Healthcare waste is costing billions — and employers aren’t doing anything about it
Providing your employees with healthcare insurance is expensive. A large chunk of healthcare costs is being wasted by the healthcare industry, according to a new survey. Read on to learn more.
Providing the workforce with healthcare coverage is expensive, but a new survey of 126 employers suggests a large chunk of that cost is being wasted by the healthcare industry on treatments patients don’t need.
The healthcare industry wastes $750 billion per year on unnecessary tests and treatments, according to a survey from the National Alliance of Healthcare Purchaser Coalitions and Benfield, a market research, strategy and communications consulting firm. Some 60% of employers don’t take steps to manage their healthcare plan’s wasteful spending, despite the fact that the same percentage of employers view it as a problem, the survey says.
“While waste has long been identified as a key concern and cost contributor, employers are operating blind and need to look at a more disciplined approach to address top drivers that influence waste,” says Michael Thompson, National Alliance president and CEO.
Employers are under the impression that prescription drugs are the culprit behind the spending waste, and they are, just not as much as other services. Around 54% of health spending waste is caused by unnecessary medical imaging tests, such as MRIs and X-rays, the survey says. Specialty drugs, unnecessary lab tests and specialists referrals are also major money pits.
However, the survey data isn’t suggesting these procedures and treatments shouldn’t be covered by employer health plans. The tests and treatments are potentially life-saving, they’re just used more than they should be. Sometimes previous test results can help with a current diagnosis, but medical staff don’t always check patient files before ordering new tests.
Most employers don’t monitor unnecessary healthcare spending. The 34% of employers who do rely entirely on their healthcare vendors to do it for them, trusting that it’s being taken care of.
“The idea of reducing waste in the healthcare system can be overwhelming,” says Laura Rudder Huff, senior consultant for Benfield. “While employers ask themselves: ‘Where to start?’ this is an issue where even small steps matter. Employers can begin by collecting data to identify where the inefficiencies are in their workforce and community and use assets such as vendors and organizations like coalitions to realize market improvements.”
The survey also recommends employers enlist the services of Choosing Wisely, an organization that counsels patients and employers on healthcare plans and medical treatments.
SOURCE: Webster, K. (7 November 2018) "Healthcare waste is costing billions — and employers aren’t doing anything about it" (Web Blog Post). Retrieved from https://www.benefitnews.com/news/healthcare-waste-is-costing-billions-and-employers-arent-doing-anything-about-it
Top 10 health conditions costing employers the most
As healthcare costs continue to rise, employers continue to look for ways to target those costs. Read this blog post to learn more.
As healthcare costs continue to rise, more employers are looking at ways to target those costs. One step they are taking is looking at what health conditions are hitting their pocketbooks the hardest.
“About half of employers use disease management programs to help manage the costs of these very expensive chronic conditions,” says Julie Stich, associate vice president of content at the International Foundation of Employee Benefits Plans. “In addition, about three in five employers use health screenings and health risk assessments to help employees identify and monitor these conditions so that they can be managed more effectively. Early identification helps the employer and the employee.”
What conditions are costly for employers to cover? In IFEPB’s Workplace Wellness Trends 2017 Survey, more than 500 employers were asked to select the top three conditions impacting plan costs. The following 10 topped the list.
10. High-risk pregnancy
9. Smoking
8. High cholesterol
7. Depression/mental illness
New rule pushes for hospital price transparency
The Centers for Medicare & Medicaid Services is pushing for a new rule that will force hospitals to provide patients with a list of the cost of all their charges. Continue reading to learn more.
The Centers for Medicare & Medicaid Services announced a proposed rule aimed at providing patients with a clear price listing of the cost of their hospital charges. In an effort to fulfill the proposed rule’s objective, CMS suggested an amendment to the requirements previously established by Section 2718(e) of the Affordable Care Act.
CMS issued the final rule (CMS-1694-F), which included the suggested amendment discussed in the April 24, 2018 proposed rule. Currently, under Section 2718(e), hospitals are given the option to either (i) make public a list of the hospital’s standard charges or (ii) implement policies for allowing the public to view a list of the hospital’s standard charges in response to an individual request.
