February 5, 2020

High-Deductible Plans Saddling Workers with Bigger Drug Outlays

A new study has found that high-deductible plans and increased use of coinsurance are exposing health plan enrollees to higher and higher pharmaceutical costs.

One of the big problems for many enrollees in high-deductible plans is that their outlays for drugs may not count towards their health plan deductibles and, if they are enrolled in separate pharmaceutical plans, they may have to pay the full list price until they meet their drug deductible, according to the “2019 Kaiser Family Foundation Employer Health Benefits Survey.”

The report warns of a growing crisis for American workers, more and more of whom are struggling with their health expenditures, be they premiums, deductibles, copays and/or coinsurance.

Workers in small firms face relatively high deductibles for single coverage and many also are saddled with significant premiums if they choose family coverage, according to the study.

The cost of group health insurance is growing at about 4% to 5% a year, reaching $7,188 for single coverage in 2019 and $20,576 for family coverage.

Workers in small firms on average contribute 16% of the premium for single coverage, compared with workers at large firms (19%), according to the report. But small-firm employees contribute 40% on average for family coverage, compared to 26% for staff at larger firms.

That said, 35% of covered workers in small firms are in a plan where they must contribute more than one-half of the premium for family coverage, compared to 6% of covered workers in large firms.

But premium contributions are only part of the story. Eighty-two percent of covered workers have a general annual deductible for single coverage that must be met before most services are paid for by the plan, and that average deductible amount is $1,655. But, the average annual deductible among covered workers with a deductible has increased 36% over the last five years, and by 100% over the last 10 years.

The hidden cost-driver

With all this as a backdrop, the cost of prescription drugs is one of the largest challenges facing group health plan enrollees, especially those who are enrolled in high-deductible health plans, whose out-of-pocket expenses for pharmaceuticals can be especially burdensome. It is the hidden cost-driver in the system.

The Kaiser survey found that about 90% of covered workers are enrolled in plans where the health plan deductible must be met before prescription drugs are covered. But, this number has been shrinking as group coverage pricing increases and employers shift more of the cost burden to employees.

There are a few ways that employees are taking on a significant load with their drug expenditures:

  • First, more workers are enrolled in plans that carve out prescription drugs, meaning that their expenditures on medication do not count towards satisfying their health plan deductibles. About 13% of employees are enrolled in a plan with a separate annual deductible that applies only to prescription drugs.
  • Many people with workers face out-of-pocket costs linked to prescription list prices regardless of the actual net, post-rebate costs. That’s because coinsurance percentages are computed based on the price negotiated between the pharmacy and the plan or pharmacy benefit manager. These negotiated prices are typically close to list prices.

    Even worse, patients pay the entire negotiated price when they are within a deductible and do not enjoy the benefits of rebates that the PBM may have negotiated with drug makers. Patients with these benefit designs do not benefit from rebates, though major brand-name drug makers sell their products at half of the list prices.
  • In the past, health plans had two- or three-tier benefit designs for drugs, mostly for generics and brand-name drugs, with lower copays and coinsurance for the lowest-tier medicines. But as prices have started increasing, many plans have four tiers and sometimes five (the specialty tier).

    The disappearance of two- and three-tier benefit designs have made out-of-pocket expenses especially high for specialty drugs. Plans place therapies for such chronic, complex illnesses as cancer, rheumatoid arthritis, multiple sclerosis and HIV on the fourth and specialty tiers of benefit plan, for which the enrollee has to pay a larger share.
January 9, 2020

New Rules Allow Employers to Reimburse for Health Premiums

Starting Jan. 1, 2020, employers can establish accounts for their employees to help them pay for individual health insurance policies they purchase, as well as for other health care expenses.

A new regulation expands on how health reimbursement accounts can be used. Currently, employers and their workers can contribute to these accounts, which can be used to reimburse workers for out-of-pocket medical expenses.

With these new Individual Coverage HRAs, employers can fund the account workers would use to pay for health insurance premiums for coverage that they secure on their own.

Up until this new regulation, such arrangements were prohibited by the Affordable Care Act under the threat of sizeable fines in excess of $36,000 per employee per year.

This rule is the result of legislation signed into law by President Obama in December 2016, which created the “qualified small employer health reimbursement arrangement (QSEHRA),” which would allow small employers to reimburse for individual insurance under strict guidelines.

The Trump administration was tasked with writing the regulations, which created the Individual Coverage HRA (ICHRA).

How it works

Under the new rule, if an employer is funding an ICHRA, the plan an employee chooses must be ACA-compliant, meaning it must include coverage for the 10 essential benefits with no lifetime or annual benefit maximums — and must adhere to the consumer protections built into the law.

