2017 Employer-based Premiums Contrast with ACA Increases

By Phil Galewitz, Kaiser Health News

2017 employer-based premiums

Family health insurance premiums rose an average 3% this year for people getting coverage through the workplace, the sixth consecutive year of small increases, according to a study released Tuesday.

Average 2017 Family Premiums: $18,764

The average total cost of family premiums was $18,764 for 2017, according to a survey of employers by the Kaiser Family Foundation and the Health Research & Educational Trust. That cost is generally divided between the employer and workers. (Kaiser Health News is an editorially independent program of the foundation.)

2017 employer-based premiumsWhile overall premium increases remain modest, workers are picking up a greater portion of the tab — this year $5,714 for family coverage, about a third of total cost.

Employer-provided coverage for a single person rose on average 4%, to $6,690. Those individuals pay $1,213 on average.

Still, the employer market looks remarkably stable compared to the price increases seen in the Affordable Care Act’s insurance marketplaces for people who buy their own coverage. Premiums on those plans spiked on average about 20% this year, and many insurers dropped out because of financial concerns.

Average ACA Premiums Up 20% in 2017

For all the media attention and political wrangling over the Obamacare exchanges, their share of the market is relatively small. They provide coverage to 10 million Americans while 151 million Americans get health insurance through their employer.

The continued slow rise of employer health premiums identified in the Kaiser survey surprised some analysts who have expected the trend to end as the economy picked up steam, leading to a jump in use of health services and health costs.

Drew Altman, CEO of the Kaiser Family Foundation, said it’s “health care’s greatest mystery” why health insurance costs have continued their slow pace even as the economy has picked up the past few years. “We can’t explain it.”

2017 employer-based premiums

Employee Deductibles Have Nearly Doubled Since 2010

Another unexpected result was that workers’ deductibles — the health bills that workers must pay before their insurance coverage kicks in — remained stable this year at $1,221. Since 2010, as companies sought to keep premiums in check, deductibles have nearly doubled. Higher deductibles can limit premium increases because costs are shifted to workers and it gives them greater incentive to cut spending.

“Increasing deductibles has been a main strategy of employers to keep premiums down and we will have to watch if this plateauing is a one time thing … or if this portends a sharper increase in premiums in future years,” said Altman. “It could be deductibles are reaching their natural limit or could be the tighter l2017 employer-based premiumsabor market” that’s causing employers to back off, he added.

Meanwhile, a second employer survey released Monday by Mercer, a benefits consulting firm, suggests a modest increase in health costs coming next year, too. Employers said they expect their health costs to increase by an average 4.3% in 2018, according to the survey.

To deal with higher medical costs — notably big increases in the prices of prescription drugs — employers are using multiple strategies, including continuing to shift more costs to workers and paying doctors and hospitals based on the value of the services rather than just quantity of services.

Jeff Levin-Scherz, a health policy expert with benefits consultant Willis Towers Watson, said there is a limit on how much employers can shift costs to their workers, particularly in a tight labor market. “Single-digit increases doesn’t mean health care costs are no longer a concern for employers,” he said.

Trend: Employer-Based Coverage Has Dropped

The 19th annual Kaiser survey also found that the proportion of employers offering health coverage remained stable last year at 53%. But the numbers have fallen over the past t2017 employer-based premiumswo decades.

The survey highlights that the amount workers pay can vary dramatically by employer size. Workers in small firms — those with fewer than 200 employees — pay on average $1,550 more annually for family premiums than those at large firms. The gap occurs because small firms are much more likely than large ones to contribute the same dollar amount toward a worker’s health benefits whether they’re enrolled in individual or family coverage.

More than one-third of workers at small employers pay at least half the total premium, compared with 8% at large employers.

That’s the case at Gale Nurseries in Gwynedd Valley, Pa., where health insurance costs rose 7.5% this year. Its 25 workers are paying nearly half the cost of the premium — at least $45 a week for those who choose the base coverage plan. Employees also have deductibles ranging from $1,000 to $2,500.

