Hospitals charge employers 240% more than Medicare

Researchers hope the study will give private payors a better grasp of what health care costs are, and allow them to compare prices within a state and across states. (Photo: Shutterstock)

This article was published on May 13, 2019 on BenefitsPro written by Scott Wooldridge.

Prices range from 150 percent of Medicare prices at the low end to 400 percent at the high end.

A new study by RAND and the Employers’ Forum of Indiana (EFI) finds that hospital prices are much higher for employer-based health plans than for Medicare.

The study gathered data from hospitals in 25 states, finding a wide variation in what hospitals charged health plans. The researchers looked at claims data for more than 4 million people, with information coming from self-insured employers, state databases and records from participating health insurance plans.

Depending on the state, prices rose and fell in the period between 2015 and 2017, the data showed, but on average, private insurers were charged 240 percent more than Medicare. Prices also varied widely among hospital systems, ranging from 150 percent of Medicare prices at the low end to 400 percent of Medicare prices at the high end. The cost of outpatient care from hospitals was higher than the average inpatient costs, averaging 293 percent of what Medicare would pay.

“The widely varying prices among hospitals suggests that employers have opportunities to redesign their health plans to better align hospital prices with the value of care provided,” said Chapin White, the study’s lead author and an adjunct senior policy researcher at RAND, a nonprofit research organization. “Employers can exert pressure on their health plans and hospitals to shift from current pricing system to one that is based on a multiple of Medicare or another similar benchmark.”

The American Hospital Association has put out a statement taking issue with the report, in part because of its sample size–utilizing data from 1,598 hospitals in 25 states. In addition, wrote AHA in a statement, “Medicare payment rates, which reimburse below the cost of care, should not be held as a standard benchmark for hospital prices. Simply shifting to prices based on artificially low Medicare payment rates would strip vital resources from already strapped communities, seriously impeding access to care.”

Different payors, different rules

EFI officials noted that private health insurance contracting for hospitals is done on a discounted-charge basis, negotiated between insurance carriers and hospitals. Medicare, on the other hand, issues a fee schedule that determines the price it will pay for each service, with adjustments for inflation, hospital location, the severity of a patient’s illness, and other factors.

According to Gloria Sachdev, president and CEO of EFI, the new study will give private payors—such as employer-based plans—a better grasp of what health care costs are, and allow them to compare prices within a state and across states.

“The purpose of this hospital price transparency study is to enable employers to be better shoppers of health care on behalf of their employees,” Sachdev said. “We all want to know which hospitals provide the best value (best quality at best cost). Numerous studies have found that rising health care costs are due to high prices, not because we are using more health care services.”

RAND recommendations

The research group issued a list of recommendations with the study. Some of the recommendations are in line with the recent movement toward direct contracting, as employers seek to negotiate directly with high-quality, lower-cost facilities.

The study’s recommendations included:

  • Employers can exert pressure on their health plans and hospitals to shift from discounted charge contracts to contracts based on a multiple of Medicare or some other prospective case rates.
  • Employers can use networks and benefit designs to move patient volume away from high-priced, low-value hospitals and hospital systems.
  • Employers can encourage expanded price transparency by participating in existing state-based all-payer claims databases and promoting development of new ones.

Transparency by itself is likely insufficient to reduce hospital prices; employers may need state or federal policy interventions to rebalance negotiating leverage between hospitals and employer health plans.

How Will You Celebrate National Employee Health & Fitness Day?

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Wednesday, May 15th is National Employee Health & Fitness Day and it’s a great opportunity to remind your employees about the importance and benefits of regular exercise!

Exercise has been linked to numerous benefits, such as reducing your risk for chronic health issues like heart disease, diabetes, depression and several types of cancer.

And yet millions of Americans fall short of meeting their daily recommended guidelines; despite the fact that it can be a significant factor with impacting medical expenses. In fact, a 2016 study published by “The Lancet” determined that individuals who participated in a 30-minute walk at least 5 days a week on average spent $2,500 less in annual medical-related expenses than those who didn’t.

So, what can be done? Use this opportunity to kick-start some new wellness initiatives. Start by expressing that this is being implemented because you care about your employees and make it an opportunity to celebrate good health. Instead of providing a pizza party, maybe mix it up with food from a place that offers sandwiches on whole wheat bread or wraps with lean protein options (such as chicken, turkey or even vegetarian options), salads and even fruit in place of cookies. Or you could organize a company-wide walk. As we mentioned before, a 30-minute walk can go a long way and by making time for it, you’re showing employees that it is a priority. Even starting small, with leading a 2-minute midday stretching break can be a small change that eventually leads to a big impact.

