A CFO’s Guide to Health Plan Fiduciary Leadership
January 17th, 2023
Recent passage and implementation of the Consolidated Appropriations Act (CAA) of 2021 creates new risks and opportunities for employers who self-insure their health benefit plans under the Employee Retirement Income Security Act of 1974 (ERISA).
What Employers Need to Know
The CAA mandates employer access to new and critically important insights into the prices they’re paying for employee health care services – details they have been unable to previously obtain from vendors to whom they pay millions of dollars each year to negotiate on their behalf. Finally, employers can evaluate the cost and quality of services they are purchasing from providers and other vendors and make informed procurement decisions. In fact, the law requires employers to demonstrate that the health care services they buy for their employees are cost-effective, high-quality and meet mental health parity and pharmacy benefit requirements.
This means that employers must take steps to establish oversight procedures and processes to document their efforts to comply with the CAA as fiduciaries, similar to the governance practices employers have already established for their 401(k) and retirement plans.
Implementing an effective health plan oversight and audit framework, with documented procurement processes, can substantially reduce corporate exposure for companies and individual directors, officers and employees. Many employers currently lack adequate controls in their existing service agreements, have historically tolerated unreasonably high fees and costs and often rely upon financially conflicted intermediaries for advice.
The CFO’s Role
It is because of these systemic barriers to compliance that CFO leadership is particularly needed to guide corrective action. Compliance may very likely require companies to adopt new business practices, amend existing health benefit contracts and ensure insurance policies for Directors and Officers cover claims involving employee health plans.
The heightened fiduciary risk of being a health plan manager is occurring at a time of increasing health plan expenses, economic pressures, workforce recruitment and retention challenges and a seemingly insatiable employee demand for immediate, personalized solutions that foster overall well-being. CFOs who embrace a health plan fiduciary framework to mitigate litigation risk may find that compliance opens new opportunities to reduce wasteful health care spending, improve predictability and enable better support for the health and wellbeing of their employees and families.
An Opportunity to Address Workforce Health Challenges
The same health plan data that can help CFOs mitigate fiduciary risk can also unlock opportunities for human resource and benefit leaders to better address workforce health challenges and manage delegated services and vendors. Fiduciary leadership that is aligned across finance, human resources and benefit teams can catalyze a transformation of employee health benefits from a liability to a valuable, strategic asset.
Click here for our guide to establishing a strategic fiduciary framework to enhance the value of employee health benefits.
4 Key Employer Health Trends for 2023
January 4th, 2023
With the pandemic’s grip finally easing, employers are shifting their focus toward key objectives that can support sustained improvements in health care quality and meaningful reductions in cost. Here, the top four trends for large health care purchasers to watch as we head into 2023.
1. Improving health equity
COVID-19 exposed major disparities in the U.S. health care system and helped fuel an employer commitment to tackle the systemic inequities faced by underserved and minority communities. Employers understand that by focusing on health plan design, care access and social determinants of care, they can make important strides toward providing more equitable and cost-effective care.
In the coming year, more large companies will be looking to cover preventive medications and services, supporting pregnancies through doula services, developing data capabilities to identify and help address social determinants, improving remote chronic disease management, and making benefits and health care simpler to access and navigate for underserved populations.
2. Strengthening primary care
Employers realize that robust primary care provides the foundation for a healthy workforce and is an essential starting point of high-value health care system. Studies show that advanced primary care, or primary care systems that incentivize integrated and coordinated care, can lower overall health utilization, improve outcomes and reduce costs.
Key strategies employers are expected to target to bolster primary care include supporting consistent advanced primary care standards for payers, providers and health care purchasers to incentivize high-quality, lower-cost primary care. Other employer efforts are likely to focus on working with policymakers to advance the development and application of alternative payment models that support and enable advanced primary care. Equally important will be the continued evolution of tools and systems that enhance consistent access to behavioral mental health in the primary care setting.
To support purchasers in their efforts to identify and work with top-performing primary care practices, PBGH recently issued a first-of-its-kind collective request for information (RFI) on behalf of members to identify provider practices that meet established standards of advanced primary care and that are willing to partner — the results of which will be used in network design and/or in direct contracting arrangements.
