Moderated by Patrick C. Haynes, Jr., Esq., LL.M. Consulting Brokerage Compliance Communication Administration

Transcription

1 Referenced Based Pricing and Value Based Products: How do they differ and what is their impact? Moderated by Patrick C. Haynes, Jr., Esq., LL.M. Consulting Brokerage Compliance Communication Administration

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3 Patrick C. Haynes, Jr. Today s speaker As Crawford Advisors GC and Vice President Compliance, Mr. Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, PPACA, ERISA, COBRA and HIPAA portability and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics. Practice Areas Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, 125, and 105, 106, 129, 132 Education Temple University School of Law, LL.M. Rutgers University School of Law, J.D. Rutgers University School of Business, M.B.A. Rutgers University College of Arts & Sciences, B.A. Admitted to Practice U.S. Supreme Court Federal and State Courts of New Jersey Pennsylvania Connecticut District of Columbia 3

4 Michael Firey Today s presenter Mike has 25 years of experience in the health care industry. Since 2005 he has been in his current role of client development for UnitedHealthcare, a division of UnitedHealth Group. In this role, Mike is responsible for aligning UnitedHealthcare s products and services with the mid to large employer sponsored health benefits marketplace. Mike collaborates with internal business partners to ensure that best practices are applied throughout the Client Development continuum. Mike is instrumental in providing marketplace feedback to support the evolution of UnitedHealthcare s products and in ensuring that best in class service is delivered to our constituents. Prior to 2005, he spent more than 16 years with another large health carrier, focusing on business development for the private, labor and government sectors with an emphasis on the financing and strategic planning of group health plans. 4

5 Roadmap Healthcare Trends What are reference based pricing plans? Examples Barriers, Alternatives, Compliance ACO s Poll Questions Takeaways 5

6 Where s the market going? Healthcare Trends 6

7 PPACA and Compliance Items That Apply to ALL Health Plans 2014 a. Eliminate waiting periods over 90 days.^ b. Eliminate all pre-ex limitations.^ c. Report minimum essential coverage (MEC) information to employees and regulators & minimum value (MV) in 2nd year SBCs. (Delayed until 1/31/2016 for EEs and 2//28/2016 to regulators). d. Provide coverage for routine costs incurred in connection with clinical trials. (GF plans: N.A.) e. Ensure that out-of-pocket exposure is no higher than is permitted for HDHPs. For 2014, that means OOPMaxes of $6,350/ind and $12,700/family.^ (GF plans: N.A.) ^ For the 1 st plan year on/after Jan 1, a. OOPMax $6,600/single and $13,200/family. b. HSA OOPMax are $6,450/single and $12,900/family a. OOPMax $6,600/single and $13,200/family. b. HSA OOPMax will be released by the IRS around 15-Oct c. Per HHS/IRS/DOL guidance no individual can face more than the individual OOPMax even if they are in a family tier (imbedded sublimit). 7

8 The Employer Mandate & Employer Penalties Q: What Are the coverage Requirements and penalties? A: Employers subject to the employer mandate are required to offer coverage that provides minimum value and is affordable. The chart below explains these requirements and the penalties that apply if they are not met. Do you offer coverage? Yes Does the plan provide minimum value? (60% of total allowed costs) Yes Is the coverage affordable? (less than or equal to 9.5% of income) Yes No Penalty No No No $2,000 per FTE (minus first 30)* Applies if one full-time employee receives federal premium subsidy for Marketplace coverage. Lesser of: $3,000 per FTE receiving that is receiving a subsidy or $2,000 per FTE (minus first 30)* * For plan years beginning in 2015, the penalty is $2,000 for each full-time employee minus the first 80 employees. For plan years beginning in 2016 and beyond, employers can exclude 30 employees from the penalty calculation. See questions 38 & 39, IRS FAQs. 8

9 Health Care Trends With the increased burden of PPACA, many employers have relied on reducing plan benefits. Reduction in coinsurance Reduction in copays Higher Deductibles Other employers have been looking to take control of their health plan by offering defined contribution plans. These plans allow employers to better budget their contributions by giving a defined amount for employees to shop for their health coverage. 9

10 Health Care Trends Insurers have striven to assemble creative products and solutions to take the cost burden off of themselves as well as employers. One such example that leading insurers have been turning to are Minimum Essential Coverage, or Skinny Plans. Crawford Webinars have spoken in depth about these plans. You can access the replay on-demand at 10

11 An Introduction Reference Based Pricing & Value Based Products 11

12 What is Reference Pricing? Establishes a standard price (or ceiling,) for a drug, procedure, service or bundle of services. Requires members to pay allowed amount beyond this amount, even for innetwork providers. Reference pricing has been shown to lower the cost and increase value in prescription plans, and is now expanding to selected medical and surgical services. A few carriers including UHC, Aetna, WellPoint and CIGNA have begun to roll out products, each with different covered services and pricing. A Tower Watson/National Business Group survey estimated that 5% of employers currently have reference based plans in place in 2013, while 15% of employers were expecting to employ these plans in