Beginning January 1, 2019, however, hospitals will be required to make available a list of their current standard charges via the Internet in a machine readable format and to update this information at least annually, or more often as appropriate.
This could be in the form of the chargemaster itself of another form of the hospital’s choice, as long as the information is in machine readable format. CMS believes that this update will further promote price transparency by improving public accessibility of hospital charge information.
In the final rule, CMS explains that it is aware of the challenges that continue to exist because the chargemaster data may not accurately reflect what any given individual is likely to pay for a particular service or visit.
Additionally, the comments received in response to the proposed rule argue that the chargemaster data would not be useful to patients because it is confusing as to the amount of the actual out-of-pocket costs imposed on a particular patient.
CMS further explains that it is currently reviewing the concerns addressed in the comments, and is considering ways to further improve the accessibility and usability of the information disclosed by the hospitals.
SOURCE: Goldman, M; Grushkin, J; Fierro, C (16 August 2018) "New rule pushes for hospital price transparency" (Web Blog Post). Retrieved by https://www.employeebenefitadviser.com/opinion/cms-rule-pushes-for-hospital-price-transparency
How employers can manage the skyrocketing cost of specialty drugs
The number of specialty drugs continues to grow. At the end of 2016, there were 700 specialty drugs in development, compared to the 10 that were in development in 1990. Continue reading to learn more.
In the past two decades, the number of specialty medications — which treat rare and complex diseases such as multiple sclerosis, pulmonary arterial hypertension, hepatitis C, HIV, cystic fibrosis, some types of cancer and hemophilia — has grown exponentially. In 1990, there were only 10 specialty drugs on the market. By 2015, that number had increased to 300 medications, and by the end of 2016 there were approximately 700 more specialty drugs in development.
These medications are usually very high cost, with some new biologic medications costing more than $750,000 a year. Why are the costs so high? There are a number of factors, including the facts that distribution networks are limited, these medications are complicated to develop and distribute, and there are few, if any, generic alternatives for these drugs.
See also: 6 ways to mitigate specialty drug costs
The Pew Charitable Trusts found that although only 1% to 2% of Americans use specialty medications, they account for approximately 38% of total drug spending in the U.S.
So, how can employers better gain control over the cost of specialty medications? Because there are hundreds of specialty medications, there’s no single strategy for cost management that can be applied universally. To build an effective cost management strategy, employers need to first analyze employee use of specialty medications. The best strategy will approach specialty medication management by disease class and drug by drug.
However, there are key building blocks of a strategy that will both manage costs and ensure that employees have access to the medications they need. Here are six things employers can do.
Assess benefit plan design structure. Employers should consider how they are incenting employees to spend their benefit dollars appropriately and wisely. A multi-tiered medication formulary where employees pay less out of pocket for generic drugs and lower cost medications and more for costly medications is one approach that’s proven effective. To help employees afford these higher out-of-pocket costs, employers can promote manufacturer copay savings programs, which many drug makers offer.
Think about utilization management. This can include requiring prior authorization for high-cost specialty medications and step therapies (employees must start with lower cost therapies and can move up to more costly ones if those are not effective).
Consider a custom pharmacy network design. By narrowing the network of pharmacies that fill specialty medication prescriptions, employers can negotiate a better unit price. A freestanding specialty pharmacy or a pharmacy benefits manager can provide savings by optimizing discounts for both employers and employees.
Offer second opinion and other support services for rare and complex diseases. A newly diagnosed rare or complex disease patient will see, on average, seven different specialists over the course of eight years before getting a true diagnosis and appropriate treatment path. These programs aim to reduce that burden and ensure success with that treatment once it’s identified. A second opinion from a top specialist in the field provides an expert assessment of the diagnosis and recommendations on the most effective treatment protocol. This not only helps manage costs, it lowers the risk of misdiagnosis and inappropriate treatment. Additional case management services can include one-to-one counseling and, when the drug regimen requires, in-home nursing services to help patients better manage their disease and improve outcomes.
See also: How employers can increase employee use of second opinions
Offer site of care choices. Where specialty drugs are administered can have a significant impact on what they cost. Medications administered in an outpatient clinic at a hospital can cost five times as much as those that are injected or infused in a physician’s office or at the patient’s home. Offering services such as home infusion or injection delivered by nurses or incenting patients with lower copays when they receive their medications at their physician’s office can lower overall specialty drug costs.
