. While there are annual contribution limits, HSAs allow your employees to roll over their balance from year to year. The funds they contribute to their HSA are pre-tax, so the savings are significant.

The Wisconsin-Madison authors surmised that many people choose the costlier health plan for two reasons:

  • Inertia – It’s easier for consumers to stick with their old plan rather than crunch the numbers to see if a new plan may be more appropriate.
  • Deductible aversion – When employees see a low-deductible plan they may associate it with better quality care, even though the network and coverage may be the same.

The best strategy to guide your staff to the plan that best suits them is to educate them. You should have workshops for your staff prior to open enrollment, to help them understand why the higher-deductible plan may often be the best choice for them if they want to save money on their overall premium and out-of-pocket expenses.

Ideally, you could encourage them to set aside the same amount of money in their HSA that would be enough to cover their deductible. This way, your employees would not feel burdened by health expenses they may have to pay for during the year.

August 11, 2021

What You Need to Know About New Health Plan Transparency Rules

Regulations are slated to take effect over the next few years that will greatly increase the transparency requirements for group health plans.

The regulations issued under the Trump administration will require health insurers in the individual and group health markets to disclose cost-sharing information upon request, make cost-sharing information available on their websites and disclose negotiated rates with in-network providers.

The rules are designed to help health plan enrollees choose the plan that is best for them and their family, as well as to give them a full picture of what they can expect to pay for services as part of their deductibles, copays and coinsurance.

There are a few different parts to the rules: one focuses on personalized cost-sharing information and another focuses on other pricing and information that insurers are required to post on their websites.

Personalized cost-sharing information

The new rules require health plans to provide personalized estimates for enrollees upon request, so they can calculate their potential out-of-pocket expenses prior to receiving medical treatment.

The following must be provided to a plan enrollee upon inquiry ahead of receiving care:

Estimated cost-sharing liability — This covers how much the enrollee would have to pay out of pocket under their plan for deductibles, coinsurance and copays for a specific medical service. These estimates must be specific to the individual that’s inquiring and not a general estimate.

Accumulated out-of-pocket payments — Enrollees can inquire to their health plans about how much they’ve paid out towards their deductibles and their plan’s out-of-pocket maximums as of the date requested.

In-network rates — Upon request, the plan must divulge how much the enrollee will have to pay out of pocket in relation to the rates it has negotiated for a specific procedure by an in-network provider.

The plan or insurer must disclose the negotiated rate, expressed as a dollar amount, even if it is not the rate the plan or insurer uses to calculate cost-sharing liability. The plans must also disclose out-of-pocket liability for an individual as well as the negotiated rates for prescription drugs. The health insurer does not have to disclose drug discounts or rebates as part of the inquiry.

Out-of-network allowed amount — The insurer must disclose the maximum amount its plan will pay for an “item or service” from an out-of-network provider.

Notice of prerequisites to coverage — If the service the enrollee is inquiring about prior authorization, concurrent review or step-therapy, the insurer must include this information in the answer to the request.

This part of the regulation will take effect in two phases:

  • 1, 2023: Insurers will be required to provide personalized cost-sharing information on 500 specific services.
  • 1, 2024: Insurers will be required to provide personalized cost-sharing information on all specific services.

Publicly available cost-sharing information

The new regulations also require health plans (not including grandfathered ones) and health insurers to post on their websites machine-readable files with detailed pricing information. They must post this information starting Jan. 1, 2022.

The website must include the following information, which has to be updated on a monthly basis:

  • Rates for all covered items and services that the plan has negotiated with its in-network providers.
  • Historical payments the insurer has made to out-of-network providers, as well as the billed charges.
  • The plan’s in-network negotiated rates and historical net prices for all covered prescription drugs at the pharmacy location level.
July 20, 2021

Few Health Plan Enrollees Know About New Price Transparency Rules

Despite a new law requiring hospitals to post detailed pricing information for their treatments and procedures online, fewer than 10% of U.S. adults are aware of the requirement.

That’s a problem considering that a growing number of Americans have high-deductible health plans, which come with up-front lower premiums but with higher out-of-pocket expenses.

One of the driving forces behind HDHPs is that they give the enrollee more “skin in the game,” by incentivizing them to shop around for care since they will have to pay for it themselves up to their deductible.

But if people are not aware they can find pricing for medical services on providers’ websites, they may not know how to begin comparing prices.

