The Senate Health Committee in May 2019
released a draft bill that aims to reduce health care costs, taking particular
aim at the lack of transparency in the system and the scourge of surprise
medical bills.
The draft legislation is the first serious
attempt at addressing the drivers behind costs in a system that is starting to
see double-digit inflation again.
Surprise bills
Unusually, the draft puts forward three
options for tackling surprise medical bills:
Option 1: This would require hospitals to make a guarantee to patients that all of its physicians are in-network. The option gives doctors the choice to either contract with the hospital’s insurers or stay out of network and subject their own charges through the hospital. That way, the insurer would get just one bill and the fees would be charged at in-network rates.
Option 2: Insurers, hospitals or doctors could opt for arbitration to resolve any disputed charges that are more than $750. The mediator would research median insurer-negotiated rates for the same procedures and in the same geographical area before deciding on a settlement amount.
Option 3: An insurer would pay the surprise bill at the median contracted rate for that region to the hospital or doctor in question.
Tackling transparency
The bill also has a number of other
provisions, including:
Requiring air ambulances to
itemize medical charges apart from transportation costs in their bills to
health plans and patients.
Requiring that patients receive
their full bill within 30 business days of treatment. If it’s later than that,
the patient would not have to pay the bill.
Hospitals, doctors and health
insurers would be required to provide, upon request by a patient, a “good
faith” estimate of their out-of-pocket costs for a procedure within 48 hours of
the request.
Plans would be required to keep
their provider directories up to date. If patients can prove that their plan’s
directory steered them to an out-of-network physician or hospital, they would not
be required to pay out-of-network rates and instead pay the negotiated rates of
their plan.
Banning gag clauses that some
hospitals include in their insurer contracts. This means that patients must be
allowed to see a hospital’s cost and quality data.
Barring “all-or-nothing”
clauses, through which hospitals force insurers to contract with all of their
facilities or none.
Pharmacy benefit managers
(PBMs) would have to send quarterly reports on the costs, fees and rebates to
the employer plans they contract with.
PBMs would be barred from
charging higher prices for drugs than what they pay drug-makers, and they would
be required to pass along 100% of manufacturer rebates to plan sponsors.
The Trump administration has issued new
rules that would allow employers to provide workers with funds in health
reimbursement accounts (HRAs) that can be used to purchase health insurance on
the individual market.
The rule reverses a long-standing part of the Affordable Care Act that carried hefty fines of up to $36,500 a year per employee for applicable large employers that are caught providing funds to workers so they can buy insurance.
The rule was put in place to keep employers
from shunting unhealthy or older workers from their group health plans into
private insurance and government-run marketplaces.
Under the rules issued by the Departments
of Health and Human Services, Labor and Treasury, employers would be authorized
to fund, on a pre-tax basis, health reimbursement funds that to buy
ACA-compliant plans. The new rules take effect Jan. 1, 2020.
With the final rules written in a way to
keep employers from trying to reduce their group benefit costs by sending
sicker and older workers into the individual market, HHS noted in a press
release announcing the rule that it would closely monitor employers to make
sure this type of adverse selection doesn’t occur.
Typically, HRAs have only been allowed to be used to reimburse workers for out-of-pocket medical expenses. This rule allows them to also be used to pay for health insurance premiums for coverage that a worker may secure on their own.
’Integration’ conditions
The regulation permits an HRA to be “integrated”
with certain qualifying individual health plan coverage. In order to be
integrated with individual market coverage, the HRA must meet several
conditions:
Any individual covered by the
HRA must be enrolled in health insurance coverage purchased in the individual
market, and must substantiate and verify that they have such coverage;
The employer may not offer the
same class of individuals both an HRA and a “traditional group health plan”;
The employer must offer the HRA
on the same terms to all employees in a “class”;
Employees must have the ability
to opt out of receiving the HRA;
Employers must provide a
detailed notice to employees on how the HRAs work;
Employers may not create a
class of employees younger than age 25, whom they might want to keep in their
group plan because they’re healthier.
For employers with one to 100
employees, a class cannot have less than 10 employees; for employers with 100
to 200 employees, the minimum class size is 10% of the workforce; and for
employers with 200 or more employees, the minimum class size is 20 employees.
While the HRA money can be used mostly for
buying plans that meet ACA requirements, employers under the rule can establish
a special type of “excepted benefit” HRA for employees who want to buy less
expensive short-term plans that do not comply with the ACA. The contribution for such plans would be
capped at $1,800 a year.
Under the ACA, employers with 50 or more
full-time workers (applicable large employers) must provide their employees
with health insurance that covers 10 essential minimum benefits and must be
“affordable.”
Under the new rule, an applicable large
employer could meet their obligation if they provide adequate HRA contributions
for employees to buy individual coverage.
The Centers for Medicare and Medicaid Services has floated proposed regulations that would affect drug benefits for group plans and association plans and attempt to reduce drug expenses for health plan enrollees and drug plans.
While the rules seem to be focused on individual plans sold on government-run exchanges, three of the changes would also affect small and mid-sized group plans.