Educate employees. When an employee or covered family member is diagnosed with a rare or complex condition that will require a higher level of care and the use of specialty medications, employers can connect employees with case managers or similar services that provide education about the condition and the medication, such as how to manage side effects or what alternative medications are available, which can increase employee adherence with the medication regimen.
SOURCE: Varn, M (8 August 2018) "How employers can manage the skyrocketing cost of specialty drugs" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/specialty-pharmaceuticals-and-how-employers-can-manage-cost
Reference-based pricing is gaining momentum — here’s why
Healthcare and pharmacy costs are constantly on the rise. In this article, Kern talks about reference-based pricing and explains why it’s gaining momentum.
In my 25 years in the insurance business I’ve seen many changes. But there’s always been one constant: Healthcare and pharmacy costs continue to accelerate and no regulatory action has been able to slow this runaway train. The problem is that we have focused on the wrong end of the spectrum. We don’t have a healthcare issue; we have a billing issue.
At the root of this national crisis is a lack of cost transparency, which is driven by people who are motivated to keep benefit plan sponsors and healthcare consumers in the dark. Part of the problem is that most cost-reduction strategies are developed by independent players in the healthcare food chain. This siloed approach fails to address the entire ecosystem, and that’s why we continue to lament that nothing seems to be working.
But that could change with reference-based pricing, a method that’s slowly gaining momentum.
Here’s how it works.
Reference-based pricing attacks the problem from all angles and targets billing — which is at the heart of the crisis.
Typically, a preferred provider organization network achieves a 50-60% discount on billable charges. However, after this 50-60% discount, the cost of care is still double or triple what Medicare pays for the same service. For example, the same cholesterol blood test can range from $10 to $400 at the same lab. The same hospitalization for chest pain can range anywhere from $3,000 to $25,000.
Reference-based pricing allows employers to pay for medical services based on a percentage of CMS reimbursements (i.e. Medicare + 30%), rather than a percentage discount of billable charges. This model ensures that the above-mentioned hospitalization cost an employer $3,000 rather than $25,000.
“Negotiating” like Medicare
Reference-based pricing is becoming increasingly popular as more organizations consider the move to correct cost transparency issues as they transition from fully-insured to self-funded insurance plans.
One well-known and considerable example is Montana’s state employee health plan. The state employee health plan administrator received a notice from legislators in 2014 urging the state to gain control of healthcare costs. Instead of beginning with hospitals’ prices and negotiating down, they turned to reference-based pricing based on Medicare. Instead of negotiating with hospitals, Medicare sets prices for every procedure, which has allowed it to control costs. Typically, Medicare increases its payments to hospitals by just 1-3% each year.
The state of Montana set a reference price that was a generous 243% of Medicare — which allowed hospitals to provide high-quality healthcare and profit, while providing price transparency and consistency across hospitals. So far, hospitals have agreed to pay the reference price.
Of course, there is still the risk that a healthcare provider working with the state of Montana health plan, or any other health plan using reference-based pricing, could “balance bill” the member. But a fair payment and plenty of employee education about what to do if that happens could help you curb costs.
If balance billing does occur, many solutions include a law and auditing firm to resolve the dispute. In one recent example, a patient was balance billed almost $230,000 for a back procedure after her health plan had paid just under $75,000. An auditing firm found that the total charges should have been around $70,000, and a jury agreed. The hospital was awarded an additional $766.
Reference-based pricing is a forward-thinking way to manage costs while providing high-quality benefits to your employees. It’s one way to improve cost transparency, which may eventually transform the way that we buy healthcare.
Kern, J. (18 July 2018) "Reference-based pricing is gaining momentum — here’s why" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/reference-based-pricing-health-insurance-gaining-momentum?utm_campaign=intraday-c-Jul%2018%202018&utm_medium=email&utm_source=newsletter&eid=1e52d1873f9d2e8d6bd477da3e7f49a3
Point-of-sale wellness: How health plans are cashing in
Many health plans are starting to offer preventative approaches to help promote health and reduce skyrocketing healthcare costs. In this article, Vielehr talks about one approach, the point-of-sale wellness method.