The bottom line? Consistent exercise and other healthy habits can save companies millions of dollars in healthcare expenditures. Yet it seems to be one of the hardest habits to make. And since people often spend 40+ hours of their week at work, it’s a great place to also encourage more regular participation. In can be a win-win benefit for both the individual and the company.

Share your plans to celebrate! Send Corporate Fitness & Health your National Employee Health & Fitness Day plans and they will send you a shout out on their social media pages! Email your stories and pictures to kcalverase@cfandh.com.

The Diversified Group family of companies includes Corporate Fitness & Health. If you’re looking for a workplace wellness program that you’ll be excited to invest in, one that can help you reduce healthcare costs and help employees avoid elevated health risks, then it’s time you learned about CF&H. With over 30 years of experience, CF&H can help your organization implement a wellness program that will keep your employees happy, healthy and engaged.

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More Value-Based Payments

According to a public-private partnership launched by HHS, the percentage of U.S. healthcare payments tied to value-based care rose to 34% in 2017, a 23% increase since 2015. Fee-for-service Medicare data and data from 61 health plans and 3 fee-for-service Medicaid states with spending tied to shared savings, shared risk, population-based payments and bundled payments were examined in the analysis.

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Updated Draft Regulations for MA Paid Family and Medical Leave

Compliance

The newly created Massachusetts Department of Family and Medical Leave released updated draft regulations on March 29th for the new Paid Family and Medical Leave law. The Department will hold several listening sessions in May throughout the state before issuing final regulations sometime before July, 2019. Below is an outline of the draft regulations with pertinent information for employers concerning their obligations under the law.

Provision Description
Key Dates
  •  July 1, 2019, final regulations due and quarterly reporting instructions due;
  •  July 1, 2019, employers must begin employee payroll deductions;
  •  July 1, 2019, new hire notice distribution begins;
  •  July 1, 2019, informational posters must be displayed on or before this date;
  • October 31, 2019, contributions (employer and employee) for July through September due;
  •  January 1, 2021, most leave available;
  •  July 1, 2021, all leave available;
  •  January 1, 2023, Retaliation against an employee for exercising rights under the PFML will be prohibited.
Governing Agency The Department of Family and Medical Leave (DFML) within the Executive Office of Labor and Workforce Development.
Benefit Administrator The Department of Family and Medical Leave (DFML) within the Executive Office of Labor and Workforce Development.  Except for employee notification, quarterly reporting, collecting and remitting contributions, employers are not involved in the benefit determination or payment of benefits.  However, note that the DFML may contact the employer for information on an employee that applies for benefits.  When this happens, employers will have 5 business days to respond to DFML.
Covered Employers All employers (one or more employees) who are required to contribute to the Massachusetts Unemployment Insurance program (UI) must submit contributions on behalf of their employees to cover the portion of PFML contribution due from employees, as well as make their required employer contribution to the medical leave portion.  Employers with fewer than 25 employees must submit contributions on behalf of their employees, however they are not required to pay the employer portion of the contributions for medical leave. Cities and towns are exempt but can opt in to the program; employers not covered by UI can also opt in to the program.
Eligible Employees All employees who meet the monetary eligibility requirements of the state’s UI program (i.e. the employee must have earned 30 times the weekly unemployment benefit that the employee would be eligible to receive and must have earned at least $4,700 during the last four calendar quarters). No minimum hour requirement.

Additionally employees whose employer they contract with issues 1099-MISC to more than 50% of its workforce are covered employees.

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How Much Are “Ineligibles” Costing Your Health Plan?

Employees

If your plan isn’t managing eligibility at enrollment, you’re probably throwing money away!

Managing eligibility in a self-funded environment can place a big burden on HR Directors, not only at enrollment, but throughout the year. Employee benefit elections, dependents and beneficiaries must be monitored consistently and then there are new hires and terminations to deal with.

Not all TPAs are alike when it comes to managing enrollment and eligibility. While some accept existing data in an effort to save time, Diversified Group goes to extremes when onboarding a new self-funded group or helping an existing client with open enrollment. Some HR Directors find our detailed approach annoying but thank us later when their plans avoid the huge costs associated with an eligibility audit. Click on the following link to read about a local example.

http://www.courant.com/community/hartford/hc-news-hartford-internal-audit-commission-report-20190116-vdbxtfiganahnat3sa7szn3l2u-story.html

Diversified Group uses BenefitReady® technology to help employers and members facilitate many enrollment and eligibility functions. To ensure that benefits are available only to those employees and dependents who are eligible, we back this technology with knowledge and expertise.