A new study by the Kaiser Family Foundation found that only 9% of those surveyed were aware that hospitals are required to publish the prices for their services online, in line with new price transparency regulations that took effect Jan. 1, 2021.

The price transparency rule, implemented by the Trump administration, requires hospitals to post on their websites:

  • A plain language description of each shoppable service and item.
  • A description of charges, including:
    • Payer-specific negotiated charge, or the price a third party payer such as a health insurance company would pay.
    • Discounted cash price, or the price a patient would pay without insurance.
    • Gross charge, or the charge absent any discounts.
    • De-identified maximum and minimum negotiated charges for each.
  • Any primary code used by the hospital for purposes of accounting or billing.

Here’s what the survey found:

  • 69% of respondents were unsure whether hospitals are required to disclose the prices of treatments and procedures.
  • 22% believed hospitals are not required to disclose this information.
  • 9% were aware hospitals are required to disclose the prices of treatments and procedures on their websites.
  • 14% said that they or a family member had gone online in the past six months to research the price of a treatment at a hospital.
  • Younger adults (ages 18 to 49) were more likely to say they or a family member had searched for the price of care online.

Educating your staff

Employers with HDHPs should inform their staff about the price transparency rule so that they can research pricing ahead of any procedures they may have. Most health system websites should be posting their pricing by now, but it may take some digging to find them. 

If they have been ordered to get a certain procedure, they can start by going to each provider available to them through their health insurance and researching the pricing on their website. If they can’t find the information, they should call the provider to get the information. They will need the negotiated price between their health plan and the provider.

Prices can vary dramatically between providers, and your staff need to make sure they are comparing the exact same service between them.

They should also consider calling the providers and inquiring about the cash price for the services. In some instances, the cash price may end up being even less than their deductible or copay.

One problem: Many hospitals have not published their rates and there has been a lack of consistency between providers in terms of how they are providing the information.

This has prompted the CMS to audit hospitals’ websites and complaints, and it recently started sending out notices to hundreds of hospitals that are not complying with the transparency regulations.

Finally, many insurance carriers offer searchable online databases for their enrollees where people can research the approximate cost of certain procedures among all the providers available to them.

May 25, 2021

Health Plan Rebates in 2021 to Be Second Highest on Record

Group health plan insurers are expected to pay out $618 million in rebates to plan sponsors for the 2020 policy year after seeing use of health care services plummet during the COVID-19 pandemic.

That’s according to a Kaiser Family Foundation estimate in April, which also projects that insurers will pay out $1.5 billion in rebates to enrollees in the individual market. 

The total $2.1 billion estimated payout this year is second only to the $2.5 billion insurers paid out in 2020 since the Affordable Care Act took effect and started requiring these rebates.  Small and large group health plans received $689 million in rebates in 2020.

The ACA requires insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on health care claims and quality improvement, leaving the remaining 20% for administration, marketing and profit. If they spend less than 80%, the shortfall has to be returned to policyholders in the form of a rebate.

The threshold for large group health plans is 85%. This threshold is called the medical loss ratio (MLR). 

The rebates that will be paid in 2021 are based on a three-year MLR average loss ratio (2020, 2019 and 2018). Rebates this year will be paid to sponsors who had group health policies in effect in 2020, and only to those who were in plans that failed to spend enough on medical services. Many plans spend more than the MLR cap on medical services and do not have to pay.

There are two main drivers of larger rebates this year:

There was a significant drop in health care utilization in 2020 — The pandemic depressed the use of medical services as many people who would normally have gone to the doctor for ailments chose to stay home to avoid the risk of contracting COVID-19.

Also, hospitals cancelled elective care early in the pandemic and when COVID-19 cases were cresting, so that they could free up resources for coronavirus patients and reduce the virus’s likelihood of transmission. In fact, an analysis by the Peterson-KFF Health System Tracker found that health care spending fell slightly in 2020, making it the first year on record to see spending decline.

Insurers in the individual market had record profits in 2018 and 2019 — The Kaiser Family Foundation earlier reported that individual market insurers were very profitable in 2018 and 2019, even though the individual mandate penalty was eliminated in 2018 and insurers had been reducing their rates the previous few years.

How to handle rebates

Health insurers may pay MLR rebates either in the form of a premium credit (for employers that are still using the insurer) or as a lump-sum payment. More than 90% of group plan rebates come as a lump sum.

Once an employer receives this money, it is their responsibility to distribute the rebate to plan beneficiaries appropriately within 90 days, or risk triggering ERISA trust issues.

