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.
While most businesses rarely get rebate checks from their group
health insurer, this year may be different as insurance companies are expected
to pay back record excess premiums, as required by the Affordable Care Act.
The landmark insurance law requires that insurers spend at least
80% of their premium income on medical care and medications, but expected
payouts in 2018 came in way below expectations. That means they have to pay out
rebates for the overcharge.
Analysts expect that insurers will pay out $1.4 billion in
rebates, $600 million of which would be paid to small and large group health
plans, according to a report by the Kaiser Family Foundation.
The reason for the sizeable expected rebate is that insurers
raised rates substantially for 2018, which was right after Congress had passed
a law that eliminated the individual mandate penalty, as well as uncertainty
about the law after the Trump administration introduced regulations to expand
the use of short-term health plans and association plans.
As mentioned, plans must spend 80% of premiums they collect on
medical claims or quality improvements if they are in the individual or small group
market. The threshold is 85% in the large group market. The rest can be spent
on claims administration, marketing and other overhead, as well as set aside
for profit.
Rebates to small group plan and large group plan members have
typically overshadowed rebates to those who purchase plans individually on
government-run exchanges. In 2017, according to the Centers for Medicare and
Medicaid Services, insurers paid out nearly $707 million in ACA rebates, as
follows:
$132.5 million to individual market enrollees.
$309.4 million to small group market enrollees.
$264.8 million to large group market enrollees.
But this year, rebates to the individual market are expected to be
$800 million, while the remaining $600 million would be paid to enrollees in
group plans.
The premium increases that many insurers pushed through led to much
higher rates – benchmark premiums were up 34% going into 2018 – because of
market uncertainties, such as:
In October 2017, the Trump administration ceased
payments for cost-sharing subsidies, which led some insurers to exit the market
or request larger premium increases than they would have otherwise.
The administration reduced funding for advertising
and outreach.
Congress repealed the individual mandate penalty,
effective for 2019.
The administration introduced regulations extending
the time people could be on short-term plans, and also introduced association
health plans as an alternative for the small group market.
But the insurers’ fears didn’t materialize. Despite payments per
enrollee growing 26% to $559 in 2017 on exchanges, per person claims increased
only 7% to $392 year over year.
Also, the repeal of the penalties and increased premiums did not
drive younger, healthier consumers out of the marketplace as had been expected.
How to disburse rebates
If you are one of the employers whose health plan gets to receive
a rebate, the big question that always comes up is “how do you distribute the
funds?”
ACA regulations require insurers to pay rebates directly to the
group health plan policyholder, who will be responsible for ensuring that
employees benefit from the rebates to the extent they contributed to the cost
of coverage.
But remember, since you as the employer also contributed to the
premiums, you are entitled to your portion of the rebate. Your take should be
in the same proportion as the premium you pay compared to your employees.
The way that you disburse the rebate is up to you, but whatever
you do, it must be in accordance with ERISA’s general standards of fiduciary
conduct.
Typically, if the rebate works out to be small for each
participant, it would likely not be worth your time to cut each employee a
check.
The preferred method in most cases is to provide the rebate in the
form of a premium reduction or discount to all employees participating in the
plan at the time the rebate is distributed.
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.
