A survey of individual healthcare consumers shows that the lack of cost transparency is taking a big toll, with more than half of respondents saying they have passed on doctor visits or prescriptions because of cost. The vast majority of those foregoing treatment cite the cost of higher deductibles and copays as the top concern along with consistently rising prescription drug costs.
Currently, patients with high deductible health plans and health savings accounts have to pay for treatment of chronic illnesses out-of-pocket until they have reached their required deductible. According to IRS Notice 2019-45, those with chronic conditions such as diabetes, high blood pressure or asthma, will reduce their financial burden prior to reaching their health plan deductible.
The notice, which becomes effective on January 1, 2020, states that the service or item needed must be low cost and supported by medical evidence showing that it will prevent the chronic condition from getting worse or causing other related health issues.
From hospitals to insurers, you’ve probably heard many say that the goal is to provide the right healthcare, at the right time, in the right place. When it comes to the infusion of high-priced specialty drugs, location can make a huge difference. As an example, the variance in the cost of hospital-administered multiple sclerosis drugs can be staggering. One third party administrator saved a self-funded health plan more than $30,000 by moving a patient from a local hospital to a beautiful treatment facility in the Cayman Islands. The patient not only received their prescription in a beautiful, clean, state-of-the-art facility, but air travel and lodging were included.
Other cases compare the administration of specialty drugs in independent physician offices and patient’s homes rather than hospital outpatient settings. Savings ranged from $16,000 to $37,000 annually and the patient received the same level of personalized care without the hassle of a hospital visit. While the patient’s condition and circumstances always take precedence, finding a more appropriate location for treatment can make a positive difference for the plan and the patient.
The IRS recently published finalized rules easing restrictions on health reimbursement arrangements (HRAs) to allow employers to provide their workers with tax-preferred funds to pay for the cost of health insurance coverage they buy in the individual market. The regulation is part of the Trump Administration’s commitment to deliver more health coverage choices to Americans.
The HRA rule should be extremely valuable to small businesses that have had a really hard time providing group health coverage. So hard, in fact, that the Kaiser Family Foundation Employer Health Benefits Survey recently reported that the percentage of businesses with 25 to 49 workers offering group coverage has fallen from 92% to 71% since 2010.
Two New Options Will Be Available
Effective January 1, 2020, employers will be able to help employees buy individual health insurance policies by offering two different tax free HRAs. The first is an Individual Coverage HRA, which can only be offered to similar classes of workers when a traditional group health plan is not currently available. Classes refer to groups of employees with similar circumstances, such as full-time, part-time, seasonal, salaried, temporary, etc. A class must include at least 10 employees for employers with fewer than 100 employees and 20 or more employees for employers of 200 or more workers.
The other option, an Excepted Benefits HRA, is designed to be offered with a traditional group health plan, although employees do not have to enroll in the health plan. The maximum annual benefit for an Excepted Benefits HRA is $1,800.
Tax-Preferred Benefits Can Extend to Millions
The new HRA rules will make it easier for small businesses to compete with larger organizations that provide high quality group health benefits. More importantly, the employees who buy individual health plans financed by a new HRA will receive the same tax advantages as those with traditional group coverage.
The Departments of Labor, Health and Human Services and Treasury estimate that HRA expansion will benefit as many as 800,000 employers and more than 11 million employees and family members, 800,000 of whom will have been previously uninsured. To learn more about these new HRAs as you begin your planning for 2020, contact your account representative at your convenience.
In a very recent decision, a federal judge ruled against Trump Administration efforts to require drug manufacturers to include the price of prescription drugs in their television commercials. Filed in federal court in mid-June, the lawsuit claimed that HHS does not have the legal power to enforce the rule and that including prices will mislead patients and discourage them from seeking treatment. In the decision rendered on July 9th, U.S. District Court Judge Amit P. Mehta agreed, adding that the administration had overstepped its authority.
A spokesman for HHS was quoted as saying “we are disappointed in the court’s decision and will be working with the Department of Justice on next steps.” While the decision is a blow to the administration’s efforts to increase cost transparency and drive down drug prices, many expect their efforts to continue.
With the Centers for Disease Control and Prevention projecting that 83 million people will soon have three or more chronic diseases, the number of employers working to manage chronic conditions like diabetes, high blood pressure and coronary artery disease is staggering.
Not only do the average medical costs for a diabetic exceed $16,000 per year, but the loss of productivity is estimated to add an additional $1,700. How can your health plan cope?
Begin with Good Information
Reviewing claims data, diagnostic tests and prescription drug data is a critical starting point. Once plan members with chronic illnesses are identified, care managers, nurse navigators or health coaches can talk with them to learn about their lifestyle, ask about medications, nutrition, their family situation and other factors that may be impacting their condition.
Chronic disease management is not a one-step process. It involves partnering with a member’s physician and other professionals to understand the patient’s needs and develop a personalized care plan. This level of personal involvement will not only help the member receive the care they need but also help them better understand how to use their health plan to their benefit.
Experience shows that 80% of a company’s healthcare spend is often attributed to 20% of plan members. Chronic illness is likely the reason, making disease management a critical part of high-quality healthcare plans.
In late June, President Trump signed an executive order directing HHS to develop rules requiring hospitals to publish clear and understandable pricing that reflects what people will actually pay for services. HHS Secretary Alex Azar added that the order should also make certain that providers and insurers provide patients with information about potential out-of-pocket costs they will face before receiving healthcare services.
While details about how the rules of the order will work are yet to be determined, hospital and health plan lobbyists criticized the order, saying it will increase prices and reduce competition. The President and CMS Administrator Seema Verma emphasized that the intention of the order is to combat the huge price variations that have long existed among healthcare facilities and make it easier for patients to find low cost, high-quality care.
Another major insurance carrier has cooperated with selected healthcare providers in two states to introduce a bundled payment program for maternity care. Like bundled payment programs used by Medicare and commercial carriers for total joint replacement, the bundled maternity program reimburses the care provider for an entire episode of care, including prenatal, delivery and postpartum services, with one overall fee. Insurers are encouraged with the positive outcomes, citing early access to care and open lines of communication as significant advantages of this approach.
According to Fidelity Investments, a couple retiring this year can expect to spend $285,000 on medical expenses during their retirement. And while the rate of healthcare cost increases has slowed in recent years, Americans are living longer, meaning they will need to address the cost of healthcare for a longer period of time.
The good news is that as we have noted many times, HSAs are becoming more popular all the time and a great way to save for retirement on a tax-free basis. Fidelity reports that their portfolio of HSA owners has grown to more than 830,000 individuals who currently own $3 billion in assets. In addition, consultants say that employers contributed nearly $9 billion to employees’ HSAs in 2018 alone. If our economy remains strong, we can expect these trends to continue. More and more employers will be able to provide matching contributions and funds contributed to HSAs are never taxed.
Employees will be able to save some additional healthcare dollars in 2020 as the IRS will increase the limit on deductible contributions to an HSA by $50 for individuals and $100 for families. The limits will be $3,550 for individuals with self-only coverage and $7,100 for family coverage. The minimum deductible for a qualifying high deductible health plan will also increase, rising to $1,400 for single coverage and $2,800 for family coverage
Research shows that the number of HSAs increased by 13% over the past year, topping 25 million accounts with an anticipated increase to 30 million by 2020. Another important statistic revealed that the average employer contribution to HSAs rose from just over $600 in 2017 to $839 in 2018 – an increase of some 39%. Supporters are encouraging legislators to make HSAs even more consumer friendly by allowing adults over 65 to continue using an HSA to save for healthcare costs in retirement. We will continue to report on these efforts going forward.