How the employer distributes the check will depend on how much their employees contribute to the plan, if at all. Here are the basic rules for employers handling their MLR rebate checks:

  • If you paid 100% of the premiums, the rebate is not a plan asset and you can retain the entire rebate amount and use it as you wish.
  • If the premiums were paid partly by you and partly by the participants, the percentage of the rebate equal to the percentage of the cost paid by participants must be distributed to the employees.

If you have to distribute funds to the plan participants, the Department of Labor provides a few options (if the plan document or policy does not already prescribe how they should be distributed):

  • The funds can be used to reduce your portion of the annual premium for the subsequent policy year for all staff who were covered by all of your group health plans.
  • The funds can be used to reduce your portion of the annual premium for the subsequent policy year for only those workers covered by the group health policy on which the rebate was based.
  • You can provide a cash refund to subscribers who were covered by the group health policy on which the rebate is based.
March 30, 2021

Group Health Plans Must Cover COVID-19 Testing for Asymptomatic People

The Centers for Medicare and Medicaid Services announced in late February that private group health plans cannot deny coverage or impose cost-sharing for COVID-19 diagnostic testing, regardless of whether or not the patient is experiencing symptoms or has been exposed to someone with the disease.

The CMS said it had issued the new guidance to make it easier for people to get tested with no out-of-pocket costs if they are planning to visit family members or take a flight, for example. Up until now, some health plans have not covered testing if a person is not experiencing symptoms or has not come into contact with someone who is later confirmed as being infected with COVID-19.

The guidance covers the part of the Families First Coronavirus Response Act of 2020 that required that plans and issuers must cover COVID-19 diagnostic testing without any cost-sharing requirements, prior authorization or other medical management requirements. Still, many people were denied getting tests because they had no symptoms or hadn’t been exposed to someone infected with the virus. 

According to the guidance:

“Plans and issuers must provide coverage without imposing any cost-sharing requirements (including deductibles, copayments, and coinsurance), prior authorization, or other medical management requirements for COVID-19 diagnostic testing of asymptomatic individuals when the purpose of the testing is for individualized diagnosis or treatment of COVID-19.

“However, plans and issuers are not required to provide coverage of testing such as for public health surveillance or employment purposes. But there is also no prohibition or limitation on plans and issuers providing coverage for such tests.”

December 3, 2020

New Rule Requires Greater Health Plan Transparency

The Trump Administration has issued a new rule that will require greater price transparency on the part of health insurers, including the rates charged by in-network physicians and copays and costs of drugs.

The final rule requires health plans and health insurers to disclose on a public website their in-network negotiated rates, billed charges and allowed amounts paid for out-of-network providers, and the negotiated rate and historical net price for prescription drugs.  

The aim of the new rule is to give health plan enrollees more information when it comes to making decisions when seeking out and price-comparing care and choosing medications. With more information about health care costs, health plan enrollees can:

  • Make cost-conscious decisions,
  • Face fewer out-of-pocket surprise bills, and
  • Potentially lower their overall health care costs.

The drug price transparency part of the final rule came as a surprise because it was not included in the original proposed regulations.

The new rules do not, however, take effect right away and different parts will be implement at different times. Nonetheless, it’s important for health plan sponsors and employers to be aware of the rules as they will greatly affect how their employees access and shop for coverage and medications.

Most of the rules do not apply to grandfathered plans. Here’s what they will do once they come into effect:

Transparency for enrollees

Insurers will be required to make available to health plan enrollees the following information:

  • Personalized out-of-pocket cost information (for their particular plan) for all covered health care items and services, including prescription drugs.
  • All underlying negotiated rates for all covered health care items and services, including prescription drugs.

This information must be provided through an online tool on their website and in paper form upon request. Items or services include encounters, procedures, medical tests, supplies, drugs, durable medical equipment, and fees (including facility fees). 

Insurers will be required to make available an initial list of 500 shoppable services that will be determined by the Centers for Medicare and Medicaid, starting with the 2023 plan year. The remainder of all items and services will be required for these self-service tools for plan years that begin on or after Jan. 1, 2024.

Public transparency

Health insurers will be required to make available to the public, consumers, researchers and others the following information in “machine-readable” files:

  • Negotiated rates for all covered items and services with in-network providers.
  • Historical payments to, and billed charges from, out-of-network providers.
  • In-network negotiated rates and historical net prices for all covered prescription drugs by plan or issuer at the pharmacy location level.

