Should Medicare Eligibility Be Expanded?

It’s a Hot Topic and One We’ll Hear More About in the Months Ahead

Whether it’s Medicare at 50, a Buy-In Option or Medicare for All, there is little doubt that the debate on expanding Medicare will be a centerpiece issue as the 2020 primary season intensifies. Prior to the Democratic debates, some of these proposals were receiving strong support among Democrats and even a few Republicans. As the conversation has continued and some of the issues have been analyzed, support has weakened – primarily due to costs.

While Senator Bernie Sanders estimates the cost of his plan at $1.38 trillion per year, other studies have published numbers in excess of $30 trillion over 10 years. Expectations of provider reimbursement rates far below what private plans currently pay have experts cautioning that hospitals will close their doors and drug companies will lose much of their funding for research and development.

Employers Provide Better Benefits
After helping employers provide high quality health benefits for more than 5 decades, we are confident that workers enjoy far better medical care and customer service than they will experience in a Medicare for All or other Government sponsored system. Add concerns over longer wait times and the government’s ability to potentially reject certain treatments and Americans could face a system similar to those that currently encourage people from other countries to seek quality medical treatment in the U.S. We’re equipped to help our clients control future healthcare costs and retain the flexibility their plans provide. To learn more, give us a call at your convenience.

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Getting Creative Can Attract Talent

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With unemployment for college-educated people age 25 and above at just 2.2%, it’s been a long time since we’ve seen a jobs market this tight. To attract and retain workers in this environment, growing companies are offering more than just competitive health benefits, and this is especially true for smaller companies forced to compete with larger companies.

Executive search firms have shared examples of employers going above and beyond their health plan by offering additional compensation to cover a candidate’s projected out-of-pocket medical expenses going forward. Technology-related firms in competitive markets are adding wellness benefits like on-site clinics or pre-arranged access to nearby fitness centers. For early to mid-career employees, companies are expanding their family leave or flex-time policies to provide easier transitions for young parents returning to work.

Flexibility and More

Whether it be more paid time off or arranging your work day to meet outside demands on your time, flexibility is becoming increasingly important, especially when you’re dealing with millennials or X-ers. Equally important to young workers is the culture present at an organization and the opportunity to make a difference – to know that what they are doing is helping their community or the world at large.

From unique apprenticeship programs at manufacturing and industrial companies to help with retiring outstanding student debt, more employers are looking for creative ways to gain an edge that will appeal to qualified, prospective employees. In a really tight job market, it pays to be creative.

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There’s More to Know About AHPs

bundled-costsMany employers will find it interesting that AHPs will continue to be categorized as MEWAs – Multiple Employer Welfare Arrangements. This consideration will make association health plans subject to some state regulations that severely restrict the formation of self-funded MEWAs.

Having to comply with the rules of each state will make AHPs more difficult to organize. While associations can create a plan that extends across state lines, they will have to follow the rules of the state they are in that has the most restrictive laws. As an example, an AHP based in New Jersey that extends into New York would still have to follow the more restrictive laws of New York.

Even though the regulations are more restrictive than many would like, AHPs should enable many small employers to offer their employees better health benefits at more affordable rates.

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How a Broken Healthcare System Impacts People’s Lives

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As a Third Party Administrator, employers and plan members count on us to make their health benefits work. While that sounds easy enough, it can be anything but easy when ordinary working families are forced to face exorbitant hospital bills.

One couple recently found themselves confronted with a very difficult situation when their son needed a medical procedure that would be considered routine in ordinary circumstances. However, what happened was anything but ordinary. The hospital rejected the couple’s insurance, saying that because they had gone out of network, they would be required to pay $9,000 up front for their child’s tonsillectomy and another $10,000 or more immediately following the procedure.

Their health plan, which we manage for their employer, has been partially self-funded for several years. In addition, the employer recently replaced their PPO network with reference based (or cost plus) pricing, a strategy that enables the plan to define pricing limits and ensure a much more transparent view of healthcare expenses.