Health care costs continue to skyrocket, and payers are constantly looking for ways to keep their populations healthier and to reduce these costs. Payers looking for more effective strategies to improve health and wellness for members should be aware of the new preventative approaches that more health plans are offering.
One such method that health plans are deploying to engage members is point-of-sale wellness, a type of incentive program that encourages members to actively make healthier purchases and lifestyle choices. As point-of-sale wellness becomes more prevalent among health plans, human resource managers and benefits brokers should understand how these programs work to best determine if they would be a valuable option for their employees and clients.
What is point-of-sale wellness?
Point-of-sale wellness is all about helping health plan members make smart, healthy purchasing decisions when they’re in a retail store or pharmacy. According to the Henry J. Kaiser Family Foundation, the average consumer visits their doctor 3.1 times per year. This same consumer will visit his or her favorite retailers multiple times per week. This presents the perfect opportunity for actionable engagement. It is often too easy for individuals to make impulsive decisions that favor cheaper care items or junk food that provides instant gratification but lead to an unhealthy lifestyle in the long run. Empowering consumers in these moments before checking out at the register with the understanding — and more importantly, the financial incentive — to make informed, smarter choices can lead to a healthier lifestyle and reduced health care costs. In short, the goal is to help individuals prioritize health and wellness at retail point of sale.
There are numerous ways that health plans can achieve this goal. One of the most common is by providing members with prepaid cards that are loaded with funds and discounts for the purchase of over-the-counter (OTC) items such as vitamins, diabetes care items and medications for allergies or cold and flu symptoms. The key component of these specialized prepaid cards is that they can be restricted-spend cards. In other words, they cannot be used to purchase any items that the health plan members want; they can only be used to purchase items off a curated list of products.
Under this arrangement, all parties, from the individual to the health plans and retailers, benefit. With a restricted-spend prepaid card in hand, an individual is rewarded for making purchases that contribute to a healthier lifestyle, while reducing health care costs both for themselves and the health plans administering the cards. In the meantime, the retailers partnering with the health plans to make point-of-sale wellness possible enjoy the opportunity to build long-term customer relationships with the health plan members using the cards.
Point-of-sale wellness in action
Point-of-sale wellness can be customized to be as general or specific as a health plan needs. For example, a health plan that supports a high number of new parents on a regular basis may offer a prepaid card designed specifically to assist members with newborn children. The first years of an infant’s life are among the most expensive from a health care perspective. More health plans are starting to offer new parents prepaid cards that are loaded with funds and discounts for items such as OTC medications, baby food and formula, diapers, strollers, car seats or thermometers. This opens an easier path for new parents to do basic at-home diagnostics and keep their babies’ health monitored so costly trips to an emergency room or urgent care center are not needed as often.
Payers that offer health and wellness programs to assist new parents in their populations can consider engaging health plans that offer these types of prepaid cards. Having a healthier child has the added benefit of reducing stress on the parents, which means they are in a better position to continue performing in the workplace.
Financial incentives for healthier choices
Most wellness programs are focused on informing participants of the best ways to support a healthier lifestyle, but that is only half of the equation. Point-of-sale wellness goes one step further to ensure participants are empowered from a financial perspective to make smarter purchasing decisions while shopping for daily care items. Businesses and benefits brokers who want to provide their employees and clients the best opportunities to live a healthier lifestyle should consider engaging health plans that prioritize these prepaid card incentives into their offerings.
Vielehr, D. (19 July 2018). "Point-of-sale wellness: How health plans are cashing in" (Web Blog Post). Retrieved from https://www.benefitspro.com/2018/07/19/point-of-sale-wellness-how-health-plans-are-cashin/
Why Employers Should Boost Dental Benefits Enrollment
Original post benefitsnews.com
You might eat a balanced diet and squeeze in a mix of cardio and weight-lifting workouts every week to stay healthy. But to be truly healthy, you’ve got to focus on more than just working out and eating well. Believe it or not, you’ve also got to focus on oral health.