A decade ago, the nursery paid the full cost of the premium.

“It’s crazy — we keep paying more and getting less,” said comptroller Candy Koons.

At the Westport (Conn.) Weston Family YMCA, health insurance premiums rose about 7% this year, leaving its 50 full-time employees to pay a $156 premium for individual coverage.

“It’s not problematic, but it’s one of our bigger costs associated with payroll,” said Joe Query, the human resources director.

 

Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.

IRS Reposts Revised Form 720 for PCORI Fee: Deadline 7/30/17

Michael BerwangerBy Michael Berwanger, JD, Director, Quality Management & Compliance

The IRS recently reposted the April 2017 version of Form 720 (Quarterly Federal Excise Tax Return) on its website.* While the form’s primary purpose is to serve as the quarterly return for various federal excise taxes, it also is used to report PCORI fees imposed under health care reform. (For more information on PCORI, see  “PCORI Fee for Self-Funded Employers”.)

Please note, the portion of the form related to the PCORI fees is unaffected. While Form 720 is filed quarterly for other federal excise taxes, the PCORI fee reporting and payment are only required annually, by July 31 of the year following the calendar year in which the applicable policy or plan year ended. The change noted at the beginning of the form is related to the excise taxes.

IRS form 720As background, PCORI fees, used to fund research on patient-centered outcomes, apply to plan and policy years ending before October 1, 2019. They are payable by insurers and sponsors of self-insured health plans, and are calculated by multiplying the applicable dollar amount for the year by the average number of covered lives. As announced in IRS Notice 2016-64, the fees owed in 2017 are as follows:

  • For plan years** ending on or after October 1, 2015, and before October 1, 2016: $2.17 per covered life
  • For plan years** ending on or after October 1, 2016, and before October 1, 2017: $2.26 per covered life

If you have already filed and used the form posted prior to the most recent update, please contact a tax professional on whether refiling is necessary.MedCost

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*If you downloaded the Form 720 (Rev. April 2017) before July 3, 2017, please note that
on page 2, under IRS No. 33, the rate is corrected to 12% of the sales price, not 12%
of the sales tax.)

*’*Plan year’ is generally the 12-month period stated in the Summary Plan Description, or for plans filing a Form 5500, the plan year stated in that filing. NOTE: The plan year may be different from the benefit year or the renewal period.

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This blog post should not be considered as legal advice.

3 Compliance Areas for Self-Funded Employers (Video)

self-funded employer compliance

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“There are three primary areas that employers should keep in mind when thinking about compliance for their health plan,” said Brad Roehrenbeck, General Counsel and VP of Legal Services and Compliance at MedCost.

1. Employment Retirement Income Security Act 

“The first of those is the Employee Retirement Income Security Act of 1974 (ERISA), which governs employer-sponsored benefit plans. ERISA was a law created in the early 1970s that has been applied to basically set the rules for how an employer that creates their own health plan should do that.”

Michael Berwanger, Director of Quality Management and Compliance, agreed. “ERISA requires several things of plan sponsors and plan administrators. One of those things is to provide notices of what benefits are available to employees. The types of notices that you might expect with the summary plan document are any tax filing notices you might need to be aware of.

self-funded employer compliance“This is to make employees aware of the rights available to them under ERISA. And with the right service provider, employers can feel confident knowing they’re distributing the right notices in the right formats.

2. HIPAA Compliance

“The second area of compliance for self-funded employers is the Health Insurance Portability and Accountability Act of 1996 (HIPAA). HIPAA requires that you safeguard patient data. Employers might find themselves subject to certain HIPAA rules; and with the right service provider, it could be relatively easy to navigate those waters.”

Keeping track of privacy obligations with documents that contain patient information is very important, said Brad Roehrenbeck. “Another thing that HIPAA requires is that anyone who handles that information, particularly if it’s electronic, must keep it secure. That basically means that you have to have systems in place that control who has access to that type of information, if you’re keeping it on your systems.