Once the ICHRA is created, the employer will a set amount every month into the account on a pre-tax basis, which the employee can then use to buy or supplement their purchase of health insurance benefits in the individual market.

The law allows employers to set up as many as 11 different classes of employees for the purposes of distributing funds to ICHRAs. The employer can vary how much they give to each different group. For example, one class may get $600 a month per single employee with no dependents, while members of another class may receive $400 a month.

The allowable classes are:

Full-time employees — For the purposes of satisfying the employer mandate, that means a worker who averages 30 or more hours per week.

Part-time employees — Like the above, the employer can choose how to define what part-time is.

Seasonal employees — Workers hired for short-term positions, usually during particularly busy periods.

Temps who work for a staffing firm — These employees provide temporary services for the business, but are formally employed through a staffing firm.

Salaried employees — Staff who have a have a fixed annual salary and are not typically paid overtime.

Hourly employees — Staff who are paid on an hourly basis and can earn overtime.

Employees covered under a collective bargaining agreement — Employees who are members of a labor union that has a contract with the employer.

Employees in a waiting period — This class would include workers who were recently hired and are in their waiting period before they can receive health benefits (in many companies, this is 90 days).

Foreign employees who work abroad — These employees work outside of the U.S.

Employees in different locations, based on rating areas — These employees live outside the individual health insurance rating area of the business’s physical address.

A combination of two or more of the above — Businesses can also create additional classes by combining two or more of the above classes.

The rules for ICHRAs are as follows:

  • Any employee covered by the ICHRA must be enrolled in health insurance coverage purchased in the individual market, and must verify that they have such coverage (as mentioned above, that coverage must be ACA-compliant);
  • The employer may not offer the same class of workers both an ICHRA and a traditional group health plan;
  • The employer must offer the ICHRA on the same terms to all employees in a class;
  • Employees must be allowed to opt out of receiving an ICHRA;
  • Employers must provide detailed information to employees on how the ICHRA works;
  • Employers may not create a class of employees younger than 25, whom they might want to keep in their group plan because they’re healthier;
  • A class cannot have less than 10 employees in companies with fewer than 100 workers. For employers with 100 to 200 employees, the minimum class size is 10% of the workforce, while for employers with 200 or more staff, the minimum size is 20 employees;
  • While benefits must be distributed fairly to employees that fall within each class, each class can be broken down further by age and family size. That means employees with families can be offered a higher amount per month and rates can be scaled by age.
December 17, 2019

Generic Drug Makers Sued over Pricing Practices

One of the country’s largest health insurers has sued a number of pharmaceutical companies, accusing them of running a price-fixing cartel of common generic drugs.

Humana Inc. has accused the companies of colluding on the prices of generics to the detriment of health insurers that have to pay for these drugs. Humana said in its lawsuit that this collusion prevented fair competition among insurers that could have reduced the cost of many of these drugs.

The background

The lawsuit comes after 45 states signed on to a suit last year over an alleged scheme among generic drug manufacturers to fix the price of some 300 medications. The states are seeking unspecified damages for what they say they had to overpay for drugs for Medicaid patients as a result of the alleged cartel. 

Humana accused Teva Pharmaceuticals, the largest generic drug producer in the world, of being the ringleader of the alleged scheme, which fixed, increased or maintained the prices of more than 100 generic drugs.

“They leveraged the culture of cronyism in the generic drug industry to avoid price erosion, increase prices for targeted products, and maintain artificially inflated prices across their respective product portfolios without triggering a ‘fight to the bottom’ among competitors,” Humana wrote in the complaint, which it lodged with the U.S. District Court for the Eastern District of Pennsylvania.

The lawsuit adds to the troubles faced by generic drug companies. Earlier in 2019, a number of states joined to sue drug makers, including Teva Pharmaceuticals. The suit also named multiple executives from Teva and other generic manufacturers as individual defendants. 

An investigation by multiple states led by Connecticut accused generic drug makers of “illegal collusion,” refuting arguments by the manufacturers that price increases were caused by industry consolidation and Food and Drug Administration-mandated plant closures.

Humana says the drug companies conspired to set market shares and customers for each company, and that they also agreed not to compete with each other for those customers so that each company could maintain or raise the price of its generic pharmaceuticals.

This is the second lawsuit Humana has filed against generic pharmaceutical companies. It filed a similar case in August 2018 against a handful of drug makers, accusing them of price fixing. That case listed far fewer drugs than the latest salvo.

