A Great Look at How Healthcare Spending Has Changed over the Decade

From Benefits Pro:  

... Health care costs have increased in the economy at a much higher rate than anything else, concurrent with an increase in demand for health services driven by the health care system itself. 

In 1982, the average consumer went to the doctor 1.8 times per year; by 2015, that number had increased to 5.5 times per year per average consumer.  Frequency and volume of patient visits has risen with the acquisition of most primary care practices and specialists by large health care systems who own hospitals.  Providers within hospital-owned health care systems are encouraged to “churn” patients, meaning refer to other specialty providers within the health care organizations to drive more billings and revenue. A lack of transparency has made it easy for high health care costs to be hidden, with the justification that “it doesn’t harm the employee, because once they meet their deductible and out-of-pocket limit, it all be covered for them.”  Who hasn’t heard that comment when they question a health care bill? 

Today, the average employee health plan deductible has increased to $1,500, while the out-of-pocket max for individuals exceeds $6,000. At the same time, wages have remained relatively flat, so more and more of today’s wage earners’ paychecks are going to pay health care expenses. In 2017, health care expenses accounted for 17.9 percent of GDP. 

Concerned employers who see these costs continuing to rise are looking for new ways to address and attack the issues, and the good news is that solutions do exist. 

Rising RX costs add to the problem.  Pharmacy costs have grown from less than 10 percent of employer health care spend to more than 20 percent of claims today.  Much of the increased RX spend comes from higher cost specialty drugs being marketed and priced to maximize profits for the pharmacy industry and those receiving rebates. 

Concurrently, insurance companies drive profits by creating formularies based on maximizing drug rebates pharmacy manufacturers pay them, rather than pushing formularies based on lowest costs for employees and employers. ... 

Getting PAID – A New Path for Employers to Address Federal Wage and Hour Violations

From Employee Benefit News: 

It is a dilemma that many employers have faced. You discover that your company violated federal law on minimum wage or overtime payments. You want to fix the problem, but you do not know how to do so without prompting employee demand letters, a Department of Labor audit or, perhaps worst, a class action lawsuit. The Department of Labor’s Wage and Hour Division (WHD) has set out to provide employers a way to quickly resolve these issues and avoid litigation…potentially.

The WHD recently announced a new nationwide pilot program called the Payroll Audit Independent Determination (PAID) program. This new program aims to facilitate timely resolution of potential overtime and minimum wage violations under federal law without litigation and to improve employers’ compliance with wage and hour laws.

While full details of the PAID program have yet to be rolled out, the basic premise is as follows:

• employer reviews WHD compliance materials;
• employer conducts an audit of its compensation practices and identifies non-compliant policies or potential claims it would like to proactively resolve;
• employer calculates the amount of back wages it believes are owed to affected employees;
• employer contacts WHD and submits its calculations and all required documents. These include, among other items, an explanation of the scope of the potential violations and a certification that the employer is not litigating the compensation practices at issue in court, arbitration, or otherwise;
• WHD evaluates the information and confirms the back wages;
• WHD issues a summary of unpaid wages and forms describing the settlement terms for each employee, which employees may sign to receive payment; and
• employer issues prompt payment.

A chief benefit of the PAID program is that employers who self-report and cooperate with WHD to remedy violations will not be required to pay liquidated damages or civil monetary penalties. They will also avoid the costs of litigation for all employees who accept the payment and sign a release. ...

IRS Addresses Male Sterilization and Male Contraceptive Benefits and HSA Eligibility

From Thompson Reuters:

The Internal Revenue Service (IRS) has issued Notice 2018-12, which provides that health plans that offer benefits for male sterilization or male contraceptives without a deductible (or with a deductible below the minimum annual deductible for high deductible health plans (HDHPs) under the rules for health savings accounts (HSAs)) do not qualify as HDHPs. The notice includes transition relief until 2020 for individuals enrolled in plans that do not qualify as HDHPs under this guidance. ... 

