In light of the recent US Supreme Court decision in Obergefell v. Hodges legalizing same-sex marriage nationwide, employers should consider the following implications for benefit plans and employment policies:
- Revisit your definition of “spouse.” Make sure the definition covers same-sex spouses in plan documents, insurance policies, trust and service agreements, beneficiary forms, required notices, and employment policies.
- Review your eligibility rules. Fully insured and public sector self-funded health plans must offer coverage to same-sex spouses. Self-funded health plans aren’t prohibited from limiting coverage to opposite-sex spouses, but you may face litigation under federal employment discrimination law.
- Adjust payroll and state tax reporting. Imputed income should no longer be calculated for the value of same-sex spouse health coverage. The timing of this change is unclear. However, we have seen guidance from the states of Ohio and Nebraska.
- Reconsider domestic partner coverage. You should weigh the pros and cons of continuing to make available domestic partner coverage, given that same-sex couples now have the right to marry in all 50 states. While the complexity of tax withholding and reporting for domestic partner coverage may be an argument in favor of dropping domestic partner coverage, would this action be in keeping with your organizational culture? Would it have an impact on recruitment/retention strategies? If you do decide to end domestic partner benefits, consider carefully the end date — after which couples will essentially be required to marry or lose coverage. We recently shared employer data on domestic partner coverage now that same-sex marriage is legal everywhere.
- Determine if you need a plan amendment. You may need a mid-year plan amendment to allow employees to enroll their same-sex spouses prospectively based on the plan’s expanded eligibility. Eliminating domestic partner coverage would also require a plan amendment.
- Don’t forget retirement plans. Make sure retirement plans give same-sex spouses the same rights, obligations, and benefits as opposite-sex spouses.
Many employers believe the Obergefell ruling will boost efforts to recruit top talent, facilitate employees’ interstate transfers, and foster a culture of diversity and inclusion. You may find the timing right to launch an effort to promote greater diversity and inclusion in your organization.
Much of the pressure driving up pharmacy benefit cost comes from specialty drugs. While some new drugs represent important breakthroughs in the treatment of complex diseases, the spike in the specialty drug cost trend rightfully has employers looking for creative strategies to manage cost growth.
There are at least three areas to consider: Sourcing (getting the best price for the drug), site of care (getting the best price for administration, since many of these medications are infused), and clinical management (establishing best-practice rules for the circumstances under which a specific drug is administered).
Here are some of the simpler strategies to discuss with your carrier or PBM:
- Comprehensive site-of-care review. It may make sense to have some specialty drugs purchased through the medical plan rather than through the pharmacy plan; for example, oncology. In some cases, doctors can get these medications more cheaply than PBMs.
- Exclusive specialty. All specialty drugs are handled by one provider as a way to obtain better unit costs. However, this is not always the best option, as it limits flexibility.
- Specialty formulary. This strategy may be considered for drug classes where there is adequate competition, for example, four or more drugs with similar profiles.
- Clinical rules audit. Reviewing current clinical rules (usually from the PBM or carrier, if drug benefits are carved in) compared to best practices.
- Home health care. As part of a site-of-care review, consider the patient’s home as a venue for infused medication. This may require patient education to self-administer the medication, and is currently common in hemophilia and certain other disease states.
Larger employers may want to consider these more complex cost management approaches:
- Specialty carve-out. Investigate these new specialty-only PBMs (Acaria Health, Magellan and Diplomat Specialty Pharmacy). While they aren’t mainstream yet, specialty-only PBMs -- which address sourcing, site-of-care and clinical rules -- will get more attention in next few years as specialty drug costs continue to rise.
- Members with hemophilia may be able to access 340B pricing through Hemophilia Treatment Center. (The 340B Drug Discount Program is a federal government program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices.)
- 340B pricing. While this is far from mainstream, a few employers have established relationships with a local hospital, ACO and/or contract pharmacy to get deeply discounted specialty drug pricing. Note that the 340B program has some complex rules regarding patient requirements to access the better pricing so this fact should be included in any review of this option.