Lawsuit highlights industry chasing profits

The generics industry used to be highly competitive, but over the years, things changed and suddenly allegedly “coordinated price hikes on identical generic drugs became almost routine,” the <i>Washington Post</i> wrote in an article last year that covered the alleged scheme and lawsuit by states.

While generics account for 90% of the prescriptions written, they only account for 23% of the total drug spend in the country, according to the Association for Accessible Medicines. Despite that, there has been a noticeable and inexplicable uptick in the price of drugs in recent years, sparking outrage among consumers, health insurers and states that run their own Medicaid programs.

If the allegations are true, the parties affected run the gamut from consumers ― who have high copays or high deductibles for their pharmaceuticals ― to hospitals and insurance companies.

December 10, 2019

New Rules Allow Employers to Reimburse for Health Premiums

Starting Jan. 1, 2020, employers can establish accounts for their employees to help them pay for individual health insurance policies they purchase, as well as for other health care expenses.

A new regulation expands on how health reimbursement accounts can be used. Currently, employers and their workers can contribute to these accounts, which can be used to reimburse workers for out-of-pocket medical expenses.

With these new Individual Coverage HRAs, employers can fund the account workers would use to pay for health insurance premiums for coverage that they secure on their own.

Up until this new regulation, such arrangements were prohibited by the Affordable Care Act under the threat of sizeable fines in excess of $36,000 per employee per year.

This rule is the result of legislation signed into law by President Obama in December 2016, which created the “qualified small employer health reimbursement arrangement (QSEHRA),” which would allow small employers to reimburse for individual insurance under strict guidelines.

The Trump administration was tasked with writing the regulations, which created the Individual Coverage HRA (ICHRA).

How it works

Under the new rule, if an employer is funding an ICHRA, the plan an employee chooses must be ACA-compliant, meaning it must include coverage for the 10 essential benefits with no lifetime or annual benefit maximums — and must adhere to the consumer protections built into the law.

Once the ICHRA is created, the employer will a set amount every month into the account on a pre-tax basis, which the employee can then use to buy or supplement their purchase of health insurance benefits in the individual market.

The law allows employers to set up as many as 11 different classes of employees for the purposes of distributing funds to ICHRAs. The employer can vary how much they give to each different group. For example, one class may get $600 a month per single employee with no dependents, while members of another class may receive $400 a month.

The allowable classes are:

Full-time employees — For the purposes of satisfying the employer mandate, that means a worker who averages 30 or more hours per week.

Part-time employees — Like the above, the employer can choose how to define what part-time is.

Seasonal employees — Workers hired for short-term positions, usually during particularly busy periods.

Temps who work for a staffing firm — These employees provide temporary services for the business, but are formally employed through a staffing firm.

Salaried employees — Staff who have a have a fixed annual salary and are not typically paid overtime.

Hourly employees — Staff who are paid on an hourly basis and can earn overtime.

Employees covered under a collective bargaining agreement — Employees who are members of a labor union that has a contract with the employer.

Employees in a waiting period — This class would include workers who were recently hired and are in their waiting period before they can receive health benefits (in many companies, this is 90 days).

Foreign employees who work abroad — These employees work outside of the U.S.

Employees in different locations, based on rating areas — These employees live outside the individual health insurance rating area of the business’s physical address.

A combination of two or more of the above — Businesses can also create additional classes by combining two or more of the above classes.

The rules for ICHRAs are as follows:

  • Any employee covered by the ICHRA must be enrolled in health insurance coverage purchased in the individual market, and must verify that they have such coverage (as mentioned above, that coverage must be ACA-compliant);
  • The employer may not offer the same class of workers both an ICHRA and a traditional group health plan;
  • The employer must offer the ICHRA on the same terms to all employees in a class;
  • Employees must be allowed to opt out of receiving an ICHRA;
  • Employers must provide detailed information to employees on how the ICHRA works;
  • Employers may not create a class of employees younger than 25, whom they might want to keep in their group plan because they’re healthier;
  • A class cannot have less than 10 employees in companies with fewer than 100 workers. For employers with 100 to 200 employees, the minimum class size is 10% of the workforce, while for employers with 200 or more staff, the minimum size is 20 employees;
  • While benefits must be distributed fairly to employees that fall within each class, each class can be broken down further by age and family size. That means employees with families can be offered a higher amount per month and rates can be scaled by age.
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 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.

October 3, 2019

Get an Early Start on Open Enrollment

As open enrollment is right around the corner, now is the time to make a plan to maximize employee enrollment and help your staff select the health plans that best suit them.

You’ll also need to make sure that you comply with the Affordable Care Act if it applies to your organization, as well as other laws and regulations.