In this particular case, we worked with the parents, their regular pediatrician and ELAP Services to arrange for the procedure to be performed at a local, affiliated surgical center – at a fraction of the price quoted by the original hospital. Their total cost was less than $2,000, approximately one tenth of the cost the original provider intended to charge. It took a great deal of work and cooperation to achieve this outcome, but the case serves as an excellent example of what can be done when a health plan has been designed to encourage open dialogue between patients, trusted advisors and providers.

More and more, hardworking Americans are facing extraordinary healthcare costs and struggling to pay their bills. NerdWallet Health conducted a study and found that a debt collection agency will contact 1 in 5 American adults regarding medical debt. This means there are approximately 51 million people who are unprepared and unable to deal with the rising cost of healthcare.

Another aspect of healthcare that is seldom discussed is the challenge facing small and mid-sized employers struggling to provide adequate healthcare to their workers. Rising costs have made it nearly impossible for many companies to hire new employees or invest in their businesses in other ways. Sadly, millions of Americans have seen their standard of living eroded by the cost shifting that has occurred.

As these parents and their employer have discovered, alternatives like reference based pricing are helping to build bridges between employers and hospitals. “While a good deal of experience is required to design these plans and manage them over time, the opportunity for cost savings is so significant that more and more employers are moving in this direction,” said Brooks Goodison, President of Diversified Group. One of New England’s most experienced Third Party Administrators, Diversified Group has responded to the growing demand. “With or without reference based pricing, Diversified has long been committed to pursuing mutually rewarding partnerships between employers and community-based health care facilities,” added Goodison. “Open communication, cooperation and innovation by businesses and healthcare providers are musts if the issue of runaway healthcare costs is ever going to be resolved.”

As cases like this have long shown, the price for a given healthcare procedure in the same locale can vary greatly, often with little difference in quality. When employers use reference based or cost plus pricing, the plan and area hospitals typically agree on a pricing schedule for covered benefits by using Medicare plus a predetermined margin. Visit Diversified Group online to learn more about reference based pricing and view a brief educational video by ELAP Services, Inc.

Employees Need More Health Benefits Education

The article below was published on October 9, 2017 by Plansponsor, written by Rebecca Moore.

The youngest employees especially feel unprepared to decide what plan they should choose, according to a survey from Aflac.

dg-questionsBenefits enrollment findings from the 2017 Aflac WorkForces Report, a national online survey of 5,000 U.S. workers, found that 67% said they are confident they understood everything they signed up for.

However, these results may indicate an underlying false sense of confidence. The survey, conducted between January 26 and February 17 by Lightspeed GMI and released by Aflac, also uncovered that 76% of workers make health benefits decisions without a complete knowledge of their health plan. When asked specifically about understanding its policies, such as concerning deductibles, co-pays and providers in their network, only 24% of these workers could respond that they understood everything. This result has been steadily declining since 2015, when nearly half (47%) believed they knew everything; in 2016,  39% believed they did.

“It’s counterintuitive to see that workers are reporting a positive benefits enrollment experience, but so many are still struggling with a good understanding of the various aspects of their health care coverage,” says Matthew Owenby, senior vice president, chief human resources (HR) officer at Aflac. “Benefits enrollment is one of the most important decisions a worker can make each year. Ensuring workers are more educated will require a sustained effort by employers and employees alike to better understand all aspects of benefits, including coverage options and costs.”

Aflac conducted a separate survey among 1,000 20- to 26-year-olds, employed either full or part time. The Aflac WorkForces Report First-Time Enrollees Survey was conducted from August 24 through 28 and found that more than half (51%) of young workers will choose their health care benefits for the first time this enrollment season. Yet only 19% feel confident, and just 31% say they feel prepared. Their biggest concern about choosing their own health insurance plan is cost (44%), followed by understanding how health insurance works (36%).

Of respondents currently on their parents’ plan (35%), more than half (54%) are leaving that coverage in the next year to purchase their own benefits for the first time. More than two-thirds (69%) of those on their parents’ plan are unaware how much their health insurance coverage even costs; however, 41% indicated they contribute financially to their parents’ plan.

“We know from our experience and past data that fewer people each year say they understand everything about their plans and their options, which means Americans are clearly hungry for answers to insurance questions,” Owenby says.