Cost for specialty drugs will continue to rise for the foreseeable future, and none of these strategies is likely to solve the problem once and for all. But with specialty drug costs now squarely in the spotlight, we’re starting to test innovative new approaches to cost management, and learning more about the trade-offs between medical and specialty drug costs. In other words, it’s far too soon to throw in the towel.
There’s been an ongoing debate since reform was first enacted about the possible merits of employers eventually exiting health care benefits altogether and moving employees en masse into the public marketplace. Stirring the pot most recently is financial industry research firm S&P Capital IQ, which estimates that by 2020 — just five years from now — 90% of American workers who currently receive health insurance through their employers will be shifted to government exchanges. S&P authors cite rosy bottom lines, trickle-down increases in employee pay and benefits, and the lure of federal subsidies for low-wage workers as the impetus for the grand exodus.
But these projections fly directly in the face of data systematically collected through Mercer’s National Survey of Employer-Sponsored Health Plans — and of the strategies employers are using successfully to manage spending and stay competitive. Most large US employers — 94% in 2013 — remain committed to offering employer-sponsored health plans for at least the next five years. Even among the smallest employers — those with just 10 to 49 employees and the least inclined to offer coverage to begin with — only 34% of current health plan sponsors say they are they are “likely” or “very likely” to terminate health coverage within the next five years.
Still, for those who remain skeptical, I offer three compelling reasons why so many employers have decided to stay the course.
1. Employees value health benefits as highly as pay.
An overwhelming 93% of employees say their health care benefits are as important as their pay. Every year, the Mercer Workplace Survey asks approximately 1,500 US employees who have medical and 401(k) plans to value their benefits. Even as deductibles have risen and benefits have become less rich, these results have strengthened over time, sending a clear message to employers: To attract and retain the best talent, you must stay in the game.
2. The public marketplace remains a huge unknown.
The exchanges may be here to stay, but the fate of plan rates and the true benefits of the public marketplace as an exit strategy are very much up for grabs. To walk away from health benefits now would introduce far too much financial risk to employers that are already in dire need of predictability and proven cost-effectiveness.
3. The math doesn’t work — for employers or employees.
The tax implications for employers constitute a triple whammy. First, they will pay the $2,000 per-person penalty (and that amount is indexed; it goes up each year). Then, they will lose the tax deduction on that money, in turn reducing the funding available to employees to purchase coverage through the public marketplace. Finally, whatever money they might add into paychecks to help employees purchase benefits on a public exchange will be subject to payroll taxes, thus reducing its value as a substitute for employer-provided benefits.
On average, health benefits cost $10,779 per employee in 2013, according to Mercer’s research, with the employee typically picking up about 20% of this cost — or about $2,200. However, most employees will pay far more than that for individual coverage in the public marketplace, and families will take an even harder hit — the lowest-level public exchange plan on average costs $20,000 a year for a family of four. Only the 25% or so with incomes below 400% of the federal poverty level are eligible for government subsidies.
As organizations continue to sort through the expanding options in today’s new order of health benefits provision, one thing is certain: A full-scale exit at the expense of talent, predictability, and affordability — for both employers and employees — remains a highly unlikely proposition.
A few weeks ago, we provided a list of five considerations for open enrollment regarding Affordable Care Act (ACA) compliance, focused on avoiding shared responsibility payments, imbedding deductibles in out-of-pocket limits, and complying with the new ACA reporting requirements. Today’s list addresses some requirements that expand beyond the ACA — including a few items you’ve probably checked off your list but might need to look at again because of recent guidance.
- Preventive care. Ensure that nongrandfathered group health plans comply with the final ACA rules and recent guidance on cost-free preventive services.
