Current Topics in Employer Sponsored Health Care

Transcription

1 Current Topics in Employer Sponsored Health Care 1

2 What is Going On with Health Care? Pharmacy Plan Design $pecialty Drugs Management Strategies Health Reform Pay or Play Accountable Care What is it anyway? Why do I care? Final Thoughts Unintended Consequences The exchanges More reporting Auto enrollment 2

3 Pharmacy Benefit Typically represents from 22% to 27% of the cost under your health plan Plan design can make a notable difference in drug trend Is an element in medical care where members can have the biggest influence on the physician s decision It is the component of your benefit that probably impacts the highest number of your members Downside can cause the most noise Upside can have very fast and significant $ impact

4 Current Pharmacy Design The percentage of employers with four-tier plans grew to 25% in 2011, reflecting growing use of specialty tiers.1 The percentage of plans using coinsurance increased to 34%, up from just 14% in It is much easier to keep the member share consistent with inflation with coinsurance instead of copayments Members do not like coinsurance, as they never know what they will pay when they go to the store Coinsurance increases consumerism, as members will try to find the best price on the drug Pharmacy survey statistics from Pharmacy Benefit Management Institute survey of 274 large 4 Employers, representing 5.2 million members

5 Current Pharmacy Design Specialty copays increased by 37% while those for brand and generic drugs remained relatively flat The average copay differential between generic and brand was $16 in 2011, compared to $7 in Thirty percent of respondents required that specialty medications be dispensed through their PBM s specialty pharmacy 5

6 Duke s Plan Design Three tier copay design ($10,$40,$55) Major differential between generic and brand drugs Not currently considering another tier for specialty Require step therapy and prior authorization In 2010 added a $100 deductible for brand drugs purchased at retail This one change (plus the large differential between generic and brand) was the catalyst in engaging the member in communicating with their M.D. regarding trying a generic first. 6

7 Generic Dispensing Generic Dispensing Rate Duke Health Plans 80% 82% 80% 76% 78% 76% 74% 70% 72% 68% 70% 68% 66% 64% 62% 60% Plan Year 2008 Plan Year 2009 Plan Year 2010 Plan Year

8 Pharmacy Issues Specialty Drugs Specialty Pharmacy What it is, and why it matters Plan design considerations Trends in specialty pharmacy management 8

9 Biologics Large Molecule No Patents 9

10 What are Specialty Drugs? Definitions vary between PBMs, but typically the category includes a high cost drug with: Potential for significant waste Unique requirements for handling, shipping, and storage Patient adherence and safety monitoring requirements Patient training and coordination of care required prior to therapy initiation or during therapy 10

11 Examples of Specialty Drugs Name of Drug Average Cost/Patient Enbrel (Rheumatoid Arthritis, $11,151 Psoriasis Humira (Rheumatoid Arthritis, Psoriasis, Crohn s) $12,105 Copaxone (Multiple Sclerosis) Revlimid (Cancer agent) $23,053 Kalbitor (Hereditary Angioedema) Zytiga (Prostate Cancer) $270,901 $55,979 $72,000 11

12 The Pipeline 12

13 Why it is Important to Have a Strategy Specialty drugs are becoming a very significant part of the drug bill Until a biosimilars program is developed, the drugs will never have a generic equivalent Psoriasis biologic drug treatments cost more than a house Recently approved Biologic drug treatments for severe psoriasis cost more than the average annual house payment according to a recently published article. Managed Care Magazine cited the 30 year total cost of these therapies ranging from $172,00 0 to $320,

14 Specialty Pharmacy Management Techniques 14

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16 Health Reform Update 16

17 Health Reform Update We have all had our 30-day open enrollments and added all of those adult children 17

18 Health Reform Update Those who are not grandfathered have paid for a lot of first dollar preventive care We are counting the days until we have to pay for 100% of all birth control measures, and We are relieved that they postponed the W-2 requirement and the Summary of Benefits mandate We are very happy that we still have no rules for auto enrollment 18

19 2012 and 2013 Eliminates the deduction for the subsidy for employers who maintain Rx plans for their Medicare D eligible retirees Medicare surtax on high income individuals Now on Medicare D too Advance notice of mid-year changes Plans must provide 60-days advance notice of changes to summary of benefits Comparative Effectiveness Research Fees Insurers and employers will contribute $1 multiplied by the # of lives covered under each health insurance policy (2012) and $2 for plan years ending during fiscal year

20 2014 and Beyond Imposes annual fee on health insurers based on market share (total of 70b over remaining 6 years of budget window) Pharmaceutical manufacturer fee increases to $3b from , $4b , and $2.8b thereafter Health insurance market reforms: Eliminates preexisting conditions, modifies community rating, eliminates health status/rating, reduces age bands to 3. Creates Independent Payment Advisory Board (which excludes doctors and hospitals) High Cost Plan Excise tax (2018) 20