Mid-year formulary changes
Under current regulations, health insurers are barred from making changes to their drug formularies mid-year. They can only introduce changes upon renewal.
The CMS says it wants to boost incentives for drug plans to use generic drugs, so it is proposing a new rule that would allow insurers to:
Add a generic drug that becomes available mid-year.
Remove the equivalent brand-name drug from the formulary, or
Remove the equivalent brand-name drug to a different tier in the formulary.
Under the rules, insurers would have to notify their affected enrollees at least 60 days before the change would take effect. They must also offer a process for an enrollee to appeal the decision.
This rule would affect insurers in the individual, small group, and large group markets.
Excluding certain brand-name drugs
Under existing regulations, all prescription medications covered under an insurance contract are considered an essential health benefit, including the requirements that aim to ensure that the drug coverage is comprehensive. Under the Affordable Care Act, health plans are required to cover 10 essential benefits, and that includes the medications that are required to treat them.
The CMS wants to change this by letting insurers exclude a brand-name pharmaceutical from “essential health benefits”, or EHBs, if there is a generic equivalent that is available and medically suitable.
As with the current rule, the proposal would only apply to plans in the individual and small group markets. That’s because large group and self-insured plans are not required to cover all 10 categories of EHBs.
The proposal would also permit insurers to count only the cost of the generic equivalent (and not the cost of the brand-name drug) toward the enrollee’s out-of-pocket limit. Also, insurers would be permitted to apply an annual and/or lifetime dollar maximum to the brand-name drug, since the prohibition against annual and lifetime dollar limits only applies to EHBs.
Manufacturers’ coupon-handling
Currently, some insurers will count manufacturer coupons for brand-name drugs in addition to what the enrollee pays in calculating their out-of-pocket outlays for deductible purposes. They may do so depending on laws in the various states in which they operate.
For example, take the scenario of a drug that costs $600, and the manufacturer provides a $400 coupon that can be used to reduce the cost of the drug and the enrollee pays $200 out of pocket. Currently, insurers will count the full $600 towards the deductible and out-of-pocket maximum.
The CMS’s proposed rule would allow insurers to only include the actual out-of-pocket expense for the enrollee when calculating how much of an out-of-pocket maximum has been satisfied.
What comes next
The comment period for the proposed regulations ended on Feb. 19, 2019, and the final rules could be out before summer. We will keep you posted once the new regulations are out.
President Trump has signed two bills into law that would add transparency to drug pricing by banning gag clauses imposed by pharmacy benefit managers (PBMs) that bar pharmacists from discussing drug prices with the person buying prescription medication.
The bills, passed with bipartisan support, take aim at the PBM practice of clawbacks, which occur when the copayment set by the PBM is more than the actual cash price of the drug. So instead of the policyholder being able to pay less for the drug, the PBM will usually pocket the difference.
And because of gag clauses, most policyholders never get to know that they can save money if they decide not to use their PBM benefits and instead pay cash for the drug.
Insurers contract with PBMs to manage drug benefit programs and act as intermediaries between insurers, manufacturers and pharmacies.
PBMs use their position to negotiate discounts, rebates and other cost reductions from pharmaceutical companies in exchange for their drugs’ preferred placement on insurers’ formularies. They also decide which medications are covered or whether they will carry a copay when the patient picks up the drug.
A number of states already have similar laws on their books, but now it will be federal law thanks to the two measures: The Patient Right to Know Act and the Know the Lowest Price Act.
Specifically, the new measures:
Allow pharmacists to tell patients they can save money on a specific drug if they pay cash, and
Allow pharmacists to recommend trying a lower-cost alternative medicine.
How gag clauses work
A drug-maker sets the retail cash price of a pharmaceutical at say $40 per bottle. The PBM negotiates with the drug company for a lower price of $20. Pharmacies buy the drug from wholesalers and when a pharmacy dispenses the drug, the PBM will pay it the discounted rate of $20.
Additionally, the pharmacy will pay a fee to the PBM for its role in negotiating the price down.
In turn, the PBM may charge the insurance company more than the $20 it had negotiated. Often too, the PBM will receive a rebate from the drug-maker for placing the drug on its formulary.
Finally, when a patient buys the medicine from the pharmacy, he or she is charged a copay amount based on the list price ($40) rather than the negotiated price ($20). Since the $50 copayment is higher than the cash price, under a gag clause the pharmacist would be prohibited from informing their patients that they could pay less if they forwent the PBM benefit and paid cash out of pocket instead.
After a period of relative stability, the future of the Affordable Care Act has once again been thrown into uncertainty.
In a surprise move, the Department of Justice announced that it would not further pursue an appeal of a ruling by U.S. District Court Judge Reed O’Connor, and instead asked the 5th U.S. Circuit Court of Appeals to affirm the decision he made in December 2018.
O’Connor had ruled that Congress eliminating the penalty for not complying with the law’s individual mandate had in fact made the entire law invalid.
