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 be 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.
Note: Certain employers are subject to Medicare Secondary Payer rules that prohibit incentives to the Medicare-eligible population.
One often overlooked cost driver to your employee benefits plans is administrative errors and oversights that are the result of sloppy record-keeping and a lack of checks and balances among your account and human resources teams.
If you are not diligent in keeping up with outgoing employees, are not paying enough attention to admin details and checking billing for errors, and are not reviewing accounts regularly, you could be leaving money on the table unnecessarily and overpaying for your group health insurance and other employee benefits you offer.
The following are some of the most common administrative mistakes that could lead to overspending on your group health plan.
Failing to keep up with staffing numbers
If your human resources and accounting are not talking to each other, you risk failing to account for personnel that leaves and continuing to include them in the health insurance roster and paying their premium.
Obviously, this is typically not an issue in a small organization of 10 to 15 employees, but the more workers you have, the easier it is for one to slip through the cracks after they leave.
Consider having HR review personnel numbers monthly and updating your files to avoid this happening.
Failing to check for ‘age-outs’
Workers who have turned age 65 may not require your company health plan anymore, since they are eligible for Medicare. You can reduce health care administration and benefits costs substantially by keeping an eye out for age-outs each year.
Missing changes to plans
Before and during open enrollment it’s important to review all of the benefits plans that you offer — health, dental and vision coverage — to make sure there aren’t any changes that will increase the cost of any of the plans.
Sometimes a plan will introduce additional coverage that your employees may not need and, if you are not staying on top of changes, you may miss the opportunity to move them to another plan.
Admin mistakes by insurers
Administrative mistakes made by the insurers you contract with can be overlooked, forcing you to overpay for your employees’ coverage.
Your accounting and HR teams should regularly audit your insurers’ billings to check for errors and ask the companies to correct any that are found. One of the most common mistakes is for an insurer to have an incorrect employee count. But the carriers can make other mistakes in billing, too.
If you notice an increase in your monthly bill with no new staff additions, you may want to delve deeper.
The takeaway
By putting in place administrative controls and a regime for regular billing and personnel-count auditing, you can avoid mistakes that add to your employee benefits costs.
Keep an open line of communication with your insurers in case you need to work with them to address any issues that arise.
Pharmacy spending, high-cost claimants and newly developed anti-obesity drugs are expected to shape health benefits and affect the cost of care and health insurance for employers, according to a new report.
The “2024 Employee Health Trends” report by Springbuk, an online health intelligence platform, reflects concerns among employers and insurers about runaway drug costs due to increasingly expensive medications and new diabetes and anti-obesity drugs.
Also, the report looks at the effects of high-cost health plan enrollees, those who are high health care users either due to a chronic condition, cancer or an accident or illness that requires ongoing care.
One such employee enrolled in one of your group health insurance plans can result in massive costs that overshadow those of the rest of your workforce if you are a small or mid-sized employer.
High-cost claimants
According to Springbuk’s research:
One out of every 1,000 health plan enrollees is likely to account for total paid claims of $340,000.
Five out of every 1,000 members are likely to have total paid claims of over $140,000.
About one in five members in each high-cost category was in the same category in the previous year.
Common high-cost claim conditions include:
Various cancers
Multiple sclerosis
Heart disease
Cystic fibrosis
Sepsis
Joint degeneration
Chronic renal failure
Psoriasis
Adult rheumatoid arthritis
Inflammatory bowel disease.
Springbuk’s report recommends the following:
Understand the population at greatest risk of becoming high-cost claimants based on conditions, history of being a high-cost claimant and demographic information.
To reduce surgical costs, the health plan can push for expert/second opinions, partner with a center of excellence, engage in payment-bundling arrangements, and pursue risk reduction.
Employ risk-reduction programs like weight-loss programs to lower the risk of surgery for degenerative arthritis.
Use preauthorization, step therapy and incentives to promote the use of biosimilars to reduce the costs of specialty drugs.
Use price transparency tools to determine which facilities are less costly, but make sure to consider the quality of care.
Pharmacy spending
Between 2020 and 2023, the average per member per month pharmacy spend increased 38% from $86 to $119. Two of the biggest contributors to the rapidly rising drug spending are specialty drugs and brand-name medications used in the treatment of chronic conditions.
According to the report, the top 10 conditions contributing to health plan drug spending are:
Diabetes
Psoriasis
Inflammatory bowel disease
Adult rheumatoid arthritis
Asthma
Multiple sclerosis
Obesity
Other inflammation of the skin
Migraine headache
Attention deficit disorder.