3. Taking fiduciary responsibility for health care
The Consolidated Appropriations Act (CAA) of 2021 imposes fiduciary obligations for employers who self-insure under the Employee Retirement Income Security Act of 1974 (ERISA). That means self-insured employers will need to demonstrate that the health care services they purchase for employees are cost-effective and high-quality. As a result, employers will be working to harness newly available hospital price information to drive cost-effective, quality care. Critical to these efforts will be tools that can make newly transparent price data meaningful and actionable. In addition, collective employer efforts to identify specific examples of overpricing will likely emerge to support negotiating leverage with hospitals and providers. Ultimately, employers’ new fiduciary obligations may spawn a shared national database with companion analytics that purchasers can use for evaluating pricing variation to help determine fair prices.
4. Reforming pharmacy benefit managers (PBMs)
A key legislative objective for purchasers in 2023 will be passage of legislation similar to the last Congress’s Pharmacy Benefit Manager Transparency Act of 2022. Comprehensive federal legislation would empower the Federal Trade Commission to increase drug pricing transparency and hold PBMs accountable for numerous unfair and deceptive practices that increase consumer costs and limit access of prescription drugs. In addition to expected action from Congress, a Federal Trade Commission investigation into PBM business practices is underway. Employers, meanwhile, will increasingly be looking to new market entrants that promise more transparent PBM services and put employers in control of their data to gain greater control over rising drug costs and employee access to quality care. PBGH is working across multiple channels to raise awareness about the extent to which PBMs have distorted the prescription drug supply chain – actions which put lives at risk, constrain employee access to medications and add billions of unnecessary costs to employers’ health care expenses.
High Health Costs Hurting Employers’ Ability to Hire and Keep Workers
January 3rd, 2023
A new survey of U.S. employers underscores the widening damage done by rising health care costs: Nearly 75% of those surveyed say health care expenses are squeezing out salary and wage increases and more than 80% believe health costs are negatively impacting their ability to stay competitive in today’s labor market.
The Pulse of the Purchaser survey, conducted online in August and September by the National Alliance of Healthcare Purchaser Coalitions, assessed employer views on health care and the workplace environment. Respondents included 152 employer-members of organizations affiliated with the National Alliance. The purchasers represented an array of sectors and ranged in size from more than 10,000 employees to less than 1,000.
‘A Street Fight’
Michael Thompson, National Alliance president and CEO, said the survey results bring into sharp relief the growing challenges employers face in recruiting and retaining talent amid a volatile labor market and the unrelenting financial burden of health care.
“The consensus among many of the responding employers is that attracting and retaining employees has become a street fight,” Thompson said. “Concerns about a recession and runaway inflation make it even more critical that employers are able to hire and keep top talent and getting unreasonable health care costs under control has a far-reaching impact on wages and ability to compete.”
The survey found that post-pandemic, finding and keeping employees has become an even higher priority for nearly 80% of employers, with 100% agreeing that health and wellbeing benefits are essential to effective hiring. Rising health care costs also remain a significant concern for employers, with the biggest cost drivers of employer-sponsored health benefits coverage for employees and their families being drug prices (93%), high-cost claims (87%) and hospital costs (79%).
Ninety-seven percent of respondents believe hospital prices are unreasonable and indefensible, and 93% say hospital consolidation has not improved the cost or quality of services. Additionally, employers familiar with transparency tools such as those from RAND, National Academy for State Health Policy and Sage Transparency are up to 10 times more likely to strongly disagree that hospital prices are reasonable and defensible.
Hospitals Continue to Seek More Money
The results of this survey come at the same time the hospital industry – a primary source of rising health care costs in the U.S. – is asking Congress to stop scheduled Medicare payment cuts and provide more federal relief due to challenging economic conditions. But a recent analysis of SEC filings by the Kaiser Family Foundation found that the nation’s three biggest for-profit hospital chains each had positive operating margins that exceeded pre-COVID levels for most of the pandemic, including as recently as the third quarter this year.
In short, the industry continues to cry hungry with two loaves of bread under its arms.
Strategies to Lower Costs
Almost half (47%) of employers, according to the Pulse of the Purchaser survey are using centers of care excellence; within the next three years, many others are looking at tiered networks (46%), sites of care (43%), contracting and performance guarantees tied to Medicare pricing and reference-based pricing (36%).