“HR directors want to make sure that they work with their IT departments to look at what kind of controls are in place, who has access to any folders where patient data is maintained, or anything else in relation to running the health plan. The HR department keeps that sensitive member information for the plan.

3. Internal Revenue Service Compliance

“The third primary area of the law that impacts health plans is tax laws. Like other types of benefit plans, health plans come with a tax benefit to both employees and employers. As dollars go in to support the plan, those dollars are provided on a tax-free basis.”

self-funded employer compliance“There are certainly tax advantages when you’re considering self-funding your health plan,” Michael Berwanger said. “To take advantage of those, you need to be aware of your compliance obligations -things like making sure you’re not discriminating unfairly in favor of your highly compensated employees.”

“There’s one other area of the tax laws that actually provides some additional benefit to employers and employees, and that is this concept of a Health Savings Account (HSA). Health savings accounts are a great vehicle under the tax laws where employees can set aside dollars and employers can contribute dollars on a tax-free basis. Those monies can be used toward deductibles and the payment of claims. Employees can keep that money for the rest of their lives or until such time as they need to use that for their medical expenses.

HSAs are a great asset for employees and a great savings vehicle. More importantly, it’s a great avenue for employers to engage with participants in the health plans to be conscious of where their health plan dollars are spent and to use them in a way that not only promotes their own health, but also the financial stability and viability and strength of both their dollars and the health plan dollars,” Mr. Roehrenbeck said.

self-funded employer compliance“As the markets continue to move towards a consumer-driven economy, it’s important for employees to be mindful of their options and how to best take advantage of the benefits available through their employers,” Mr. Berwanger noted.

“We find ourselves in a challenging environment. It’s important to be able to offer great incentives and great packages to employees. A self-funded health plan is a great opportunity to be able to do that.

“The risk can be worth the reward. Managing those compliance obligations isn’t as complicated as you might think, once you have a good trusted advisor to help you navigate that.”MedCost

(This post is a transcript from the video, “3 Compliance Areas for Self-Funded Employers.”)

 

 

Controlling Specialty Drug Costs (Video)

Specialty Drug Costs Can Be Managed with These Strategies
specialty drug costs

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“It’s interesting that a lot of these specialty drugs are designed for a very small percentage of the population that have a certain disease state,” said Michael Cornwell, MedCost Director of Sales and Underwriting.

“There may be less than 200,000-300,000 people in the country that need that particular drug. That’s one of the reasons specialty drugs are so expensive.”

MedCost Pharmacist Zafeira Sarrimanolis agrees. “It’s an exciting time in the drug manufacturing world, because all of these new medications have been coming out over the past ten years or so for medical conditions that really weren’t treatable before.

“For example, hepatitis C medications previously were not very effective and really hard for patients to tolerate. Now we have new medications on the market that are practically a 100% cure rate for patients.

specialty drug costsThese drugs are also a lot easier for them to take and tolerate. Part of the problem with that is the price tag on some of those new medications.”

“One of the largest reasons people are readmitted to the hospital is because they don’t adhere to the medication,” said Michael Cornwell. “Programs like step therapy ask you to try a clinically appropriate drug before you try a similar but more expensive one.

Prior authorizations probe a physician’s reasoning behind prescription choices. A lot of these specialty drugs are really for a pretty small percentage of the population. So when you look at a population as a whole, the people taking those drugs are usually between 1%-1½% of your population. That’s the good news.

“The bad news is they’re very expensive. Probably the biggest growth area in the specialty arenas are the cancer drugs. There’s a whole pipeline of new cancer treatments hitting the marketplace. But in that pipeline, member education and aid in helping and consulting is a good thing too. It allows us to have some personal outreach try to help these people manage their disease state.MedCost

(This post is a transcript from the video, CONTROLLING SPECIALTY DRUG COSTS.”)

