Million-dollar medical claims increase by 87 percent

This article was published on July 18, 2018 on Employee Benefit News, written by Cort Olsen. Photo Source: Employee Benefit News.

The number of million-dollar medical claims has nearly doubled, with cancer care remaining the most costly health condition, according to a new Sun Life Financial report.

Cancer made up $798.7 million in reimbursements to self-funded employers from 2014 to 2017, followed by metabolic disorder and hemophilia disorder, according to Sun Life’s 2018 High-Cost Claims Report.

The report, based on analysis of Sun Life’s database of over 62,000 medical stop-loss claimants, shows that high-cost conditions totaled $6.9 billion in paid charges over the four-year period.

The number of patients with million dollar claims rose 87%, to 194 in 2017 from 104 in 2014, with most charges ranging from $1 million to $1.5 million, and totaling over $935 million in charges.

cubing costs stats

The growth in million-dollar claims can be expected to expand further due to new life-saving treatment options coming to market, along with existing treatments getting approved for expanded use.

“This means better care and outcomes for patients,” says Dan Fishbein, president of Sun Life Financial, who notes that the trend is an important consideration for employers who self-fund their medical plans. “We partner with our clients to protect them from the financial risks of these high-dollar claims, but also to work with them to identify opportunities for cost savings that may improve patient care as well.”

Other analysis from the report showed that rare conditions hit highest dollars. The two highest claims for a patient in a single policy year were for metabolic disorder in 2016, with a total of $6.7 million in treatment costs, followed by hemophilia disorder with a total treatment cost of $5 million in 2017.

Million-dollar cases left a big footprint. Patients with claims of more than $1 million represented only 2% of the total number of stop-loss claims from 2014 to 2017, but roughly 20%, or nearly $600 million, of the total $3 billion in stop-loss reimbursement.

The impact of injectable drugs peaked in 2017 with four of the five costliest injectable drugs, used to treat cancer or related conditions, accounting for approximately $45 million, or 24% of the total $186.3 million spent that year.

Employers had an 85% chance of seeing a high-dollar claim in any given policy, according to the report. Those who self-insure their health plans use a stop-loss coverage to protect themselves from excessive financial losses from high-dollar claims.

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Reference-based pricing is gaining momentum

This article was published on July 17, 2018 on Employee Benefit News, written by John Kern. Photo Source: Employee Benefit News.

In my 25 years in the insurance business I’ve seen many changes. But there’s always been one constant: Healthcare and pharmacy costs continue to accelerate and no regulatory action has been able to slow this runaway train. The problem is that we have focused on the wrong end of the spectrum. We don’t have a healthcare issue; we have a billing issue.

At the root of this national crisis is a lack of cost transparency, which is driven by people who are motivated to keep benefit plan sponsors and healthcare consumers in the dark. Part of the problem is that most cost-reduction strategies are developed by independent players in the healthcare food chain. This siloed approach fails to address the entire ecosystem, and that’s why we continue to lament that nothing seems to be working.

But that could change with reference-based pricing, a method that’s slowly gaining momentum.

getting blood work

Here’s how it works.

Reference-based pricing attacks the problem from all angles and targets billing — which is at the heart of the crisis.

Typically, a preferred provider organization network achieves a 50-60% discount on billable charges. However, after this 50-60% discount, the cost of care is still double or triple what Medicare pays for the same service. For example, the same cholesterol blood test can range from $10 to $400 at the same lab. The same hospitalization for chest pain can range anywhere from $3,000 to $25,000.

Reference-based pricing allows employers to pay for medical services based on a percentage of CMS reimbursements (i.e. Medicare + 30%), rather than a percentage discount of billable charges. This model ensures that the above-mentioned hospitalization cost an employer $3,000 rather than $25,000.

“Negotiating” like Medicare

Reference-based pricing is becoming increasingly popular as more organizations consider the move to correct cost transparency issues as they transition from fully-insured to self-funded insurance plans.

One well-known and considerable example is Montana’s state employee health plan. The state employee health plan administrator received a notice from legislators in 2014 urging the state to gain control of healthcare costs. Instead of beginning with hospitals’ prices and negotiating down, they turned to reference-based pricing based on Medicare. Instead of negotiating with hospitals, Medicare sets prices for every procedure, which has allowed it to control costs. Typically, Medicare increases its payments to hospitals by just 1-3% each year.

The state of Montana set a reference price that was a generous 243% of Medicare — which allowed hospitals to provide high-quality healthcare and profit, while providing price transparency and consistency across hospitals. So far, hospitals have agreed to pay the reference price.

Of course, there is still the risk that a healthcare provider working with the state of Montana health plan, or any other health plan using reference-based pricing, could “balance bill” the member. But a fair payment and plenty of employee education about what to do if that happens could help you curb costs.

