Fewer Spouses Covered on Employee Benefit Plans

This article was published on August 5, 2019 on IFEBP.org written by Lois Gleason, CEBS.

More and more employers are seeking cost savings by discouraging or blocking employees from enrolling a spouse in the employer’s health plan. Here’s what you need to know about the growing trend of spousal carve-outs:

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Image Source: IFEPB.org

Employers often use one of the following four methods to reduce the number of spouses they cover:

  1. Charging employees more to cover spouses who have access to employer-sponsored coverage through their own jobs.
  2. Charging employees more to cover spouses whether or not they have access to other coverage.
  3. Choosing not to cover any spouses who have access to their own employer-sponsored coverage.
  4. Choosing not to offer coverage for any spouses under any circumstances.

Recent survey data reveals a clear trend:

  • The 2018 International Foundation Employee Benefits Survey showed that 20.1% of responding health plan sponsors imposed spousal surcharges or exclusions.
  • The June 2019 PWC Health and Well-being Touchstone Survey results showed that 38% of survey respondents apply a spousal surcharge if the spouse has access to coverage through another employer. The median surcharge is $100 per month.
  • The December 2018 issue of AYCO Compensation & Benefits Digest reported that just over 25% of its survey participants are imposing a spousal surcharge in 2019. The most commonly used surcharge amount is $100 per month.
  • The 22nd Annual Willis Towers Watson Best Practices in Health Care Employer Survey shows that 27% of companies used a spousal surcharge in 2017.

At least three factors are driving this spousal carve-outs trend:

  1. Plan sponsors are looking for new ways to stem the rising tide of health care benefit costs.
  2. Employees, especially those on single-only coverage, may view spousal surcharges as a more equitable way for an employer to allocate health benefit costs among single and married employees.
  3. As more plans impose surcharges or exclusions, plans that cover spouses without a surcharge could be at risk for adverse selection.

In an effort to save costs, health plan sponsors are increasingly nudging (or pushing) spouses of employees to obtain coverage somewhere else.

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Transparency in healthcare: The case for an employer bill of rights

medical-costs

This article was published on January 31, 2019 on Employee Benefit News, written by Steve Kelly.

Today more than ever before, benefits and human resources professionals are struggling to provide their teams with quality coverage at affordable rates. Costs have skyrocketed for the more than 150 million Americans who receive healthcare coverage through their workplace — more than doubling since 2008, according to the Kaiser Family Foundation.

Private health spending by businesses has steadily grown year after year and accounts for 20% of the $3.3 trillion of total health spending in the U.S. Businesses are finding that they can’t afford to wait any longer. They need to take control of their healthcare costs and seek resources to make changes to the plans they currently offer.

With the complexities surrounding the decision-making process for benefits programs, businesses often feel unaware, or worse yet, misled when it comes to their foundational rights regarding health plans.

Enter the Employer Bill of Rights — an initiative to help business owners empower themselves to learn and exercise the basic rights often overlooked in today’s healthcare system and take an activist role as they investigate and select healthcare options.

Knowledge is power

The employer bill of rights is rooted in the mission that every business owner needs to take responsibility for providing the best possible benefits program to their employees. Businesses can utilize the employer bill of rights as a tool and learn how to pay for healthcare like any other business expense.

With the employer bill of rights, employers are empowered to:

1. Pay a fair amount for healthcare.
Healthcare costs are often the second largest operating expense after employee wages. Employers do not have to accept the status quo for their health plan and pay significantly inflated medical expenses.

2. Know what healthcare services actually cost.
A traditional PPO health plan typically leaves the employer in the dark about how plan parameters were set by the insurer and medical provider. Businesses have a right to know the cost of medical services.

3. Audit medical bills.
Billing mistakes and inflation of medical charges are common. Businesses and individuals have a right to carefully evaluate healthcare expenses. A line-by-line auditing of medical bills helps ensure the charges are accurate and fair.

4. Explore your health plan options.
By partnering with an informed and experienced healthcare consultant, employers can discover health plan options beyond the traditional PPO model. A self-funded health plan, where employers pay for medical claims as services are rendered instead of providing ongoing and advanced payments to an insurance company, can take employers on the path toward more control over healthcare spending.

Self-funding is on the rise, with the number of businesses deciding to self-insure increasing by nearly $37 between 1996 and 2015, according to the Employee Benefit Research Institute.

5. Offer your employees a comprehensive and affordable benefits program.
Employees count on their employer-sponsored health plans to be reliable and financially feasible. Employers have a right to offer healthcare solutions that minimize the financial burden on the plan member.

6. Design a health plan to meet your unique needs.
The best health plans are well-rounded and flexible. Employers have the right to customize their health plan to determine the approach that best suits the needs of their business and team. Unlike traditional health plans, self-funded plans are customizable.