The idea behind these changes is to provide opportunities for detailed research studies, data analysis, and offer third party developers the ability to create private apps and websites to help consumers shop for health care services and prescription drugs.

These files are required to be made public starting with the 2022 plan year.

The takeaway

These are final rules but, as mentioned, the part of the rule that affects your group health plan and your employees doesn’t take effect until 2023 as the industry will need time to prepare and comply. 

Once the rules take effect, your covered employees should have a wealth of information at their fingertips when they are shopping and comparing health services and drug information.

July 1, 2020

COVID-19 Changes to Health Plans Must Be Documented, Circulated

A number of plan sponsors have made changes to their group health plans in response to the COVID-19 pandemic, such as covering testing and sometimes treatment without any cost-sharing by the plan enrollee.

But any changes that are made must be followed up by amending the plan and communicating the changes to the enrollees.

Under the Employee Retirement Income Security Act, all health plans are required to deliver a Summary Plan Description (SPD) to enrollees to inform them of the full spectrum of coverage and their rights under the plan.

Whenever a plan sponsor makes a material modification to the terms of the plan or the information required to be in an SPD, they must amend the plan and let participants know about the change through a Summary of Material Modification (SMM).

Material changes

To qualify as “material,” a change must be important to plan enrollees. Examples include adding or eliminating a benefit, changing insurance companies, or changing rules for dependent eligibility.

Plan changes related to the COVID-19 pandemic that would have to be included in the SMM and SPD could include:

  • Offering continuing coverage to staff who would otherwise lose coverage due to a furlough, layoff or reduction of hours.
  • Changing eligibility terms to allow workers who may not have been eligible for coverage before to secure coverage (this could include part-time workers).
  • Covering a larger portion of an employee’s premium share.
  • Adding an employee assistance program to provide counseling for workers who may be undergoing unusual stress.
  • Adding telemedicine coverage.
  • Using funds in health savings accounts (HSAs) and flexible spending accounts (FSAs) to purchase over-the-counter medications.
  • Covering COVID-19 testing with no cost-sharing. 
  • Covering COVID-19 treatment without cost-sharing.

Some of the above changes are required by new laws and health plans must respond accordingly by changing their SMMs and SPDs. For example, the Families First Coronavirus Response Act requires that group health insurance and individual health insurance plans cover coronavirus testing with zero cost-sharing.

And the Coronavirus Aid, Recover and Economic Stabilization Act reverses an Affordable Care Act rule that barred policyholders from using funds in HSAs and FSAs to pay for over-the-counter medications. 

When the plan sponsor adopts these changes, it must also amend its plan summaries.

And SMMs must be delivered to plan participants within 60 days after a change has been adopted. You can deliver the SMM by mail, e-mail or posting it on your company’s intranet site. It’s recommended at this time that you opt for e-mail delivery.

One of the issues that may come up with any changes implemented in response to the COVID-19 outbreak is that some of the changes may be temporary. 

If that’s the case, the plan needs to include the termination date of any benefits that are adopted on a temporary basis.

However, if you don’t know how long the temporary benefits will be in effect, their temporary nature must be communicated in the SMM. Employers need to issue another SMM when the temporary benefit or coverage term ends.

The takeaway

This is an unusual time and unusual times call for unusual measures. It’s unusual for changes to be made to a plan in the middle of a plan year but because of the way the pandemic crash-landed, many plan sponsors have had to make changes. 

That said, you should work with us and your carrier on ensuring that the amended documents are sent out to staff.

As the employer, you should be aware of all the changes that have been made in response to COVID-19 so you can discuss them with any employees that have concerns or questions.

April 7, 2020

CARES Act Helps Coronavirus-affected Employers, Employees Alike

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act stimulus law to help American workers and businesses weather the outbreak has a number of provisions that employers and their workers need to know about and can take advantage of during this crisis.

The CARES Act includes provision for:

  • Extended unemployment benefits.
  • Requiring health plans to cover COVID-19-related costs.
  • Small Business Administration (SBA) disaster loans.
  • Loans for large corporations.

Parts of the CARES Act will likely benefit your organization and employees in some way. Here’s what you need to know:

Extended unemployment

The CARES Act extends unemployment insurance benefits to workers, as long as they lost their jobs due to the outbreak.

Unemployment benefits under the CARES Act also apply to furloughed employees.

Depending on your state, workers will be able to collect both state unemployment and federal unemployment through the CARES Act, which was designed to augment any unemployment benefits workers may receive in your state.

