Unless you’ve spent the last few weeks vacationing on an internet-free tropical island or remote mountain-top (if so, lucky you!), you’ve read something about the controversy surrounding the EpiPen, the severe-allergy drug injector sold by the pharmaceutical company Mylan. Since 2007, when Mylan acquired the EpiPen, the list price has risen from about $100 for a two-pack to about $600. There are virtually no alternatives on the market, and the medication is potentially life-saving – in other words, not optional. A grassroots social-media campaign, driven largely by parents of children with food allergies, pushed Mylan to offer a $300 “savings card” to commercially insured patients to reduce their out-of-pocket costs and to broaden the eligibility for uninsured patients to receive free EpiPens. What they didn’t do was reduce the list price for the drug, and the barrage of negative press continued, affecting Mylan’s stock price. The company responded by announcing they would introduce their own generic version of the product in a few weeks, at half the price. It will be the exact same product as brand-name version – which the company will continue to sell for the full price. Although drug companies have introduced generic versions alongside their own brand-name drugs to compete with other generics, it doesn’t appear that another generic epinephrine auto injector will be available in the short-term.
Although this move may take heat off the company, the reason Mylan didn’t just reduce the price of the brand-name drug is because they hope and expect that sales of the brand-name version will continue – because (as this New York Times article suggests) some doctors will keep writing prescriptions for it by name, out of habit; because pharmacists will have a financial incentive to sell the more expensive, brand-name version; and because consumers with the $300 savings card might get the brand-name version for free but have a small co-payment for the generic version. On the other hand, some PBMs and carriers may have negotiated prices for the brand-name that are lower than the generic price! Employers will need to talk to their PBM or health plans to understand the current pricing structure and how, now that the target has moved and moved again, to get the best deal for their employees and their organization.
This story shines a spotlight on the urgent need for regulation to address pharmaceutical price-gouging and the extreme variation in prices paid by different purchasers for the same drug. On the defensive, Mylan’s CEO called out high-deductible plans as the real culprit; in fact, they exposed unfair price increases that might otherwise have gone unnoticed, as they do in so many cases. But the EpiPen story also highlights a problem with consumerism: you can’t be a smart shopper if there is no alternative to a product that your life, or your child’s life, may depend on.
Employers implementing HSA-eligible consumer-directed health plans will almost certainly confront participant concerns about greater cost exposure from higher deductibles and other required cost-sharing features. There are a number of creative approaches employers and participants can take to manage financial risk while leveraging the tax-preferred features of an HSA (or a health reimbursement account). Participants can consider the following strategies:
Full contribution rule. An individual who is otherwise ineligible to make a full-year HSA contribution (because, for example, they enroll in the plan mid-year, or have a health FSA grace period balance from the prior year) can make a full-year contribution for the current year, if they (1) are HSA-eligible on December 1, and (2) remain HSA-eligible for the entirety of the following year. This helps participants who are subject to the full annual deductible but would otherwise be unable to fund an HSA to pay for qualifying expenses.
Provider payment plans. While not specific to CDHPs, it’s worth noting that providers – namely hospitals and physicians – generally permit patients to establish a payment schedule to retire their out-of-pocket expenses. This means a plan member might not have to pay their entire deductible or other out-of-pocket exposure with a single payment. Participants could work with their provider(s) to align payments with their pay periods, so they can fund their HSA on a pay period basis and simultaneously pay the provider with tax-free HSA distributions.
Permitted coverage / supplemental health insurance. Certain types of insurance that can be disregarded when determining whether an individual is eligible to contribute to an HSA, for example, critical illness insurance, certain types of accident insurance, and hospital indemnity policies. While these types of coverage are generally offered on a voluntary basis, it is possible for the employer to subsidize this coverage, although the coverage will then generally be being deemed subject to ERISA, invoking compliance-related considerations. Regardless, some employers may find it beneficial to subsidize these types of coverage. Lower-wage / risk-averse participants may value the additional coverage more highly than an employer HSA contribution.
The rise of the CDHP has brought real and perceived financial risk challenges to the forefront for both employers and participants. It’s important for employers to ease participants’ concerns and build their confidence with effective benefits communications about how they can get the most out of an HSA.