- Other ACA reporting and disclosure. In addition to the new ACA reporting requirements, review delivery operations for summaries of benefits and coverage (SBCs) and watch for revised SBC templates. Prepare for round two of online submission and payment of ACA’s reinsurance fee.
- Midyear changes to cafeteria plan elections. Decide whether to permit midyear changes to cafeteria plan elections for either or both of the status-change events in IRS Notice 2014-55.
- Same-sex marriages and domestic partnerships. Assess how the US Supreme Court’s Obergefell v. Hodges ruling legalizing same-sex marriage nationwide affects your benefit programs and employment policies. Also consider the decision’s indirect implications for domestic partner coverage.
- Mental health parity. Check that plan designs and operations provide parity between medical/surgical and mental health/substance use disorder (MH/SUD) coverage. Federal audits of health plans now evaluate compliance with the final Mental Health Parity and Addiction Equity Act (MHPAEA) rules that took effect in 2015. In addition, state legislative activity and litigation around parity issues continue.
- Wellness. Review employee wellness programs against the proposed Equal Employment Opportunity Commission (EEOC) rules requiring voluntary participation and restricting incentives for completing health risk assessments and/or biomedical screenings. Be prepared to make changes after the EEOC finalizes these rules for nondiscriminatory wellness plans under the Americans with Disabilities Act.
- Fixed-indemnity and supplemental health insurance. Review fixed-indemnity and supplemental health insurance policies to ensure they qualify as excepted benefits under the ACA and the Health Insurance Portability and Accountability Act (HIPAA).
When finalizing health benefit designs and contribution strategies, be sure to update all employee communications materials as well as terms and agreements with your vendors.
Opioid abuse. You’ve probably read lots of stories about it recently, but have you seen the stats? They’re alarming, to say the least: There has been a fourfold increase in opioid prescriptions from 1999 to 2010 and a fourfold surge in deaths due to overdose.
Opioids are medications that relieve pain, such as hydrocodone (e.g. Vicodin), oxycodone (e.g. OxyContin, Percocet), morphine (e.g. Kadian, Avinza), and codeine, as well as non-prescription drugs such as heroin. As a group they’re the third most commonly abused drugs after alcohol and marijuana, and they’re now responsible for killing more people than automobile accidents, according to the Substance Abuse and Mental Health Services Administration.
They have also been blamed for a decrease in life expectancy among certain groups of middle-aged Americans. Among self-insured employers, some estimates claim that 32% of opioid prescriptions are misused or abused, while Mercer data shows that opioid users 18 and older cost 5.5 times as much in total allowed medical and pharmacy costs compared to non-users.
The National Council on Alcohol and Drug Dependence reports that 70% of people using illicit drugs, including non-medical use of opioids, are employed -- and then there are all the employees whose work may suffer as a result of worrying about a loved one with an addiction. Among 18-25 year olds, 12% use opioids non-medically, as do 5% of those 26 and older. The CDC also reports that there is 6% utilization among those aged 12-17. Employees across the country are struggling with this disease -- diagnosed and undiagnosed, directly and indirectly.
Something needs to be done -- and all of us, including employers, can play a role in addressing this epidemic. You can help support those with addiction by training managers and supervisors to identify problems and referring employees to sources of help such as your EAP or Behavioral Health carrier. In addition, it’s important to develop communication tools for employee awareness efforts. And if your organization has a drug-testing program, check to see if the panel of substances tested for includes opioids.
Just as important is to prevent new cases. Review your medical, dental, and pharmacy benefit design to prevent the over-prescription of opioid medications. For example, the current recommendation is to limit prescriptions after procedures to seven days, which has been shown to decrease the development of new addictions. In addition, employers can ask their carriers or PBMs whether they flag members who are deemed high-risk for addiction, and if they follow up to ensure providers are consulting state Prescription Drug Monitoring Programs (PDMPs).