The Pandemic Emergency Compensation program funded by the CARES Act will provide an additional $600 per week on top of state unemployment benefits, through July 31. 

The law extends state-level unemployment by an additional 13 weeks. For example, whereas most of California’s unemployment benefits last 26 weeks, the bill extends state benefits to 39 weeks. The extended benefits will last through Dec. 31.

Health plan changes

Under the CARES Act, employer-sponsored group health plans must provide for covered workers – without cost-sharing or out-of-pocket expenses – the cost of COVID-19 testing, treatment and vaccinations when and if they become available.

SBA loans

In response to the Coronavirus (COVID-19) pandemic, small business owners are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.

This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid.

This program is for any small business with fewer than 500 employees (including sole proprietorships, independent contractors and self-employed persons) as well as private non-profit organization affected by COVID-19.

And the law’s The Paycheck Protection Program offers 1% interest loans to businesses with fewer than 500 workers.

Borrowers who don’t lay off workers in the next eight weeks will have their loans forgiven, along with the interest.

These loans are designed to provide a direct incentive for small businesses to keep their workers on the payroll. If small businesses maintain payroll through this economic crisis, some of the borrowed money via the PPP can be forgiven – the funds will be available through June 30. Act fast.

Mid-sized employers

Under the CARES Act, the Secretary of the Treasury is authorized to implement financial assistance programs which specifically target mid-size employers with between 500 and 10,000 employees.

Loans would not have an annualized interest rate higher than 2% and principal and interest will not be due and payable for at least six months after the loan is made. But unlike loans under the PPP, these are not forgivable.

Large employers

The CARES Act provides $500 billion to the Treasury Department’s Exchange Stabilization Fund for loans and other funding for large companies and corporations affected by the outbreak.

  • $454 billion is set aside for loans, loan guarantees.
  • Companies that receive funds are prohibited from using them for stock buybacks.
  • Loans include terms limiting employee compensation and severance pay.

Like loans for mid-sized employers, they are not forgivable.

August 26, 2019

Workers Getting Squeezed by Higher Health Plan Costs

While health insurance premiums aren’t going up as much as they used to, both employers and their workers are still struggling with higher health care costs.

According to the “2018 Health and Voluntary Workplace Benefits Survey,” published by the Employee Benefit Research Institute together with Greenwald & Associates, roughly half of all workers experienced an out-of-pocket cost increase in their workplace health insurance plans.

That’s roughly the same percentage as in 2017, but lower than the 61% who saw cost increases passed on to them from their employers in 2014.

And employees are feeling the pinch: About 28% of all workers affected by reductions in employee contributions to health care plans have decreased their own contributions to retirement plans such as IRAs, 401(k)s, 403(b)s and 457 plans.

Nearly half have cut back on other savings as well, to cover their rising share of health care costs.

The troubles don’t end there, though: About 25% of respondents reported they had trouble paying for basic necessities like shelter, rent and heat, and 36% reported difficulty with paying other bills.

About 27% told researchers they had already used up all or most of their savings, while about one-third have increased their level of credit card debt. Thirty percent have delayed retirement, and 21% have been forced to drop other insurance coverage. Twelve percent have taken a withdrawal or loan from a retirement plan.

The increased out-of-pocket costs on workers seem to be having some effect on consumer behavior as well, as more individuals are taking steps to control overall costs. For example, 73% are trying to control health care costs by taking better care of themselves.

One-quarter of respondents said they had not skipped prescription drugs to save money, while half reported delaying going to the doctor.

Employees like their plans

That said, half of workers surveyed expressed satisfaction with their own company health plans.

But price remains a sore spot: Only 17% of respondents said they were extremely satisfied or very satisfied with the cost of their health insurance plan, while just 15% reported satisfaction with the cost of health care services excluded by their plans.

However, only 12% reported that they were unsatisfied with their own health plan.

The takeaway

While workers are generally happy with the plans currently on offer from employers, they are anxious about what the future may hold for them and their families.

While nearly half of workers surveyed said they were very confident or extremely confident that they could get needed treatments today, only about one in three expressed confidence about being able to get needed medical care over the next 20 years.

For employers, that means providing better education and working with employees to provide them with specific voluntary benefits like long-term care insurance in case they suddenly have a medical emergency that will keep them laid up for some time.

You can also work with us to see where you can save money and pass those savings on to your employees, while at the same time improving their benefits package. If you are concerned about what employees are feeling, call us and we can go over your current benefits package to see where you can make improvements.