This post is part of our 2017 Planning Checklist series.
A growing number of employers are moving Medicare-eligible retirees to special retiree medical exchange platforms. Mercer’s National Survey of Employer-Sponsored Health Plans found that 27% of retiree plan sponsors are using an exchange to provide coverage to Medicare-eligible retirees in 2016, up sharply from just 15% two years ago. The programs are attractive because they offer a wider range of choices for retirees and also take on benefit administration.
Now, the combination of the public exchange and expansion of the individual market off-exchange has opened up opportunities for pre-Medicare-eligible retirees as well. The individual marketplace for pre-65 retirees is evolving. Characteristics typically associated with the Medicare marketplace -- rate stability, standardized plans, carrier availability and longevity -- appear to be more challenging in the pre-65 market.
Recently, several insurance companies have announced their plans to exit the public exchange in certain markets, raising questions with employers about the availability of exchange coverage and off-exchange coverage for pre-65 retirees. Michelle Andrews recently addressed this question in Kaiser Health News. While some states, like the District of Columbia, require the insurance company to offer coverage on the public exchange in order to offer coverage off-exchange, that is not true in every state. But while carrier participation in the pre-65 market has fluctuated, with some national carriers leaving the market or scaling back on their higher value plans, the total number of carriers has remained relatively balanced, as new entrants and smaller, regional carriers gain market presence.
Typically, employers considering a move to a pre-65 retiree exchange are seeking reductions in cost, risk, and administrative burden for this population. Or, based on a geographic footprint analysis, they have found that their pre-65 retirees will likely see savings and choice in the individual market. Often both are the case. It’s important to keep in mind that pre-65 individual coverage options may offer advantages over traditional group insurance in terms of participant personalization of choice and employer administration relief. Issues arising in a handful of markets around the country shouldn’t necessarily mean putting the brakes on a strategy to move retirees out of group plans when there may be a better alternative for them and the organization.
Given that this is an election year and the political landscape surrounding health care reform has been heating up, we can expect little change or significant change in the Affordable Care Act regulations depending on which party gains control of the Senate, House of Representatives, and the White House. For now, the public exchanges are in flux and could create challenges in the pre-65 retiree demographic. For employers looking for alternatives to a traditional group plan for pre-65 retirees, it’s important to do your homework.
Compliance is a never-ending process. The key is in the timing – planning for future deadlines while making sure you meet the more pressing ones. I recently sat down with the Financial Management Network to talk about all things compliance. Here’s where I would focus employers’ attention:
- Employer should have already started preparing for their 2016 ACA reporting, since there is no longer a “good faith compliance” standard, and the timeframes to disclose individual statements and IRS transmittal returns revert back to the original deadlines (e.g., Jan. 31, 2017 for the Form 1095-C; March 31, 2017 for the electronic Form 1094-C)
- Employers that offer flex credits, opt-out payments and/or wellness incentives must reassess their health plan’s affordability for purposes of employer-shared responsibility (ESR) affordability calculations and ACA reporting
- Employers that offer wellness programs should review such programs in light of the EEOC’s fine ADA and GINA wellness program rules.
You can listen to the complete interview here.
As discussed in an earlier post, the EpiPen controversy has put issues surrounding drug pricing very much in the public view. But while ensuring the affordability of life-saving pharmaceutical products deserves attention, it’s a complicated issue with many stakeholders. There is little government guidance for employers and their vendors on benefit design, such as which drugs to include on high-deductible health plan preventive drug lists so that they bypass the deductible. While adding the EpiPen might seem like an obvious step, there are many drugs that fall into the gray area between prevention and treatment, and for any individual employer to try to draw that line could put them at risk. More guidance from the government would help in the short-term, but ultimately the affordability problem will only be solved by addressing underlying drug prices.
Over the past few years, there have been some short-lived alternatives to the EpiPen, but the only one currently available is an authorized generic for Adrenaclick, which may not be significantly cheaper than EpiPen and is in limited supply. While we’re already seeing activity among other drug manufacturers looking to get a competing product on the market, it will take some time. Mylan’s generic version of the EpiPen, however, will likely be available within a few weeks.