 

Listening to the Voice of the Customer (Video)

Health care is complex. It always has been — even more so today in a continually changing industry and environment. MedCost strives to be the kind of partner that helps our customers navigate, translate and adapt to those changes.

When MedCost started as a small company, we were still using some of the principles we use today. We were sitting down and listening to the unique needs of the customer. We were using data even before there were sophisticated mechanisms to use data. To understand what was driving their costs, what providers they were utilizing, how we can essentially customize some sort of solution, whether it be a product, a program or a service to essentially help them better manage or to achieve what they were trying to achieve with their health plan.

In this time, in this industry, collaboration is more important than ever. We have a legal team, a communications team, a pharmacist, an underwriting team — all designed to essentially help support the employers, and bring some of the best new ideas to the employer to help them engage in new or better health and wellness programs. And also to drive lower costs for their population.

We essentially try to be one single source for an employer to come and partner with them — to not only design but to administer their health plans.

We’re interested in your unique needs. Contact Jason at jclarke@medcost.com or call 336.774.4283.MedCost

(This post is a transcript from the video, “Listening to the Voice of the Customer.” )

2018 HSA and HDHP Dollar Limits Released by IRS

By Michael Berwanger, JD, Director, Quality Management & Compliance

The IRS has released Revenue Procedure 2017-37, setting the 2018 dollar limitations for health savings accounts (HSAs) and high-deductible health plans (HDHPs).

The contribution, deductible and out-of-pocket limitations for 2018 are shown in the table below. All of these amounts are scheduled to increase from 2017. (The 2017 limits are included for reference.)

2018 HSA HDHP

For guidance on HSAs, please review the IRS frequently asked questions’ page at https://www.irs.gov/publications/p969/ar02.html.MedCost

This blog post should not be considered as legal advice.

 

5 Factors in Employer Prescription Drug Costs

Why are employer prescription drug costs spiraling higher every year?

“There are a combination of factors,” said Zafeira Sarrimanolis, PharmD, MedCost Pharmacist and Clinical Consultant. “This is a major problem for employers who do not want to make employees unhappy by instituting clinical pharmacy programs in their health plans.”

employer prescription drug costs


What Are the Factors in Employer Prescription Drug Costs?

  1. Manufacturer Price Hikes.

    Costs for drugs like EpiPen® and Humira® have been widely publicized.[i] Prices are escalating 16-17% per year. Manufacturers are also promoting new uses for existing high-cost drugs, even though there are already FDA-approved, lower-priced drugs for the same conditions already on the market.

  2. Increased Use of Prescription Drugs.

    The number of people taking cholesterol drugs is up from 6.5% (1999-2002) to 13.1% (2009-2012). Similar increases are seen in other common chronic conditions, including depression which increased 6.4% to 9.0% over the same period.[ii]

employer prescription drug costs

 

3.Specialty Drugs.

New, expensive medications for diseases such as cancer and multiple sclerosis are constantly hitting the market. Specialty drugs account for about 1% of total prescriptions but 35-45% of pharmacy spend, averaging $3,400 per drug per month.[iii]

4. Patent Expirations.

In 2016, Crestor, Zetia and Benicar all had patent expirations. The increased competition from generic equivalent drugs is decreasing costs across the board. Unfortunately for high-cost injectable medications like Humira, the introduction of generic versions is not as simple.

5. Advertising.

An estimated 80 drug commercials per hour are shown across TV outlets.employer prescription drug costs[iv] Radio, magazines, newspapers and social media also contain prescription drug ads that prompt individuals to ask doctors about specific drugs.

It’s an exciting time in the drug industry with the influx of new drugs coming on the market,” said Michael Cornwell, MedCost Director of Sales and Underwriting. “But it also presents challenges for us in the industry since controlling these costs is not always user-friendly.”

 

Employer Strategies for Controlling Prescription Drug Costs

 

Pharmacy Benefit Managers

Working with a Pharmacy Benefit Manager (PBM) supports cost management for employers in the pharmacy portion of their health plans. A PBM negotiates discounts and rebates from drug manufacturers, which are then returned back to the employer. PBMs also contract with pharmacies and process pharmacy claims.

