A recent IRS proposal would enable workers to use ordinary health reimbursement arrangements (HRAs) to pay for direct primary care program memberships. In addition to giving workers the peace of mind in knowing they can fix the costs of primary care, the proposal would help primary care doctors reduce the time and money they spend on administrative work and make them far more efficient.
The IRS says this would be accomplished by declaring that payments for direct primary care arrangements and healthcare cost sharing ministry memberships are expenses for medical care under Internal Revenue Code Section 213. While this step will have a significant impact on healthcare providers and payers, there are sure to be many questions asked within the health benefits industry. The period for comments on this proposal will run through August 10, 2020.
When President Trump signed the Families First Coronavirus Response Act into law in mid-March, employers with fewer than 500 employees became responsible for providing paid leave to certain employees through Dec. 31, 2020.
The benefit extends to employees unable to work or telework due to the need for leave to care for a son or daughter under the age of 18 that has been impacted by the closing of a school or place of care as a result of a federal, state or local emergency declaration. According to the law, the first 10 days of this leave may be unpaid but provided with pay after 10 days at a rate no lower than two-thirds of an employee’s regular rate of pay. Paid leave is not to exceed $200 per day or $10,000 in aggregate and employees cannot be required to use available paid time off before receiving the benefit. This expansion applies to employers with fewer than 50 employees even though they are not currently subject to FMLA.
Uninsured people needing medical treatment for the coronavirus will be able to get that treatment without concerns about out-of-pocket costs or unexpected charges. Thanks to the federal stimulus package passed by Congress in early April, hospitals and healthcare providers that treat these folks will be paid for unreimbursed care at current Medicare rates.
While the law does not require that health insurance carriers and employer-sponsored health plans waive cost-sharing charges such as deductibles and coinsurance for coronavirus patients requiring medical treatment, many groups are pushing for this relief. In response, some large insurance carriers and health plans have said they would waive out-of-pocket costs for in-network COVID-treatment through the end of May. Pressure for this relief is expected to mount as shutdowns of non-essential businesses continue and more and more workers are laid off or furloughed.
Relief for HDHPs and HSAs
In another emergency ruling, the IRS said that HSA users with high deductible health plan coverage can use their coverage to pay for testing for SARS-CoV-2, the virus that causes COVID-19 pneumonia, without having to be concerned about satisfying the minimum deductible requirements common to HSA coverage. The same flexibility will now also apply to HSA account holders who need to use their coverage to pay for treatment of COVID-19 pneumonia. The IRS has cautioned that this guidance only applies to the COVID-19 emergency and does not void the other requirements governing High Deductible Health Plans and Health Savings Accounts. Since regulations and requirements regarding benefits for COVID-19 continue to evolve rapidly, plan members are advised to consult their health plan before seeking testing or treatment.
The Kaiser Family Foundation reports that annual premiums for employer-based, family coverage increased to $20,576 in 2019. This represents a one year increase of about 5 percent and a pattern of similar increases each year throughout the past decade, significantly outpacing the rate of annual inflation over the same period.
A recent survey by a data analytics firm found that benefits objectives often vary based on company size. Results showed that while smaller companies were focused on increasing employee productivity, mid-range employers were more concerned with employee satisfaction levels. Very large employers identified employee health and well-being as their main objective.
One interesting finding was that regardless of objectives, a high percentage of employers expressed concern that their health benefits were falling behind those of industry peers. If you share that concern, be aware that even though expectations vary by industry and workforce demographics, the days of doing things because “that’s the way we’ve always done it” are over.
Stay Open to New Ideas
Top workplaces are committed to innovation in every part of their operation and health benefits are no exception. By self-funding, most use claims data to respond to member needs and take advantage of new opportunities. Health concierge services, price transparency tools, bundled pricing and the trend to low or no deductibles and copays are just a few of the ways health plans are innovating to rein in rising costs and help employees get the care they need – important objectives of a high quality health plan.
Whether you refer to it as Reference Based Pricing, Medicare Reference, Cost Plus or something else, the important thing is to understand what it is and why it’s being used to lower health plan costs.