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More Smaller Companies Are Self-Insuring Health Benefits

The article below was published on August 7, 2017 by Bloomberg BNA, written by Sara Hansard.

Small and midsized companies are increasingly providing their own health coverage for employees instead of buying fully insured plans since Obamacare was enacted in 2010.

As the Affordable Care Act drives up premiums because of more requirements and taxes, self-insurance has become a more attractive option because it is often less expensive than purchasing fully insured plans, people with knowledge of health insurance markets say. But some policy analysts argue the companies that are self-insuring generally have healthy employees and that leaving the fully insured risk pool results in higher costs for fully insured companies with older, less healthy employees.

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Percent of Private-Sector Enrollees in Self-Insured Plan

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Between 2013 and 2015, as a result of an increase in self-insured plans among small and midsized employers, the percentage of covered workers enrolled in self-insured plans increased from 58.2 percent to 60 percent, according to data from about 40,000 employers interviewed by the U.S. Department of Health and Human Services and compiled by the Employee Benefit Research Institute (EBRI).

Under self-insurance, expenses are paid directly by companies as they are incurred. Under fully insured policies, employers pay premiums to insurance companies that take the risk of covering employees. Sponsors of self-insured plans often purchase stop-loss policies that reimburse for catastrophic claims and/or aggregate claim totals that exceed pre-determined limits. Most large companies use self-insurance administered by insurers or third-party administrators.

The largest increases in self-insured coverage occurred in establishments with 100-999 employees, rising 21 percent from 33.6 percent of employees in 2013 to 40.5 percent in 2015, and among establishments with 25-99 employees, where the practice increased from 13.2 percent to 15.2 percent, a 15 percent increase.

For the midsized companies, “That is a sizable jump,” Paul Fronstin, director of health research and education at the Washington-based EBRI, told Bloomberg BNA. “You don’t see that kind of change too often.”

More Small Companies Capable

Data for 2016, which EBRI plans to publish shortly, show that self-insurance among small companies has continued to rise to 17 percent, Fronstin said. Many health-care policy observers predicted that increased regulations under the ACA would drive more small employers to self-insure, Fronstin said. “This is confirming the anecdotes.”

Self-insured plans generally have to follow the same regulations that govern fully insured plans under the ACA, Fronstin said. But “the ACA piled on. A lot of things added up,” such as covering part-time employees who work 30 hours a week and having to cover dependent children up to the age of 26, he said.

Healthier Risk Pool

Employers have found they can counteract some of the increased cost by self-insuring, “especially if you have a decent risk pool” of healthier employees, Fronstin said.

Mercer Health & Benefits LLC, which provides health-care consulting and brokerage services, has also found increases in the use of self-funding among the employers it surveys annually, principal James Bernstein told Bloomberg BNA. Bernstein is based in Mercer’s Cincinnati office.

The largest movement Mercer found was among midsized companies with 500 to 1,000 employees. Fifty-one percent of those companies self-insured in 2014, while 66 percent did so in 2016, Bernstein said. There are geographical differences as well, he said. Employers in the Midwest led the pack with about 74 percent self-insuring, while fewer employers in the Northeast and West Coast self-insured because health maintenance organizations such as Kaiser Permanente are more prevalent there, he said.

Self-insurance is gaining more traction among midsized companies because they can take advantages of discount programs with pharmacy benefit managers, national stop-loss carriers, and health management programs, Bernstein said. Those programs aren’t generally available to smaller companies, he said.

Companies Using Self-Insurance

Over the past five years that Hardwood Products Co. has been self-insured, health-care spending has decreased by about $900,000 even as the number of employees increased by 50 to about 470, Chief Financial Officer Scott Wellman told Bloomberg BNA. The company, based in Guilford, Maine, manufactures tongue depressors and other medical and nonmedical woodenware.

“The biggest reason we self-insure is the cost savings,” Wellman said. “It’s a misnomer to say you’re fully insured versus self-insured because you pay the claims anyway. I’d rather pay my claims as they happen, not a year after the fact.”