7. Defend the best interests of your business and your employees when paying for healthcare.
Surprise medical bills and inflated prices are common, but healthcare finances do not have to be handled alone. Employers and individuals have the right to access advocacy services that support fair and reasonable healthcare payments and help employers meet their fiduciary responsibility.

8. Make direct connections with providers and health systems.
Fair outcomes can be achieved when people work together. By creating direct partnerships with providers and health systems in their communities, employers can become good stewards of healthcare by building bridges and driving quality healthcare experiences for all.

The path to activism

Change in healthcare is possible when businesses take charge and challenge the status quo. As we continue to see the rise of self-funded health plans, the growth of reference-based, or metric-based, pricing is following suit.

The reference-based pricing approach starts at the bottom with an actual cost amount, then adds a fair profit margin to calculate a total cost of service. Simply stated, it allows employers to utilize rational limits of payment to medical providers instead of relying on the traditional PPO model.

Businesses can be activists for change by standing up against out-of-control healthcare costs, and they can start by adopting the employer bill of rights and investigating reference-based pricing. By innovating their healthcare solutions and turning away from insurance plans which have failed to adapt to the changing healthcare landscape, business owners have the opportunity to improve the health plans they offer their employees, transform their bottom line and help spark reform for businesses across the country.

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The end of the health insurance carrier

This article was published on September 27, 2018 on Employee Benefit News, written by Nelson Griswold.

More than six years ago, Aetna CEO Mark Bertolini proclaimed that “the end of insurance companies, the way we’ve run the business in the past, is here.”

At the very least, it’s the beginning of the end for these dinosaurs. The health insurance carriers face slow but steady disintermediation by innovative next generation employers and benefits professionals who are using alternative funding to take control of employer health plans and reduce costs.

Merriam-Webster defines “disintermediation” as “the elimination of an intermediary in a transaction between two parties.” In general, the purpose of disintermediation is the removal of an unnecessary middleman that adds more cost than value to a process.

medical-costs

Photo Source: Employee Benefit News

In our dysfunctional benefits/healthcare model, the employer delegates to the carrier middleman responsibility for controlling costs by managing the healthcare supply chain, which is all the medical and health-related products and services purchased by employees. The most costly are prescription drugs, hospitalization, outpatient surgery, and physician visits.

The employer wants lower healthcare costs and with a fully insured plan depends on the carrier to control the cost of healthcare by managing this complex supply chain. The carriers, however, consistently have failed to perform this most basic task. Healthcare costs have risen every year since 1960, according to the Centers for Medicare and Medicaid Services. And healthcare costs haven’t just risen but have soared, growing 261% between 1999 and 2016.

The carriers’ spectacular failure is the logical result of grossly misaligned incentives: Carriers financially benefit from rising healthcare costs. From 1999 to 2016, rising healthcare costs drove up health insurance premiums — also known as carrier revenue — by 213%, according to the Kaiser Family Foundation.

As of July, BUCAH stock values had grown an average of more than 255% in the previous five years. We can’t expect carriers to work to reduce healthcare costs and healthcare spending; businesses never work long-term for their customers’ interests against their own financial interests.

The employer that wants to take control of its health plan to reduce costs must disintermediate the carrier and implement some form of self-funding. No, self-funding isn’t new and it isn’t the solution by itself. I’ve written previously that the value in self-funding is control, not cost savings. Self-funding is a means to an end.

With control of the health plan thanks to self-funding, the employer can work with a NextGen benefits professional who knows how to manage the supply chain to both improve the quality and lower the cost of healthcare for the employer and employees.

This does not mean that every employer should disintermediate the carrier and jettison their fully insured plan. Not every employee population is a good fit for a self-funded health plan; some are too sick and need to stay fully insured. But for employers that are a good candidate for self-funding, responsible brokers and advisers have a fiduciary responsibility to their clients to disintermediate the carrier, if possible.

Sounds crazy … extreme? So did today’s $2,000, even $5,000 deductibles, just five years ago.

Benefits professionals and employers today have the power to reduce year-over-year healthcare cost while enhancing benefits and improving medical outcomes. But you can’t do it with a carrier running the show. If the employer can move to self-funding, it’s sheer malpractice not to disintermediate the carrier.

