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.
by US Rx Care | Oct 24, 2018 | Uncategorized
After managing to jettison the individual mandate requiring U.S. adults to carry health coverage, efforts are afoot in Congress to do away with the Affordable Care Act employer mandate, although there seem to be mixed views on the reality of the legislation making it to the president’s desk.
One bill, HR 4616, is currently in the House Ways and Means Committee awaiting further amendments before a vote can be made on it. The measure would suspend penalties for the employer mandate for 2015 through 2019, as well as postpone implementation of the “Cadillac tax” on high-cost employer-sponsored health plans for one more year, until 2022.
The Congressional Budget Office and the congressional Joint Committee on Taxation have estimated that the bill would increase the size of the federal budget deficit by $39.5 billion over the period from 2019 through 2028. This would be the result of decreased government revenue and additional spending.
The employer mandate requires applicable large employers (or ALES, which are firms with 50 or more full-time or full-time equivalent workers) to offer affordable health coverage that also covers certain minimum essential benefits as required by the ACA.
Employers that fail to offer health insurance could be fined up to $2,300 for every employee that wasn’t offered coverage, and up to $3,480 per employee who is eligible for an ACA exchange premium tax credit because they do not have access to affordable employer-sponsored health coverage.
This being an election year, however, pundits have told trade publications that they don’t think the legislation will be brought to vote in 2018.
For now, if you are an ALE that’s required to secure health insurance for your workers, you still have a number of obligations under the ACA. There has been no legislation that rolls back any requirements on employers in regards to securing coverage for their employees.
With that in mind, if you’re an ALE you need to keep the following top of mind:
The IRS is assessing penalties for ACA infractions – Employers that are flagged for possibly not providing affordable coverage that covers the minimum essential benefits, or have made filing errors, may receive a 226-J letter from the IRS.
The letters explain that the employer may be liable for a penalty, based on information obtained by the IRS from Forms 1095-C filed by the employer for a specific coverage year, and tax returns filed by the employer’s employees. If you receive a letter, you have 30 days to respond.
If you fail to respond, within 30 days, it will result in a final assessment of the proposed penalty.
You must still file Forms 1094-C and 1095-C, or risk a penalty for not doing so.
The IRS uses information on Forms 1095-C in applying the ESRP (employer shared responsibility payment) rules and deciding whether to assess penalties against the reporting employer. If you’re an ALE, you are required to file Form 1095-C annually with the IRS as well as send the forms to your employees. You must provide the forms to employees by Jan. 31, and to the IRS by March 31 of every year.
Failure to submit the forms to the IRS or provide them to employees as required can result in penalties. The penalties can be doubled if the IRS finds that an employer intentionally flouted the filing requirement.
Summary of Benefits and Coverage forms are still required – Not only are they still required, but the Centers for Medicare and Medicaid Services has, on occasion, rolled out new language and information that it requires all SBCs to include.
The SBC is designed so that your employees can easily compare plans, so they can make an informed decision about which health plan they should choose from your offerings.
If you fail to provide an SBC to your staff, it can result in penalties of $1,128 per employee.
The takeaway
While machinations continue in Washington, the full spectrum of employer-related rules of the ACA still applies. The administration has introduced new rules that would allow for “association” plans to be sold, but as of now no such plans have hit the market.
And due to the complexities of the ACA and the difficulty in having unlike employers band together for coverage, the marketplace may be slow to come up with products that are ACA-compliant (including complying with the affordability requirements of the law, as well as providing the minimum essential benefits as prescribed by the law).
That means ALEs should just continue complying with the law fully.
by US Rx Care | Oct 17, 2018 | Uncategorized
The Trump administration has taken another step in its effort to roll out short-term health insurance plans by extending the amount of time such plans can be in effect.
Under the new rule, which was issued August 1, short-term plans can be purchased for up to 12 months and policyholders can renew coverage for a maximum of 36 months.
These controversial plans, though, do not have to comport with the Affordable Care Act, like not covering 10 essential benefits and not having to cover pre-existing conditions – and they can even exclude coverage for medications.
As a result of the changes, the Centers for Medicare and Medicaid Services predicts that an additional 600,000 people will enroll in short-term plans in 2019, jumping to 1.6 million individuals by 2021. Part of that will include some 200,000 people who drop their plans in the individual market and sign up for short-term coverage.
That’s compared with about 122,500 people enrolled in short-term plans in 2017, according to the National Association of Insurance Commissioners. But enrollment is expected to surge now that the individual mandate penalty has been eliminated.
That said, CMS predicts that premiums for 2019 ACA exchange plans will rise 1%, while net premiums will decrease 6%.
The final rule goes into effect 60 days after it is posted, but state regulators would still need to approve any new plans that come to market. Health insurers may start selling short-term plans that last up to a year in a few months. The new regulation, however, does not require insurers to renew the policies.
Health insurers and consumer advocates have assailed the plans, saying they provide limited coverage and that many people won’t understand just how skimpy the plans are when they buy them.
They also said that if younger and healthier people gravitated to these less expensive plans, it would leave an older, sicker pool of enrollees in ACA marketplace plans, which could further force rates higher in the marketplaces.
New rules change the game
The renewability portion of the regulations was modeled on COBRA plans, which allow people who leave a job to continue on the same plans they had while on the job, but they have to foot the bill themselves.
Plans will be able to exclude someone based on pre-existing conditions. The plans also do not have to cover the ACA’s 10 essential health benefit categories, such as maternity care or prescription drugs, for example.
Insurers that sell these plans will be required to:
- Prominently display wording in the contract that the plans are exempt from some ACA provisions.
- List coverage exclusions and limitations for pre-existing conditions.
- List what health benefits are covered.
- Explain if the plans have lifetime or annual dollar limits on health benefits.
By skirting many of the ACA provisions, the short-term plans offer less coverage and are hence less expensive.
That said, states will be able to regulate these plans as they see fit. For example, California limits the time someone can be enrolled in a short-term plan, and it bars renewals.
