by US Rx Care | Jan 9, 2020 | Health care costs
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.
by US Rx Care | Dec 17, 2019 | Health care costs
A new study has found that more and more large employers are ditching high-deductible health plans as the job market tightens and they need to boost improve their health insurance offerings to retain and attract talent, and saddle their employees with less of the cost burden.
The change is also in response to the increasing burden that’s been placed on workers in employer-sponsored health plans after a seismic shift over the last decade to high-deductible health plans. HDHPs – also known as consumer-directed plans – were also expected to put more responsibility on employees to shop around for the most cost-effective medical services, but those expectations have not materialized.
This year, 39% of large, corporate employers surveyed by the National Business Group on Health offer HDHPs as their workers’ only choice. For 2019, only 30% of employers surveyed said they would solely offer HDHPs.
Pundits also say that some companies are boosting other options because of the continued postponement of the “Cadillac tax” on pricey health plans as it looks more and more likely that the tax will be scrapped and never take effect.
While nearly 40% of large employers offered only HDHPs in 2018, just 29% of U.S. workers are in HDHP job-based plans this year, the same level as in 2017, according to the Kaiser Family Foundation. That’s the highest level ever since the plans were introduced about 13 years ago.
The plans have allowed employers to shift more of the cost burden to their employees by requiring them to have more “skin in the game” in terms of their health care expenditures. But that notion failed because most health care is unplanned and requires fairly quick treatment, which makes it more difficult to shop for the provider that charges the least.
Over the years, the up-front premium cost employees pay has risen, but so have deductibles in these plans and deductible levels have increased faster than wages. In fact, 25% of workers have a single-person deductible of $2,000 or more, according to the Kaiser Family Foundation.
The average total health insurance cost is nearing $15,000 per employee, and the average worker pays $5,547 of that every year.
Other ways employers seek to lower costs
As costs increase, more employers are trying to find other ways to shave costs instead of shifting more deductibles and premium costs to their workers. Some of the ways the National Business Group survey found employers are trying to tackle costs include:
- Managing expenses for the most expensive diseases – This can include cancer, terrible accidents, prematurely born babies and other diseases. Treatment for many of these afflictions can cost $1 million or more. This is being done through accountable care organizations and “centers of excellence” that the insurer contracts with to focus on specific treatments.
- Using more technology – This can include workers using nurse video-chat services and other types of telemedicine.
- Using primary care clinics – Some insurers and self-insured employers are contracting with primary care clinics nearby their offices so that employees can get common ailments treated quickly.
- Tackling pharmaceutical costs – Nearly all of the employers surveyed said the prescription drug system needs to be overhauled, drug contracts should be more transparent and the rebate system needs fixing.
Some companies are working with a select few pharmacy benefit managers that can move rebates forward to the point of sale so that employees benefit from the rebate. Thirty-one percent of employers said they are considering implementing point of sale rebates in the next few years.
by US Rx Care | Dec 13, 2019 | Health care costs
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.
by US Rx Care | Dec 10, 2019 | Health care costs
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 Washington Post 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.
by US Rx Care | Dec 5, 2019 | Health care costs
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.
by US Rx Care | Nov 26, 2019 | Health care costs
In an effort to coax health plan participants to use
price-shopping behavior when deciding on where to have a procedure, more
insurers are starting to roll out a system known as “reference pricing.”
With reference pricing, the health insurer imposes a
limit on the amount it will pay for a particular procedure – a limit that is
reasonable and allows access to care for patients. The price is usually a
median or average price in the local market.
When a health plan participant selects a provider that
charges less than the cap, they will receive the standard coverage with little
or no cost-sharing.
But, if they decide to use a provider that charges
more than the cap, the participant will have to pay the entire difference out
of pocket. These excess payments do not count towards the patient’s deductible
or the annual out-of-pocket maximum.
Use of reference-based pricing rose from 11% to 13%
among large employers in 2015, according to a study by Mercer Benefits.
Proponents of reference pricing say that it can reduce
health care spending because it encourages people to shop for better deals and,
eventually, encourages hospitals to lower their prices.
Organizations that have implemented reference pricing
report lower outlays for procedures.
CalPERS, the pension fund for California state
employees, in 2011 began reference pricing and asked its preferred provider organization,
Anthem Blue Cross, to research the average costs for hip and knee replacements
among hospitals and develop a program that ensures sufficient coverage by those
hospitals that meet a certain cost threshold.
The program set a maximum of $30,000 for these
procedures.
The number of Anthem-CalPERS enrollees who chose a
designated high-value hospital for their knee or hip replacement surgery
increased from 50% between 2008 and 2010 to 64% in the first nine months of
2012, compared with little to no change among Anthem policyholders not enrolled
in CalPERS.
Also, the average price for such procedures fell from
more than $42,000 before the initiative to $27,148 in the first nine months of
2012.
The changes resulted in savings of about $5.5 million
during the first two years of the reference pricing initiative, and the average
cost to CalPERS for the procedures fell by 26%.
CalPERS says that after it implemented reference
pricing, some of the hospitals that charged more than the payment limit
significantly reduced their prices for the procedure.
These price reductions have increased; the number of
California hospitals charging prices below the CalPERS $30,000 reference limit
rose from 46 in 2011 to 72 in 2015.
Limits of reference pricing
To be clear, reference pricing cannot be applied to
all procedures.
It should only be used for procedures or products that
health plan enrollees can shop for, and when they have time to compare choices
based on price and quality. This can include:
- Scheduled procedures like the aforementioned knee replacements
- Ambulatory surgical procedures
- Lab tests
- Imaging
- Pharmaceuticals
What it should not be used for:
- Emergency procedures
- Unique components of care that the patient can’t select
independently, like a lab test during a visit to a doctor
- Complex medical conditions