It’s also important to facilitate a successful return to work, by supporting the ongoing care needs of the employee as well as the families affected by addiction. And through careful monitoring of claims data, employers can look for red flags of addiction such as:
- Members obtaining large quantities of opioids
- Members prescribed narcotics by different doctors
- Members prescribed narcotics for more than 30 days
Prescription drug abuse is a serious medical issue, and should be treated as such. By taking action now, you can do right by your employees who may be suffering from addiction, while also doing your part to address a sensitive and complex issue plaguing our society.
Confronting issues around healthcare costs is a significant challenge facing today’s small- and medium-sized businesses. While you might think your size limits your options, that’s not necessarily the case.
In fact, whether or not any particular small- or medium-sized company can actually reduce its health insurance premiums while maintaining the same level of coverage depends on each entity's specific situation. But there are some general techniques that will apply to all. Here are four actionable approaches to controlling healthcare costs:
- Negotiate better
This may seem obvious. The proposal you receive for next year is not necessarily the carrier’s best and final offer. Sit down with your broker to develop a renewal, marketing and negotiation strategy. A well-planned approach will help you get the lowest possible cost and leverage everything that today’s competitive marketplace has to offer.
- Investigate turn-key health and benefits solutions
Don’t assume you have to manage everything within your company. Investigate offerings that provide a “turn-key solution” that includes more personalized health and benefits support. A benefits solution like Mercer Marketplace 365+ would take the stress out of healthcare for your employees, making them happier and healthier in more ways than one.
- Switch to individual plans
Although it’s not a common strategy, some businesses have considered an individual plan approach that eliminates the employer contribution and positions employees who qualify to take advantage of subsidies that could provide them with coverage at around $100 a month. Options for individuals exist on the public exchange as well as in the private market. Be sure to consider potential penalties under the ACA and any impact this approach may have on other important business objectives, such as the ability to attract and retain employees.
- Promote a “Culture of Health” within the office
Reward employees for taking care of themselves and living a healthy lifestyle by giving them tools to track fitness goals and introducing lifestyle initiatives. These incentives will also motivate employees to take advantage of the benefits they have, such as their annual check-up. Studies show that leaders who live and promote healthy lifestyles are successful at getting employees to do the same.
The key to controlling company healthcare costs lies in having a plan -- and putting it to work.
The Commonwealth Fund released findings from its Health Care Affordability Tracking Survey, which focused on those with private insurance between the ages of 16 and 64. The primary finding was that three out of five privately insured adults with low incomes, and half of those with moderate incomes, reported that their deductibles are difficult to afford. The survey also found that some individuals delayed or avoided care as a result.
While small firms are more likely to have very high deductibles than large employers, Mercer’s newly released National Survey of Employer-Sponsored Health Plans found that large employers raised the individual in-network PPO deductible by 15% in 2014, to nearly $800 on average. At the same time, enrollment in high-deductible consumer-directed health plans rose from 18% to 23% of all covered employees. As employers shift more financial accountability to employees, finding tools and resources to package with high-deductible health plans becomes an important consideration.
From the employer perspective, high-deductible plans are attractive because they are less expensive but still meet the minimum criteria for what must be offered under the ACA to avoid assessments. But, thinking about these plans from the employee perspective, there are two key concerns. First, if you’re providing a choice of plans, how do you make these plans attractive to employees? For them, the essential question is “what is a smart buy?” As deductibles get higher, employees will weigh how much they are willing to pay for health insurance when the deductible is so high that they may never get any value from it other than preventive care. That’s an especially important decision for low-paid workers. A second concern is whether plan design will result in employees delaying or avoiding care. While it might be penny-wise to forgo a physician visit when a health problem is first detected, in the event the problem is serious, the savings pale next to the higher cost of more intensive treatment at a later stage, especially when early treatment offers the potential for a better outcome.
So what can employers do to help employees manage higher deductibles and make good decisions, for both their finances and their health?
