New drug plan would curb exorbitant pharmaceutical costs

California Governor, Gavin Newsom has proposed a pharmaceutical plan to cut costs of pharmaceutical prescriptions. It was suggested that using low prices obtained by the state, could help other buyers. Read this blog to learn about how California Governor is purposing an attempt to lower costs for California residents.

California’s governor unveiled plans to establish a state-run generic-drug wholesaler, as part of a series of measures that together would constitute one of the furthest-reaching attempts to curb pharmaceutical costs in the U.S.

Gov. Gavin Newsom on Thursday also proposed creating a single market that would allow drug buyers to pool their bargaining power to drive down costs. And Newsom suggested using low prices obtained by the state’s Medicaid program to aid other buyers, among other steps.

The most populous U.S. state, California has a history of using its economic muscle to try to influence national policy on everything from auto emissions to health care. The drug-pricing proposals, which in some cases appear to require new law, are likely to be opposed by a pharmaceutical industry that has formidable economic and legal wherewithal of its own.

“These nation-leading reforms seek to put consumers back in the driver seat and lower health care costs for every Californian,” Newsom, a Democrat, said in a statement.

The plans, released as part of the state’s proposed 2020-2021 budget, are almost certain to face substantial practical, political and legal hurdles. For example, the proposal to create a state-run drug label would rely on drug companies to supply inventory on a contract basis.

Companies could balk at that notion if it stands to further compress their margins. Major generic manufacturers, including Mylan NV and Teva Pharmaceutical Industries, have struggled to turn a profit on some widely used medications. For higher-cost generic drugs, there can be few competing manufacturers with the licenses to produce the pills for the U.S. market.

Creating a single buying pool could run into difficulties, as well. Newsom’s proposal says state programs, health insurers and private employers would band together as a sole buyer, and that drugmakers would have to offer their products at one price to the entire market.

But that could limit patient access to medications if pricing disputes lead drug companies to withhold their products. In Europe, negotiations between drugmakers and government health programs have resulted in some expensive drugs not being available, one of the trade-offs for the continent’s typically lower costs. It’s unclear if California could successfully hold together a large pool of independent buyers in the face of pressure from patients unable to access treatments.

SOURCE: Bloomberg News (09 January 2020) "New drug plan would curb exorbitant pharmaceutical costs" (Web Blog Post). Retrieved from

Healthcare strategies that can save employers money

Todd Rolland compares the traditional strategies to new stratigies for healthcare savings in the artilce below.

It is no secret that employee benefit costs are rising. As an employer, we wonder what can be done to reduce costs and as an employee, we are curious if we are getting the best deal. Medical insurance costs are rising faster than many companies’ profit margins and outpacing inflation on a year-to-year basis.

Rising healthcare costs are eroding revenue unlike any other element within a business. Government regulations and rising premiums are also affecting cash flow which can impact all areas of business operations. Separating rhetoric and marketing from meaningful, impactful company-wide solutions is becoming increasingly difficult. However, as the paradigm shift of healthcare strategies gains momentum, sustainable solutions are becoming clearer.

There are evolving options with this new paradigm shift of healthcare strategies: traditional, direct contracting, reference-based pricing and bundled pricing. A strong market push for pricing transparency has created additional opportunities for employers to save money and control costs, and they are doing just that. Employers now have the ability to function much like the traditional PPO has historically functioned by negotiating directly with providers.

The traditional approach includes elements such as reinsurance, administration, PPO networks, pharmacy benefit managers, population health management, predictive modeling, multiple plan designs and wellness strategies.

New options
Direct contracting is also a viable option because providers are much more willing to contract directly with employers than ever before. The idea is to establish a delivery and pricing contract that accomplishes two primary objectives:

  1. An agreed-upon fee schedule for services performed that is less than typical insurance company PPO-contracted rates.
  2. Incentive for participants to utilize contracted providers for the care needed.

The third option, reference-based pricing, allows employers to structure partial self-funding plans that reimburse a certain percentage of Medicare reimbursements levels for claims. PPO fee schedules can be 100-200% higher than these Medicare rates. As a result, the reimbursement plan can save employers a considerable amount. However, there is still a risk in balanced billing. The direct contracting option protects the employer with balanced billing issues that they would otherwise experience with reference-based pricing methodologies.