The link between oral health and cardiovascular health isn’t new; however, there is new evidence that more closely ties periodontitis, better known as gum disease, to heart attacks and stroke. One study showed that treating oral inflammation caused by gum disease with a topical remedy reduced vascular inflammation, which is a leading risk of hypertension, heart attack and stroke.
Heart disease is a serious problem in the United States — one in four people will die of the malady if it goes untreated. It’s also a major expense for Americans, including employees and employers who sponsor their health plans; heart disease costs nearly $1 billion a day in medical care and lost productivity.
Gum disease can affect more than just the heart. For pregnant women, it can also affect unborn babies. The bacteria caused by periodontitis can get into the blood stream and target the fetus, contributing to premature birth or low birth weight. Not only does prematurity and low birth weight put newborns at risk for issues in the beginning of life and learning, as well as developmental issues later on, it’s also costly for a family. In its first year, a preemie can cost around $49,000 in expenses, compared to just $4,551 for an infant who doesn’t experience complications. The March of Dimes reports that pre-term birth costs more than $12 billion in excess healthcare costs.
Diabetics also need to pay special attention to their oral health. In addition to monitoring their feet, eyes, kidneys and heart for complications, they are more prone to periodontitis. A higher risk of gum disease can make it more difficult to control blood glucose, and can also cause disease and infections in the bones that hold teeth in place, making it more difficult to chew. Gum disease may also lead to tooth loss. Diabetes costs the United States $322 billion in a combination of healthcare fees and lost productivity.
It’s important for employers and employees to understand how oral health plays a part in overall health, and that simple, inexpensive treatment can save businesses and plan participants thousands of dollars and countless hours of pain and suffering.
Analyzing claims data is one way to see how oral health might affect employees. The highest number of claims typically comes from cardiovascular, maternity, diabetes and musculoskeletal claims — all of which are exacerbated by periodontitis.
For years, dental health was given a back seat in health plans, wellness initiatives and employee education. Most initiatives focused on preventing heart disease through diet and exercise, and focused little, if at all, on dental care. Many health plans did not — and still do not — include dental coverage, which is a minimal expense compared to other program costs overall. Consequently, employees may simply write off dental care because they may not have a history of cavities. But dental coverage and consistent employee education and communication can help them understand the risks, develop good habits and begin to take their dental health into their own hands.
Employers can work closely with insurance brokers to understand medical and dental coverage, and what their costs and claims are for both. They’ll likely see that medical claims are far higher than dental claims. They can then work together with benefit consultants to create an affordable dental plan, or bridge the gap between dental and medical for those at higher risk for periodontitis issues so that employees can get the treatment they need.
Finally, employers need a long-term communication strategy to educate employees on the value of benefit offerings and the importance of good oral hygiene. They’ll be happy and healthier, and the employer’s medical costs will decrease.
Everybody wins.
Making Sense of the Alphabet Soup of Healthcare Spending Accounts
Original post benefitnews.com
Employers are passing more and more healthcare responsibility to their employees, and in some cases, giving them a greater share of the financial burden. Likewise, businesses are looking for ways to help employees manage healthcare expenses. There are a number of products for that purpose, and while they’re similar, they’re not the same.
With acronyms being used to explain still-new concepts, it can be difficult for employees to understand the difference between them or even to remember which product they use. It’s important to educate them about these products so they get the most out of them.
Health savings account. A health savings account is like a 401(k) retirement account for qualified medical expenses. An HSA helps people pay for medical expenses before they hit their deductible. Employers and employees can both contribute money tax-free, and the money can be rolled over from year to year with only a maximum annual accrual. All contributed funds can be invested once a specific minimum is met (determined by the bank).
HSA-compatible health plans don’t include first-dollar coverage (except for preventive care), which means employees must meet a deductible before benefits will be paid by a health plan. This deductible is set by the IRS each year; in 2016, high-deductible health plans must have a deductible of at least $1,300 for an individual and $2,600 for a family.
Employees and employers can both contribute funds to build an HSA, and all funds count toward the annual maximum. The employee “owns” the HSA and the money that’s in it.
HSA funds can be spent on qualified medical expenses as outlined by section 213(d) of the IRS tax code, dental, vision, Medicare and long-term care premiums, and COBRA (if unemployed). After age 65, health premiums can also be withdrawn, but are subject to income tax.