During open enrollment — the point of purchase for health insurance — decision-support tools can be very helpful in facilitating good financial decisions. Not only can employees model the cost of the care they expect to need and their total out-of-pocket expense, some tools will suggest amounts to contribute to supplemental accounts such as a Health Savings Account. The most advanced tools utilize an individual’s medical claims from the prior year to illustrate their out-of-pocket expense had they been enrolled in the currently available plan options.
Even after open enrollment, there are ways that employers can help plan members with high deductibles stretch their health care dollars and become better health care consumers. Suggestions include:
- Encourage healthy behaviors by paying incentives into accounts that can be used to cover deductible expense.
- Provide access and promote use of a nurse line, concierge, and/or health advocate for members to consult about care needs, provider recommendations, and the approximate cost of various options for care.
- Provide access to transparency tools — technology that members can use to research cost for office visits, lab tests, and prescription drugs from different providers.
- Sponsor and promote access to lower-cost care options via telemedicine and convenience care clinics for more routine health care needs.
- If you have on-site occupational health professionals, consider transforming their role to include primary care and wellness support.
- Expert medical advice is a helpful service to help navigate members to qualified second opinions and referrals to centers of excellence.
While the navigating the health care delivery system is still daunting to many, we have seen big advances in the availability of tools and resources to help us all become smarter shoppers for health care. And there is much more to come.
Taking the approach "measure it and it will improve," The Vitality Institute is calling on companies to begin reporting employee health metrics the same way they report earnings -- with the goal of reducing the incidence of non-communicable diseases (such as cancer, diabetes, and cardiovascular disease) in the US workforce. The Institute assembled a commission including representatives from major corporations, the health care industry, and academia to make recommendations. In a report issued last week, they estimate that if employers got serious about improving the health of their employees, improved productivity and reduced health spending could be worth $300 billion annually. While the commission is thinking big, employers can take a small but important step on the road to measurement by completing the HERO Employee Health Management Best Practices Scorecard, an online inventory of just about everything employers are doing today to improve workforce health. Mercer collaborates with the nonprofit Health Enhancement Research Organization to offer the online Scorecard free of charge to all employers -- you can access it here. It has just been updated with current best practices and a set of easy-to-use metrics for measuring program outcomes. Upon submitting the completed Scorecard, you'll receive a reply e-mail with your organization's best practice score compared to national averages. Over 1,200 employers have used the Scorecard since it was first launched in 2009.
Critical illness coverage is becoming increasingly important as medical benefit offerings become leaner and enrollment in high-deductible health plans rises. Our National Survey of Employer-Sponsored Health Plans found that 45% of employers with 500 or more workers now offer critical illness coverage as a voluntary benefit for their employees. As Mercer’s Barry Schilmeister describes in this recent Kaiser Health News article, “More employers are looking at the reality of pulling back on the value of health plans but looking to offer something else that would make people feel a little more comfortable about taking on that additional risk.” Critical illness coverage, which typically provides a lump sum payment for certain diagnoses such as cancer, heart attack, stroke, kidney failure as well as major organ transplants, can help fill a coverage gap for employees.
We know most employees stay with the same medical plan year after year unless forced to make a change, and that probably goes for their dependent coverage elections as well. Michelle Andrews wrote a helpful article in Time about coverage choices for dependent children after college. But the truth is, employees should consider their options each year for how best to cover their family members. In recent years employers have been lessening the subsidies for spouse and dependent coverage – and some have taken stronger measures with spousal exclusions and surcharges. All this to help individuals see the opportunity during open enrollment to sit down at the kitchen table and evaluate the options for the coming year. With more generous subsidies for individual coverage, it may be a no-brainer for both working spouses/partners to take their own coverage. But then comes the question, where to cover the kids? This decision is best made by considering:
- Paycheck contribution for the coverage
- Plan features for cost sharing – deductible, coinsurance, out of pocket maximums
- Network of providers -- are your doctors in the network?
Employers might want to consider how to address these dependent coverage decisions in your open enrollment materials this year.