Employer Sponsors of Health Benefits Part 2: More Gridlock Ahead

Regardless of what side of the political spectrum you find yourself, you would probably agree that to say Washington, DC is in gridlock is an understatement. We are not going to assign blame to any particular party for the impasse. Instead, we’ll focus on how employer-sponsored health benefits could be impacted in 2019-2020 and by the results of the next Presidential election in November 2020.

.We will look at how the Trump Administration’s executive actions between now and then could shape the direction of employer-sponsored health benefits. We will also speak to how the makeup of the U.S. Supreme Court (SCOTUS) could impact the outcome of any related legal challenges.

On February 27, Representatives Pramila Jayapal (D-WA) and Debbie Dingell (D-MI) introduced the Medicare for All Act of 2019. This bill goes far beyond the Affordable Care Act (ACA) by eliminating employer-sponsored health plans. In fact, Healthcare.gov (i.e. the ACA Marketplace or Exchange) would also be eliminated as everyone is moved to Medicare within two years. Given the Democrats have a 235-197 majority in the House of Representatives (there are 3 vacancies), it’s quite possible the Medicare for All bill will pass. However, the Republican majority in the U.S. Senate (53-47) likely means this bill would not pass the Senate—if it ever makes it to the floor for a vote. Other health care-related bills passed by the Democrat-controlled House will likely be opposed by the Trump Administration and the Senate Republicans too.

The Trump Administration will continue issuing healthcare-related Executive Orders (EO), such as the one which changed the maximum coverage period for short-term limited duration insurance plans from 12 to 36 months. Another example is the EO that would allow organizations (beyond churches and religious employers) to avoid the ACA’s contraceptive mandate based on religious or moral grounds. Predictably, this EO was challenged by Attorneys General from five states where the governor is a Democrat and/or the legislatures are primarily controlled by Democrats. As a result, two federal district courts have issued nationwide preliminary injunctions to block this order.

The Trump Administration is also likely to continue directing the DOL/HHS/Treasury Departments to issue regulations or guidance that are consistent with its objectives and policies to control healthcare costs and improve access to affordable coverage. One example is the proposed rules to expand the use of Health Reimbursement Arrangements (HRAs) by employers of any size to pay for individual health insurance premiums. Another example is the possibility the HHS Secretary could relax prescription drug importation rules to give Americans the ability to purchase their prescriptions from abroad at a fraction of US prices.

Although Democrats would probably not oppose prescription drug importation because it will help reduce costs for their constituents, they are likely to challenge the HRA measure. Democrats are concerned about their constituents losing comprehensive, ACA-compliant coverage through their employers (at least until they can get them moved on to Medicare) in exchange for a stipend that may not be sufficient to cover the premiums for an individual health insurance policy (probably with higher deductibles and a more narrow provider network). And speaking of challenges, you may recall that Attorneys General from eleven states and the District of Columbia filed suit to block the Administration’s endorsed DOL/HHS/Treasury regulations on Association Health Plans (AHPs), because they believe AHPs will undermine the ACA Marketplace and result in people being covered under non-ACA compliant plans.

Earlier, we mentioned the makeup of SCOTUS will determine the fate of court challenges to the Trump Administration’s (and that of future Administrations) healthcare-related EOs and regulations. Today, the Administration enjoys an advantage with the recent appointments of Justices Gorsuch and Kavanaugh. However, with Chief Justice Roberts showing a tendency to be a more moderate voice, that advantage is narrow. What if President Trump has the opportunity to appoint another conservative Justice before the November 2020 election and that nomination is approved by the Republican majority in the Senate? If that happens, it’s more likely the Administration’s EOs and regulations will be upheld in the future.

Learn more on possible 2020 election scenarios by reading the third article in this series: Employer Sponsors of Health Benefits: Part 3: Possible 2020 Election Scenarios.

Questions? Contact the Findley consultant you normally work with, or Bruce Davis at 419.327.4133, Bruce.Davis@findley.com.

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Posted March 7, 2019

Evaluating Stop Loss Coverage: 5 Questions Self-Funded Health Plans Must Ask

Why is evaluating stop loss coverage important?