Just like a 401(k), the account is portable. If the owner of the HSA changes jobs, the money can still be used for medical expenses, but the employee can no longer contribute to it.
Health reimbursement accounts. HRAs help employees pay for medical expenses before a deductible is met. But unlike an HSA, employees cannot contribute to an HRA, only employers. The money an employer places in an HRA can be used for medical expenses not covered by a health plan, such as deductibles and copays for qualified medical expenses as outlined by section 213(d) of the IRS tax code, dental, vision, Medicare and long-term care premiums. The associated health plan can have any deductible amount — there are no minimums and the plan does not have to be a high-deductible health plan. Unlike an HSA, an HRA is not portable, and funds can’t be used for non-medical reasons, even with a penalty. Funds also don’t typically earn interest and are not invested.
Employers must be more involved with HRA accounts since they are the only party who can deposit money; they also determine if funds can be rolled over from one year to the next.
Flexible spending accounts. FSAs allow employees to defer part of their income to pay for medical expenses tax free as part of a Section 125 cafeteria plan. Allowable expenses include those outlined by section 213(d) of the IRS tax code as well as dental and vision expenses. Both employers and employees can contribute to an FSA; however, the amount employees plan to contribute at the beginning of the year can’t be changed mid-year. FSA funds can’t be invested and fees associated with the plan are normally paid by the employer. There are no underlying plan restrictions and these accounts can be maintained alongside traditional health plans. The employer owns the account and is responsible for the management.
Funds in an FSA can be rolled over only if there is a carryover provision; in this case, $500 can be carried to the next year.
With an FSA, individuals must substantiate need for a reimbursement at the time of service by keeping receipts and filling out a form. Some FSAs include “smart” debit cards that automatically pay certain copays and don’t require documentation.
Determining which is best
HSAs, HRAs and FSAs serve slightly different purposes and can even co-exist in some circumstances. For example, those enrolled in an HSA can contribute to a limited-used FSA. Those enrolled in an HRA can also contribute to an FSA without limitations.
HSAs work well for employers who don’t want to add to administrative burdens or additional costs. And they’re a great way to give employees a way to offset the costs of qualified high-deductible health plans and save for post-retirement health expenses. However, employers may want to stray from an HSA or refrain from fully funding the account early in the year if there’s high turnover at a company; the money deposited goes with the employee when they leave.
For employees, HSAs provide investment opportunity and are portable; they also encourage consumerism and are cost-effective to administer. But one of the biggest advantages is that the employee doesn’t have to pre-determine expenses since unused funds carry over.
HRAs can work well for an employer that is not offering a qualified high-deductible health plan but wants to promote consumerism while self-funding a portion of the risk. The funds contributed are immediately available and completely funded by the employer, which is an advantage to the employee. However, there is no tax advantage to employees and the fund can’t be transferred.
FSAs are the most appropriate for employers offering traditional health plans. Employees benefit because they can contribute pre-tax dollars and the funds are immediately available. But the “use it or lose it” provision is a definite disadvantage for employees.
There are pros and cons to all three funds. It’s best to review them carefully to determine which ones will work for your business, and make sure to communicate the funds’ features and restrictions to your employees.
5 Strategies to Cut Healthcare Costs without Cutting Benefits
Original post benefitsnews.com
For employers, it’s been an ongoing battle to keep health insurance costs down without cutting employee health benefits. According to a PwC report, healthcare costs will remain a challenge in 2016 as costs are expected to outpace general economic inflation with a 4.5% growth rate.
There is no single culprit in the battle against rising healthcare costs; rather, there are many drivers contributing to the increase. Soaring prices for medical services, new costly prescription drugs and medical technologies, paying for volume over value, unhealthy lifestyles and a lack of transparency concerning prices and quality are all factors contributing to the spike in premiums.
So what can you do?
It can be a difficult juggling act to keep your health insurance premiums from financially squeezing your business, while also providing a robust benefits package for your employees. However, you may have more options for controlling your company’s healthcare costs than you realize. With the right knowledge and planning, there are ways to keep health insurance costs from derailing your company’s profits while also providing your workforce with the benefits they need.