More than 90% of employers say they have implemented or are considering high-cost claims management, mental health and substance use access and quality, hospital quality transparency, hospital price transparency and whole person health.
Employers are open to a range of policy and regulatory remedies, including drug price regulation (82%), surprise billing regulation (79%), hospital price transparency (76%) and hospital rate regulation (72%).
States are also sending a strong signal that providers need to compete on value and will no longer be allowed to engage in anti-competitive practices to gain market power. In states as varied as California, Washington, Texas and Indiana, state lawmakers are working to eliminate anti-competitive contracting practices and increase transparency around pricing, quality and costs.
The Influence of the CAA
At the federal level, the landmark Consolidated Appropriations Act of 2021 (CAA) requires plan sponsors be given access to new and critically important health care pricing information. At the same time, it imposes fiduciary obligations for employers who self-insure under the Employee Retirement Income Security Act of 1974 (ERISA).
Under the law, self-insured employers will need to demonstrate that the health care services they buy for employees are cost-effective and high-quality. That means they must take steps now to ensure appropriate oversight procedures are in place that will enable them to document their efforts to comply with CAA’s provisions. It also means that employers will increasingly have access to new and critically important insights into the prices they’re paying for employee health care services – details they have been unable to previously obtain from vendors to whom they pay millions of dollars each year to negotiate on their behalf.
Supporting Non-Hospital Birthing Options: Employer Strategies to Improve Quality
May 23rd, 2022
Maternal infant health outcomes in the U.S. remain the worst among high-income countries, and Black women in the U.S. are nearly three times more likely to die from pregnancy-related complications than white women are. Additionally, U.S. women of reproductive age are significantly more likely to have problems paying their medical bills or to skip or delay needed care because of costs.
To underscore the high costs disproportionate to the poor maternal health outcomes, the cost of maternity care represents American employers’ second-highest annual health care expenditure – $1 in every $5. Faced with unacceptable results, employers are looking for pathways to improve maternal health care quality, affordability and the overall patient experience.
Improving Quality and Lowering Costs
Consumer surveys have shown that more patients are seeking non-hospital, community-based childbirth options, such as midwives, doulas and birth centers. This is particularly true for birth participants of color who are looking for alternatives to the hospital-physician childbirth experience.
Recent CDC 2020 vital statistics data mirror what we have seen from consumer surveys. Although overall births declined, in 2020 the number of births in birth centers nearly doubled. This is a significant indication that more women want choice in their maternity care team and care location and that more families, when given a choice, are seeking a non-hospital childbirth option.
Non-hospital maternity care options can help to address the problem of high-cost, low-quality care. Evidence shows the use of midwives improves overall maternal and infant health and decreases the cost of maternity care. In fact, research shows that collaborative care led by certified nurse midwives can result in 22% fewer primary C-sections. It also helps address a growing shortage of perinatal health providers. Despite these benefits, however, certified nurse-midwives are vastly underutilized, delivering only 9% of babies nationally.
A birth center is a midwife-led childbirth facility that offers individuals and families a more natural, lower intervention and less medicalized childbirth experience. Birth centers are freestanding facilities and separate from acute obstetric or newborn care where care is provided in the midwifery and wellness model of care. Birth centers typically have relationships with other community health providers and arrangements with other facilities, such as hospitals, for transfers to other levels of care when needed.
The CMS Strong Start program demonstrated that women who received prenatal care in birth centers had better outcomes and lower costs. This included lower rates of:
- Preterm births
- Low birth weight
Additionally, costs were more than $2,000 lower per mother-infant pair during birth and the following year for women who received prenatal care in birth centers.
How Purchasers Can Support Non-Hospital Options
Employers know that improving maternal health outcomes in the U.S. and reducing disparities will require changes to the existing system of care to make it more patient centered. Here are three ways employers can influence the health system and health plan leaders’ perspectives to address the barriers preventing birth center expansion, collaboration between hospitals and birth centers and access to midwives:
- Benefit design: Benefits programs can be designed to expand access to midwives and birth centers. For example, eBay has started covering out-of-network midwives at in-network rates to improve access to community providers.
