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Number of Employers Offering Coverage Grows

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:

  • 2013:8%
  • 2014:4%
  • 2017:8%

 

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.

 

 


A New Health Care Model Tackles Costs, Quality Care

As group health insurance costs continue rising every year, more employers are embracing a new plan model that aims to both cut costs and improve outcomes for patients.

This trend, known as value-based primary care, is a bit of an umbrella term for various models that involve direct financial relationships between individuals, employers, their insurers and primary care practitioners. Insurers are experimenting with different model hybrids to find better care delivery methods that reward quality outcomes and reduce costs.

This new approach was made possible by the Affordable Care Act and the Medicare Access and Child Health Plan Reauthorization Act. And as the future of the ACA remains in doubt, the enabling parts that allowed for this system of payment reform that rewards health care providers that produce better quality outcomes for lower costs will likely remain intact.

And now more health plans are adopting this model. The 2016 “Health Care Transformation Task Force Report” found that the share of its provider and health plan members’ business that used value-based payment arrangements had increased from 30% in 2014 to 41% at the end of 2015.

In a McKesson white paper, payers reported that 58% of their business has already shifted to some form of value-based reimbursement.

How does it work?

First, let’s look at what the value-based primary care model is not: it’s not a fee-for-service system, under which when doctors see a patient and deliver care, they then bill the insurer a fee that is directly tied to the service they provided.

Fee-for-service arrangements have a fee schedule that lists the usual and customary charges for thousands of different procedures. The payment amounts will vary also based on the

reimbursement rate negotiated between the insurer and health care provider.

The part of the equation that’s missing is that the there is no direct link between the payment and the outcomes of the care. The insurer does not look at if a person was cured or has recovered successfully. There is only a link between the service provided and the payment.

Many value-based models provide a payment bonus to doctors and hospitals that produce better quality outcomes, like if they have more patients who don’t relapse or who recover at a slower pace and require more doctor visits.

Providers of value-based primary care typically charge the health plan a monthly, quarterly or annual membership fee, which covers all or most primary care services, including acute and preventive care.

The main goal is to get away from the fee-for-service system which puts pressure on doctors to only provide very short primary care visits with their patients, who will often send the patient out for unnecessary high-margin services such as scans and specialists and/or write excessive prescriptions. By eliminating this billing structure, doctors are able to practice more proactive care, which can reduce or eliminate certain future health care costs.

But just because the model is patient-focused, it does not mean that costs are higher. Proponents of value-based care say the focus on patients, and focusing on preventative and forward looking care rather than reactive care, reduces overall costs, which should be reflected in premiums.

Some benefits to patients include:

  • More time with their doctor
  • Same-day appointments
  • Short or no wait times in the office
  • Better technology, e.g., e-mail, texting, video chats, and other digital-based interactions
  • 24/7 coverage by a professional with access to their electronic health record
  • More coordinated care.

 

Vale-based care also improves provider experience and professional satisfaction, which, in turn, is known to improve the quality of care.


Drug Costs Starting to Drive Group Plan Inflation

Under the Affordable Care Act, group health insurance costs have been rising at a much slower rate than they had during the decade preceding its passage.

In fact, the rate of annual premium growth in the group market has hovered around 5% – more than half of what it was between 2001 and 2010. Also, health care’s share of the national economy actually fell from 17.4% in 2010 to 17.2% by 2013. However, that trend hasn’t lasted and in 2016 the share was 17.9%.

There has been a lot of debate about why rates have been increasing and some pundits say that if it were not for spiraling pharmaceutical costs, the rate of health insurance inflation would be lower.

While the drug industry would deny pharmaceutical costs are what’s driving health care cost inflation, the numbers show otherwise, according to an analysis by Modern Healthcare, an industry trade publication.

Here are the figures that drive home the point. Between 2013 and 2016, personal health care consumption rose 16.7%, according to the Centers for Medicare & Medicaid Services (CMS). This is what was driving that inflation:

  • Hospital spending: Up 15.5%
  • Professional services (mostly physician office-based care): Up 16%
  • Drug spending: Up 23.9%

Source: CMS

For 2018 group health plans, the inflation components of the three main areas could not be starker:

  • Hospital costs: 6.1% (from 2017)
  • Physician costs: 4.3%
  • Pharmaceuticals: 10.9%

Source: Segal Company

The situation may actually be worse than the numbers hint at. Retail drug sales don’t include the most expensive medicines – those delivered in hospital outpatient and physician offices. The CMS doesn’t track that data separately, but one can get a glimpse of what’s happening by examining the latest financial reports from major hospital systems.

Controlling drug costs

Prescription drug costs now account for about 17% of total U.S. healthcare spending and were the fastest rising component of that spending over the past year.

Drug costs have been difficult for health care providers and the insurance industry to tackle.

The pharmaceutical industry has been able to fend off government efforts to counter price hikes. It successfully lobbied Congress in 2003 to bar Medicare from negotiating prices in the new Part D program.

The industry has been aided by opposition from physician and patient advocacy groups, who fear that cost-benefit calculations will be used to cut them off from high-priced but effective medicines.

Benefits consulting firm Segal Company asked managed care organizations, health insurers, pharmacy benefit managers and third-party administrators to rank the cost-management strategies implemented by group health plans in 2017. Here are the top five:

    • Using specialty pharmacy management– This focuses on controlling costs of specialty drugs, many of which cost more than an annual health premium for a year’s worth of dosing.
    • Intensifying pharmacy management programs– This includes negotiating better pricing for commonly used drugs.
    • Contracting with value-based providers.
    • Increasing financial incentives in wellness plans.
    • Adopting high-deductible health plans.

These strategies show plan sponsors are looking to drive utilization to high-quality, low-cost providers in lieu of simply passing the costs on to their employees.


New Rules Allow Short-term Plans to Last up to Three Years

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.


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.


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