21 2014 and Beyond Requires employers w/ 50 or more employees to pay a penalty if they do not offer their employees coverage Requires employers to auto-enroll employees in a health plan whenever they get the regs out Requires individuals to obtain insurance coverage or face a penalty maybe and Establishes health insurance exchanges 21

22 The Exchanges What they are How they might work What impact they could have on a workforce and on society 22

23 The Exchanges Employer based health insurance covers 64% of the U.S. population under the age of 65. The exchanges could fundamentally change this relationship. 23

24 The Exchanges According to the Healthcare.gov website, the Exchanges can help you: Look for and compare private health plans Get answers to questions about your health coverage options Find out if you are eligible for health programs or tax credits that make coverage more affordable Enroll in a health plan that meets your needs 24

25 The Exchanges PPACA requires that state-based health insurance exchanges be operational by January 1, The key elements of the model include access to insurance regardless of health status; incomebased fixed dollar subsidies; and some standardization of plan design to foster informed choice. Initially they will serve: Small employers with 100 or fewer workers Individuals without access to employer sponsored coverage Larger employers in

26 Why Standardization of Plan Design? Standardization can help promote price competition by reducing the number of dimensions on which plans can differ Prevents plan designs that appeal to healthy people Very important when insurers are not allowed to deny enrollment, limit coverage for pre-existing conditions, or vary premiums based on health status Helps to avoid a race to the bottom where insurers compete to enroll healthy people by dropping coverage for a broad set of services used by sick people. 26

27 Vermont Exchange Model Some states are going the single carrier route with Vermont being the first to commit. Got an $18 million infusion of taxpayer money to set up an exchange with two choices, only varying by the amount of out-of-pocket expense Private insurance companies in Vermont are excluded from providing any health plans under this model Proponents state that savings will be derived from not having to spend money on marketing, administration, legal expenses, and other non-medical costs.

28 Marriage/Better Job Disincentives The premium assistance program under PPACA penalizes married couples, and those who get a raise or promotion. A family of four earning just below $88,000, or 400% of the FPL, will receive about $5,000 in annual subsidies in If their income went up to $88,750, their subsidy goes to zero. This would also be the case if the single parent of two children making $45,000 married someone making any more than $43,000. The affordability test for employer coverage is also tied to individual coverage affordability, not family.

29 Pay or Play After 2014 should employers continue to offer group health, or send employees to the exchanges and pay the penalty? 29

30 Pay or Play Source: IFEBP, May

31 The Cost to Employers Family Premiums Worker and Employer $16,000 $14,000 $12,000 $10,000 $9,773 $8,000 $8,824 $8,167 $9,325 $9,860 $8,508 $6,000 $4,000 $2,000 $2,713 $2,973 $3,281 $3,354 $3, $3,997 $0 Source: Kaiser Family Foundation Employee Contribution

32 Things to Consider What is going on in your industry The number of low and medium income employees Youremployers company s of subsidy However, will have a level strong incentive to move as many as 35 million workers who will be eligible for premium assistance out of employer plans and into subsidized coverage provided through the exchanges because both the employers and the workers will be better off if they are able to access the large new federal subsidies available to exchange enrollees. The extra cost of these workers is estimated as $1 trillion over the next 10 years. Douglas Holtz-Eakin, former Congressional Budget Office Director 32

33 Reasons to Pay (under the Pay or Play mandate) The penalty is less expensive (right now) than providing coverage, if there is no gross-up in pay to help those ineligible for the subsidy to buy coverage. It is easier to pay the penalty than to comply with all of the regulations Low income people may receive more subsidy than your company would provide in employer contribution to the premium Employees may have a broader range of choices than you are able to offer If your company is the last man standing you will be paying a higher cost for services You avoid the Cadillac tax Companies avoid the administrative complexities of dealing with the reporting and compliance issues 33

34 Reasons to Pay You might have more full-time employees than you think, once the DOL defines what a full-time employee is. 34

35 Why Play? Having coverage through an employer is still of tremendous benefit to employees particularly those who will not qualify for a subsidy. It remains extremely valuable as a vehicle for attracting and retaining valued employees Premiums are pre-tax, Employer contributions may be far larger than the subsidy for those with children/spouse No looming threat of losing the subsidy because you get a raise or get married The employer goes through the trouble of negotiating the plan The employer can intercede on your behalf if there is a problem Employer contribution is not taxable (yet)

36 Reasons to Play Competitive issues within your industry People not eligible for subsidies will have to pay significantly more for coverage with after-tax dollars Many people may have a negative view of the exchanges, and will shun employers with only that option particularly if the situation is similar to Mass. where the majority of physicians (53%) will not accept new patients enrolled in the state exchange. Significant compensation issues if other employers with whom you compete still offer their own, pre-tax plan as employees will be paying for the exchanges with after-tax money These are also your high value employees who are costly to recruit You will have to gross up the salary for many employees to help pay for the coverage, and this will also increase the cost of other coverage related to salary (retirement, life insurance, LTD, FICA, FUTA) The cost of the gross-up plus the penalty may exceed what 36 you were paying for health insurance.