- Payment and contracting: By paying for care differently and moving towards value-based payment rather than fee-for-service models, employers can greatly improve access to high-value facilities such as birth centers. A simple birth center bundled payment model would allow all prenatal, labor and delivery and postpartum care provided by the birth center to be captured under one claim/invoice. A bundled payment project with Qualcomm produced valuable lessons learned that could benefit other employers pursuing a bundled payment option.
- Quality improvement: In the event of a transfer from a birth center to a hospital, the transfer process is smooth and respectful for the patient and their family. PBGH is leading a project in California to establish a model to inform procedures regarding transfers.
In response to the lack of comprehensive, coordinated care and the overmedicalization of childbirth PBGH has developed several strategies to help employers impact their maternity marketplace.
6 Things Every Employer Should Know About Their Pharmacy Benefit Manager
May 11th, 2022
Pharmacy benefit managers (PBMs) ostensibly work on behalf of self-insured employers to manage drug spending and ensure employee access to preventive and curative medications. But an industrywide lack of transparency, coupled with complex and often-confusing policies and contract terms, has opened the door to PBM profiteering. Large, self-insured employers – and their employees – are the ones paying the price.
Here are six things employers should keep in mind when evaluating the drug supply chain and PBMs:
1. The higher the drug price, the more money the PBM makes. Like drug manufacturers and wholesalers, PBMs are paid a percentage of retail drug prices. They’re incentivized to exclude lower-cost drugs and promote higher-cost medications in their approved drug lists or formularies. This means employers often end up paying higher drug prices for branded medications when clinically equivalent generic drugs exist. Branded drugs will at times, be needed, knowing that, every employer should engage in a detailed negotiation related to rebates and insist that all earned rebate dollars are passed back to the employer.
2. Industry consolidation is contributing to reduced transparency and higher costs. The three leading PBMs are controlled by national health care enterprises, managing nearly 90% of prescription claims in the U.S. These consolidations create potential conflicts of interest between business units and make it nearly impossible to trace the flow of funds surrounding prescription drug costs. Every employer should take their PBM out to bid at the end of every contract cycle and consider working with new market entrants that have adopted a more innovative, transparent approach, aligned with the needs of employers and their employees.
3. The big three PBMs are adding cost and opacity by layering on new organizations that contract directly with drug manufacturers. The three leading PBMs all have group purchasing organizations (GPOs) to serve as intermediaries between drug manufacturers and their respective PBM operations. Even though it’s not clear what, if any, value the GPOs will create, research suggests they’re expected to extract an added 5-8% in fees from the drug supply chain. Additionally, because they’re replacing PBMs as the organizations that contract directly with drug manufacturers, the GPOs will help insulate PBM operations from audits and potential legislative cost remedies, including new transparency requirements of the Consolidated Appropriations Act. Every employer should scrutinize their PBM contract and ensure they have access to the data ownership and audit rights they need to evaluate and optimize their pharmacy benefit.
4. Employers should focus less on rebates and more on total manufacturer revenue. In PBM contract negotiations, large employers typically want a guarantee that they will receive 100% of manufacturer rebates, often missing the contractual loophole that caps these rebate payments at a fixed dollar amount, preventing the employer from collecting on total rebates earned. This is money PBMs have long kept for themselves to boost profitability. On top of an employer’s rebate dollars, a PBMs collection of administrative fees has also increased, with transaction and claims processing fees as recent additions to client invoices. Employers should comfortably question every fee that gets included in their PBM contract. To implement the strongest possible contract, every employer should push for a guarantee of a major percentage of all manufacturer revenues, or the higher of, the guaranteed rebate amount or actual manufacturer rebates earned.
5. Each PBM creates its own definitions of brand and generic drugs. Almost every single PBM contract begins with a Definitions section. PBMs have long used widely varying definitions for categorizing drug types to maximize their rebate earnings. To make matters more confusing, the initial Definitions section isn’t the only place PBMs define contractual terms; they might do so in several other spots throughout the contract. In doing this, PBMs are guaranteeing they maximize their opportunities to make decisions that continue to fuel their profits. Every employer should be vigilant about their PBM’s defining and redefining of contractual terms as it directly impacts the employer’s financial plan performance. Your contracts begin with an all-inclusive Definitions section, using the readily accessible industry standards as the source, and include a clause dictating that the terms and their definitions are only available once.