13 What is Value Based Pricing? Value based pricing is the alignment of incentives between purchasers and manufacturers mostly for pharmaceuticals. Payers and Pharma companies agree to link payment for a medicine to value achieved, rather than volume. 13

14 What problems does Reference Based Pricing Try and Solve? Reference Based Pricing aims to offer reasonable alternatives to high-cost providers without compromising quality. Patients have the carrot of lower, and in some instances, no member cost share if they go to the providers who charge at or below the reference price. This may make patients more sensitive to the price of service and more likely to choose cost-effective hospitals or physicians (CPR Action Brief 09/12). 14

15 Your Current RBP Benefit Pharmacy benefits have long been RBP. A reference price is set for a class of substitutable medications and members pay the incremental costs to obtain medications priced higher. The RBP is the formulary drugs on your PDL and your tier 3 represents the amount over the reference price. 15

16 Examples Reference Based Pricing & Value Based Products 16

17 What s the opportunity?- Core Network 17

18 What s the opportunity?- Castlight 18

19 What s the opportunity?- Bluebook 19

20 What s the opportunity? 20

21 Cataract Removal & Insertion of Lens 21

22 Cataract Removal & Insertion of Lens 22

23 Cataract Removal & Insertion of Lens 23

24 The Inpatient Cost Problem 24

25 What strategic considerations should be addressed when considering RBP? Services have a high likelihood of delivering value Substantial variation in price Services are shopable & distributed Price must be credible and achievable Tools to estimate costs for reference based services are accurate and comprehensive Strong employee communications 25

26 Examples of RBP in Action 26

27 Colonoscopy Cost 27

28 Colonoscopy Cost Colonoscopy costs anywhere from $900 to $7,200 an eightfold variance. Safeway allows up to $1,500 for routine colonoscopies. Member responsible for price difference. Prior to implementation, 30% of members (16 out of 53,) incurred charges over $1,500. After implementation, only 11% of members incurred charges over $1,500. And, the number of members obtaining a colonoscopy increased by 40% after implementation. Cost savings achieved: 35% 28

29 Barriers, Alternatives and Compliance Reference Based Pricing 29

30 Barriers to RBP Need good transparency tools Operational: there is non-uniformity in why, when, and how certain services are obtained and claims submitted. Need to make sure the cost savings from the RBP service is not offset by higher volume or cost of related, but not included procedures. Regulatory: how will the ACA treat preventive services and will the amount over the RBP be included in the OOP maximum for in-network coverage. 30

31 Alternatives to RBP High Performance Networks - they are inherently the most efficient providers. Employers may add incentives to use those providers, or offer an option composed of only those providers (Narrow Network.) Place of Service Cost Sharing: 31

32 Compliance Questions have been posed about whether the health costs over the reference price would be allowed to exceed the OOPM which is set at $6,600 and $13,200 for EE/F respectively. The Departments had the following to say: "Until guidance is issued and effective, with respect to a large group market plan or selfinsured group health plan that utilizes a reference-based pricing program, the Departments will not consider a plan or issuer as failing to comply with the out-of-pocket maximum requirements of PHS Act section 2707(b) because it treats providers that accept the reference amount as the only in-network providers, provided the plan uses a reasonable method to ensure that it provides adequate access to quality providers. For non-grandfathered health plans in the individual and small group markets that must provide coverage of the essential health benefit package under section 1302(a) of the Affordable Care Act, additional requirements apply." 32

33 Accountable Care Organizations or ACO s ACO plans are similar to reference based pricing plans insofar as they promote increased consumer awareness. The Two Defining features of ACO Plans are: Narrow Hospital-centric Networks Cost and Quality Incentives They have started to be incorporated by Hospital employees, and while not many Large Employers have transitioned to these plans yet, they are certainly something to keep an eye out for these networks in the future. These networks in conjunction with reference based pricing plans can save both in fixed costs as well as back end cost. 33

34 How much did you learn? Poll Questions 34

35 Question 1 Which of the following is true about reference based pricing plans? A) It will most likely increase procedure volume B) It will most likely increase procedure cost C) Both A and B D) Neither A or B 35

36 Question 2 The DOL and HHS have determined that any cost in excess of the reference based price may not go over the PPACA OOPM. A) True B) False 36

37 Question 3 In the Safeway Case Study, the increased volume of colonoscopies outweighed the cost savings from the implementation of the reference based price. A) True B) False 37

38 Takeaways It is important to properly communicate a reference based pricing plan, so that members are fully aware of allotted amount of benefits for procedures. It is a growing design, with almost a 300% increase in employers planning to offer this pricing model in 2014 vs The government has outlined that these plans are OK for now. Amounts over the reference based price DO accumulate over the OOPM. It has shown increased volume AND savings, which proves that employees are becoming more educated healthcare consumers. 38

39 Questions Crawford Advisors, LLC 200 International Circle, Suite 4500, Hunt Valley, MD Devon Square Two, 744 West Lancaster Avenue, Suite 215 Wayne, PA Via to: To Download These Slides: Questions & Requests: 39