by US Rx Care | Dec 4, 2018 | Uncategorized
The US is experiencing a prescription drug pricing epidemic, and some drug companies are driving a wedge into the health insurance model by severely jacking up pharmaceutical prices to astronomical levels.
Unfortunately, the cost of some drugs has become so extreme that by paying for one prescription it could take decades to recoup the cost in premium collections.
The scourge was recently highlighted in an investigative report by “60 Minutes” on CBS.
The investigation reflects the difficulties facing health insurers in paying for drugs and also the fact that many pharmacy benefit managers, which are in business to rein in runaway drug costs, are not actually doing much to stem the rampant and exorbitant price increases.
The “60 Minutes” piece focused on one city which was faced with financial ruin because of the costs of just one drug for one of its employees. The city’s experience is emblematic of just how bad things have gotten.
The city of Rockford, Ill., had for years been self-insuring and paying the health care costs for its 1,000 employees and their dependents. But then one pharmaceutical busted the city’s health care budget: Acthar.
In 2015, two small children of Rockford employees were treated with Acthar, a drug that’s been on the market since 1952. It is used to treat a rare and potentially fatal condition called infantile spasms, which afflicts about 2,000 babies a year.
The drug had been affordable in 2001 when it sold for about $40 a vial. By 2015, the price had spiraled to $40,000 a vial – a phenomenal 100,000% increase.
As a result, the city paid out close to $500,000 for the two children’s Acthar prescriptions.
The problem is that Acthar is not the only drug on the market that has seen that kind of price increase. Pharmaceutical companies have been on a major price-hike spree, pushing once-affordable drugs into the stratosphere – often after one company buys the rights to a drug from another firm.
The maker of Acthar also in 2010 decided that it wanted to boost sales of the drug because there are only about 2,000 cases of infantile spasms a year. So it started marketing it to doctors for other diseases that it was not designed to treat.
The company began to market the drug for several chronic conditions like rheumatoid arthritis that affect adults, even though there was no evidence it worked for these conditions.
Prescriptions surged, and by 2015 Medicare was spending $500 million a year on Acthar.
They were able to get those prescriptions because many of the doctors who prescribed a lot of Acthar also were getting money from the company. The drugmaker paid them for speaking, consulting and conducting research studies for the company.
“60 Minutes” found that those doctors appear to be the ones who are most likely to also prescribe Acthar. The drugmaker paid doctors millions over a nearly two-year period, with the top earner getting more than $350,000.
PBMs no help
To rein in drug costs, Medicare contracts with pharmacy benefit managers (PBMs), which are supposed to negotiate down the price of drugs. Unfortunately, the city manager of Rockford says the PBM the city was using didn’t do that.
He said that PBMs actually wield a lot of clout, but often don’t use it when they should.
Many observers say that PBMs have divided loyalties and make money when drugs are more expensive. Express Scripts, the largest PBM in the country, for example, not only is a PBM, but it also owns a pharmacy that sells expensive drugs and a company that ships and packs them.
Rockford has sued the manufacturer of the drug and also Express Scripts, which the city hired specifically to contain costs, but alleges it didn’t do.
Express Scripts has denied any wrongdoing and, in its motion to dismiss, argues it was not “contractually obligated” to contain costs.
Unfortunately, there are many players with their hand in the drug pie. Besides the drugmakers, PBMs and pharmacies, doctors can make more money by prescribing more expensive drugs over ones that are cheaper and just as effective.
by US Rx Care | Nov 28, 2018 | Uncategorized
As the number of employers offering high-deductible health plans continues growing, the spotlight recently has highlighted an inconvenient truth: some employees are going broke and filing bankruptcy because they cannot afford all of the out-of-pocket expenses and deductibles they must pay in these plans – just like the bad old days in the 1990s and 2000s.
Besides being in plans with high deductibles, many employees are also paying more for coverage as employers have shifted more and more of the premium burden to their staff.
Making matters worse, studies are showing that many people with HDHPs are forgoing necessary treatment and not taking the recommended dosages of medicines because they can’t afford the extra costs.
Consider:
- Enrollment in HDHP plans grew to 21.8 million in 2017, up from 20.2 million the year prior, and 5.4 million in 2007, according to a report by America’s Health Insurance Plans.
- Nearly 40% of large employers offered only high-deductible plans in 2018, up from 7% in 2009, according to a survey by the National Business Group on Health.
- 50% of all workers had health insurance with a deductible of at least $1,000 for an individual in 2018, up from 22% in 2009, according to the Kaiser Family Foundation.