Notice 2018-12 

In Notice 2018-12, the IRS takes the position that benefits for male sterilization and male contraceptives are not preventive care under Code Section 223. As a result, a health plan that provides benefits for male sterilization and contraceptives without satisfying the minimum deductibles for HDHPs under the Code's HSA rules is not an HDHP. These requirements apply regardless of whether coverage of such benefits is required by state law.
An individual who is not covered by an HDHP for a month is not an eligible individual under the HSA rules and may not, as a result, deduct HSA contributions for that month. In addition, HSA contributions made by an employer on behalf of such an individual are not excludible from income and wages. ....

 

Patients Overpay For Prescriptions 23% Of The Time, Analysis Shows

From Kaiser Health News: 

As a health economist, Karen Van Nuys had heard that it’s sometimes cheaper to pay cash at the pharmacy counter than to put down your insurance card and pay a copay. 

So one day, she asked her pharmacist how much her prescription would cost if she didn’t use her health coverage and paid cash. 

“And sure enough, it was [several dollars] below my copay,” Van Nuys said. 

Van Nuys and her colleagues at the University of Southern California Schaeffer Center for Health Policy & Economics decided to launch a first-of-its-kind study to see how often this happens. They found that customers overpaid for their prescriptions 23 percent of the time, with an average overpayment of $7.69 on those transactions. 

The USC study, released Tuesday, analyzed the prices that 1.6 million people paid for 9.5 million prescriptions in the first half of 2013, based on data from Optum Clinformatics, an organization that sells anonymized claims data for analysis, and National Average Retail Price (NARP) data, which contained drug prices paid by insurers and was based on a national survey of pharmacists. 

It showed that the overpayments totaled $135 million during that six-month period. 

The practice of charging a copay that is higher than the full cost of a drug is called a “clawback” because the middlemen that handle drug claims for insurance companies essentially “claw back” the extra dollars from the pharmacy. (The middlemen, known as pharmacy benefit managers, include Express Scripts, CVS Caremark and OptumRx. Express Scripts and CVS Caremark say they don’t use clawbacks. OptumRx declined immediately to comment.) 

Here’s how it works: After taking your insurance card, your pharmacist says you owe a $10 copay, which you pay, assuming that the drug costs more than $10 and your insurance is covering the rest. But unbeknownst to you, the drug actually cost only $7, and the PBM claws back the extra $3. Had you paid out-of-pocket, you would have gotten a better deal. ... 

Client Question: Can Medicare File 3-Year Old Claims Against Our Plan?

Question: Our company’s group medical plan has a 12-month time limit for filing claims. We received a notice from Medicare and it looks like they want to file claims with our plan that are three years old. Is that allowed?

Answer: Medicare does not submit claims to group medical plans, but they do make demands for reimbursement to correct errors. This usually happens in dual coverage situations, which means that the individual is covered under both the employer’s group plan and Medicare. Federal law then determines which plan must pay first. Generally, the employer’s plan pays first on claims by active employees (and spouses) if the employer’s total workforce size is 100 employees or more. On the other hand, Medicare is the primary payer if the employer has fewer than 20 employees or, regardless of the employer’s size, if the claim is for a retiree or retiree’s spouse. (Further rules apply to employers with 20 – 99 workers, and to special cases involving people with end-stage renal disease.)

To identify potential dual coverage situations, insurers and administrators report group plan enrollment information to the Centers for Medicare and Medicaid Services (CMS). Not all cases are identified in advance, though, and occasionally Medicare pays claims that should have been paid by the group plan. CMS then contacts the employer or insurer to collect information on specific claimants and find possible Medicare overpayments.

CMS usually is looking for information on persons for whom Medicare has already paid claims, which may have been several years ago. Receiving an inquiry now regarding claims paid three years ago is not unusual.

  

Why is 2018 the Year To Audit Your Healthcare Premiums? Because Obamacare Insurers Just Had Their Best Year Ever — Politico

This is from Paul Demco writing at Politico on March 17, 2018: 

Obamacare is no longer busting the bank for insurers. 

After three years of financial bloodletting under the law — and despite constant repeal threats and efforts by the Trump administration to dismantle it — many of the remaining insurers made money on individual health plans for the first time last year, according to a POLITICO analysis of financial filings for 29 regional Blue Cross Blue Shield plans, often the dominant player in their markets. 