Bundled pricing is rapidly evolving and creates a significant opportunity for employers to save money. Employers simply pay agree-upon cash pricing for surgeries performed on an outpatient basis, and in certain cases, an inpatient basis. The price includes all services including facility, surgeon, anesthesiology, pathology, radiology, etc.

Additionally, two strategies that are gaining attention around prescription costs are average script pricing and pass-through average sales price prescription pricing. Both offer employers opportunities to find significant claims savings.

See the original article posted on EmployeeBenefitAdvisor on August 9, 2016 Here.


Rolland, T. (2016, August 9). Healthcare strategies that can save employers money [Web log post]. Retrieved from

Look Beyond Health Care Financing to Workforce Health

Originally posted February 26, 2014 by Thomas Parry on

Employer focus on employee health care will expand in 2014 beyond financing health coverage to managing employee health. We expect to see employers focusing more strategically on workforce heath — in particular, how to build business impacts such as lost work time and performance into their overall assessment of best practices — and how to connect investments in health back to business goals.

However employers’ decisions have been determined by the Affordable Care Act, the reasons to continue investing in employee health and productivity remain, given their impact on employers’ bottom-line costs and top-line job performance. The evidence is clear: poor workforce health has a profound impact on companies, regardless of their industry or size.

Research by our organization, the Integrated Benefits Institute, has investigated financial productivity losses due to worker illnesses including depression, diabetes, low back pain, stress and metabolic conditions. Our findings highlight the necessity for employers to think beyond how health issues impact medical costs. Our research shows:

  • Depression costs employers approximately $62,000 annually per 100 employees in lost work time and medical treatments.
  • Employees with diabetes are 47% more likely to miss at least one day of work per month than workers with normal fasting blood glucose.
  • Low-back pain costs employers $51,400 annually per 100 employees in lost productivity and medical treatments.
  • Employees with metabolic syndromeare three times more likely to have a work-disabling event such as a heart attack or stroke.
  • Stress at work contributes more to poor job performance than either stress at home or financial worries.

Over the course of the year, I’ll be sharing more of our findings related to these illnesses, and the benefits to organizations with a strong commitment to employee health and performance. Our research reveals that employees in organizations with a strong health culture report that they spend more time working, work more carefully and concentrate better than employees at organizations with poor cultures of health.

Workers with better work environments — such as favorable workloads, work-life balance, good relations with managers and fewer demands on their time — also report fewer sick days than those in less healthy workplaces.

Employers can take several steps to acting more strategically about investing in employee health:

1. Assess where you are. Use key metrics to know where your organization currently is and what you have achieved to date regarding employee health. Work with your benefits supplier partners to obtain data and determine your company’s performance relative to organizations, especially organizations within your industry.

2. Use comparisons to identify the greatest opportunities to improve employee health. Since organizations have limited resources, start by focusing on the biggest problems — and the biggest opportunities — facing your company.

3. Measure outcomes. Determine beforehand how you will track results — and track them beyond health care costs alone. Simply saying a program is successful isn’t enough to convince the CFO of the business case for health improvement — results must be measured quantitatively. Senior management is more responsive to requests for investment when HR professionals are able to demonstrate the value of programs in business-relevant terms with metrics demonstrating changes over time.

Employers will find that their investments in workforce health and performance will be most effective when integrated with a broader strategy that includes an understanding of how their organizations can positively or negatively influence workers’ health.



2013 rise in employer health costs lowest in years

Originally posted November 20, 2013 by Dan Cook on

Is it the lull before the storm?

Employers, it appears, worked hard to hold down health plan cost increases this year. A Mercer study released Wednesday reported that the increase — just 2.1 percent over last year — was the lowest hike since 1997.

But don’t count on another new low in 2014.

Employers told Mercer they expect health plan costs to jump 5.2 percent next year if they keep on looking for – and finding -- ways to restrain health costs.

If they chucked all those efforts, employers say, the increase next year would be more along the lines of 8 percent.

Let’s not rain on the cost-reduction parade quite so quickly. Employer health costs have been reined in of late, and the efforts should be recognized.

The best performance came from the employer group represented by those with 10 to 499 employees. Their costs nudged up just 1 percent this year over last. Even large employers experienced just a 3.7 percent increase — still lower than the overall 4.1 percent increase in 2012 vs. 2011.