If balance billing does occur, many solutions include a law and auditing firm to resolve the dispute. In one recent example, a patient was balance billed almost $230,000 for a back procedure after her health plan had paid just under $75,000. An auditing firm found that the total charges should have been around $70,000, and a jury agreed. The hospital was awarded an additional $766.

Reference-based pricing is a forward-thinking way to manage costs while providing high-quality benefits to your employees. It’s one way to improve cost transparency, which may eventually transform the way that we buy healthcare.

Jury deems Centura Health $230K surgical bill ‘unreasonable,’ awards $766

This article was published on June 21, 2018 on BenefitsPro, written by Greg Land. Photo Source: BenefitsPro.

hospital-bill

A Colorado jury declared a hospital’s billing unreasonable, turning aside its lawsuit demanding almost $230,000 from a patient whose insurer already covered the cost of her surgery.

The patient had already paid her deductible and her insurer had paid the hospital about $75,000, which an audit deemed the “reasonable value of the goods and services” she had been provided, her lawyer said.

Lead attorney Ted Lavender of FisherBroyles’ Atlanta branch, who represented the former patient with office partner Kris Alderman and Denver partner Frank Porada, said testimony in the case revealed just how murky hospital billing can be and how some patients are targeted for whopping bills to make up for those who pay substantially less for the same services.

“The hospital experts explained how the rates get set, and it ultimately devolved into this idea that paying patients have to pay more to make up for nonpaying patients, the uninsured, those on Medicare and Medicaid, who don’t pay full price,” Lavender said.

In his client’s case, records showed that surgical spinal implants cost the hospital about $31,000.

“They turned around and charged $197,640 for those items on the hospital bill,” said Lavender. “That is a 624 percent markup.”

The hospital is represented by Traci Van Pelt, Michael McConnell and David Belsheim of Denver’s McConnell Fleischner Houghtaling.

Van Pelt said they will file posttrial motions and appeal the verdict.

The case involved back surgery performed on Lisa French in 2014 at St. Anthony North Health Campus, north of Denver. Hospital filings said French’s surgery was to relieve back pain and was “considered elective.”

French’s employer had a self-funded ERISA insurance plan, and she was told prior to surgery that she would owe $1,336, of which she immediately paid $1,000.

French’s contract included phrasing that she “understand[s] that I am financially responsible to the hospital or my physicians for charges not covered or paid pursuant to this authorization.”

St. Anthony’s billed her insurance plan $303,888 after the surgery and for two presurgical consultations based on its “chargemaster” billing schedule, an industrywide practice whereby providers list all the prices they charge.

As Lavender explained, French’s employer’s insurance plan contracts with a health care consulting firm, ELAP Services, which audits claim costs and negotiates with providers for self-funded insurers. On its website, ELAP says it “assists in plan design and jointly establishes limits for payment of medical claims that correlate to the providers’ actual cost of services.”

ELAP audited the fees St. Anthony’s charged French and determined that her actual charges came out to about $70,000, Lavender said. Between her co-pays and the insurance plan, St. Anthony’s was paid $74,597.

St. Anthony’s parent company, Centura Health Corp., sued French in state District Court in Adams County, Colorado, seeking an additional $229,112 in 2017.

ELAP provides legal representation to clients facing suit pursuant to its services, and Lavender, Alderman and FisherBroyles Denver partner Frank Porada were assigned French’s defense.

According to defense filings, Fishers contract with St. Anthony’s contained no stated price and was thus ambiguous.

The hospital was already paid the reasonable value for the services, according to a defense account. The chargemaster rates are “grossly excessive and defendant had no choice but to sign the Hospital Service Agreement, making them unconscionable” and thus unenforceable, the defense said.

During a six-day trial in Brighton, Colorado, before Judge Jaclyn Brown of Colorado’s 17th Judicial District, Lavender said the entire dispute was over the prices and methodologies medical providers use.

“We had one expert, and they had three,” said Lavender. “They spent $100,000 on experts.”

“The reality is that there’s nobody to say how much they’re charging is reasonable,” Lavender said.

The jury made that determination for French on June 11, answering “no” when asked whether her bills were reasonable. The panel agreed she had a contract with St. Anthony’s to pay “all charges of the hospital,” but that those charges were “the reasonable value of the goods and services provided,” not those set by the hospital’s chargemaster.

The jury awarded the hospital $766.74.

The hospital’s attorneys did a good job explaining how hospitals have to shoulder the burden for underpayments and nonpayment by other patients, Lavender said.

“They know they’re not going to collect from everybody,” he added. “But in the end, it just reveals how antiquated and nontransparent the system is, because nobody understands the bill.”