The biggest reason for the improvement is simple: big premium spikes. The Blue plans increased premiums by more than 25 percent on average in 2017, meaning many insurers charged enough to cover their customers’ medical costs for the first time since the Affordable Care Act marketplaces launched in 2014 with robust coverage requirements. ... 

The POLITICO analysis found the Blue plans spent an average of 80 percent of premium revenues on medical costs last year. That’s below the 85 percent threshold that’s viewed as a rough benchmark for profitability, and it’s a 12 percentage point improvement over 2016. 

“They understand the risks of the market better now than they did at the start of the ACA exchanges,” said Deep Banerjee, an analyst with Standard & Poor’s who has written extensively about the marketplaces. 

The gains were particularly notable among some of the biggest insurers. Health Care Service Corporation spent 77.7 percent of premiums on medical claims, an improvement of 18.5 percentage points over the prior year. Similarly, Blue Cross Blue Shield of North Carolina saw its margin improve by just over 10 percentage points.... 

Here’s What Congress is Stuffing Into Its $1.3 Trillion Spending Bill

HR and Healthcare Related Issues from the Washington Post:

Immigration enforcement: The bill bumps up funding for both U.S. Customs and Border Protection and for U.S. Immigration and Customs Enforcement — delivering increases sought by the Trump administration. But there are significant restrictions on how that new money can be spent. Democrats pushed for, and won, limitations on hiring new ICE interior enforcement agents and on the number of undocumented immigrants the agency can detain. Under provisions written into the bill, ICE can have no more than 40,354 immigrants in detention by the time the fiscal year ends in September. But there is a catch: The Homeland Security secretary is granted discretion to transfer funds from other accounts “as necessary to ensure the detention of aliens prioritized for removal.”

... Health care: Left out of the bill was a health-care measure sought by GOP Sens. Susan Collins (Maine) and Lamar Alexander (Tenn.) that would have allowed states to establish high-risk pools to help cover costly insurance claims while restoring certain payments to insurers under the Affordable Care Act. Trump, who ended the “cost-sharing reduction” payments in the fall, supported the Collins-Alexander language. But Democrats opposed it because they claimed it included language expanding the existing prohibition on federal funding for abortions....

Opioids: The bill increases funding to tackle the opioid epidemic, a boost that lawmakers from both parties hailed as a win. The legislation allocates more than $4.65 billion across agencies to help states and local governments on efforts toward prevention, treatment and law enforcement initiatives. That represents a $3 billion increase over 2017 spending levels.​ ...

Restaurant tips: In December, the Labor Department proposed a rule that would allow employers such as restaurant owners to “pool” their employees’ tips and redistribute them as they saw fit — including, potentially, to themselves. That generated a bipartisan outcry, and the bill spells out explicitly in law that tip pooling is not permitted: “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.” ... 

Apprenticeships: Federal money for apprenticeship programs will increase by $50 million, and there’s a $75 million increase for career and technical education programs. The office of House Speaker Paul D. Ryan (R-Wis.) noted that other job training and “workforce development” programs also stand to benefit, including “more money for child care and early head start programs to help make it easier for job seekers to enter or return to the workforce.” This has been an area of concern for former “Apprentice” star Ivanka Trump....

  

California Passes New Law Making Contractors Jointly Liable for Their Subcontractors’ Failure to Pay Wages

Only California would expect an employer to pay someone else's employees.  This is from the law firm of Epstein Beker & Green:  

On October 14, 2017, California Governor Jerry Brown signed Assembly Bill 1701, which will make general contractors liable for their subcontractors’ employees’ unpaid wages if the subcontractor fails to pay wages due. The new law will go into effect on January 1, 2018.
Specifically, section 218.7 has been added to the Labor Code. Subdivision (a)(1) provides the following:

For contracts entered into on or after January 1, 2018, a direct contractor making or taking a contract in the state for the erection, construction, alteration, or repair of a building, structure, or other private work, shall assume, and is liable for, any debt owed to a wage claimant or third party on the wage claimant’s behalf, incurred by a subcontractor at any tier acting under, by, or for the direct contractor for the wage claimant’s performance of labor included in the subject of the contract between the direct contractor and the owner.