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House Passes Two Bills to Expand HSA Coverage

United States Capitol Building

Yesterday, the House passed two bills that would expand HSA coverage:

The Restoring Access to Medication and Modernizing Health Savings Accounts Act of 2018 (HR 6199)

This Act would:

  • Allow plans flexibility in providing first dollar coverage up to $250 for a single and $500 for a family for additional services, such as those related to treatment of chronic conditions and telehealth services.
  • It would also make certain OTC drugs a qualified medical expense.
  • Allow HSA funds to pay for direct primary care up to $150 per month for an individual and $300 per month for a family.
  • Expand HSAs to allow physical activity, fitness and exercise related services (i.e., gym memberships, sports equipment) to be qualified medical expenses (up to $500 for an individual and $1,000 for a family).
  • It would also loosen some of the contribution restrictions on spouses who have a flexible spending account (FSA) at their employer.
  • Allow employees, at the employer’s discretion, to convert their FSA and HRA balances into an HSA contribution upon enrolling in a high deductible health plan with an HSA. The conversion amount is capped at $2,650 for an individual and $5,300 for family coverage.

Increasing Access to Lower Premium Plans and Expanding Health Savings Accounts Act of 2018 (HR 6311)

This Act would:

  • Increase the maximum contribution to health savings accounts (HSAs) to $6,650 for an individual and $13,300 for a family.
  • Allow both spouses to make catch-up contributions to the same health savings account. Under current law, if both spouses are HSA-eligible and age 55 or older, they must open separate HSA accounts for their respective “catch-up” contributions.  This provision would allow both spouses to deposit their catch-up contributions into one account.
  • Allow working seniors enrolled in Medicare Part A to contribute to an HSA.
  • Allow individuals in a bronze or catastrophic health plan to contribute to an HSA.
  • Allow balances on flexible savings accounts to be carried over.
  • Allow HSAs opened within 60 days after gaining coverage under a HDHP as having been opened on the same day as the HDHP. This would give a grace period between the time coverage begins through an HDHP and the establishment of an HSA.  Currently, HSA funds can only be used for qualified expenses after the HSA has been established.
  • It would also delay the Affordable Care Act’s health insurance tax for another two years to 2021.

There are a handful of other healthcare related bills yet to be taken up by the House. It is unclear if they will act prior to the August break (beginning July 30th). Both of the above Acts will most likely be taken up by the Senate after the break.

Diversified Group will be following the progress of these bills closely and will provide updates as they are received.

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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.

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.

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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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Why more small, midsize employers are turning to level-funding

This article was published on May 22, 2018 on Employee Benefit News, written by John Milne.

Small and midsize businesses seeking flexible benefit plans for their employees that also provide a means to contain costs often feel their options are limited. The fully insured world restricts flexible and creative plan options, and many employers are stuck in a cycle of paying steep increases year over year because they’re being pooled with many other small plans.

A traditional self-funding model might also be out of the question without solid claims data to understand risk and your potential monthly claims.

However, there is another alternative funding strategy that may be right for small and midsize businesses that want to take control of their plans and access claims data while paying a consistent premium each month. It’s called level-funding, and it’s ideal for companies that like the idea of self-funding but want to keep the safety and stability of consistent premium payments.

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Photo Source: Employee Benefit News

In a level-funded plan, employers work with a third-party administrator to determine the expected claims for the year. The TPA adds a “claims corridor” to the expected claims amount, typically between 10-15%. This, along with the stop-loss insurance and administrative fees, becomes the annual premium. This number is divided by 12 to determine the total monthly cost.

Throughout the year, the TPA pays claims as they come in; at the end of the year, if any claims dollars are leftover from the expected claims bucket, the employer receives a refund. However, if the claims exceed the allotted amount, the stop-loss insurance kicks in to pay the difference, rather than the employer having to pay more.

Employers in a level-funded plan get access to detailed claims reporting, which highlights where employees are both overspending and underspending on their health insurance. With this information, employers can customize their health plan to better serve employee needs.

As with any self-funded plan, employee education and communication play a large role in cost containment. Employers have access to claims data and can see trends in their employees’ healthcare that could be driving up costs. For example, employers can look at how employees use urgent care centers, emergency rooms and primary care doctors’ offices, and educate employees on which care center is right for different situations.

Similarly, employers may need to take a bigger role in educating employees about prescription drug plans — from helping them understand a formulary, to discussing mail-in pharmacy plans and generic versus brand name medications.

Disease management programs also help level-funded employers control costs. Employers can help employees manage chronic health issues, or prevent those at risk from developing one.

Employee education and communication plans can take a variety of forms, including intranet messages, emails, posters and postcards — depending on how your employees best consume information.

Employers who understand their employee demographics and emphasize education have saved significantly with a level-funding benefits strategy. We know of one employer with 60 covered participants has saved 35% by moving from a fully-insured plan to a level-funded plan, and they are projected to receive a surplus at the end of the first year.

For financially stable and relatively healthy employers, level-funding is a step in the right direction toward traditional self-funding. While it does require more employee education, the results are access to claims data, plan flexibility and the ability to better contain costs from year to year.