Isn’t Everyone Entitled to Know the Cost of Care?

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The President’s Executive Order Demands Healthcare Cost Transparency

We have long chronicled the huge price swings that often exist among healthcare providers in the same locales. To combat this situation and help patients find low cost, high-quality care, the President recently signed an executive order directing HHS to develop rules requiring hospitals to publish clear and understandable pricing that reflects what people will actually pay for tests, surgeries and other procedures. HHS also wants the rules to ensure that providers and insurers give patients information about their potential out-of-pocket costs before receiving care.

While lobbyists argue that this requirement will only drive prices higher, the administration sees enabling patients to know how much hospitals charge as a relatively simple idea – one that will promote greater competition for health services and reduce costs for consumers.

When the Administration required hospitals to post prices online earlier this year, the step had little impact. Data included billing codes that few people could decipher and list prices which few people ever pay. While the rules for this order must be developed, it is intended to require that hospitals disclose what patients and insurers actually pay in a format that patients can understand.

We’re certain that the rules will not be written overnight and not without loads of input. But if an executive order can lead to an environment where patients can understand what costs lie ahead and how to find more affordable, high-quality options, then let’s give it a shot.

Tell Us How You Feel!

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Connecticut Paid Family and Medical Leave Law

On June 25, 2019, Governor Ned Lamont signed into law Connecticut’s Paid Family and Medical Leave law. Below are some highlights from the new law:

Connecticut Paid Family and Medical Leave Law
Key Dates June 25, 2019 – CT Governor signs legislation into law;
January 1, 2021 – Employee payroll tax begins;
January 1, 2022 – Benefits become available and final regulations are due;
July 1, 2022 – Annual notice of benefits to all new employees required.
Governing Body New state agency, the Paid Family Leave Insurance Authority.
Covered Employers Employers with at least one employee working in the state. The law exempts municipalities, local or regional boards of education, and nonpublic elementary and secondary schools. Municipal union employees can bargain to be covered under the state program. If the union bargains and is granted inclusion, non-union employees for that municipality will automatically be included.
Eligible Employees An employee who has earned at least $2,325 in a base period (ex:  first four of the five most recently completed calendar quarters) and have been employed at least 3 months preceding the leave request. Available to full-time, part-time and former employees (if they apply within 12 weeks of losing their job).
Leaves Covered Family leave to bond with a newborn or adopted child. Medical leave to care for a family member with a serious illness (family member’s include spouse, child, parent, parent-in-law, stepparent, others who are equivalent to a family member, grandchild, grandparent or sibling).  Medical leave is also available for the employee’s own serious illness. Paid leave is also available to serve as an organ or bone marrow donor.

Intermittent leave will also be allowed except in the case of bonding with a newborn or adoption.

Length of Leave Up to 12 weeks of paid family and medical leave during a 12 month period, with another two weeks available for a serious health condition related to pregnancy.
Benefit Amount 95% of base weekly earnings up to 60 times the minimum wage rate (maximum weekly amount will be approximately $780 per week in 2022 up to $900 per week in 2023).
Payroll Contribution Beginning January 1, 2021, a new payroll tax up to .5 percent of the employee’s wages will be deducted to fund the program. Wages are capped at the Social Security wage base ($132,900 in 2019).
Concurrent Benefits If an employee is receiving worker’s compensation, unemployment compensation and another other state or federal wage replacement, they will not be eligible for benefits under the CT Paid Family and Medical Leave.
Private Employer Plans Connecticut employers can opt out of the state program if they have an employer sponsored private plan that provides the same or more generous benefit. Private plans must be approved by a majority of covered employees.

The above is a brief overview of the law as it stands today and is subject to change. Final regulations are due by January 1, 2022 which is the same date that benefits are first payable. The regulations should clarify issues surrounding implementation, coordination with CT’s unpaid FMLA leave and provide sample model notices. Diversified Group will keep you informed of any developments.

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Flying to Centers of Excellence

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CNBC recently featured a story about Walmart and their history of not only suggesting that employees visit Centers of Excellence for surgeries and second opinions but flying them all expenses paid. The case study revealed that between 2015 and 2018, more than half of their employees suffering from spine pain were able to avoid surgery by seeking treatment at Mayo Clinic.

Shorter hospital stays, lower readmission rates, fewer episodes of postsurgical care and a faster return to work were other benefits gained when results were compared to patients who chose other hospitals for treatment. Walmart reported that even though they spent more per surgery at Mayo Clinic than what other hospitals were charging, they saved money because of better outcomes and surgeries that were avoided.

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Expanding HRA Options Effective 2020

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On June 13, 2019, The Departments of Health and Human Services, Labor, and Treasury issued the final rule expanding health reimbursement accounts (HRAs) which allows employers greater flexibility in the breadth and scope of HRAs available for their employees.

Background:

Since 2013, regulations have prohibited employers from paying for an employee’s individual health insurance policy and required that HRAs offered to employees be integrated with a group health plan. In 2016, Qualified Small Employer HRAs (QSEHRA) were developed to allow small employers (under 50 lives) to offer an HRA with IRS defined annual limits (in 2019 $5,150/individual and $10,450/family) to be used to pay for individual health premiums of minimum essential coverage when the employer does not offer a group health plan. In October of 2017, President Trump issued an Executive Order that in part directed the agencies to end rules that prohibited employers from paying for individual health insurance premiums through an HRA.