Part of the reduction in cost came from the increasing popularity of high-deductible health plans for employees, the study said. Consumer driven health plans are now entrenched in the workplace and offer savings to employers. As the study said:

“Nationally, enrollment in CDHPs rose from 16 percent of covered employees in 2012 to 18 percent in 2013. This is the same portion that enrolled in HMOs. In the Midwest, CDHP enrollment is now more than double that of HMOs (27 percent compared to 10 percent).  CDHPs are an important option for employers looking for a low-cost plan to make extending coverage to additional employees more affordable. The average cost of coverage in a CDHP paired with a tax-advantaged health savings account is 17 percent less percent than coverage in a PPO and 20 percent less than in an HMO.”

Employers also point to wellness plans as contributing to lower costs, although most can’t quantify the contribution.

As Mercer’s Julio A. Portalatin, president and CEO, said, “The good news is that employers have already taken decisive action to slow cost growth so they will be in a better position to handle the challenges ahead. But the impact of the ACA on enrollment levels remains a huge question mark.”

Employers pointed to the uncertainties of the implementation of the Patient Protection and Affordable Care Act as drivers for next year’s anticipated uptick.

They expect to be providing coverage for more workers in 2014 as the PPACA kicks in, which will add to their costs. “Next year, because of the individual mandate (contained in the PPACA), it is likely that fewer employees will waive coverage for themselves and more will elect dependent coverage – although the extent of the change is difficult to predict,” the study said.

Tracy Watts, Mercer’s national leader for health reform said “there are a lot of unknowns when it comes to enrollment.”

“A big question is how many employees will enroll for the first time, given that the tax penalty for not obtaining coverage is relatively small. But an employer might wind up covering more dependents if others in the area have made changes to discourage their employees from enrolling dependents,” she said.

Other highlights mined from the Mercer data:

  • In 2015 employers, more large employers are going to be required to offer health coverage to workers. Among all large employers, 32 percent say they expect to be affected, while 48 percent of large wholesale/retail companies say they will have to offer coverage.
  •  Fifty-five percent of respondents said they now include same-sex domestic partners as eligible dependents.
  • Twenty-three percent of large employers vary the employee contribution amount based on tobacco-use status or provide other incentives to encourage employees not to use tobacco. That’s up from 19 percent in 2012. Among employers with 20,000 or more employees, 46 percent now use an incentive.

Employers Push for Better Health Pricing

Originally published by Dan Cook on the BenefitsPro website.

Catalyst for Payment Reform told lawmakers this week that efforts to elicit better value for employer-sponsored health plans take a flawed approach to solving the pay-for-value problem.

The crux of the issue: health plans are being evaluated by the simplest measures rather than ones that dig deeper. For most purchasers of the plans, this only frustrates efforts to control costs and facilitate better outcomes for those covered.

“One of today’s biggest shortcomings is the separation of price and quality information,” Dr. Suzanne Delbanco, executive director of the group, said in an appearance before the U.S. Senate Committee on Finance.

“I think we have probably too many [quality metrics] now and not enough that focus on exactly those points where there’s the greatest opportunity for reducing harm and where there’s the greatest variation in performance. We tend to measure things that are easy to collect data on and that show very little difference between providers.”

Catalyst for Payment Reform represents major employers dedicated to finding better ways to evaluate their health plans to achieve greater efficiencies and better outcomes. Among the members: Safeway, Dow Chemical, 3M and CALPERS, the mammoth California employee pension fund.

Delbanco said her organization is promoting reference-based pricing, where purchasers establish the price of a particular service, and the patient pays any additional costs beyond that. CALPERS uses this approach in hip and knee surgeries.

Others who testified at the hearing on high prices and low transparency in healthcare included Giovanni Colella, CEO and co-founder of Castlight Health; TIME magazine contributing editor Steven Brill; and Dr. Paul Ginsburg, president of the Center for Studying Health System Change.



SHRM Research Spotlights Health Care Reform Strategies

Originally posted by Stephen Miller on the SHRM website.

New survey reports detailing how U.S. employers are responding to health care reform were released by the Society for Human Resource Management on June 16, 2013, in conjunction with its Annual Conference & Exposition.