Despite that, a 2017 report by the Centers for Disease Control and Prevention found that 15.4% of adults in HDHPs in 2016 had issues paying bills, compared to 9% of those with other types of insurance. And there have been a number of news reports about the deep financial toll on HDHP enrollees that have suddenly been hit by serious maladies.
Meanwhile, the average deductible for a family had risen to an average of $4,500 in 2017 from $3,500 in 2006, according to the Kaiser-HRET 2017 survey of employer-sponsored health plans.
As a result, some employers are rethinking their use of these HDHPs and trying to reduce the burden on their workers, according to news reports.
Skimping on care
Studies show that many put off routine care or skip medication to save money. That can mean illnesses that might have been caught early can go undiagnosed, becoming potentially life-threatening and enormously costly for the medical system.
A study by economists at University of California, Berkeley and Harvard Research, published in the Journal of Clinical Oncology
Findings: When one large employer switched all its employees to high-deductible plans, medical spending dropped by about 13%. That was not because the workers were shopping around for less expensive treatments, but rather because they had reduced the amount of medical care they used, including preventative care.
The study found that women in HDHPs were more likely to delay follow-up tests after mammograms, including imaging, biopsies and early-stage diagnoses that could detect tumors when they’re easiest to treat.
A report by the Robert Graham Center for Policy Studies in Family Medicine and Primary Care, published in Translational Behavioral Medicine
Findings: People with HDHPs but no health savings accounts are less likely to see primary care physicians, receive preventive care or seek subspecialty services. Compared to individuals with no deductibles, those enrolled in HDHPs without HSAs were 7% less likely to be screened for breast cancer and 4% less likely to be screened for hypertension, and had 8% lower rates of flu vaccination.
The study authors noted that although more individuals have health insurance under the Affordable Care Act, premiums and deductibles have increased, leaving many Americans unable to afford these costs.
Oddly, many people in HDHPs are also forgoing preventative care services, even though they are exempted from out-of-pocket charges, including the deductible under the ACA. This is likely because most people don’t know that the ACA covers preventive care office visits, screening tests, immunizations and counseling with no out-of-pocket charges. As a result, they do not benefit from preventive care services and recommendations.
Companies with second thoughts
A few large employers – including JPMorgan Chase & Co. and CVS Health Corp. – recently announced that they would reduce deductibles in the health plans they offer their employees or cover more care before workers are exposed to costs.
CVS Pharmacy, part of CVS Health Corp., in 2013 had moved all of its 200,000 employees and families into HDHPs. During routine questionnaires, CVS later found that that some of its employees had stopped taking their medications because of costs. The company, in response, expanded the list of generic drugs its employees could buy for free to include some brand name medications, as well as insulins.
by US Rx Care | Nov 21, 2018 | Uncategorized
The Department of Labor in June issued its final rules for expanding employers’ access to association plans, a move that could result in some increases in premiums for other plans, including Affordable Care Act-compliant small group health plans.
The rule in its essence allows more small businesses and self-employed workers to band together to buy insurance. The final rule is part of the Trump administration’s plan to encourage competition in the health insurance markets and lower the cost of coverage.
It does that by broadening the definition of an employer under the Employee Retirement Income Security Act (ERISA) to allow more groups to form association health plans and bypass ACA rules, like requiring plans to offer the 10 essential benefits. But what’s not clear is how the marketplace will react and what kind of plans will ultimately be created to target this new potential market.
In announcing the final rules, Labor Secretary Alexander Acosta said that some 4 million people would likely gain coverage in the association plan market, most of them migrating from the small group and individual markets. The figure also includes an estimate that 400,000 people who currently don’t have coverage will end up securing coverage in association plans.
An insurance-industry-funded analysis of the final rule by Avalere Health, a health care consulting firm, has predicted that mostly healthy, young people are expected to gravitate to association plans, which would spark rising premiums in the ACA individual and small group markets. Avalere projected premiums would increase by as much as 4% between 2018 and 2022.
Under prior rules, association health plans had to comply with ERISA’s large-employer insurance requirements. Many existing association plans have been required to comply with small group and individual insurance market regulations, including protections for people with pre-existing medical conditions and covering the ACA’s 10 essential health benefits.
The specifics of the final rule
Here’s what you need to know about the final rule:
- Association health plans cannot restrict membership based on health status or charge sicker individuals higher premiums.
- Plans may be formed by employers in the same trade, industry, line of business, or profession. They may also be formed based on a geographic test, such as a common state, city, county or same metropolitan area (even if the metropolitan area includes more than one state).