Under section 218.7, the direct contractor’s liability will extend only to any unpaid wage, fringe benefit or other benefit payments or contributions – including interest – but will not extend to penalties or liquidated damages.

Section 218.7 makes clear that nothing in it “shall be construed to impose liability on a direct contractor for anything other than unpaid wages and fringe or other benefit payments or contributions including interest owed.”

Notably, employees will not have standing to enforce section 218.7 on their own. That is, AB 1701 gives the California Labor Commissioner, labor-management cooperation committees, and unions the right to bring an action against the direct contractor, but it does not provide any private right of action to potentially unpaid employees themselves to bring a claim against the direct contractor for unpaid wages.

For labor-management cooperation committees and unions who prevail in an action against a direct contractor for unpaid wages, they will be entitled to their reasonable attorney’s fees and costs, including expert witness fees.

For judgments rendered against direct contractors, their property may be attached to satisfy judgment. ...
 

Five New Healthcare Bills in the California Legislature Could Greatly Impact Healthcare Costs, Choice and Coverage Levels

SB 910 — would remove an individual's ability to purchase short-term health insurance policies starting in 2019. The Department of Health and Human Services expressly allowed the sale on such plans last year. Recently, HHS further proposed a rule to expand short-term plans from less than 3 month terms to just under a year. CA SB 910’s supporters call these short-term plans “junk insurance” because they don’t have to cover each and every one of the so called 10 "essential benefits" required by PPACA. SB 910 would compel consumers to purchase plans covering areas of health that may not be needed for the purchaser.

SB 974 — would allow low-income adults who are in the U.S. unlawfully to sign up for Medi-Cal. Experts estimate that nearly 2 million of the 3 million uninsured Californians are in the country without legal documentation. State law already offers Medi-Cal to individuals under the age of 19 who are here illegally. This would expand taxpayer sponsored healthcare coverage to adults present unlawfully.

SB 538 — would prohibit agreements that the state viewed as "anti-competitive" between hospitals and insurers. SB 538 proponents believe the legislation would create more price competition among health care providers by adding more bureaucratic oversite at the state level.

AB 587 — This measure would expand the state’s bulk prescription drug purchasing program by allowing counties and local governments to join, potentially enabling them to purchase drugs at lower costs.

AB 595 — would give the state oversight of potential mergers between nationwide health insurance plans. The proposed law would mean that California could veto the marriage of insurance carriers within its boarders, ultimately leading to more carriers exiting California.

  

PPACA Premiums Could Rise 12-32% Next Year

From Insurance News Net:

... Consumer behavior itself, such as the mix of enrollees and their use of health services, is likely to increase premiums by 7 percent in each of the next three years.

Milliman, which conducted the analysis, said the cumulative effect is that premiums could rise by more than 90 percent through 2021.

Expected rate increases will vary wildly across the nation, analysts warned, but said states that promote their markets or take steps to regulate prices down would fare better than others.

Taxpayer-funded subsidies will blunt rising costs for most people on Obamacare's exchanges, but several million Americans will take it on the chin. ...

 

Yet Another Study: Wellness Programs Are Not Generating Medical Savings

From Modern Healthcare: 

The Affordable Care Act required the CMS conduct an independent evaluation of wellness programs that targeted various health conditions experienced by Medicare beneficiaries, and that study found no evidence of cost savings.

"Utilization and expenditures actually increased among (chronic-care management) program participants," the report said.

The findings are based on spending data for Medicare enrollees in fall prevention, weight loss and chronic care initiatives. The CMS followed beneficiaries one year after they joined a wellness program.

The results mirror those found in the corporate world, where companies are increasingly funding wellness programs meant to improve employees' health.

Corporate wellness spending hit $8 billion in 2016, up from $1 billion in 2011, according to researchers The Harris School of Public Policy at the University of Chicago.

Researchers have also found that these efforts have aided in employee retention, but not changes in employee behavior or cuts in healthcare spending. ...
 