6. Three critical questions should be asked and answered before signing a contract. PBMs have long thrived in an environment characterized by inordinate complexity and a lack of transparency. For this to change, every employer must become more informed and proactive to use their purchasing power to ensure PBMs are consistently working in the best interests of the employer and its employees.
Use this information and the following set of questions in your upcoming discussion with your PBM:
- What are you [PBM] doing to drive to the lowest net cost for my plan?
- Employers should not be romanced by the story of high rebate earnings potential. Your PBM’s best practice should always be to implement the lowest-cost, highest-efficacy formulary.
- Do you [PBM] mandate/encourage the use of generic drugs?
- The FDA requires generic drugs to have the same active ingredient, strength, dosage form, and route of administration as the brand-name drug. A PBM looking to drive for the lowest net cost and most patient centered outcomes would be managing their formulary by including the lowest cost option for these medications as opposed to the higher cost branded product that would be driving more silent rebate dollars to them.
- What measures are in place to ensure that only the most clinically effective, lowest net cost drug is administered and approved for my member?
- Guaranteeing there is never a brand drug indicated as preferred over an available generic or biosimilar drug is the foundation for driving clinically effective utilization amongst your membership.
Greg Baker, R.Ph. is the co-founder and CEO of EmsanaRx. A pharmacist by training, Greg brings a strong clinical focus to pharmacy benefit management. Throughout his 25 year career, he has been a leader in direct pharmacy services with a focus on optimizing patient outcomes. Greg has genuine care and concern for the wellbeing of patients. His commitment to improving patient outcomes led him to co-found EmsanaRx. Greg values honesty, integrity and clarity in business practices. These values, paired with the operational knowledge and insight of an industry insider, position him to be a positive force for change in the health care industry.
Advice from a Purchaser Who Took on Health Care’s Status Quo and Won
April 14th, 2022
Read and re-read your contracts, and don’t agree to anything that will keep you from fulfilling your fiduciary responsibilities.
Dig into the data. Read the fine print. Follow the money.
That’s Marilyn Bartlett’s advice to employers and purchasers struggling to contain soaring health care costs and looking to gain greater transparency from plans, third-party administrators (TPAs), pharmacy benefit managers (PBMs) and brokers.
“You need to become aware of the full range of costs, including all the hidden fees and incentive arrangements used by health care providers, middlemen, service providers and vendors. You’re the fiduciary, so you have a responsibility to understand where the money goes.” -Marilyn Bartlett
Bartlett knows what she’s talking about when it comes to driving down health care costs. As a certified public account and the former administrator of Montana’s state employee health plan, Bartlett rescued the 31,000-member state plan from impending insolvency by carefully examining existing contracts and reviewing stakeholder financial data to drive better deals for the state.
Here, the contractual terms she found that were unnecessarily adding millions of dollars annually to the cost of health care, and the approach she recommends employers and purchasers take to carefully examine the contractual commitments they make with their vendors.
Use all available tools
According to Bartlett, new tools—notably hospital price transparency rules and the prescription drug reporting requirements for self-insured employers contained in the Consolidated Appropriations Act (CAA)—can give purchasers much better insight into how their health care dollars are spent. For instance, brokers will be required to disclose direct compensation paid by TPAs, PBMs and others. But it is important to push for disclosures on indirect, non-cash compensation, too. That information, combined with what brokers are required by law to disclose, can help employers determine exactly who the broker is working for.
The CAA also contains a prohibition on gag clauses that have traditionally restricted purchaser access to provider cost and quality information. This should help level the playing field when it comes to provider and plan negotiations.
Throw away the chargemaster
Bartlett took over Montana’s state health plan in 2015 in the wake of a $28 million loss the previous year. Actuaries were projecting the insurer would be insolvent by 2017. A former controller for a Blue Cross/Blue Shield plan and chief financial officer of a TPA, Bartlett drew from her experience to systematically disassemble and rebuild the plan’s provider and vendor arrangements.
Her first step was to review the wildly varying prices the plan paid to hospitals. One hospital, for instance, charged four times the amount of another for a knee replacement, and virtually all relied on discounts off their chargemaster, or internal price list, to set rates. Using this methodology, some facilities were charging as much as five times the Medicare rate for the same service.