- The primary purpose of the association may be to offer health coverage to its members. But, it also must have at least one substantial business purpose unrelated to providing health coverage or other employee benefits.
A “substantial business purpose” is considered to exist if the group would be a viable entity in the absence of sponsoring an employee benefit plan.
- The association plan must limit enrollment to current employees (and their beneficiaries, such as spouses and children), or former employees of a current employer member who became eligible for coverage when they worked for the employer.
- The final rule reduces the requirement for working owners. To be eligible to participate they must work an average of 20 hours per week or 80 hours per month (the proposed rule required an average of 30 hours per week or 120 hours per month).
An association plan may not experience-rate each employer member based on the health status of its employees; however, it may charge different premiums as long as they are not based on health factors.
For example, employees of participating employers may be charged different premiums based on their industry subsector or occupation (e.g., cashier, stockers, and sales associates) or full-time vs. part-time status.
by US Rx Care | Nov 13, 2018 | Uncategorized
The IRS has released the inflation-adjusted amounts for 2019 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s employer shared responsibility provisions.
For plan years beginning in 2019, the affordability percentage has increased to 9.86% (from 9.56% in 2018) of an employee’s household income or wages stated on their W-2 form. The higher rate is indicative of the anticipated small group plan inflation that continues hitting premiums.
If you are an applicable large employer under the ACA (with 50 or more full-time staff), you should examine the affordability percentages for your lower-waged employees so you don’t run afoul of the law. Fortunately, as the percentage has increased, you’ll have more flexibility when setting your employees’ contribution rates.
A recent study by PricewaterhouseCooper’s Health Research Institute found that employers and insurers are expecting a 6% increase in health care costs in 2019. While that rate is just slightly above the average 5.6% increases since the ACA took effect, many employers have increasingly been passing the inflationary costs on to their covered employees.
The report by PwC noted three trends that are having the largest effect on health care costs.
Abundance of treatment options – With covered individuals demanding more convenience in their treatment options, employers and health plans have responded by giving them more ways to obtain care, like retail clinics, urgent care clinics and electronic physician consultations. While the long-term goal is to reduce health care spending on services, currently the increased offerings have resulted in higher utilization.
Mergers by providers – Hospitals and other health care providers have been consolidating for the better part of a decade, and that trend is expected to continue in light of several recently announced mega-deals. Prices tend to rise when two health systems merge and the consolidated entity gains market share and negotiating power.
Physician consolidation and employment – Hospitals, health systems and medical groups are hiring more and more doctors out of private practice. And when that happens, costs tend to go up since these organizations tend to charge higher prices than independent practitioners.
In 2016, 42% of physicians were employed by hospitals, compared to just 25% in 2012, according to the PwC report. Hospitals and medical groups tend to charge between 14% and 30% more than physicians in private practice.
Restraining factors
At the same time, there are some factors that are dampening overall cost increases:
- Expectations that next year’s flu will be milder than this year’s main virus.
- More employers are offering care advocates who help covered individuals navigate the insurance system to find the best quality care at the best price. According to the survey, 72% of employers offered health-advocacy services to their employees in 2018.
- More employers are using “high-performance networks,” also known as “narrow networks.” In essence, a plan will use a narrow network of doctors who care for the bulk of covered individuals. Not contracting with as many doctors means lower overall outlays for medical services.
While the doctors in these networks are not always the least expensive providers, they typically are ones who have proven over time to yield the best results.
The takeaway
We are here to help you get the most value for your and your employees’ health care spend. Talk to us about any of the tools mentioned above to see if we have a program that might work for your organization.
by US Rx Care | Nov 6, 2018 | Uncategorized
In 2015, spending on prescription drugs grew 9%, faster than any other category of healthcare spending, according to the U.S. Centers for Medicare and Medicaid Services.
The report cited increased use of new medicines, price increases for existing ones, and more spending on generic drugs as the reasons for this growth. Increasingly, though, observers of the healthcare system point to one player – pharmacy benefit managers.
Pharmacy benefit managers are intermediaries, acting as go-betweens for insurance companies, self-insured employers, drug manufacturers and pharmacies. They can handle prescription claims administration for insurers and employers, facilitate mail-order drug delivery, market drugs to pharmacies, and manage formularies (lists of drugs for which health plans will reimburse patients.)
Express Scripts, which provides network-pharmacy claims processing, drug utilization review, and formulary management among other services, is the best-known PBM. CVS Caremark and UnitedHealth Group’s OptumRx are other major players.