Bill to Improve HSAs Would Permit Pre-Deductible Coverage of Preventive Care

From: Wolters Kluwer Legal & Regulatory: 

The Bipartisan HSA Improvement Act will make HSAs more useful and effective for employers, according to the American Benefits Council. The bill was introduced recently by Representatives Mike Kelly (R-PA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN) and Ron Kind (D-WI).

“Workplace-based health insurance covers more than 178 million people nationwide, compelling employers to be innovative in managing rising health care costs,” Council President James A. Klein said. “Not only will the Bipartisan HSA Improvement Act give employers more flexibility in HSA-based plan design, it will also allow HSAs to take full advantage of cost-saving innovations like chronic care management and onsite and near-site health centers.”

The bill includes provisions that would:

• Clarify that certain services and prescription drugs that prevent chronic disease progression are preventive care that will not be subject to a deductible;
• Allow employers to provide primary care, chronic disease prevention, and other high-value services at on-site and near-site medical clinics without imposing a deductible;
• Permit the use of HSA funds to pay for medical expenses for adult children up to age 26; and
• Permit HSA contributions if a spouse has a health FSA.

As Klein noted in a letter of support for the legislation, our employer-based health insurance system “is predicated on smart tax incentives and companies’ ability to design and offer plans that best suit the needs of a modern workforce. HSAs are the direct descendants of this sound public policy, allowing employees and their families to take greater control of their health care.”
​

Possible Employer Action Required - IRS Reduces HSA Limit for Family Coverage for 2018

The Tax Cuts and Jobs Act (“Tax Act”) enacted late last year has affected the 2018 calendar year maximum Health Savings Account (HSA) contribution for individuals with family coverage under a high deductible health plan (HDHP). On March 5, 2018, the Internal Revenue Service (IRS) released Revenue Procedure 2018-18 which announced that the maximum contribution for those with family coverage has been reduced from $6,900 to $6,850. This reduction was triggered by the Tax Act’s changes to the operation of the consumer price index for making annual adjustments to the HSA limits. The IRS’ other HSA and HDHP limits for 2018 remain the same.

This reduction is particularly important for any individual with family HDHP coverage who has already contributed $6,900 for 2018 and must receive a refund of the excess contribution in order to avoid an excise tax.

Action Steps:

• Employers with HDHPs should inform employees about the reduced HSA contribution limit for family HDHP coverage. Employees may need to change their HSA elections going forward to comply with the new limit. Also, any individuals with family HDHP coverage who have already contributed $6,900 for 2018 must receive a refund of the excess contribution in order to avoid an excise tax.

Our Legislative Alert contains additional information on this reduction in the maximum HSA contribution for those with family HDHP coverage.

Paying Employees to Shop Around For Better Healthcare Prices

From the Washington Post: 

Maine’s law, adopted last year, requires insurers that sell coverage to small businesses to offer financial incentives — such as gift cards, discounts on deductibles or direct payments — to encourage patients, starting in 2019, to shop around. 

A second and possibly more controversial provision also kicks in next year, requiring insurers, except HMOs, to allow patients to go out-of-network for care if they can find comparable services for less than the average price insurers pay in network. 

Similar provisions are included in a West Virginia bill now under debate. 

Touted by proponents as a way to promote health care choice, it nonetheless raises questions about how the out-of-network price would be calculated, what information would be publicly disclosed about how much insurers actually pay different hospitals, doctors or clinics for care and whether patients can find charges lower than in-network negotiated rates. 

“Mathematically, that just doesn’t work” because out-of-network charges are likely to be far higher than negotiated in-network rates, said Joe Letnaunchyn, president and CEO of the West Virginia Hospital Association. 

Not necessarily, counters the bill’s sponsor, Del. Eric Householder, who said he introduced the measure after speaking with the Foundation for Government Accountability. The Republican from the Martinsburg area said “the biggest thing lacking right now is health care choice because we’re limited to our in-network providers.” 

Shopping for health care faces other challenges. For one thing, much of medical care is not “shoppable,” meaning it falls in the category of emergency services. But things such as blood tests, imaging exams, cancer screening tests and some drugs that are administered in doctor’s offices are fair game.

Full story.