  • The Affordable Care Act (ACA) lifted all lifetime limits on specific stop loss coverage, so the reinsurers (those that provide stop loss insurance protection) are potentially responsible for unlimited risk.
  • With healthcare costs rising at annual rates of 5-7%, a $100,000 claim back in 2010 would be >$165,000 in 2018. Depending on the specific stop loss limit, this places increasing pressure on the employer sponsor’s budget.
  • The rise in $1 million+ claimants in a given year has steadily increased.
  • Specialty pharmaceutical drug prices continue to trend significantly higher than medical inflation and, in many cases, represent 45-50% of an employer’s total pharmacy spend.

This pressure on costs impact the stop loss premiums for self-funded employer sponsors.

It is easy to think you can just shop this coverage each year for the lowest cost and move on, but before you consider that as a solution, consider these important provisions to evaluate:

1. Are the contract provisions the same?

This seems simple enough, but when considering an RFP for stop loss, state very clearly the type of contract to be proposed (i.e., 24/12 – incurred in 24 months and paid in 12, or 15/12 or 12/15, incurred in 12 months and paid in 15). If this is not clearly spelled out, proposals may come back as 15/12 contracts or even 12/12 contracts, and these are NOT the same in terms of protection.  Generally, the few months of incurred and paid liability, the less risk the reinsurer is taking on and the lower the premiums charged.

2. Contingent or firm offer?

A “contingent” offer means the proposal is subject to more updated claim information, disclosures, or even case management notes. Depending on the timing of the RFP, some stop loss carriers will offer “firm” quotes (no additional information needed) with data no more than 90-120 days out from the effective date. The request for a firm quote allows you to evaluate quotes based on final terms.  Regardless, know if you are comparing firm or contingent quotes.

3. Does the contract provide immediate cash flow protection?

This is an important aspect to consider for all size groups, but especially those employers on the smaller end. Some stop loss contracts require the employer to pay up front the cost of the actual claim. The claim is then submitted for reimbursement and a review process takes place. How would paying a $500,000 claim and not get reimbursed for 60-90 days impact your cash flow?

4. Are there “run in limits?”

Some quotes will look like everything is the same: for example, 24/12 contract, same stop loss level, and the same benefits protected. However, one contract may have quoted or placed a run in limit into their caveats that would limit their liability on the run in claims. You should avoid this practice and request a “no run in limit” contract.

5. Does the stop loss contract match the Summary Plan Description?

Too many times we hear stories that the claim was an eligible claim under the plan from the viewpoint of the plan administrator, but the claim was denied as ineligible under the stop loss contract. It is important to review these two contracts to make sure that all claims processed under the administrative agreement are in fact eligible under the stop loss contract.

Stop loss coverage is meant to cover the unknown large claims of a self-funded plan. Going into any review process without sufficient knowledge is a risk your company cannot afford.

Questions? Please contact the Findley consultant you normally work with or Dave Barchet at dave.barchet@findley.com, 216.875.1914.

Posted October 26, 2018

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On-Site Clinic Considerations — Best Practices

By Dave Barchet.

On-site clinics continue to gain momentum as more and more large employers focus on ways to improve health and well-being and lower costs. On-site clinics have evolved from providing basic occupational health to now providing services for preventive care, acute care, chronic condition management, specialty care and wellness initiatives, as well as providing prescription drug dispensing.

There are many different models that can be adopted, from having a registered nurse on site for a few hours a week to a full blown clinic (bricks and mortar) staffed with medical directors, PAs, RNs, services available during typical office hours.

Whether the reason for exploring a potential on-site clinic is to provide more robust access to your employees (especially in rural locations); to enhance and integrate your well-being program; or to focus on cost savings, there are some basic keys to success. We will review these success factors below, but keep in mind that on-site clinics are not for every employer.

A recent study by Mercer illustrated that in 2016, 32% of employers with 5,000 or more employees offered on- site clinics for primary care services, and another 10% were considering adding their own health clinics in the next two years. More than half of the employers in the survey said that their clinic was integrated with their population health efforts.

