Benefits Industry News

By Kathleen Koster
August 1, 2010
It’s no accident that health care reform relies on a public health care exchange to save uninsured individuals and small businesses money on health care coverage.
But before 2014 (or 2017 in the case of large businesses) arrives, employers have private individual exchanges to help their retirees attain less costly and more comprehensive coverage.
One such retiree, George W. Farnall, 71, of Middlesex, N.C., had hoped for a worry-free retirement, but was winded by high premiums, deductibles and out-of-pocket costs until his former employer, Caterpillar, Inc., rerouted retiree health care coverage to a Medicare exchange-based system on Jan. 1.
“It’s something that I dreamed about when I was a young man, that whenever I got to be retirement age, I wouldn’t have to worry about where the money was going to come from for health care costs,” says the former assembly technician at Caterpillar’s Clayton, N.C. plant.
“I thought I’d died and gone to heaven [when I got on the new system]. It’s working so well, maybe I’ll get caught up on the other bills [I accrued] from the previous system this year,” he adds.
Caterpillar is one of many Fortune 500 clients of Extend Health, Inc., the country’s largest private Medicare insurance exchange.
Founded in 2004, Extend Health “operates a private Medicare exchange that helps employers or firms provide insurance choices to their retirees to buy their own individual plans using funds in a health reimbursement arrangement,” says Bryce Williams, CEO of Extend Health.
Companies like Extend Health are transitioning employers from the typical group insurance model to a more financially predictable exchange-based model, with lucrative results.
“We believe we’re saving our clients over $500 million each year while providing as good or better benefits for retirees. The group model is the evil here; it is a wildly inefficient way to deliver what is available via guaranteed issued coverage in the individual market,” advocates Williams.
Most employers, including Caterpillar, provide subsidized health care (which rolls over year to year) to cover premiums, what the Medicare plan does not and out-of-pocket costs for retirees.
Caterpillar puts money in an account yearly, which covers the Medicare deductible and the remainder that Medicare covers, says Farnall. When the premium is withdrawn from his bank account, his carrier notifies Extend Health and they electronically put money back into his checking account – it’s very convenient, he says.
But what Farnall appreciates most about the new system is that “I know exactly how much it’s going to cost me each month,” he explains – an advantage both he and Caterpillar can appreciate.
Another employer on the exchange-based system, Ford, saves $85 million each year, which is, in part, helping turn the company around. Concerning FAS 106, the exchange model can help affix what future exposure will be for companies.
In 2006, there were $850 million FAS savings to employers’ balance sheets. These numbers help explain why Extend Health calculates employer satisfaction at 94.5%.   For complete article,  click here.

Source:  Employee Benefit News article used by permission

According to a new survey by National Business Group on Health, more than half (53%) of large U.S. employers plan to revise their 2011 health care benefit programs in the wake of health care reform legislation and anticipated large benefit cost increases next year.

Also considering the provisions of the Patient Protection and Affordable Care Act, 19% of respondents are scaling back changes they planned to make while an equal number are making no changes.

The remaining respondents were still undecided pending further review of the final regulations.

Among employers who will be making specific changes to their health benefit plans to comply with the new law, 70% said they will remove lifetime dollar limits on overall benefits while 37% said they will make changes to annual or lifetime limits on specific benefits.

Approximately one-fourth will remove annual dollar limits on overall benefits while 13% reported they will remove pre-existing condition exclusions for children.

The survey, based on responses from 72 of the nation’s largest corporations representing more than 3.7 million employees, was conducted in May and June 2010.

“While the health reform law has forced employers to evaluate their health care benefit strategies and decide whether to comply with the law or lose grandfathered status, they haven’t lost sight of the fact that controlling rising costs remains one of, if not, their highest priority. They have to foot the bill, not the government,” says Helen Darling, president of the National Business Group on Health.

“In fact, with cost increases expected to accelerate next year, many of the plan design changes employers are making are being done to help curb those increases, as they have to do every year,” she adds.

Employers estimate their health care benefit costs will jump to an average of 8.9% next year, compared with an average increase of 7% this year. To help curb those increases employers plan to use a wider variety of cost-sharing strategies.

According to the survey, 63% of employers plan to increase the percentage employees contribute to the premium, up from 57% who did so this year, while 46% plan to raise out-of-pocket maximums next year compared with 36% this year.

In order to further mitigate costs, employers are shifting to consumer-directed health plans. In fact, 61% of plan sponsors will offer a CDHP in 2011.

While the most common type of plan employers will offer is a high-deductible plan combined with a health savings account (64%), the survey found a large spike in employers moving to a full replacement plan.

Among employers offering a CDHP, the number moving to a full replacement plan doubled from 10% this year to 20% in 2011.

“Consumer directed health plans are living up to their expectations as a way to help save employers money and put employees in greater control of their health care. In fact, offering these plans was the most often-cited tactic by employers to control costs. We fully expect that employer interest in CDHPs, and especially full-replacement plans, will continue to increase in the future,” says Darling.

As the health reform law makes Medicare Part D benefits richer as the “doughnut hole” closes between now and 2020, 5% of employers plan to drop retiree health coverage in 2011 while 60% are considering doing so in the future.

In attempt to cut costs with wellness initiatives, 41% of employers offered premium discounts for completing health assessments while 22% offered premium discounts for participating in tobacco cessation programs.

In addition, one in four (25%) of plan sponsors plan to raise the co-pay or co-insurance for retail pharmacy prescription drug benefitswhile 21% plan to do the same for mail-order pharmacy benefits.