Here are some questions to discuss with your PBM or health plan now, to ensure your members have the access they need to this product and you’re controlling spending to the extent possible.
- What is the status of EpiPen and the authorized generic of Adrenaclick on the formulary? This is important because formulary status can determine drug coverage, the amount of patient contribution, and what manufacturer rebates might be obtained.
- How are any earned drug rebates being accounted? Rebates from the drug manufacturer may be one critical aspect of how to recoup some of the plan sponsor’s expenditures, so the primary payers should ensure those rebates are completely flowing back to them.
- Is EpiPen on an inflation protection program? Such protection strategies are a growing trend in managing drug expenditures and they look to ensure that the pharmaceutical manufacturer have some type of price protection or cap on how much they can increase their pricing. Unfortunately, this type of pricing protection may only be associated with increasing the rebates to keep pace with the ingredient price increases; however, it may offer some relief to plan sponsors.
- Is a generic interchange available for EpiPen? For now, the answer is mostly no, but this will be an option to consider once Mylan’s generic version is actually available.
- Will the generic price points be better for employees than the negotiated brand price? Though generics traditionally are the lowest-cost option, if the generic does not offer a significantly lower price, the plan sponsor should explore whether the branded version, net of the rebate, is actually a lower-cost option.
- Are there programs to manage the quantities being dispensed? Such strategies are often applied to ensure patients are not stockpiling large quantities of a medications.
- Are there ways to better account for the drug manufacturer couponing efforts? As the drug manufacturers have been providing more coupons to cover the cost of their products, plan sponsors continue to struggle with how to account for copays patients actually do not pay because, for example, they are applied to the deductible. Although these coupon programs traditionally only benefit the patient, plan sponsors have begun to consider how they might benefit from this type of manufacturer funding, as they still pick up most of the cost for most drug therapies.
Finally, as you monitor availability and price, you may want to review employee communications as well. You may want to consider providing educational materials that provide resources for employees that need help with the cost of EpiPen. And, if plan members can save money by asking a physician to prescribe a generic as availability grows, that’s a message worth reinforcing.
There have been lots of stories in the news over the past week about the Department of Justice suit to block Anthem’s purchase of Cigna and the Aetna and Humana deal. As Tom Murphy reports, leadership from both Anthem and Aetna have committed to defend the lawsuits. The final outcome remains uncertain and could entail a prolonged legal process. The two questions we have been hearing from employers are “what does this mean to us?” and “should we go out to bid now or wait and see what happens?” From an employer perspective, nothing changes – you should continue to refresh your benefits strategy and actively manage your health benefits to meet your goals and objectives. This includes aligning with vendor partners that best support your strategy. We recommend that employers not delay a vendor selection due to this potential consolidation. As the legal proceedings unfold, employers will have visibility into any activity that could impact their vendor partner and their member population. The cost trend for employer-sponsored health coverage has hovered around 3% for the past several years – proof we are managing cost while still providing meaningful health benefits. Don’t let this slow you down!
Last week the IRS issued a statement encouraging entities unable to submit their ACA information returns by the June 30 deadline to complete their filing after the deadline. The ACA Information Returns (AIR) system will continue to allow completion of required system testing and submission of information returns. So if you’re currently correcting errors or working on replacement submissions, keep going! The IRS may not assess a late filing penalty if the employer has made a legitimate effort to file the returns and completes the process as soon as possible.
The e-file deadline for ACA reporting (Form 1094-C) is just days away. But before we take a collective sigh of relief, I would be remiss not to talk about corrections. After all, how often do you submit an electronic file to a third-party with zero errors? For 2015 reporting, the IRS will not penalize you for making a “good faith” effort to comply with the reporting requirements and error correction is part of that good faith effort.
If you haven’t seen it yet, you might check out this helpful video from the IRS on ACA information returns corrections. It covers:
- information reporting requirements
- what the IRS means by a corrected return
- how errors are identified; what errors require filing a correction and examples of corrected errors
- the timing for making corrections
- the electronic correction process
- penalties for ACA Information Returns