Since the majority of drug spending is related to chronic conditions, strategies focused on their main causes can help rein in spending. These include:
Healthy diet and lifestyle coaching,
Weight-loss courses and counseling,
Free gym memberships and other programs that emphasize the importance of exercise, and
Smoking cessation services.
Other recommendations:
Target brand-name drugs and specialty drugs in your cost-containment strategies.
Take steps to ensure members taking specialty and high-cost brand-name drugs are using generic formulations and biosimilars where available, provided the net cost is lower.
Understand the PBM contract.
Consider whether engaging with a clinical program partner that focuses on pharmacy savings opportunities would be cost-effective.
Medications or bariatric surgery may be considered for members who are not able to achieve or sustain weight loss.
One thing to consider about these medications is that they are helping your employees control their conditions and preventing complications or progression of the illness, thereby reducing other health care costs.
Obesity
More than 41% of Americans are considered clinically obese, defined as having a body mass index of 30 or more. Obesity is linked to a number of health conditions, which are all costly to treat, including diabetes, gastrointestinal disorders, heart disease, cancer and musculoskeletal disorders.
Enter highly expensive GLP-1 drugs, originally designed to treat diabetes, with one of their main side effects being that those who take them eat less and shed weight. As a result, demand for these pharmaceuticals has boomed, but not all health plans cover them.
Overall plan outlays for treating obesity jumped 40% in 2023 from the year prior, driven largely by an eye-popping 138% explosion in drug spending.
You can take steps to reduce these outlays for treating obesity by using step therapy, which entails first starting a program that is focused on diet, exercise and behavioral modifications. If those efforts fail, traditional weight-loss medications may be considered before moving to GLP-1 drugs or bariatric surgery.
Consider partnering with a clinical program that addresses obesity.
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.
A new area of potential liability for employers was recently opened when a class-action suit was filed against Johnson & Johnson, accusing it of mismanaging its pharmacy benefit manager plan, resulting in the health plan and its enrollees overspending millions of dollars on medications.
Health plans contract with PBMs to tamp down pharmaceutical costs, but reports have shown that they often send enrollees to pharmacies they own and which overcharge for medications sometimes by thousands of percent.
PBMs have been drawing increasing flak from states attorneys general as well as Congress and state houses, where multiple measures that would rein them in are in play.
If the lawsuit is successful, it could leave both self-insured and insured employers exposed to lawsuits by disgruntled employees who are forking out significantly more than they should.
The case
The class action, filed Feb. 5 in the US District Court for the District of New Jersey, accuses J&J of breaching its fiduciary duty under ERISA when it mismanaged its employee health plan by paying its PBM, Express Scripts Inc., inflated prices for generic specialty drugs that are widely available at a much lower cost.
The employees suing J&J cite a number of examples of how the company’s plan overpaid for prescription drugs. One of the most egregious examples cited in the lawsuit was an instance when the plan paid more than $10,000 for a 90-pill generic drug to treat multiple sclerosis, which can be purchased without insurance on different retail and online pharmacies for $28 and $77.
“The burden for that massive overpayment falls on Johnson and Johnson’s ERISA plans, which pay most of the agreed amount from plan assets, and on beneficiaries of the plans, who generally pay out-of-pocket for a portion of that inflated price,” the plaintiffs wrote.
“No prudent fiduciary would agree to make its plan and beneficiaries pay a price that is two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket,” they added.
It further accuses J&J of agreeing to terms under which plan beneficiaries were financially incentivized to obtain their prescriptions from the PBM’s own mail-order pharmacy, even though that pharmacy’s prices are routinely higher than the prices at other pharmacies.
The case accuses the company of:
Failing to regularly put PBM services out to bid.
Failing to negotiate favorable terms with PBMs and continually supervise PBM’s actions to ensure that the plan is reducing costs and maximizing outcomes for beneficiaries.
Failing to periodically attempt to renegotiate PBM contracts.
Failure to independently assess the PBM’s formulary placement of each prescription drug and closely supervise PBM’s formulary management to ensure the plan is paying only reasonable amounts for each prescription drug.
Improperly steering plan participants towards their PBM’s mail-order pharmacy, even though that pharmacy’s prices were routinely higher than what retail pharmacies charge for the same drugs.
The fallout
Legal observers say employers that offer their employees group health insurance that includes one of the nation’s large PBMs, could be targeted.
The driving argument would be that employers have been warned through news reports of how PBMs have been accused of not being transparent about their negotiated prices, and how they often pocket rebates that could be used to lower the plan’s and enrollees’ outlays.
Most at risk are employers that are in self-insured or level-funded plans. It’s not clear yet how much liability insured employers may have, but they too could be accused of choosing health plans for their employees that contracted with PBMs that allegedly overcharge for medications.
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.