Here are five strategies to cut costs without minimizing the benefits offered to employees:
1. Level-funding company healthcare costs.
In between a traditional fully insured plan and a traditional self-funded plan lies an innovative solution known as level-funding.
Traditional fully insured plans are contracts between the employer and the insurer where the employer pays a predetermined and fixed amount per employee per month (PEPM) and the insurer assumes the financial (claims) risk, net of employee co-pays and deductibles.
Traditional self-funded plans are one in which the employer assumes the financial (claims) risk for providing healthcare benefits to its employees. In practical terms, self-insured employers pay for each out-of-pocket claim as they are incurred, and the model is almost always is packaged with stop-loss insurance in case of large claims.
Level-funding is a hybrid of the two aforementioned plans, whereby the plan is filed as a self-funded plan, but the employer is billed each month a fixed and unchanging premium per employee per month, and after a year or two may qualify for a refund of premium if claims were lower than expected, or receive a proposed increase to premiums at renewal if claims were higher than expected. Since these plans are filed as self-funded, they are typically exempt from state taxes and many of the federal healthcare law’s health insurance taxes, but subject to a modest annual transitional reinsurance fee.
Additionally, according to data from the U.S. Department of Health and Human Services, nearly 30% of employers with between 100 and 499 employees self-insures their benefits, and over 80% of employers with 500 or more employees self-insure their benefits.
2. Provide a proactive wellness initiative.
Health and wellness programs have become popular ways for employers to manage healthcare costs — and some companies are finding that employees are more engaged in these programs when they’re offered incentives, rewards or even disincentives for participating or attaining certain health-related goals. Some companies are also seeing an impact of incentives on their program ROI.
For wellness programs to be effective, they need to be robust and allow for individual needs and interests. Wellness programs need to be comprehensive and tailored to individuals; meeting them where they are and helping them keep their healthy goals and ambitions in check with robust resources.
One other important aspect of having an effective wellness program is measuring employee engagement. By determining their level of inclusion, employers can understand how to implement incentive-based initiatives for the future. And remember, leading by example is important to make your employees feel comfortable.
3. Implement tax-advantaged programs.
Tax-Advantage benefits programs allow for a reduced cost of living for employees by handling expenses using pre-tax dollars. This method ensures the use of money that is valued at 100% of a wage or salary, instead of paying with funds that are devalued due to taxation.
There are four major types of programs that utilize this method: flexible spending accounts (FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs) and premium offset lans (POPs). Each program offers a different process for healthcare payments that involves both employers and employees, and can lighten the burden of rising medical expenses.
4. Use a flexible contribution arrangement (FSA).
Elaborating further on the aforementioned benefit programs, FSAs enable employees to collect and store money that can be used for medical expenses tax-free. FSAs may be funded by voluntary salary reductions with an employer, and there is no employment or income tax enforced.
Another benefit of FSAs stems from the ability of employers to make contributions towards an account that can be excluded from an employee’s gross income. From an employee’s mindset, an FSA allows for flexibility and a metaphorical safety net in case of a medical emergency.
5. Use deductible exposure mitigation vehicles (HRAs).
A health reimbursement arrangement is another tax-advantaged employer health benefit plan that can trim your tax bill and reduce the cost of medical services.
HRAs are an employer funded medical expensed reimbursement plan for qualifying medical expenses. These plans reimburse employees for individual health insurance premiums and out-of-pocket medical expenses. They allow the employer to make contributions to an employee's account and provide reimbursement for eligible expenses. All employer contributions are 100% tax deductible when paid to the participant to reimburse an expense. They are also tax-free to the employee.
Based on the plan design, HRAs can be an excellent way to supplement health insurance benefits and allow employees to pay for a wide range of medical expenses not covered by insurance.
What works, what doesn’t
It’s crucial to educate employees on available tools and programs — by doing so you can control costs, while simultaneously providing appropriate benefits and employee engagement. To make the most out of a conscientious business decision, take the time to understand what is and isn’t working for you on your current plan, and what your other options are.
By adopting these new healthcare benefit strategies, you are engaging your workforce and enabling them to have an active role in determining an appropriate course of action.
