New Rules Lay Down Law for Group Plans in 2019

In the final rules that the Centers for Medicare and Medicaid Services released for 2019, it also covered annual cost-sharing limits for group plans, rules on SHOP exchanges, and grandfathered plans, among other items we’ve covered earlier.

Here we break down some of the focuses of the 2019 rules:

Annual cost-sharing limits for group plans –  The maximum annual limit on cost-sharing for 2019 will jump to $7,900 for self-only coverage and $15,800 for other than self-only coverage. That’s up from $7,350 and $14,700, respectively, for this year.

New rules for SHOP –  Starting in 2019, the Small Business Health Options Program will no longer be required to provide employee eligibility determinations or appeals, premium aggregation or online enrollment. The SHOP scheme was created as a way for small employers to shop on an exchange much like individuals buying Affordable Care Act plans on marketplaces do.

SHOPs will still be required to determine employer eligibility for the SHOP and certify each qualified health plan available through the SHOP. However, enrollment will not be done online, but rather through agents and brokers who have registered with SHOP or an insurer offering a qualified health plan.

Notably, the small business health care tax credit will remain in place for eligible employers. SHOP will still have a website that includes information on the plans in all geographical areas, a premium calculator and access to customer service where SHOP personnel can answer questions.

One other item that will stay in place is the “rolling enrollment” rule that allows employers to buy SHOP coverage at any point during the year if they meet certain criteria.

The main reason for these changes is that SHOP enrollment has been well shy of expectations, so CMS is looking for ways to continue offering the administration functions required by the ACA.

That said, state-based SHOPs will still have leeway to maintain their current operations as they see fit. But for the most part, starting with the 2019 policy year, federal and state SHOPs will mainly rely on brokers and insurers to take on more of the responsibility for determining employee eligibility, conducting enrollment and collecting premiums.

Another grandfather extension –  CMS has extended the transitional policy that allows  states to permit insurers in small group markets to renew health insurance policies they would otherwise have to cancel because they don’t comply with parts of the ACA.

This means that states may allow insurers that have continually renewed eligible non-grandfathered individual and small group policies since Jan. 1, 2014, to again renew those policies, provided that the policies end by Dec. 31, 2019.

Health insurers that use the transitional policy will be required to send informational notices to affected individuals and employers.

 


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.


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