Employers Rethink HDHPs as More People Struggle with Medical Bills

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.


DOL Issues Final Rules for Association Health Plans

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.


DOL Employers Expect 6% Hike in Health Costs for 2019

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.


Business Insanity Podcast

If you don’t know Barry Moltz of Business Insanity podcast – you need to get him on your radar. He is a wonderful host who is enthusiastic about introducing you to the people and ideas that can improve your life.

On this episode, we talk about control and predictability to provide benefits, offer quality access to care and reduce costs.


timecode: 19:10-36:00

This podcast is special for me because I’m extremely passionate about changing the way employers access and pay for healthcare. Listen to segment 2 (about 20 minutes into the podcast) and let me know your feedback! I’m all ears.

  • Did my story resonate with you in some way?
  • Are you ready to gain control over your healthcare spend?
  • Did you want to learn how to make a healthcare plan predictable and repeatable?
  • Did you just want to learn more about that voice you heard?

Whatever the reason, I’m glad you are here.

Happy listening!


Pharmacy Benefit Managers: A Break On Rising Prescription Costs Or a Cause of Them?

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.


Infographic: How Healthcare is Robbing Companies Blind

In this infographic, we illustrate how skyrocketing healthcare and health insurance costs are stealing profits from companies and undermining wage increases.  Working with a Next Generation benefits advisor can help you reject the status quo, making your benefits plan a valuable business tool.


White Paper: How Managing the Healthcare Supply Chain Creates Savings for Your Business

In this document, we provide you with a summary of steps in the healthcare supply chain where your advisor can help you reduce costs. By being informed, you’ll make the best decisions for your employees and your bottom line.

Managing the ‘supply chain’ is a standard practice in virtually every industry because of the significant strategic and revenue opportunities that come along with better solutions and enhanced efficiency. Healthcare benefits, however, are still behind. Just as an office manager would be apprehensive trusting an intern to select and purchase a new computer on their own, business owners alike should not automatically trust their employees to make the most cost-efficient choices when it comes to their healthcare on their own.

 

 


Efficiency vs Effectiveness

Efficiency vs. Effectiveness

There has been a lot of discussion lately about the changing nature of the CFO’s role. There are many people who write eloquently on the subject, and I am a huge fan of Peter Chisambara of ERMP Insight.

His latest blog post, Finance Transformation: From Efficiency to Effectiveness, talks about how the CFO and the finance department are helping different business units execute more strategically.

I believe this task should extend to the healthcare spend. Adding predictability and control to the healthcare spend will allow the C-Suite to have more meaningful conversations about headcount reduction, or not adding benefits, rather than taking them away, turning the healthcare spend into a capital expense with a measurable ROI rather than an operating expense

Typically, the goal of the healthcare plan is retention and recruitment. Let’s get back to that, not further away from it.  Today’s healthcare plans are a huge expense for the employer and often unusable for the employee. No wonder everyone is aggravated!!!

Sounds great, right? But, how?

As a CFO with P&L responsibility, you manage every department’s expenses.. except the benefits spend. It’s time to change that.  You have probably been told that your plan is a “black budget” do to privacy issues and that you are “receiving the best possible discounts.”

When I hear that, I think I am paying the best price. That is not necessarily true. And what about the quality of care? Historically, it was nearly impossible to predict and control a company’s healthcare budget.

Today, due to new solutions, strategies, technology, and a wealth of data, business leaders can (and are) taking back control of their healthcare budgets to reclaim trapped profits while delivering a benefits package that leads to healthier, happier, more engaged employees that are more fulfilled and more productive.

We call the solution the BenefitsAdvantage Roadmap

1. Uncover the hidden cost drivers – Do you know what commissions you are actually paying? What diagnoses are driving your costs? Are your employees really receiving quality care? All these questions are answerable now.

2. Uncover the hidden savings opportunities – Who offers the best care at the most effective cost (EASY to find out)? Do your vendors have a fiduciary responsibility to you, rather than each other? If not, you are missing out on substantial savings.

3. Design your customized roadmap to savings, cost control and predictability – Every employer is a bit different. Design a plan that works for you.

4. Roll it out – Communicate the [email protected] out of it! Employees have budgets too. If they no how to extract the maximum value from the plan, your plan will benefit

5. Refine and Optimize – Make it more effective, year after year

You wouldn’t let your employee buy their own computer or desk or supplies on your dime without knowing that the product meets your quality specifications and what it costs.

Why let them do it with your medical plan dollars?


Next Generation Benefits Advising

The Difference Between a “Status Quo” Insurance Broker and a Next-Generation Benefits Adviser

Delivering healthcare to your employees is a growing business challenge. Not only do annual premiums rise year-after-year, but more employees are making career decisions based on benefits plans, especially as pressure on consumer healthcare costs increase as well.

Your benefits plan is more than a simple line-item expense, and you do not have to sink into benefits quicksand with each rate increase.

With the right approach and the right insights, your benefits plan can be a strategic advantage that not only preserves your budget but also drives other key performance factors like employee retention and morale.

To realize this potential, however, you need an expert that does more than the “status quo” insurance broker. You need a next-generation benefits adviser.


What’s the Good News Ladies

Susan Comb’s recently featured me in her “What’s the Good News, Ladies” column for BenefitsPRO magazine.

I am in great company this month – Paula Beersdorf and Cerrina Jensen have great things going on also.

It is easy to forget all the good things that have happened in the past year!  So much has happened and we are just getting started, look out 2018!!

 

 

You can read the full article here:

https://www.benefitspro.com/2018/03/12/whats-the-good-news-ladies-march-madness-edition/?slreturn=20180212134428

 


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