Two New HRA Options arising out of the Executive Order effective January 1, 2020 are:

  1. Individual Coverage HRA
  2. Excepted Benefit HRA

Individual Coverage HRA:

This HRA would allow employers to provide tax-free funding to an employee’s HRA account that could be used to purchase individual health insurance policies. This differs from the QSEHRA in that there is no requirement around the size of the employer.

  • Employers cannot offer both a traditional group health plan and an Individual Coverage HRA to similarly situated employees. However, they can choose a group of employees to offer either the group health plan or the HRA based on a specific class:
        • Full-Time Employees*
        • Part-Time Employees*
        • Seasonal Employees
        • Employees covered by a collective bargaining agreement
        • Employees who have not satisfied a waiting period for coverage
        • Non-Resident aliens with no US-based income
        • Employees whose primary site of employment is in the same rating area*
        • Salaried Employees*
        • Non-Salaried Employees*
        • Temporary Employees of staffing firms
        • Combination of 2 or more of the above*
          *Minimum class size requirements will apply depending upon the classes defined (those with asterisk), whether some classes have a group health plan offered, and the size of the employer. (For example, the minimum class size is 10 for employers with 100 or less employees and 20 employees for an employer with 200 or more employees. The minimum class size for mid-sized employers (between 100 to 200) is 10 percent of the total number of employees.)
  • The HRA must be offered on the same terms and conditions to all similarly situated employees. Dollar amounts, however, can vary based on age and number of dependents;
  • Employees must have the ability to opt out of the HRA and waive future HRA reimbursements at least annually;
  • HRA sponsors must be able to vary their HRA terms to account for different effective dates for individual coverage which can vary based on enrollment;
  • If an employee stops being enrolled in an individual policy, they forfeit the HRA prospectively;
  • Loss of the HRA for reasons other than failing to maintain individual coverage may qualify the HRA for COBRA;
  • Individuals covered by the HRA must attest to being enrolled in an individual policy providing minimum essential coverage. Employers can rely on their employees attestation statement as accurate. No further verification is required;
  • Individual coverage can be purchased on or off the exchange. It also includes student health coverage;
  • Employers can specify reimbursements – premiums only, non-premium cost shares, or particular medical expenses per existing HRA rules. An Individual Coverage HRA that reimburses solely for premiums would not disqualify contributions to an HSA if the individual otherwise meets the requirements (enrollment in a HDHP);
  • Under some circumstances, an Individual Coverage HRA may reimburse for Medicare premiums;
  • Employers must provide a notice to participants which outlines the terms and conditions of the HRA at least 90 days before the start of the plan year;
  • Individual Coverage HRAs are not considered ERISA plans;
  • Individual Coverage HRAs are considered an offer of minimum essential coverage for 4980H(a) employer shared responsibility provision. If the Individual Coverage HRA is also deemed affordable, the offer would also satisfy the 4980H(b) employer shared responsibility provision;
  • Employees being offered an affordable Individual Coverage HRA will not be eligible for a premium tax credit from the exchange (also must be stated clearly in the employee notice);
  • Affordability means that health insurance for the employee should cost no more than 9.86% (indexed annually) of the employee’s household income, using the lowest cost silver plan for self only coverage on the local exchange and incorporating the employer’s contributions. Because this would be a logistical impossibility for most employers, the final notice includes 3 safe harbors to determine affordability:
        • Location: This safe harbor allows employers to use the lowest cost silver plan where the employer’s primary site of employment is located as the standard for affordability calculations;
        • Calendar Year: Employers who implement an individual coverage HRA for the following calendar year could use the existing year’s estimates as a baseline for affordability;
        •  Affordability: Since it is unlikely that employers know their employee’s household income, they can use the already established affordability safe harbors of W-2, rate of pay or federal poverty line.

Excepted Benefits HRA:

Currently, only HRAs classified as an excepted benefit HRA (reimburses only limited expenses, such as vision or dental) can be stand-alone/not integrated with the medical plan. The new Excepted Benefit HRA would allow a stand-alone HRA to also reimburse cost sharing expenses and still qualify as an excepted benefit if it meets certain requirements:

  • The maximum benefit cannot exceed $1,800 for the plan year (indexed annually);
  • Must be offered alongside a traditional group health plan although employees do not have to be enrolled in the traditional plan;
  • The HRA must be available on the same terms for all similarly situated individuals regardless of health factor. Similarly situated means job classification, such as full-time, part-time, different geographic locations, union, non-union, and different occupations or even dates of hire or length of service ;
  • Reimburses cost sharing expenses as well as premiums for excepted benefits (such as vision, dental, std), short-term medical plans, and COBRA premiums (individual or group premiums, Medicare premiums are not eligible);
  • No employer size requirement;
  • Can permit rollover of unused amounts;
  • Subject to Section 105(h) nondiscrimination rules.

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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.

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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Proposals on Many Wish Lists

self-fundingNow that the makeup of the new Congress has been decided, many employers are hoping Washington can work together to address a few of their important concerns. High on many lists, especially those belonging to large employers, would be doing away with the Cadillac Tax on high-cost health plans once and for all. While implementation has been delayed until the 2022 tax year, the law will require insurers and large employers to pay a 40% excise tax on the costs that exceed $11,100 for employee-only coverage and $29,750 for family coverage.

Other items that employers have been talking about for a long time include making HSAs considerably more user friendly and easing ACA reporting requirements to allow employee statements to be provided electronically rather than by mail.

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