A proper benefits partner maintains track of legislation and regulatory changes, advocates for small to mid-sized businesses and has the expertise to prevent violations from unforeseen rules and laws. By enabling these programs and using the right benefits partner, you can see your company’s healthcare costs lower substantially.
Avoiding PPACA excise tax a priority
Originally posted August 20, 2014 by Dan Cook on www.benefitspro.com.
Despite foreseeing record-breaking employee health care costs in the near term, major employers will continue to offer coverage to full and part-time workers. However, coverage for spouses and dependents could be targeted for cutbacks.
That’s the latest from a Towers Watson survey that found employers generally anticipate a 5.2 percent increase next year in health plan costs, which would put coverage cost per employee at an all-time high, Towers Watson said.
However, many employers are planning to make design changes to their plans. Should they occur, employers then project a 4 percent plan increase.
“Despite this cost trend, most (83 percent) employers consider health benefits an important element of their employee value proposition, and plan to continue subsidizing and managing them for both full-time and part-time active employees,” Towers Watson said. Virtually all of these large employers surveyed said they will continue to offer health benefits to employees, with few indicating they were ready to move coverage to a private exchange.
The results were gleaned from the company’s 2014 Health Care Changes Ahead Survey.
Large employers were asked about their health care-related cost concerns for the future. A major one is the excise tax that goes into effect in 2018 as part of the full rollout of the Patient Protection and Affordable Care Act.
“Nearly three-quarters (73 percent) of employers said they are somewhat or very concerned they will trigger the tax based on their current plans and cost trajectory,” Towers Watson said. “More than four in 10 (43 percent) said avoiding the tax is the top priority for their health care strategies in 2015. As a result of the excise tax and other provisions of the health care reform law, CEOs and CFOs are more actively engaged in strategy discussions.”
The objective is not to eliminate or even substantially reduce employee coverage, Towers Watson said, but to continue to manage costs as finely as possible without gutting coverage.
“The emphasis is on achieving or maintaining a high-performance health plan,” said Randall Abbott, senior consultant at Towers Watson. “And CFOs are now focused on a new gold standard: managing health cost increases to the Consumer Price Index. This requires acute attention to improving program performance."
Other key findings from the study:
- 81 percent of employers plan moderate to significant changes to their health care plans over the next three years, up from 72 percent a year ago;
- 48 percent are considering tying incentives to reaching a specified health outcome such as biometric targets, compared with just 10 percent that intend to adopt it in 2015;
- 37 percent are considering offering plans with a higher level of benefit based on the use of high-performance or narrow networks of medical providers, compared with just 7 percent in 2015;
- 34 percent are considering telemedicine, compared with 15 percent in 2015, as employers encourage employees to use such telemedicine strategies as virtual physician office visits to improve access and efficiency of care delivery;
- 33 percent are considering significantly reducing company subsidies for spouses and dependents (10 percent have already implemented such reductions, and 9 percent intend to do so in 2015);
- 26 percent said they are considering spouse exclusions or surcharges if coverage is available elsewhere (30 percent have that tactic in place now, and another 7 percent expect to add it in 2015);
- 30 percent of employers considering caps on health care coverage subsidies for active employees, using defined contribution approaches (13 percent have them in place today and another 3 percent planning them for 2015).
Employers continue to study private exchanges, although 77 percent “are not at all confident public exchanges will provide a viable alternative for their active full-time employees in 2015 or 2016.”
Still, 24 percent said private exchanges could provide a viable alternative for their active full-time employees in 2016. They are looking at three key factors to emerge that would push them in that direction:
- Evidence they can deliver greater value than their current self-managed model (64 percent);
- Adoption of private exchanges by other large companies in their industry (34 percent);
- An inability to stay below the excise tax ceiling as 2018 approaches (26 percent).
“The most effective employers are continually evaluating new strategies for improving health plan performance,” Abbott said. “Examples include a steady migration to account-based health plans, action-based incentives, adoption of value-based payment methods with health plan partners and plan designs that drive efficiencies. Other options are technology-based solutions such as telemedicine, fitness devices or trackers, and social media to encourage employees to take a more active role in both their personal health status and how they use health care goods and services.”