Here are some pointers to make open enrollment fruitful for both your staff and your organization.

Review what you did last year

Review the results of last year’s enrollment efforts to make sure the process and the perks remain relevant and useful to workers.

Were the various approaches and communication channels you used effective, and did you receive any feedback about the process, either good or bad?

Start early with notifications

You should give your employees at least a month’s notice before open enrollment, and provide them with the materials they will need to make an informed decision.

This includes the various health plans that you are offering your staff for next year.

Encourage them to read the information and come to your human resources point person with questions.

Help in sorting through plans

You should be able to help them figure out which plan features fit their needs, and how much the plans will cost them out of their paycheck. Use technology to your advantage, particularly any registration portal that your plan provider offers. Provide a single landing page for all enrollment applications.

Also, hold meetings on the plans and put notices in your staff’s paycheck envelopes.

Plan materials

Communicate to your staff any changes to a health plan’s benefits for the next plan year through an updated summary plan description or a summary of material modifications.

Confirm that their open enrollment materials contain certain required participant notices, when applicable – such as the summary of benefits and coverage.

Check grandfathered status

A grandfathered plan is one that was in existence when the ACA was enacted on March 23, 2010, and is thus exempt from some of the law’s requirements.

If you have a grandfathered plan, talk to us to confirm whether it will maintain its grandfathered status for the next plan year. If it is, you must notify your employees of the plan status. If it’s not, you need to confirm with us that your plan comports with the ACA in terms of benefits offered.

ACA affordability standard

Under the ACA’s employer shared responsibility rules, applicable large employers must offer “affordable” plans, based on a percentage of the employee’s household income. For plan years that begin on or after Jan. 1 of next year, the affordability percentage is 9.86% of household income. At least one of your plans must meet this threshold.

Get spouses involved

Benefits enrollment is a family affair, so getting spouses involved is critical. You should encourage your employees to share the health plan information with their spouses, so they can make informed decisions on their health insurance together.

Also, encourage any spouses who have questions to schedule an appointment to get questions answered.

September 17, 2019

Small Employers Can Reimburse for Medicare Part B, D Premiums

As the workforce ages and many employers want to keep on baby-boomer staff who have the experience and institutional knowledge that is irreplaceable, one issue that always comes up is how to handle health insurance.

Once your older workers reach the age of eligibility for Medicare, under current law you can help them pay for Part B and D premiums with a Medicare Premium Reimbursement Arrangement. These types of arrangements became legal after legislation was signed into law in 2013 to help employers provide benefits to their Medicare-eligible staff.

But the issue surfaced again recently when the Trump administration came out with new guidance for health reimbursement arrangements that paves the way for employers to set up HRAs to reimburse staff for health premiums in their personal (not company group) health plans.

Anybody who is about to turn 65 has a six-month period to sign up for basic Medicare, but if they want additional coverage they can pay for Medicare supplemental coverage such as Parts B and D.

Part B covers two types of services:

Medically necessary services: Services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice.

Preventive services: Health care to prevent illness (like the flu) or detect it at an early stage, when treatment is most likely to work best.

Part D, meanwhile, covers prescription drug costs.

The dilemma for employers has often been whether to keep the Medicare-eligible employee on the company health plan or cut them free on Medicare.

Smaller employers – those with 20 full-time-equivalent employees – have the option to open a Medicare Premium Reimbursement Arrangement for those employees if they are coming off a group health plan and into Medicare.

For small employers, it’s legal to set up an arrangement like that, as long as doing so is at the employee’s discretion. Employers are not allowed to push an employee into a Medicare Premium Reimbursement Arrangement in order to get them off the company’s health plan.

The good news for employers is that they often can reimburse their employees in full for Part B and D, as well as Medicare Supplement, and still pay less than they would pay in group employee premiums alone. 

On top of that, the employee gets a lower deductible and overall out-of-pocket experience with less, if any, premium contribution.  

What you need to know

Here’s what you should know if you’re considering one of these arrangements:

A Medicare reimbursement arrangement is one where the employer reimburses some or all of Medicare part B or D premiums for employees, as long as the employer’s payment plan is integrated with the group’s health plan.

To be integrated with the group health plan:

  • The employer must offer a minimum-value group health plan,
  • The employee must be enrolled in Medicare Parts A and B,
  • The plan must only available to employees enrolled in Medicare Parts A and B, or D, and
  • The reimbursement is limited to Medicare Parts B or D, including Medigap premiums.

Small Employers Can Reimburse for Medicare Part B, D PremiumsNote: Certain employers are subject to Medicare Secondary Payer rules that prohibit incentives to the Medicare-eligible population.