The PBM controls pharmacy costs for employers through development of a preferred drug list (or formulary) and clinical programs. MedCost as a benefits administrator works closely with PBM partners to get the best rates for employers, customizing a pharmacy plan for each client’s unique population.

Formulary Management

Preferred drug lists are arranged in tiers, or cost levels, of generic, preferred and non-preferred medications. A PBM Pharmacy & Therapeutics Committee of industry experts follows a clinically-driven formulary decision-making process to define the preferred drug list. Some drugs are excluded from coverage in favor of clinically-similar alternatives that treat the same disease.

Exclusions can save as much as 15% of prescription drug costs in an employer’s health plan.

Prior Authorization

Prior authorizations require a doctor to provide additional clinical information to determine whether the health plan covers that drug. Employees, providers and health plan administrators dislike the inconvenience of waiting for approval of drugs. But this strategy is key to ensure that members take safe, clinically-appropriate and cost-effective drugs.

“There’s a human factor,” said Michael Cornwell. “We do not want to be disrupted in using familiar medicines. But employers cannot save money without these strategies.”

Step Therapy

Step therapy requires initial use of a lower-cost, clinically-similar drug for a medical condition, before a higher-cost drug for the same condition is covered by a health plan.

Summary

When 1% of prescriptions drive 40-45% of an employer’s pharmacy spend, avoiding wise management is no longer optional”, said Zafeira Sarrimanolis. “Part of my role as a MedCost Pharmacist is to emphasize the importance of cost-management strategies to our employers and consultants.”

“I also work closely with our clients to help employers understand the importance of educating their employees about these changes and why they are needed.”

“It’s all about making sure each employee gets the right drug for the right medical condition at the right time. That’s how we control pharmacy costs.MedCost

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[i] Brad Tuttle, “21 Incredibly Disturbing Facts about High Prescription Drug Prices,” Money Magazine, June 22, 2016, http://time.com/money/4377304/high-prescription-drug-prices-facts/ (accessed April 26, 2017).

[ii] “Health, United States, 2015,” National Center for Health Statistics, Centers for Disease Control and Prevention,   https://www.cdc.gov/nchs/data/hus/hus15.pdf#079 (2009-2012), (accessed April 26, 2017).

[iii] “The Growing Cost of Specialty Pharmacy – Is It Sustainable?” American Journal of Managed Care, February 18, 2013, http://www.ajmc.com/payer-perspectives/0213/the-growing-cost-of-specialty-pharmacyis-it-sustainable (accessed April 26, 2017).

[iv] “Prescription Drug Costs Remain Atop the Public’s National Health Care Agenda,” Kaiser Family Foundation, October 28, 2015, http://kff.org/health-costs/press-release/prescription-drug-costs-remain-atop-the-publics-national-health-care-agenda-well-ahead-of-affordable-care-act-revisions-and-repeal/ (accessed April 26, 2017).

Self-Funded vs. Fully-Insured Health Plans (Infographic)

Why are more employers choosing self-funded versus fully-insured health plans? This infographic compares the fixed costs of self-funded employer plans, with potential savings available from health dollars not spent by the company.

In the event that an employer’s claims are larger than projected, stop-loss insurance that is purchased protects business assets.

Self-Funded vs. Fully-Insured

This short video, “Reasons to Consider Self-Funding,” gives four key reasons that over 58% of US employees are enrolled in self-funded health plans. Evaluate these reasons to see what is best for your business.MedCost

(To print this infographic, click on the title and scroll to “PRINT THIS PAGE” at the bottom)

How This Employer Reduced Health Costs – and Improved Employee Health

A Case Study

Reduced Health Costs Improved Employee Health

 

Executive Summary

Our client is a South Carolina municipality with an annual public budget of over $53 million, insuring 800 health plan members. The City of Aiken is governed by seven elected City Council members and Mayor.