Association Health Plans Final Rules Released

On June 19, 2018, the U.S. Department of Labor released the final rule on Association Health Plans (AHPs). The rule seeks to expand health coverage among small employer groups and self-employed individuals. It will make it easier for small business to join together to purchase health insurance without the myriad of regulations individual states and the Affordable Care Act (ACA) imposes on smaller fully insured employers. AHPs are not required to provide the essential health benefits (EHBs) package included in the ACA. The plans have been intended to provide less expensive options for small businesses, regional collectives, and industry groups that may not be able to purchase insurance through the public exchanges.

The rule broadens the definition of an employer under the Employee Retirement Income Security Act of 1974 (ERISA), to allow more groups to form association health plans and bypass rules under the Affordable Care Act. ERISA is the federal law that governs health benefits and retirement plans offered by large employers. Below is a comparison of the original proposed rule and the final rule just released.

association-health-plan-chart
The final rules confirm that self-insured Association Health Plans are considered Multiple Employer Welfare Arrangements (MEWAs) and does not curtail a state’s ability to regulate self-insured AHPs. This means that self-insured AHPs will be subject to MEWA laws in each state where coverage is offered/where members are located. Self-insured AHPs will have to follow the MEWA rules of the state with the most restrictive rule on an issue by issue basis. The final rule did leave an opening for future self-insured AHPs with the following language on page 96 of the 198 page regulation: “a potential future mechanism for preempting State insurance laws that go too far in regulating self-insured AHPs…” But for now, there is not anything in the final regulation designed to help self-insured AHPs thrive.

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ACA Affordability Percentage for 2019

On May 21, 2018, the Internal Revenue Service (IRS) issued Revenue Procedure 2018-34 which indexes the contribution percentages for 2019 for purposes of determining affordability of an employer’s plan under the Affordable Care Act (ACA).  For plan years beginning in 2019, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.86 percent of the employee’s household income for the year for purposes of the employer shared responsibility rules. This is an increase from the 2018 affordability threshold percentage of 9.56%. The 2019 increase in the affordability percentage for employer shared responsibility purposes means that employers will be able to charge employees a slightly higher price for their health benefits and still  meet the “affordability” test.

Since an employer would not know an employee’s household income, IRS Notice 2015-87 confirmed that ALEs using an affordability safe harbor may rely on the adjusted affordability contribution percentages if they use one of three affordability safe harbor methods. The three safe harbors to measure affordability are Form W-2 wages from that employer, the employee’s rate of pay or the federal poverty line (FPL) for a single individual. The affordability test applies only to the portion of the annual premiums for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that also satisfies the minimum value requirement.

Below is an example of how the percentage change impacts an employer’s monthly affordable amount using the three safe harbor tests.  The example assumes an employee earns $10/hour.

Safe Harbor

$10 / hour

2018

2019

W-2 Income

$165.71

$170.91

Rate of Pay

$124.28

$128.18

Federal Poverty Line*

$96.72

$99.75

*Based on Jan. 2018 FPL of $12,140

Under the ACA, employees (and their family members) who are eligible for coverage under an affordable employer-sponsored plan are generally not eligible for the premium tax credit from the Exchange. This is significant because the ACA’s employer shared responsibility penalty for applicable large employers (ALEs) is triggered when a full-time employee receives a premium tax credit for coverage under an Exchange.

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2018 Massachusetts EMAC Payment Update

In August of 2017, Massachusetts passed H.3822 “An Act Further Regulating Employer Contributions to Health Care”. The purpose of the act is to reinforce the finances of the Commonwealth’s Medicaid and Children’ s Health Insurance (CHIP) programs (MassHealth). Since the implementation of the Affordable Care Act, many states have seen health coverage shift from private employers to the state’s Medicaid program. Primarily due to expanded Medicaid eligibility, many more employed individuals are taking subsidized care through the exchanges and Medicaid versus their employer’s plan. Currently Massachusetts covers 1 in every 4 residents on MassHealth.

To help ease some of this fiscal burden, effective January 1, 2018, the Commonwealth has instituted a temporary, two year, two tiered assessment on employers expected to collect $400 million over 2018 and 2019.

Employer Assessments:

    • Tier One – An increase in the Employer Medical Assistance Contribution (EMAC)* rate currently paid by employers, resulting in a maximum per employee annual contribution of $77 in 2018 and 2019 instead of the current $51;
    • Tier Two – A separate, targeted EMAC payment requiring employers to pay an additional 5% of wages on the first $15,000 in annual earnings ($750 maximum per employee) for each non-disabled employee who is enrolled in a state-subsidized health plan, MassHealth or ConnectorCare – regardless of whether the employer offers a group health plan or whether the employee is a full or part-time employee.