As a result, the plan imposed a new, take-it-or-leave-it reference pricing model that tied all reimbursements to Medicare rates: Hospitals would receive, on average, about 230% of Medicare and the amounts could only increase if Medicare raised its baseline payments for the same service.
“We knew their financial condition and where their break-even points were” by reviewing Medicare cost reports, Bartlett said. “So, we were eventually able to get them to agree. We pulled rates down and got immediate savings.” Hospital cost savings reached $4.6 million in 2016, $12.7 million in 2017 and $15.6 million in 2018. Today, the plan routinely generates a surplus and premiums haven’t been increased since 2017.
The National Academy for State Health Policy recently launched its interactive Hospital Cost Tool, which provides data on a range of measures to offer insights on hospital profitability and breakeven points calculated using annual Medicare Cost Reports. This provides purchasers with an important tool to model the actions taken in Montana that significantly lowered costs.
Re-read the contracts
In addition to scrutinizing hospital pricing, Bartlett urges purchasers to dig deep into the health plan’s TPA, PBM and consulting contracts. She was appalled by what she found in Montana. Some of the more egregious contract language included clauses that:
- Gave the TPA authority to unilaterally pay non-covered services if they received pushback from a provider or patient.
- Allowed the TPA to keep prescription drug rebates as “reasonable compensation” for its services.
- Restricted the plan’s ability to perform its fiduciary duty by prohibiting it from seeking recovery of network provider overpayments.
- Prevented the plan from directly contacting any health care provider without involvement of the TPA.
- Imposed numerous constraints on how the purchaser could audit TPA claims data.
- Enabled the TPA to sell the purchaser’s data to outside parties.
- Allowed the TPA to pay affiliated third-party vendors without any purchaser knowledge or oversight.
- Allowed the TPA to pay providers less than the claim amount collected from the purchaser and pocket the difference.
- Routed drug manufacturer rebates through a third-party “rebate aggregator” that collected up to 25% of the rebate before sending the balance on to the health plan.
- Allowed PBMs to contract with pharmacies they own.
Read and re-read your contracts, and don’t agree to anything that will keep you from fulfilling your fiduciary responsibilities. Even if not explicitly banned by the CAA, hidden contract terms or contract terms that limit the availability of data place employers at risk for failing to meet their fiduciary responsibilities. This, in turn, can put them in both regulatory and legal jeopardy.
Bartlett said she believes the CAA disclosure requirements will go a long way toward helping purchasers—and the country—get control health care spending.
“All the money in the system; that comes from employers, employees, consumers and the taxpayer. It’s all of us, and it’s just horrible how much waste there is. So, I think these transparency rules can give us the leverage we need to finally start reducing that waste.” -Marilyn Bartlett
Today, Bartlett is helping state health plans pursue the same cost-saving tactics she employed in Montana in her role as a senior policy fellow with the National Academy of State Healthcare Policy.
What the End of the COVID-19 Public Health Emergency Will Mean for Employers
April 11th, 2022
The current COVID-19 public health emergency declaration has now been in place for more than two years – since January 2020. While a new wave could cause its extension, it will most likely end this summer.
Several policies that grant health care providers and payers extended authorities and flexibilities have been tied to the public health emergency, meaning these policies will go away when the public health emergency ends. But the health system has grown used to these extended authorities, and large employers need to be prepared for the potential impact of these policy shifts.
Several policies that will have a direct impact on large employers and other purchasers when the public health emergency ends are described below.
Discretion on HIPAA enforcement: To increase access to telehealth and ease the burden on providers, telehealth can be delivered on non-HIPAA compliant platforms. This discretion on HIPAA enforcement will end with the public health emergency. Most employers have moved to HIPAA-compliant platforms as the pandemic has stretched on, but those who have not will need to ensure all telehealth vendors are HIPAA-compliant when the public health emergency ends.
Waiver of Medicare site-of-service and benefits rules: The waiver of Medicare site-of-service and benefits rules is also tied to the public health emergency. While this does not have a direct impact on employers, some follow Medicare rules on site-of-service and benefits. It is important for employers who do to be aware that the waiver will end with the public health emergency.