About 90 percent of Hardwood Products’ employees are in high-deductible plans with companion health savings accounts. For the past three years, premiums have stayed the same and deductibles have been lowered, Wellman said. “Our costs have stayed steady so we’ve given back to the employees.”

More Ability to Cut Costs

One of the main reasons employers self-insure is it gives them more power to lower medical expenses. Hardwood Products has about 30 diabetics, and the company partners with Tufts Health Plan in Boston on disease management practices, Wellman said. Costs for treating those patients average under $1,800 annually, far below national average costs between $4,500-$5,000 for claims, he said. “And they’re getting better care,” he said.

Hardwood Products has a stop-loss policy with Pareto Captive Services LLC to cover annual claims above $80,000. The average employee size of the 400 companies served by Pareto is about 120 employees, Andrew Cavenagh, founder and managing director of the Philadelphia-based company, told Bloomberg BNA.

The smallest employer covered by Pareto is 50 employees, Pareto said. The company, which started in 2011, has been growing at a rate of 30 percent to 40 percent per year, and the average stop-loss threshold level is $35,000 a year, he said. Pareto has contracts with employers that cover a total of about 50,000 employees,

Over the past year premium increases for long-term members “were effectively zero,” Cavenagh said. Typical stop-loss policies only cover excess claims for one year. Pareto’s stop-loss policies provide more protection from multiyear claims that exceed the threshold by pooling assets from its members, he said.

Service Uniform, a Denver-based company that rents work uniforms, decided to self-insure in 2014 as a result of the ACA, corporate general manager Dennis Tschida told Bloomberg BNA. “It scared us to death because there’s a lot of unknowns,” such as ensuring that plans met the law’s requirements for affordability and taking action to prevent being subject to the Cadillac tax on high-cost plans, he said. The Cadillac tax has been delayed until 2020.

Service Uniform, which has about 180 employees, still has to meet ACA requirements, but being self-insured “gives us a heck of a lot more control over everything,” Tschida said. “We can design the plans for the needs of the people.”

The company was able to modify its plan to provide employees better access to physical therapy treatments; improve the design of its pharmaceutical plan; and add telemedicine and concierge medicine services, Tschida said. The company, which had experienced 15 percent to 18 percent premium increases in prior years, was able to save about $200,000 in the first two years, he said.

AEgis Technologies Group Inc., a Huntsville, Ala.-based defense contractor, has had modest health-care cost increases from $8,355 in 2013 to $9,657 in 2016 after it began self-insuring, an increase of about 16 percent, Chief Financial Officer Rodney Kreps told Bloomberg BNA. During this period, he said, fully insured rates have climbed at annual rates of 15 percent to 20 percent. The company has about 325 employees.

AEgis also uses high-deductible plans coupled with health savings accounts, which the company helps fund. That gives employees incentives to be cost-conscious, and some employees have been able to build up HSA accounts to $1 million, which can be carried over from year to year, Kreps said.

“Every time the world has made a major shift to get costs under control it’s because you put decision power back in the hands of the consumer,” Kreps said. “That’s what self-insurance does.”

Stop-Loss Plans Offered to Healthy Groups

But some health-care policy analysts argue there is a downside to the trend of self-insurance. More insurers are offering self-funding and stop-loss plans to attract healthy employer groups, according to a study recently published by the Robert Wood Johnson Foundation (RWJF).

Self-insurance plans are “marketed almost exclusively to healthy groups, groups that have very, very good claims experience,” Sabrina Corlette, a research professor with Georgetown University’s Center on Health Insurance Reforms and an author of the study, told Bloomberg BNA.

“Once they self-fund they are no longer part of the risk pool for the ACA fully insured market,” Corlette said. “If you have a critical mass of healthy employers leaving the market, that can lead to premium hikes in the traditional, fully insured market,” she said. “You can have ever-increasing premiums for the employers that can’t qualify for the self-funded plans because they can’t pass underwriting.” In the past some states have acted to limit the use of stop-loss policy sales to small groups, Corlette said. But more recently, states such as New Mexico, Vermont and Minnesota have made it easier to sell stop-loss policies to small groups, she said. “Insurers and brokers are encouraging them to do that,” she said of the states moving in that direction.

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