*EMAC is a MA payroll tax paid by employers. Its purpose is to help finance the cost of subsidized care for low income MA residents. The EMAC was effective 1/1/14 to replace the MA Fair Share Contribution when it was repealed in lieu of the ACA. EMAC applies to employers with 6 or more employees in a quarter. Contributions to EMAC are paid on the first $15,000 of each employee’s wages.

The program will be administered by the Department of Unemployment Assistance (DUA). The DUA will match quarterly wage reports with MassHealth and ConnectorCare records to determine which employers owe the assessment and how much. The amount owed will appear on the employer’s DUA statement in the section showing the employer’s Unemployment Insurance liability. Payment is due on or before the last day of the month succeeding the quarter in which wages were paid and reported. Employers can check to see if the state’s calculations match their own records online after the EMAC Supplement is calculated.

For more information/FAQs from the DUA, click here.

HIRD Form is Back
Employers will be required to annually submit a new version of the HIRD (health insurance responsibility disclosure) form, also beginning in 2018 to verify information that is currently self-reported by individuals who apply for public health insurance programs. The new Massachusetts healthcare coverage form is an annual report on the employer’s offer of health insurance to its employees, including information on eligibility, cost, benefit design and employee contributions. The final version of the form and regulations governing its completion will be available in early March for employers to use in their 2018 healthcare reporting. More guidance on the form and when/how to file will be forthcoming. Employers who knowingly falsify the form or fail to file it face a penalty of $1,000-$5,000, according to state law.

The human side of healthcare: When treatment is at risk because profit takes priority

health-benefits

This article was published on April 06, 2018 on CTViewPoints, written by Steve Kelly.

For the New Haven parents of one young boy who needed a tonsillectomy, the news was grim. Not because his diagnosis was risky or complicated, but because the family’s hospital rejected their health insurance and demanded $9,000 up front for the procedure. By the time their son would be eating ice chips and Jell-O post-surgery, a minimum of $10,000 more would be due.

This inflexible posture taken by a reputable Connecticut provider in the face of a healthcare consumer in need is disturbing. Fortunately for Americans, the U.S. provides access to much of the finest medical care in the world – skilled doctors and nurses and clinicians whose priority is patient care. Unfortunately, the broken part of our healthcare system is the way we pay, and it trickles down from the facilities to the employers to the employees to the families.

An independent study conducted by Castlight Health, a San Francisco-based healthcare price transparency company, shows pricing variations for common procedures that are sometimes five-fold within the same geographic area. Every single day hardworking people are hit with charges that are difficult to understand and challenging to justify.

Remarkably, after extensive time and effort in wrangling with the facility, the New Haven parents were able to have their child’s same physician perform the procedure at an affiliated local surgical center instead, for a prices of less than $2,000, or about one tenth of the cost.

The more than 150 million Americans who get their healthcare coverage from their employer are equally at risk for denial by a healthcare facility. Yet inexplicably absent from mainstream news coverage of healthcare reform are the challenges facing those employers – employers who struggle to provide adequate healthcare to their workers.

In many cases, health plan costs rise annually and far faster than a company’s earnings. This negatively impacts multiple areas of business and the very employees the plans are designed to protect. These rising costs lead to less hiring of new employees, less investment back into the business, less competitiveness in their market space, and a gradual erosion of their employees’ standard of living. Suddenly, the conversation shifts to rising healthcare costs being not simply an economic issue but arguably a quality-of-life issue for the workforce, rather than an insurance regulation discussion.

For many of these employers, options are few. Each year, the open enrollment period serves up more of the same – ineffective traditional PPO models that are constructed on vague cost details with misleading discounts based on inflated prices, all underscored by a pervading lack of control.

Trading a PPO for an approach known as reference-based pricing is both a viable alternative and a business-saving strategy that’s gaining significant traction. Referenced-based pricing restores information and control to employers and their workforce because the coverage plan defines pricing limits upon which claims will be paid. It’s been around for over a decade, and has been adopted by thousands of employers for its cost-saving benefits and transparent view into healthcare expenses.

An approach like referenced-based pricing builds bridges between employers and hospitals while making healthcare a community-centric solution that supports open dialogue between patients and providers. These direct relationships are the remedy to America’s ineffective insurance process that has failed to contain costs or improve quality. Instead of health benefits being provided through insurance company intermediaries, addressing healthcare costs needs to be between the medical providers and the employers in the communities they serve.

Collaboration and direct partnerships between employers and their community medical facilities is a proven approach for resolving the issue of high healthcare costs. It’s past time for businesses and the medical community to innovate and provide a viable alternative for affordable healthcare that employers, and their 150 million employees, can count on here in Connecticut and nationwide.

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