Part one, Health Care Reform—Challenges and Strategies, examines the difficulties that HR professionals are facing and the strategies they are using to handle the new regulations. Part two, Health Care Reform—Impact of Health Care Coverage and Costs, focuses on future health care coverage benefits and expected costs.

In addition, a two-page summary of the survey findings is presented in SHRM Research Spotlight: Health Care Reform—Challenges and Costs.

The research was conducted in May 2013, using a randomly selected sample of SHRM members. The Society received 818 responses, half from members with the job function of benefits and compensation and half with the job title of HR manager or higher.

Increased Costs, Cost-Sharing Expected

A large majority of those surveyed (84 percent) expect their health care coverage costs to increase in 2014. Among these respondents, more than half (55 percent) predicted an increase of up to 10 percent, 19 percent forecast a 10 percent to 15 percent increase, and one-quarter (26 percent) expected an increase of 16 percent or more. Generally, small organizations expect greater jumps in costs.

Most responding organizations (83 percent) are likely or highly likely to pass on higher costs to their employees.

When asked what actions their companies are taking as a result of the Patient Protection and Affordable Care Act (PPACA), respondents mentioned the following:

  • HR staff education. Nearly three-quarters of organizations are educating HR staff members through classes (74 percent) or working with legal/benefits counsel (73 percent) to help them understand the health care law.
  • Redesigned plans. More than one-half are working with their benefits provider to design a compliant health care plan for 2014 (61 percent) or analyzing the short-term financial impact of the law (60 percent).
  • Alternative plan options. More than one-half (56 percent) already offer (37 percent) or plan to offer (19 percent) their employees alternative, lower-premium coverage, including high-deductible plans with health savings accounts or health reimbursement arrangements.
  • Self-insurance. Just over half of organizations (52 percent) have fully insured medical benefits. Larger businesses are more likely to be self-insured, as are publicly owned, for-profit companies. 
  • Spousal coverage. Thirteen percent of organizations have provisions to limit coverage for employees' working spouses, such as applying surcharges or exclusions, and 9 percent plan to implement them in 2014.
  • Grandfathered status. About one-quarter (26 percent) indicated they will try to keep a grandfathered health plan, which is exempt from certain PPACA provisions. Fifty-five percent will not maintain grandfathered status, and 19 percent are unsure.
  • Staff and hour reductions. Few organizations (3 percent) have reduced or plan to reduce their staff. However, 9 percent have already limited part-time workers to less than 30 hours per week, and another 12 percent plan to do so.
  • Resources. To help them comply with reform provisions, employers are turning to their insurance brokers (78 percent), SHRM resources (62 percent), legal counsel (48 percent), consultants (34 percent) and internal experts (20 percent).




Wellness programs dealt setback under proposed IRS rules

Original article

By Allen Greenberg

The IRS, in what would be a blow to employers, is proposing companies shouldn’t be allowed to count the cost of wellness programs in their health care plans under the Patient Protection and Affordable Care Act.

Should it be affirmed, the rule would force employers to spend more to meet the law’s minimum value provisions.

Wellness programs are a key part of the PPACA.

The law was written with the idea that more employers would put wellness programs in place or expand existing such programs to help improve the health of Americans and help control health care spending.

Specifically, the hope is that more employers might reimburse workers for the cost of fitness center membership, reward employees for attending a monthly, no-cost health education seminar; or that they reward employees who complete health risk assessments.

The proposed rules from the IRS, however, wouldn’t allow employers to consider the costs of wellness programs in establishing whether they’ve reached the government’s definition of “minimum coverage” under the ACA.

Only wellness programs designed to prevent smoking will qualify, the IRS said.

Under PPACA, a large employer must pay an excise tax penalty if it fails to provide minimum coverage for even one full-time employee, forcing that employee to get a tax credit to buy health insurance through one of the new insurance exchanges, or marketplaces.

Labor unions that worried some employers might try to skirt minimum health care coverage by including wellness programs welcomed the news.

"We are very happy with the rules," Dania Palanker, senior counsel for the National Women's Law Center, told reporters.

But employer advocates were disappointed, calling it a setback.

The public has until July 2 to submit comments to the IRS for changes.

Click here to read the IRS’s proposed ruling.