Health plans with reference based pricing provide high quality coverage at a lower cost by using Medicare fee schedules as a base. Then they negotiate with hospitals and physicians to determine an acceptable percentage margin over and above Medicare. Margins often fall within a range of 25% to 65%. The absence of PPO networks takes many of the “unknowns” out of play. Rather than operating at the mercy of networks that traditionally save their largest discounts for the largest health plans, reference based pricing takes the mystery out of network discounts by fixing fees for covered services. In addition to lower out-of-pocket expenses, members also gain the flexibility they need to search for a physician that meets their needs rather than settling for a smaller network in order to save on out-of-pocket expenses.
Experience Makes the Difference
Administration is always important when a health plan is self-funded. But reference based pricing requires much more than claims administration. Supporting a health plan with reference based pricing requires a TPA with the skills to make providers comfortable with this form of reimbursement and the resources to protect the plan against issues such as balance billing.
Many employers fear reference based pricing because of balance billing, which can occur when the established fee does not pay a provider’s bill in full and the provider chooses to bill the unpaid balance to the member directly. Even though resourceful TPAs point out that concerns about balance billing are often overblown, they typically integrate measures to protect members against it. In most cases, these include adding the services of attorneys or consultants to enforce the terms of the reimbursement agreement or negotiate a payment settlement with hospitals that may not be subject to negotiated reimbursement rates.
Experienced TPAs know that the competitive landscape for providers can often determine the potential for referenced based pricing in a given community. While it may not be appropriate for all employer groups, the ability to control future healthcare costs certainly makes it worth exploring.
As physician consolidation continues, more and more hospitals are adding ambulatory surgery centers, including many that are physician-owned. The rise in popularity is primarily due to the ability of these facilities to traditionally offer high quality procedures at a lower cost than hospitals.
The Kaiser Family Foundation employee health benefits survey for 2019 shows that the cost of annual premiums for employer-sponsored health insurance plans have reached $20,576. While there are differences between small and large employer groups, costs are rising faster than wages for both and average contributions by employees have reached $1,242 for single coverage and more than $6,000 for families. And while wages have increased by 26% in the past decade, contributions to healthcare premiums have gone up 71%.
A recent study in the State of Texas revealed that when health systems acquire physician practices, patient costs go up. The study was in response to a wave of consolidations across all facets of healthcare, from institutions to individual physician practices. Results showed that the share of physician practices owned by hospitals in Texas rose from 14% in 2012 to 29% in 2016.
When two years of claims data was analyzed, it showed that PPO members spent nearly 6% more when treated by doctors in hospital-owned practices, versus physician-owned practices. A breakdown revealed that higher costs were attributable to additional services being provided rather than higher fees. Higher costs for imaging, durable medical equipment and operating and recovery room use were common contributors, with no evidence of improved quality shown.
Communication and helping plan members get the most out of their health plan should be an all year round endeavor. Surveys continue to indicate that even highly educated employees describe benefits, insurance and the enrollment process as “very confusing.”
Consider academic research by the Commonwealth Fund and a recent study by Accenture. While one points to higher deductibles and co-pays as the leading financial barrier to medical care, the other cites low health literacy as a hidden cost adding billions in administrative expense to our healthcare system. While it may never be possible for your plan to do away with co-pays and deductibles, high performance TPAs are doing many things to help plan members make more informed healthcare decisions. Here are a few ideas.
1. Simplify Summary Plan Descriptions – Remember that these are more than compliance documents. They are communication pieces and need to be written so that regular people can read them. Make it easy for employees to find information on eligibility, how they enroll, what the plan covers, what isn’t covered and how to file a claim. Move as much legal information as humanly possible to the end.
2. Put an End to Boring Content – To make things easier on the eyes and draw attention to information people care about, use different kinds of headings and add visuals or infographics to any benefit-related communications. Include links to your TPA’s website or other websites that employees can learn from. You don’t need a Hollywood producer to use video clips and after all, video is pretty much all that younger people look at these days. Seriously!
3. Create a Decision Support Taskforce – It sounds challenging, but look outside HR to recruit a team of individuals who feel comfortable with your health plan and healthcare in general. Let people know they can reach out to these individuals with questions about plan options, coverage, how to file a claim, provider networks, etc. People will appreciate this, especially your younger employees, who studies show are particularly confused and stressed over everything insurance related.
Improving your communications can make people feel much more confident about the decisions they have to make. You don’t have to tackle everything at once and even a little progress will improve morale and help people avoid making decisions they may regret later.