Managing enrollment and eligibility may sound like a little thing. But little things add up, especially when they lead to costly claims your health plan should have avoided. Get the help you need to take control. Talk to Diversified Group today.

Tell Us How You Feel!

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Get Set to Run & Join Us in Supporting Camphill Village on May 18th

runners

Diversified is proud to sponsor the Camphill Village 5K Trail & Fun Run coming up on Saturday, May 18th! If you’d like to participate, there are three running options that allow people of all abilities to join from virtually anywhere!

  • Sign up to run from home or anywhere; just be sure to take to Facebook and Instagram to share photos and your reason for participating leading up to and during the run. Use the hashtag #Camphill5K and your posts will be featured on their website and social media. If you send your address, they will also send you a gift from their event to show their thanks.
  • Sponsor a runner or sign up to personally run the 5K Trail Run through the Camphill Village scenic woods and pathways.
  • Sponsor a participant or sign up to leisurely walk, jog or stroll around Ring Road at the Village in the Fun Run. (Kids 12 & under run the Fun Run for free!)

With these options, it’s easy to support this wonderful cause. Through sponsorships, donations and registrations, this 5K and Fun Run will help to provide the programs and services that make Camphill Village the very special place it is for adults with special needs.

Diversified Group is proud to support this event that attracts virtual runners from all over the country and has raised more than $40,000 to benefit the lives of people who call Camphill Village their home.

To register, click below to visit the website and go to Runner Sign Up.

More About Camphill Village

Camphill Village in upstate New York is 615 acres of wooded hills, gardens and pastures. Adults with special needs and long- and short-term service volunteers live and work together as equals in extended family homes throughout the area. We are a non-profit organization dedicated to our mission of being an integrated community where people with developmental differences are living a life of dignity, equality and purpose. Through sponsorships, donations and registrations, this 5K and Fun Run will help to provide the programs and services that make Camphill Village the very special place it is for adults with special needs.

DOL’s Recent Clarification Surrounding FMLA

Page with FMLA (Family Medical Leave Act) on the table with stethoscope, medical concept

The Department of Labor (DOL) on occasion will issue opinion letters to clarify employer’s obligations under various federal employment laws. These DOL opinion letters help employers to understand their obligations and can be relied upon to establish a “good faith” defense against certain federal claims.

On March 14, 2019, the DOL issued an opinion letter regarding FMLA leave and its coordination with other employer leave provisions. The DOL clarified that if an employee’s leave taken for medical reasons is deemed FMLA qualified, the employer must then designate the leave as FMLA leave within five business days and may not delay such designation even to accommodate or benefit its employee. In other words, if an employee requests to take paid PTO leave and delay the designation of qualified FMLA leave until after the paid PTO is exhausted, per this opinion letter, once an eligible employee communicates a need to take leave for a qualified FMLA reason, neither the employer nor the employee may decline FMLA protection for that leave. Thus, when an employer deems that leave is for a qualified FMLA reason, the leave counts toward the employee’s FMLA leave entitlement.

The employer may instead allow the employee to “stack” the FMLA leave and paid leave by allowing the employee to take the FMLA leave unpaid and to use any available paid leave upon exhaustion of the FMLA entitlement. Alternatively, the employer may require employees to utilize available paid leave concurrently with FMLA leave, thus paid leave counts toward the FMLA leave entitlement, and vice versa.

Employers should review applicable state leave laws that may offer additional or different benefits that may cause the DOL opinion letter to contradict existing precedent. For example, this opinion letter contradicts the 2014 Ninth Circuit Court’s case Escriba v Foster Poultry Farms, Inc. which found that an employee could affirmatively decline to exercise their FMLA rights, even when they clearly would have qualified, in order to preserve the FMLA rights for future use. Those employers in the Ninth Circuit jurisdiction (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) may want to consult their legal counsel prior to relying on this opinion letter.

It is intended for Diversified Group’s medical plan document language to correspond with an employer’s human resource practices. Our documents typically include language that FMLA will run concurrently with other leaves in compliance with the DOL’s intent. To ensure that your medical plan document and your HR practices are coordinated, we offer a gap analysis which looks at gaps between your plan document and your employee handbook with an eye to ensuring compliance with your plan document and your stop loss carrier’s requirements. Gap analysis is done at no cost to you. If you are interested in having a gap analysis completed, please contact either Dave Follansbee or Laura Williams at the contact information below.

Dave Follansbee – dfollansbee@diversifiedgb.com / 860-295-6531
Laura Williams – lwilliams@diversifiedgb.com / 860-612-8644

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