Copies of the survey report can be found at www.businessgrouphealth.org.

Source: Employee Benefits News article used by permission

Change is definitely on the horizon. The recently passed health care reform legislation is designed to ensure virtually all Americans will have access to reasonably priced medical insurance and, as a result, reasonably priced health care.

As companies move toward new rules and mandates, most will find that implementing measures to reduce health care costs now will pay off in the long run.

According to the Congressional Budget Office, total spending on health care in the U.S. has doubled over the last 30 years and now makes up about 16 percent of the gross domestic product.

Prior to passage of the health care reform bill, the CBO estimated that, over the next 25 years, health care spending would again double, reaching 31% of GDP.

Combine that forecast with the fact that our aging population is expected to need ever-increasing amounts of medical care and prescription drugs, and the situation looks dire.

Even if health care reform accomplishes a key goal of reining in costs, it is clear that companies will need to find additional means of reducing spending.

Fortunately, there are a number of methods to do just that – methods that don’t involve raising employee premiums, reducing coverage or increasing copays.

Generic drugs are widely viewed as one of the most important and effective cost-reduction strategies available. The savings can be significant – on average, a brand-name drug costs 50% to 70% more than its generic counterpart.

Even with widespread acceptance of generic drugs among both employers and employees, there is room for growth in some industries and areas of the country. The Generic Pharmaceutical Association reports that generic medicines account for 69% of all prescriptions dispensed in the U.S., but just 16% of all dollars spent on prescriptions.

Any good generic program should be designed to provide physicians with the flexibility to use branded medications when clinically appropriate.

Such step-therapy elements mean patients would first be required to try the generic equivalent. If the generic is not effective or the patient has an adverse reaction, the physician can switch the patient to a name-brand medication.

One program element that has proven to be extremely effective in transitioning members to generics involves notifying plan members and physicians when a brand-name drug’s patent protection expires and a generic becomes available. Follow-up mailings and telephone calls are used to reinforce the message.

Electronic prescribing is yet another place to find savings. Studies conducted by Henry Ford Health System, Brigham and Women’s Hospital and the Institute for Health Policy in Boston show that physician use of e-prescribing increases generic utilization from 3% to 15%.

Programs that reward healthy behavior with premium discounts or reductions in copays and deductibles can be very effective in lowering overall health care costs.

The 1996 Health Insurance Portability and Accountability Act allows, as an exception to HIPAA’s nondiscrimination regulations, for employers to provide incentives to all similarly situated employees who take part in health promotion and disease prevention programs in order to achieve a healthy body weight, blood pressure and cholesterol levels, and eliminate tobacco usage.

These voluntary programs help build a corporate culture of wellness and fitness at the same time that they reduce absenteeism, boost productivity and lower overall corporate health care costs. The reason? Healthier employees need fewer doctor appointments, fewer hospitalizations and fewer prescription drugs.

Mail-order pharmacy is a key component in any cost-containment program, providing savings as high as 10%, according to a study by the Lewin Group released by the Pharmaceutical Care Management Association.

It is particularly beneficial for medications used to control chronic conditions, such as diabetes, heart disease or hypertension. The use of a mail-order pharmacy can increase safety and further control costs by identifying potentially dangerous interactions between the drugs a patient is taking.

Disease therapy management programs help guide patients who have chronic conditions that require significant self-care efforts.

One comprehensive study done by a leading PBM and published in the American Journal of Managed Care found that a disease therapy management program containing both a disease self-management component and a medication therapy management component resulted in higher medication adherence, a 33.6% reduction in relapses and substantial reductions in medical costs for multiple-sclerosis patients.

One of the most successful means of controlling health care costs is through a partnership with a pharmacy benefits manager.

PBMs offer a variety of programs designed to improve outcomes at the same time they lower costs, including generic drug utilization, drug interaction alerts, adherence/refill reminders, employee education, mail-order pharmacy, disease therapy management and more.

PBMs can negotiate discounted drug rates with national retail pharmacies, thereby reducing prescription costs for plan members. These discounted prices also apply to generic drugs and mail-order prescriptions.

The pressure to reduce health care spending is relentless these days. Medical and pharmacy costs continue to rise each year, and the impact of the health care reform bill is still a huge unknown.

By focusing now on strategies to reduce your costs and strengthen existing programs, you’ll take control of your own future at the same time you provide employees with benefit plans that promote safety, education, empowerment and improved outcomes.

Source: Employee Benefit News article used by permission

You’ve likely been focusing mostly on the plan design and administration requirements of health care reform. But, the law has a series of new notification and communication requirements that start this year and extend over the next several years.

You’ll need to be thinking not only about the strategic communication needs—how to keep employees engaged in their health and managing costs—but also how to meet these legal requirements in a way that adds the most value. (And, creates the least amount of additional work for you and your team.)

Much is still in flux about the changes in health care, but this article captures the key notification requirements and what to look for as regulations are issued.

Seven health care reform notices

The final regulations detailing the exact disclosure requirements for all regulations are not yet out. But here are seven items that should be on your radar for your benefits communication strategy.

• Notice of key plan design changes effective 1/1/11 (during this fall’s enrollment for most companies)
• Summary of material changes (2012)
• Summary of medical coverage (2012)
• Description of all disease management programs (2012)
• Automatic medical enrollment and opt-out actions (TBD—likely 2013)
• Notification of exchanges and “free choice vouchers” (2013)
• Description of claims process (TBD)

Read more…..

Employee Benefit News article used by permission