Benefits Industry News

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

The Obama Administration released interim final regulations aimed at creating a system of checks and balances for the internal and external appeals processes of health claims.

Governed by the Patient Protection and Affordable Care Act, the interim final rule requires group health plans and insurers to establish a comprehensive appeals process for patients who appeal decisions on coverage, services and claim payments. The interim final regulations apply to self-funded health plans, but not to grandfathered plans under the PPACA.

The Departments of Health and Human Services, Labor and the Treasury issued the interim final rule, which will take effect on Sept. 21, 2010.

Health plans and insurers that are subjected to the regulations are required to establish an internal appeals process that:

• Allows consumers to appeal when a health plan denies a claim for a covered service or rescinds coverage;

• Gives consumers detailed information about the grounds for the denial of claims or coverage;

• Requires plans to notify consumers about their right to appeal and instructs them on how to begin the appeals process;

• Ensures a full and fair review of the denial; and

• Provides consumers with an expedited appeals process in urgent cases.

If a health plan or insurer denies the appeals case, the patient, under the regulations, can present his or her case to an independent reviewer not affiliated with the health plan or insurer.

Most states provide an external appeals process in which a second set of eyes reviews the case. However, state laws on external appeals of health claims can vary greatly depending on the state. As a result, the interim final rule calls for a federal standard for external reviews of claim appeals cases.

For external appeals, federal regulators are encouraging states to adopt the guidelines created by the National Association of Insurance Commissioners. The interim final rule calls for states to implement the NAIC standards before July 1, 2011. The NAIC rules require:

• External review of plan decisions to deny coverage for care based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit.

• Clear information for consumers about their right to both internal and external appeals – both in the standard plan materials and at the time the company denies a claim.

• Expedited access to external review in some cases – including emergency situations or cases where their health plan did not follow the rules in the internal appeal.

• Health plans must pay the cost of the external appeal under State law, and States may not require consumers to pay more than a nominal fee.

• Review by an independent body assigned by the State. The State must also ensure that the reviewers meet certain standards, keep written records, and are not affected by conflicts of interest.

• Emergency processes for urgent claims, and a process for experimental or investigational treatment.

• Final decisions must be binding so, if the consumer wins, the health plan is expected to pay for the benefit that was previously denied.

Source: Employee Benefits News article used by permission

On July 14, 2010, the Departments of Labor, Health and Human Services and Treasury released final interim rules implementing the preventive health services provisions under the Affordable Care Act. Read this alert to learn more about the new rules.

Click here for the full text of this alert.

Source:  Proskauer Rose Law Firm

By Kathleen Koster

July 15, 2010

Two integral provisions of the health care reform legislation, “dependent eligibility” and “affordability,” will likely result in much higher health care costs for employers than previously estimated by government officials and other industry consultants, according to a new report.

The bswift Special Report on the Impact of Health Reform on Employers analyzes the 2010 benefits premium, contribution and dependent data of 242 bswift client organizations. The sample includes mid-sized and large employers with 50 to 15,000 employees representing a variety of industries, including retail, manufacturing and professional services.

“The bswift Special Report highlights the dramatic differences in impact of PPACA among employers. For some, the impact is negligible. For many others, PPACA may increase costs substantially for 2011 and may also require a complete overhaul of the organization’s health strategies in the next three years,” says bswift CEO Rich Gallun.

“Dependent eligibility” provision’s impact on employers

HHS had originally determined the effect of requiring organizations to cover employees’ children up to age 26 to be 0.7% of total health care costs for employers. On the other hand, the bswift Special Report found the likely impact to be 1.6%, more than double the initial HHS estimate.

The HR and benefits administration firm looked at the statistical median and discovered that a company with 1,000 enrolled employees and a median health premium cost of $8,325 per employee annually is likely to experience $133,200 in additional costs for 2011 because of this provision.

Nevertheless, the bswift Special Report found a widely disparate impact of the provision among employers.

On the high end of the spectrum, the impact could be more than 13% of an employer’s total health care costs. On the low end, the impact could be less than 0.3% of total health care costs.Impact varies based on size, age and family composition of the company’s workforce, as well as the employer’s current dependent eligibility rules.

In order to minimize employee confusion surrounding the dependent eligibility extension and reduce administrative hassle, many companies have already changed their dependent eligibility rules in advance of the law’s 2011 deadline, analysts at bswift found.

The “affordability” provision’s impact on employers

Companies with more than 50 employees will face stiff penalties beginning in 2014 if they do not offer full-time employees an affordable health plan option that costs less than 9.5% of the employee’s total household income.

Under the provision, the new law will penalize employers $3,000 per year for each full-time employee who receives a federal tax credit or subsidy to buy coverage within a state-based insurance exchange because his or her health plan is considered unaffordable. To qualify for the credit, employees must disclose household income information to the government.

Using employee salary data, bswift analysts estimated an organization’s risk of failing the “affordability” test in 2014. They uncovered that 52% of employers are likely to have more than 5% of employees in the “danger zone” (who pay more than 9.5% of their compensation for health premiums).

Again, bswift looked at the statistical median and found that a company with 1,000 employees is likely to have 5.8% (58 employees) in this “danger zone,” which entails $174,000 annually in penalties or 2% of the employer’s total health care costs.

Unfortunately, some employers face a more expensive problem. For employers with more lower-salaried employees and less generous health contributions, the “affordability” provision has even more costly repercussions.

In this case, bswift found that a company with 1,000 employees and 20% in the “danger zone” could experience penalties of $600,000 annually or 7.5% of the employer’s total health care costs.

Overall, the bswift Special Report finds that approximately one in three employers has more than 20% of their employees in the “danger zone.”

“For employers, this legislation puts a whole new level of urgency not only around compliance but also around the evolution of their health and employee benefit strategies. In response to PPACA, employers are modifying their health plans and employee contribution programs for 2011 and beyond. We are also seeing employers re-visit how health care fits into their employees’ total compensation package,” says Gallun.

The bswift CEO concludes, “As employers modify their health programs over the next several years, the role of the Exchanges should remain top of mind – not just as a negatively perceived ‘dumping ground’ (‘Pay or Play’) but rather as an opportunity to refine the implicit health care contract between employer and employee. Some leading edge employers are looking seriously at a Defined Contribution approach – with the Utah Health Exchange and also in the large employer market – as an incremental pathway out of the relentless burden of providing increasingly expensive health coverage to employees.”

Source: Employee Benefit News article used by permission