But, even though the DOJ won’t be pursuing defense of the law and challenging the ruling on appeal, a number of states’ attorneys general have stepped up to fight the ruling.
What this means for the future of the employer mandate is unclear, as the court process still has a long way to go. The ruling could be overturned on appeal and invariably whatever the 5th Circuit decides, the case will likely be appealed to the U.S. Supreme Court.
Already there has been fallout in the private health insurance market since the individual mandate penalty was eliminated, but the employer mandate, which requires that organizations with 50 or more full-time or full-time-equivalent workers offer health coverage to their employees, remains intact.
As the case winds on, it will be some time before anything changes. The 5th Circuit has not yet scheduled arguments. The DOJ has asked for a hearing date for July 8, and Democratic states’ attorneys general agreed.
Despite the DOJ’s announcement, the law stands and applicable large employers must continue complying with its requirements.
Analysis
The move was surprising because in the past President Trump had signaled that he wanted to keep parts of the ACA, particularly the barring of insurers from denying coverage based on pre-existing conditions. If the entire law is scrapped, so will that facet – as well as other popular provisions, like allowing adult children to stay on their parents’ policy until the age of 26.
Trump said his administration has a plan for something much better to replace the ACA.
Democrats have introduced some legislation to try to stabilize markets and improve on some ACA shortfalls. Their legislation aims to cut premiums for individuals buying on exchanges by expanding premium tax credits. Another bill would reaffirm the pre-existing condition protections, and restore enrollment outreach resources, which have been cut back under the Trump administration.
But with a divided Congress, the likelihood of anything reaching Trump’s desk are slim to none.
Meanwhile, the success of the ACA has been spotty. In some parts of the country, usually in areas with high population density, competition among plans ensures lower prices for people shopping on exchanges. But in smaller regions, cost increases are rampant.
A new analysis by the Urban Institute, a liberal-leaning think-tank, finds that more than half (271) of the country’s 498 rating regions have only one or two insurers participating in the ACA marketplace. Those regions are disproportionately in sparsely populated areas.
Regions with little competition tend to have much higher premiums. In a region with only one insurer, the median benchmark plan for a 40-year-old nonsmoker is $592 a month. That compares to $376 for the same consumer in a region with at least five plans.
Most employers are doing all they can to keep their employees’ health insurance and health care outlays to a minimum.
And while most of those efforts are focused on the upfront cost of insurance, co-pays and deductibles, many employers fail to help their employees control the very costs they actually have the most control over and one of those areas is medicine.
Helping your employees become wise consumers of health services can also cut your overall insurance costs as well as help your employees conserve more of their own funds if they have high co-pays and deductibles.
The cost of drugs can vary greatly between pharmacies to a shocking degree. And while your employees may have low co-pays for some drugs, if they go to the most expensive option when the insurance is covering the tab, it basically adds to the cost drivers for your insurance plan.
Here’s how wild the price swings can be. Consumer Reports recently surveyed pharmacies to price out a basket of five popular generic prescription drugs and here are the prices:
Healthwarehouse.com: $66
Costco: $150
Various independents: $107
Sam’s Club: $153
Walmart: $518
Kmart: $535
Grocery stores: $565
Walgreens: $752
Rite Aid: $866
CVS/Target: $928
It also pays to shop around from store to store and ask for discounts.
“A Rite Aid store near our headquarters in Yonkers, N.Y., was able to get the price of atorvastatin, the generic version of Lipitor, down to just $18 from $300 through a combination of in-store and external discount programs,” the report states. “But at another Rite Aid, we were told the cost could only be lowered to $127.”
Consumer Reports recommends that your employees:
Use online discounts. There are a number of websites that can provide you with discount coupons or vouchers for drugs, including:
GoodRx
Blink Health
WeRx.org
On these sites you enter the name of the drug, dosage and quantity and where you live and it will provide coupons or vouchers and identify which pharmacies you can use them at.
Expand your shopping horizons. As you can see on the list above, prices vary tremendously. And combining shopping around with a good plan for using coupons and your employees can save themselves and your health plan boat loads of money. They should also check out their local warehouse discount store as both Costco’s and Sam’s Club’s pharmacies were also quite reasonable. Not to be outdone, neighborhood pharmacies and grocery store pharmacies were also much cheaper than the large regional drug store chains. “The absolute lowest prices we found in each city we called were almost always at these kinds of stores,” Consumer Reports wrote.
Ask pharmacies if they will honor online coupons. Pharmacies will almost always honor them, Consumer Reports found. But Consumer Reports mystery shoppers had to be persistent in getting the pharmacies to use them, since they often run prescriptions through insurance automatically, even when paying the retail cash price and using discount coupons would cost less.
One last thing
Consumer Reports recommended that once someone settles on pharmacy that consistently gives them good deals on pharmaceuticals, they should fill all of their prescriptions there.
That way it’s easier for them to spot “potentially dangerous interactions and other safety concerns.”
But if your employees notice that their pharmacy bills start rising noticeably, it may be time for them to start shopping around again. To stay on top of this requires regular checks to make sure that they are not seeing prices creep up.