The Ante — 1,000 or More Employees at a Single Work Site

Success of a clinic is dependent upon volume, so consideration of an on-site clinic should start with your population size and, more importantly, your population location. Do you have 1,000 employees (some would even say 2,000) working at a single work site or campus? If so, this is a good start for further considerations. This cuts out any barrier of access and also greatly reduces the amount of time off the employees need to take to get to the clinic for care.

Let’s face it, one of the key drivers of utilization is the convenience and ease at which the clinic can be reached.

Hours of Operation — 40 Hours a Week, at Minimum

Not only is geographical access important, but so are the hours of operation. Consider the clinic a true doctor’s office. Your employees are on-site generally five days a week and 40 hours a week, so the clinic should be available to them during that same time as well. While the cost of operating a clinic on a 40 hour per week basis increases, so does the utilization, which is key to the success of the clinic. If operating time is limited, employees may resort to using the emergency room or urgent care as their primary care provider. Employers with multiple shifts may want to consider extending the hours of operation to accommodate shift workers.

No Cost or Copay to the Employees Who Use the Clinic

A $0 obligation for the employee will help drive utilization, which is the main factor in operating a cost-effective clinic. Findley recently conducted a study of the impact of an on-site clinic and found the plan savings per visit at an on-site clinic versus visits through the health plan network were $62 per visit. Actual plan savings will vary between different groups due to geography, the Preferred Provider Network being used, and the level of services the clinic provides.

It is important to note the exception of offering a $0 cost to the employees is with Qualified High Deductible Health plans with Health Savings Accounts. The IRS requirements of member cost sharing would remain with the QHDHP.

Trust/Ability to be Liked

This is one of the most important factors. The staff at the clinic has to be likable and trusted. How do you accomplish this? Consider an interview process with key stakeholders or a health care committee up front.

If that is not doable, consider a video message from the clinic staff to the employees. This would serve as both advertising and a way for the employees to get to know the staff personally.

Promoted and Supported by the Top Level of the Organization

Like any endeavor a company wishes to take on, it is more believable and acceptable when it is promoted and supported from the C-Suite of your organization. Moving down the path of an on-site clinic is not inexpensive, so additional investment in the messaging and where the message comes from is worth the time and cost.

Visit Other Companies On-Site Clinics

We encourage prospective groups to visit other companies’ on-site clinics to take a tour. We have found that employers with on-site clinics are more than happy, and are frankly proud, to show off their facilities. This allows you to experience clinic operations first hand, explore different options, and determine what is right for your company . . . a full blown clinic (bricks and mortar) or an RN staffing the clinic a few hours a week.

For more information about on-site clinics, contact Dave Barchet at 216.875.1914 or Dave.Barchet@findley.com.

What’s in a Name?

As you have read throughout this article, I have used the term on-site clinic, which is the most commonly used or accepted term to describe this service model. A lot goes into a name, however, and we have seen the term on-site health center being frequently used as well.

The dictionary defines a “Clinic” as: an establishment or hospital department where outpatients are given medical treatment or advice, especially of a specialist nature.

The dictionary defines a “Health Center” as: a building or establishment housing local medical services or the practice of a group of doctors.

Essentially they are defined the same way, but which sounds more appealing to you? The name can be especially meaningful if you are focusing on preventive services and wellness, which according to the Mercer Survey, over half of the responding employers was the reason for integrating the clinic into their health efforts.

An alternative for smaller employers are near-site clinics. This is primarily a financial play. as smaller employers join together to contract with a clinic to help avoid the direct overhead costs of operating an on-site clinic. Employers sharing a near-site clinic should be careful about the fees they are charged.

Some pricing arrangements allocate the percentage of the clinic’s fees to the number of employees or members in each group. If one or more employers pulls out, each remaining employer’s portion of the cost could suddenly rise to accommodate the clinic’s full operating costs. When contracting with an off-site clinic, put the onus to find employer replacements on the clinic’s operator; thus, keeping the employer’s share of the costs unchanged for the balance of the contract.