State licensure flexibilities: One of the challenges with telehealth is that physicians will have to be licensed in the same state as the patient receiving care. Some states have created significant new licensure flexibilities to improve access to telehealth providers, though not all states have tied those flexibilities to the public health emergency. To the extent employers are using telehealth providers who are in a different state from employees, they should investigate if their state licensure flexibilities will end with the public health emergency and adjust policies accordingly.
Pre-deductible coverage: The CARES Act of 2020 allowed for coverage of telehealth services pre-deductible in high-deductible health plans. Many employers have chosen to take advantage of this option because it provides better access to care for their employees. This provision, which does not fall under the public health emergency, expired in December 2021 but was just renewed effective April 1 and will end on December 31, 2022. While some policymakers have signaled their intent to make the provision permanent, the on-again, off-again nature of the expiration and renewal has created a sense of “whiplash” for employees and employers. Employers must decide whether they will re-enact this policy with its currently limited duration.
Enhanced federal match and continuous coverage: To reduce the rates of uninsured people during the pandemic, two Medicaid changes were put into effect – an enhanced federal match rate and a continuous coverage requirement. Both will go away when the public health emergency ends, and it is expected that more than 10 million people will lose Medicaid coverage. As people lose coverage, employers should be prepared for a possible increase in the number of people seeking employer-sponsored insurance.
Enhanced subsidies: Although not tied directly to the public health emergency, in response to COVID-19, enhanced subsidies were implemented in the individual market to help uninsured people get and stay covered during the COVID-19 pandemic. These subsidies expire on December 31, 2022. If the public health emergency and Medicaid provisions end in July, enhanced subsidies may enable people losing Medicaid coverage to purchase inexpensive coverage on Affordable Care Act health insurance exchanges. When the enhanced subsidies in the individual market expire, it is expected that there will be an increase in people joining employer-sponsored insurance coverage, in particular partners of employees already enrolled.
5 Federal Policies for Employers to Watch in 2022
January 28th, 2022
Federal policymakers, like the general public, are desperately searching for an end to the COVID-19 pandemic and a return to normality. However, with the country in its fifth wave of coronavirus cases and hospitals full to the point of breaking, the ongoing pandemic clouds and shapes the health policy landscape. Here are the five federal policy areas employers and purchasers should watch in 2022:
1. COVID Regulations and Legislation Affecting Employers
In 2020, Congress required health plans to cover the cost of COVID diagnostic testing when administered by a clinician, but the law did not set a maximum price for COVID testing, leading to sporadic price gouging. More recently, the Biden Administration finalized guidance requiring health plans to cover up to eight at-home tests per person per month. The guidance allows health plans to set a maximum reimbursement of $12 per test for tests bought over-the-counter if the plans also provide free tests to enrollees. Employers, health plans and vendors have acted quickly to implement the rule, but some employers have expressed concerns about implementation, price gouging and the overall cost to employers, which would exceed $4,000 for a family of four over 12 months. We are urging the administration will continue to revise the guidelines based on feedback from employers.
It has now been more than ten months since enactment of the American Rescue Plan Act – the last major COVID relief legislation. Congressional leaders have floated the possibility of another COVID relief bill. Specific provisions have not yet been identified, but it seems likely that it would provide economic relief to struggling businesses, including health care providers. PBGH has recommended that any further health care provider relief be tied to a moratorium or limits on mergers and acquisitions, which have historically increased costs without a corresponding increase in quality. Large employers and their employees have been forced to pick up the tab for an increasingly consolidated market.
2. A Renewed Push for Build Back Better – Including Prescription Drug Price Relief
President Biden’s nearly $2 trillion Build Back Better (BBB) proposal included provisions on drug pricing, but the effort was stymied by concerns from Sen. Joe Manchin (D-WV), who announced in late December 2021 that he would not vote for the bill as currently constructed. Senate Democratic leaders have left open the possibility of coming back to BBB later this year.
On Jan. 19, 2022, President Biden suggested in a press conference that the Senate would break the BBB bill into pieces, attempting to pass provisions that have support of all 50 Democratic Senators. The timing of this effort is unknown, but likely in the next several months.
