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

Size: px

Start display at page:

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

Aubrie Matthews
6 years ago
Views:

1 Reference Based Pricing Plans: How and When Will These Plans Impact Employers Moderated by Patrick C. Haynes, Jr., Esq., LL.M. Consulting Brokerage Compliance Communication Administration

2 2

3 Patrick C. Haynes, Jr. Today s moderator As counsel for Crawford Advisors Employee Benefits and Executive Compensation Group, 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, 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

In this role, Mike is responsible for aligning UnitedHealthcare s products and services with the mid to large employer sponsored health benefits marketplace.

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 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. 7

One such example that leading insurers have been turning to are Minimum Essential Coverage, or

8 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 8

9 An Introduction Reference Based Pricing 9

10 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

11 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). 11

pay the incremental costs to obtain medications priced higher.

12 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. 12

13 Examples Reference Based Pricing 13

14 What s the opportunity? 14

15 Cataract Removal & Insertion of Lens 15

16 Cataract Removal & Insertion of Lens 16

17 Cataract Removal & Insertion of Lens 17

18 The Inpatient Cost Problem 18

19 What strategic considerations should be addressed when considering RBP? Services have a high likelihood of delivering value Substantial variation in price Services are shoppable & distributed Price must be credible and achievable Tools to estimate costs for reference based services are accurate and comprehensive Strong employee communications 19

20 Examples of RBP in Action 20

21 Colonoscopy Cost 21

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.

22 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% 22

23 Barriers, Alternatives and Compliance Reference Based Pricing 23

24 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. 24

25 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: 25

26 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." 26

27 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 Hospitalcentric 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. 27

28 How much did you learn? Poll Questions 28

29 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 29

30 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 30

31 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 31

32 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. 32

33 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: 33

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

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