37 Costs and Penalties (For those who play ) No good deed goes unpunished, for those employers who continue to offer employer sponsored coverage, there will be significant reporting requirements, as well as the reviled Cadillac tax. 37

38 Cadillac Tax 40% excise tax (Cadillac tax) for those who have premiums of >$10,200 for singles and $27,500 for families in 2018 According to an estimate by Towers Watson, this tax will affect >60% of large employers active health plans in 2018 All it takes to drive costs above the excise tax cap for six in ten employers is an 8% average annual cost increase 38

39 New Costs and Penalties Adult children to age 26 each additional person adds between $180 - $350/month depending on whether or not dependent pregnancy is covered Reprogramming to accommodate tracking of health insurance payments to W-2 and other IRS mandated reporting Potential for increased stop-loss premiums since lifetime caps have been removed Requirement to offer coverage If one or more employees receive a premium tax credit the employer must pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each FTE. 39

40 New Costs and Penalties Increased cost to account for the value of the employee share that was previously paid for preventive care What is now covered: Age newborn to 21 years: Vision and hearing screening Oral health risk assessments Developmental assessments Screenings for hemoglobin level, lead, tuberculin and other tests Dental screening Obesity screening Depression screening Birth control of all types 40

41 New Costs and Penalties Increased taxes on the Rx and medical device providers will likely be passed along to employers through higher prices Fully insured plans may cut back on certain services now covered under the premium when they have to provide a rebate if loss ratio larger than 15% (large group) or 20% (small group) Removing annual maximums: Administrative cost to set up auto enrollment, and cost of additional individuals who will elect coverage No pre-existing condition exclusions for persons < age 19 Must cover everyone 30 or more hours/week Must meet essential benefits test 41

42 Points to Ponder If many employers drop coverage, the government will likely increase the fine substantially especially when they realize what a revenue shortfall they have. Many state exchanges will not be ready to go by 2014 The cost of the coverage in the exchanges will be dictated by the type of people who enroll, how much adverse selection occurs, prices negotiated with the provider community, and the number of people who enroll If the exchanges have an abundance of sick enrollees, and coverage is expensive, there will be additional employee pressure for a health premium subsidy or a continuation of employer sponsored coverage 42

43 Cost Containment in the Future The government is counting on something called Accountable Care Organizations or The Medical Home The bottom line being transfer of risk to the provider community.

44 Accountable Care Accountable care organizations take up only seven pages of the Health Reform Law, yet have become one of the most talked about provisions An ACO is a network of doctors and hospitals that shares responsibility for providing care to patients. It is set up much like the Kaiser Permanente HMO model in California except that patients don t HAVE to use their doctors. ACOs would make providers jointly accountable for the health of their patients, giving them strong incentives to cooperate and save money by avoiding unnecessary tests and procedures. For ACOs to work they'd have to seamlessly share information. Those that save money while also meeting quality targets would keep a portion of the savings. But some providers could also be at risk 44 of losing money. /

45 Accountable Care coming to a practice near you.. sometime Large hospital systems are buying up physician practices with the goal of becoming ACOs that directly employ the majority of their providers. ACOs aim to replicate "the performance of an HMO" in holding down the cost of care while avoiding "the structural features that give the HMO control over [patient] referral patterns," which limited patient options and created a consumer backlash in the 1990s. 45

46 What is the Downside? Mergers and provider consolidation. As hospitals position themselves to become integrated systems, many are joining forces and purchasing physician practices, leaving fewer independent hospitals and doctors. Greater market share gives these health systems more leverage in negotiations with insurers, which can drive up health costs. 46

47 Where Does That Leave Us? One big question is: If it is all about reducing health care costs, who will make less money in the New World Order? 1) Insurance companies 2) Physicians 3) Pharma companies 4) Hospitals 5) Medical Device companies 6) Nurses 7) Labs 8) Lab Techs 9) People who build and design hospitals 10) All the rest 47

48 What are the Unintended Consequences? Health care is one of the few sectors that is still hiring people might this change? Will more limited Pharma earnings dampen R & D? Will patient care be impacted if the provider community is paid a flat rate per person? Will the country be completely bankrupt when it comes to the reality of government providing health care to the masses, since they can t say no to anyone 48

49 QUESTIONS? 49