For 2019, Employers Adjust Health Benefits as Costs Near $15,000 per Employee

This article was published on August 13, 2018 on SHRM.org, written by Stephen Miller.

Plans are steering employees toward expanded telehealth options and high-value centers of excellence

With the cost of employer-sponsored health care benefits expected to approach $15,000 per employee next year, large U.S. employers continue to make changes, new research reveals.

Many want to hold down cost increases and are steering employees toward cost-effective service providers, such as telehealth options and high-value in-plan provider networks, according to the nonprofit National Business Group on Health (NBGH) survey 2019 Large Employers’ Health Care Strategy and Plan Design. The survey was conducted from May to June with 170 large employers as they finalized their 2019 health plan choices; more than 60 percent of respondents belong to the Fortune 500.

Cost Increases Hold Steady

Big employers project that their total cost of providing medical and pharmacy benefits will rise 5 percent for the sixth consecutive year in 2019. If they weren’t making benefit changes, their costs would rise 6 percent, the survey showed.

The total cost of health care, including premiums and out-of-pocket costs for employees and dependents, is estimated to average $14,800 per employee in 2019, up from $14,099 this year. Large employers will cover roughly 70 percent of those costs, leaving $4,400 on average for employees to pick up in premium contributions and out-of-pocket expenses.

Health benefit costs are still rising at two times the rate of wage increases and three times general inflation, “making this [cost] trend unaffordable and unsustainable over the long term,” Brian Marcotte, NBGH president and CEO, said at an Aug. 7 press conference in Washington, D.C.

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Consumer-Directed Health Plans

“The most unexpected data point in the survey this year is that employers are dialing back their move to consumer-directed health plans”―or CDHPs―especially as a full replacement for other health plan options, Marcotte said. CDHPs typically combine a high-deductible health insurance plan with a tax-advantaged account that employees can use to pay for medical expenses, most commonly a health savings account (HSA) or health reimbursement arrangement.

“We may be at a tipping point in terms of cost-sharing with employees,” Marcotte said.

In 2019, the number of employers offering CDHPs as a sole option will drop by 9 percent, from 39 percent to 30 percent, “reflecting a move by employers to add more choice back into the mix” by also offering traditional health plans such as preferred-provider organizations, he noted.

To lessen the pain of high deductibles while maintaining incentives for cost-conscious spending, large employers are contributing to their employees’ HSAs, on average, $500 for an individual and $2,000 for a family, NBGH found.

The shift to CDHPs as a sole option over the last decade was driven, in part, by the Affordable Care Act and its 40 percent “Cadillac tax” on high-value health plans, originally to take effect in 2018, Marcotte said. “A lot of companies moved to high-deductible health plans to minimize the impact of the Cadillac tax or to delay its impact, but the Cadillac tax has been kicked down the road, first  to 2020 and now to 2022,” Marcotte said. Many believe it may be further delayed or repealed altogether, “so employers are relaxing” about the need to reduce the scope of their plans. Continue reading

Fighting Specialty Drug Costs

prescriptionTo help control rising specialty drug costs, the National Business Group on Health has issued a lengthy report including 5 public policy recommendations they hope will educate the marketplace and encourage effective, strategic partnerships.

According to NBGH officials, plan design is the key to managing the use of specialty prescriptions as well as the costs. The report details progress resulting from the aggressive use of utilization review, case management and prior authorization for specialty drugs. Other measures yielding positive results are the design of a specialty tier into the benefits plan and taking measures to administer specialty prescriptions in a facility separate from the hospital. Prescriptions authorized by a hospital or billed under the medical benefit are harder to track and often more costly.

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A Dose of Reality: PBM’s Job is Rarely To Save Costs

Article as seen in MyHealthGuide Source, written by Ron E. Peck, Esq., Sr. VP & General Counsel, The Phia Group, LLC, The Self-Insurer July 2016 – pages 10-15 Full Text

Utilization review. Precertification. Medical case management. It seems as if health plans have been, for lack of a better word, micromanaging how medical care is sought and obtained by plan participants, for decades upon decades. It makes sense. Whether I’m a fully insured carrier or a self-insured plan sponsor, I know that a complicated pregnancy, chronic illness, cancer diagnosis, or any other number of conditions will seriously hurt — if not sink — my plan.

As specialty drugs, implants and other devices usher in an age of skyrocketing costs, not enough attention is being paid to this area in dire need of improvement.

Drug costs already make up 25% of all healthcare expenses. Indeed, a recent study revealed that large employers spent — on average — almost a thousand dollars per covered life, on pharmacy costs in 2014.

  • Specialty and Compound drugs accounts for between 25% and 35% of total drug spending.
  • Further, the costs associated with specialty drugs is increasing at nearly double the 10% rate attributed to other drugs; meaning a 20% jump per year.
  • Even more startling, more than 50% of drugs in the later stages of FDA approval are specialty drugs.
  • Some existing medication have increased substantially, with some increases exceeding 47%.
  • All of this adds up to a total pharmacy spend projected to double by 2020.

The Role of the PBM

A report says that eighty percent (80%) of employers agree or somewhat agree that their Pharmacy Benefit Manager (PBM) is sufficiently managing drug costs. I’m sure — if asked about medical expenses in general — the same respondents would be full of complaints. Yet, when we focus on drug costs which — as described above — are one of the (if not the) fastest growing drivers of plan expense, 80%+ of plan sponsors are satisfied. Someone isn’t getting the memo!

  • PBMs are not necessarily the problem. The issue is that we — as an industry — don’t recognize their role, limits and mission. People assume PBMs exist to contain drug costs. This is simply not the case (with a few exceptions).

Plan sponsors contract with PBMs directly or through their third party claims administrator, to decide what drugs are covered, what the costs shall be and, as it relates to payment to pharmacies, the where, when and how much. Further, plans rely upon their PBM to set the participant cost-share and establish pharmacy networks. PBMs therefore serve many important roles; none of which are — first and foremost — dedicated to identifying cost containment opportunities.

  • Understanding the role of a traditional PBM, what they do to create revenue for themselves and recognizing the pros and cons of said arrangement, is the key to devising independent cost controls.

Some plan sponsors think that they simply pay the PBM for the cost of any drugs actually dispensed and usually an administrative fee for managing the prescription drug program. Little do they know, but many other costs — and conflicts — impact the bottom line when it comes to prescription drug purchasing and distribution, above and beyond the problem of rising drug costs.

The costs of the drugs purchased are exploding. Plans, however, are not only contending with the rising cost of the drugs themselves. They must also worry about lost refunds, PBMs pocketing spreads (the difference between what the plan pays and the pharmacy receives) and other revenue bolstering tactics, such as up-charging and therapeutic shifting. Continue reading