A PBM typically has contracts with both insurers and pharmacies. It charges health plans fees for administering their prescription drug claims. It also negotiates the amounts that plans pay for each of the drugs.
At the same time, it creates the formularies that spell out the prices pharmacies receive for each drug on the lists. Commonly, the price the plan pays for a drug is more than the pharmacy receives for it. The PBM collects the difference between the two prices.
It can do this because the health plan does not know what the PBM’s arrangement is with the pharmacy and vice versa. Also, one health plan does not know the details of the PBM’s arrangements with its competitors.
A PBM could charge one plan $200 for a month’s supply of an antidepressant, charge another plan $190 for the same drug, and sell it to a pharmacy for $170. None of the three parties know what the other parties are paying or receiving.
In addition, drug manufacturers, who recognize the influence PBM’s have over the market, offer them rebates off the prices of their products.
In theory, the PBM’s pass these rebates back to the health plans, who use them to moderate premium increases. However, because these arrangements are also confidential, the extent to which these savings are passed back to health plans is unknown. Many observers believe that PBM’s are keeping all or most of the rebates.
To fund the rebates, drug manufacturers may increase their prices. The CEO of drug maker Mylan testified before Congress in 2016 that more than half the $600 price of an anti-allergy drug used in emergencies went to intermediaries.
The PBM’s argue that they help hold down drug prices by promoting the use of generic drugs and by passing on the savings from rebates to health plans and consumers.
They reject the notion that they are somehow taking advantage of health plans and pharmacies, pointing out that they are “sophisticated buyers” of their services. They also argue that revealing the details of their contracts would harm their abilities to compete and keep prices low.
Nevertheless, PBM’s are now attracting scrutiny from Congress, health plans and employers. At least one major insurer has sued its PBM for allegedly failing to negotiate new pricing concessions in good faith. In addition, businesses such as Amazon are considering getting into the PBM business. Walmart is already selling vials of insulin at relatively inexpensive prices.
PBM’s earn billions of dollars in profits each year. With the increased attention those profits have brought, it is uncertain how long that will continue.
by US Rx Care | Oct 31, 2018 | Uncategorized
The number of companies offering health insurance to their employees has risen for the first time in a decade, according to new research from the Employee Benefit Research Institute.
In 2017, almost 47% of private-sector employers offered health insurance, up from 45.3% in 2016. The percentage had previously been dropping steadily since 2008, when more than half (56.4%) were providing coverage.
The trend continues that the larger the company, the more likely it is to offer coverage, with 99% of firms with 1,000 or more employees offering health benefits.
Interestingly, the pre-Affordable Care Act numbers are higher than the post-ACA numbers, despite the fact that the law required employers with 50 or more full-time workers to provide most of their staffers with health coverage.
And the fact that numbers started ticking higher in 2017 points not so much to the results of the ACA, but that the labor market is tightening and as competition for talent increases, more employers are adding health coverage to their benefit packages, according the EBRI’s analysis.
The increases have been across all business sizes.
The percentage of employers offering health benefits in 2017, compared to 2015, is:
- Employers with fewer than 10 employees:5% in 2017, up from 22.7% in 2015.
- Employers with 10–24 employees:2%, up from 48.9%.
- Employers with 25–99 employees:6%, up from 73.5%.
- Employers with 100‒999 employees3%, up from 95.1%.
Another interesting development is the percentage of workers who are eligible to receive health coverage at their employer also ticked up to the highest level since 2014, the year the ACA took effect. But the number was still not as high as in 2013.
The percentage of employees eligible for health insurance is as follows:
The takeaway: Coverage matters
The EBRI attributes the increases in both the above metrics on the fact that workers have been migrating to jobs that offer health coverage. It also puts the changes down to the strong economy, the tighter job market and the fact that group health insurance rates have been increasing at a moderate clip of about 5% a year.
It also indicates that more employers are offering coverage to recruit and retain talent.
There has been a significant drop-off among small employers offering coverage since the recession hit in 2008 (when 35.6% of firms with fewer than 10 employees offered it, a percentage that dropped to its nadir in 2016 of 21.7%).
EBRI analysts cite many factors for the larger decline in coverage offering among the smallest employers, including the effects of the recession on their businesses and the fact that their employees could get coverage on exchanges at relatively low rates thanks to government subsidies.
The overall uptick in 2017 was largely driven by small employers, meaning that they are likely having to step up to compete for talent. As competition for talent will likely continue to grow, it’s likely that more employers will continue adding health benefits, in addition to other voluntary benefits, to sweeten the pot.
If you would like to know more about your options, feel free to contact us.