The Challenge

Managing self-funded health costs, while providing excellent benefits for employees and their families.

Outcome

Reduced Health Costs Improved Employee Health

Savings achieved by:
  • Sending information quickly & accurately
  • Keeping cost trends low
  • Paying claims properly & promptly
  • Expert COBRA administration
  • Compliance education & direction
  • Personal client relationship
  • Responsive account management
“We highly value our relationship with MedCost. They have helped us tremendously with ACA regulations and plan administration. We’re very appreciative of how they take care of any issues.”  
 – Al Cothran, Revenue Administrator, City of Aiken, SC

Reduced Health Costs Improved Employee HealthHow Aiken Reduced Health Costs & Improved Employee Health

Al Cothran knows numbers. And the numbers that this Aiken Revenue Administrator saw in rising medical costs concerned him. This South Carolina municipality was a former member of a state municipal group that pooled self-funded health insurance. But increasing government regulations presented a stiff challenge, especially after the state municipal group ceased to exist in 2011.

The City wanted to continue to offer lower deductibles as their employees aged and needed more benefits. As a municipality that self-funded health expenses, the staff and City Council needed a benefits partner that could navigate a highly regulated industry while understanding their unique needs.

As premiums, pharmacy and claims costs skyrocketed throughout the health care industry, the City of Aiken turned to their long-time partner to preserve expenses—MedCost.

Benefits of MedCost Partnership

*Constant Access to Expert Nurse Consultants

Aiken began a wellness program in 2003 after several employees died of heart disease. In 2007, the City contracted with Aiken Regional Hospital for an RN to staff an onsite clinic three days per week. Services expanded to five days as sick leave use decreased, along with workers’ compensation claims.

Aiken’s contract nurse has greatly benefited from the training she has received from MedCost prenatal nurses, specialty case managers and nurse health coaches. The contract nurse transmits this knowledge to Aiken employees.

And the addition of obesity to the COACH program has affected Al personally. He has lost 60 pounds and changed his nutrition significantly. The City’s Comprehensive Health program (COACH) is producing a 2:1 return on their investment.

*Compliance Knowledge of Government Regulations

“MedCost’s compliance department alone is worth the price of admission,” said Al. Complex regulations and legislative changes in the Affordable Care Act presented huge hurdles for Al’s staff. MedCost experts provided timely updates and deadlines. MedCost’s seamless management of COBRA has also been a relief. “One of the best things we ever did was to turn COBRA over to MedCost,” said Al.

*Customized Reporting

MedCost’s specific, measurable analyses identify spending trends that empower Al and his staff to take action. Key observations categorize at-risk populations, with recommendations for cost containment. medicalMedCost Care Management programs help support Aiken’s RN, especially in complex cases of cancer, diabetes or cardiac conditions. Employees are encouraged to get regular screenings.

“You can’t put a monetary amount on the heart attack you prevented,” said Al.

*Help with Employee Dependents

“A lot of our big claims are for dependents,” Al said. “Those dealing with cancer have been very complimentary of MedCost case managers who have helped them.” MedCost staff helps pinpoint members who need nursing support while communicating with Aiken’s onsite RN – avoiding gaps in care that can be costly in every way.

“Our COACH program has been a huge benefit for us, in cost savings of premiums. I can’t tell you how many cities have toured our facility to see how we are doing wellness. We highly value our relationship with MedCost.”MedCost

This case study was published with permission from the City of Aiken, SC.

7 Ways to Manage Medical Cost for Employers (Infographic)

medical cost

*Discover more resources about MedCost Care Management programs hereOr browse through seven ways to manage medical cost:

  1. Complex Case Management 
  2. Inpatient Management
  3. Outpatient Management
  4. Telehealth Services
  5. Nurse Health Coaching
  6. Maternity Management
  7. Behavioral Health

To print this infographic, click on the title and scroll to “PRINT THIS PAGE” at the bottom.MedCost