Happily, for employers and purchasers, Sen. Manchin’s opposition to the bill is unrelated to the provisions on drug pricing. Not only has Sen. Manchin expressed continued support for meaningful drug pricing reform, but he has also suggested he would prefer the provisions be strengthened to encompass more high-cost drugs. The current legislation would allow Medicare to negotiate on the price of certain high-cost sole-source drugs after their patent and market exclusivity periods have expired. It would also impose strict inflation caps on all high-cost sole-source drugs. Importantly, those inflation caps would apply to all purchasers, not just Medicare. If enacted, this provision would save employers, other health care purchasers and consumers tens of billions of dollars over the next decade.
3. New focus on PBMs and Drug Supply Chain
Policymakers have been looking at opportunities to increase transparency and accountability of pharmacy benefit managers (PBMs) and others in the drug supply chain. The Trump Administration’s Transparency in Coverage rule, which is being implemented by the Biden administration, albeit on a somewhat delayed timeframe, includes significant new drug price transparency requirements of health plans and PBMs. Not surprisingly, the Pharmacy Care Management Association (which represents PBMs) has sued the administration to stop implementation of certain sections of the rule. If implemented, the rule would require PBMs to report on negotiated rates and historical net prices for covered prescription drugs.
Separately, the Consolidated Appropriations Act (CAA), enacted in December 2020, requires self-insured employers to report on drug costs. Specifically, the CAA requires them to report the 50 most frequently dispensed prescription drugs, the 50 most costly prescription drugs to the employer’s plan and the 50 drugs leading to the greatest increase in cost for the plan during the previous year. Further, they must submit information regarding the impact on premiums of rebates, fees and other renumeration to drug manufacturers. While the CAA’s new requirements don’t directly call out PBMs, ultimately PBMs will be required to provide the information employers need to meet their obligations under the law.
Lawmakers are now discussing whether to directly require PBMs to report on drug price information to federal authorities. Even more aggressively, some lawmakers are considering legislation that would extend fiduciary responsibilities to PBMs and other contractors of group health plans. This would go a long way to holding drug supply chain “middlemen” accountable for ensuring drug discounts are passed on to employers, other health care purchasers and consumers.
4. Addressing Market Consolidation and Anti-Competitive Practices
Health care system consolidation is not a new problem, but it has gained attention over the past several years, particularly in light of a slew of megamergers proposed during the COVID-19 pandemic. In an executive order signed in July 2021, President Biden directs the Department of Health and Human Services to move forward with the price transparency requirements noted above, and directs the Department of Justice and Federal Trade Commission (FTC) to review and revise guidelines for challenging future consolidation by health systems. New guidelines will make it more likely that the FTC will intervene to stop anti-competitive mergers among health systems, improving the competitive landscape and combating rising health care costs that land on employers and other large purchasers, as well as consumers.
Congress has also taken notice of the problem. Last fall, Sens. Mike Braun (R-IN) and Tammy Baldwin (D-WI) introduced legislation to ban anti-competitive contracting practices between hospitals and health plans. Their bill, the Healthy Competition for Better Care Act, would bar health plans from entering into contracts that include anti-competitive provisions, including “anti-tiering / anti-steering” and “all-or-nothing” requirements.
5. Post-COVID Telehealth Policy
Many policymakers and other stakeholders are actively considering overdue changes to telehealth policy. Responding to the closure of in-person settings early in the pandemic, Congress and the Administration reacted swiftly by waiving many telehealth restrictions, which are now beginning to expire.
Many bills have been introduced in Congress on telehealth over the last year, and there appears to be a growing consensus around addressing several key issues. Importantly for employers, lawmakers are considering options to allow telehealth services to be delivered across state lines. Currently, state licensing requirements limit the ability of clinicians to deliver telehealth to people outside of the state in which they are licensed. Revising licensing requirements could significantly increase the number of telehealth providers available to employees and their ability to shop around for the services they need.
Looking Toward the Horizon: Top 7 Health Care Trends for Employers in 2022
January 6th, 2022
At the recent PBGH year-end roundtable, noted health care futurist Ian Morrison discussed key health care trends that both he and PBGH believe will be most relevant to purchasers in the year ahead. Morrison is the author of several books on health care and has worked with more than 100 Fortune 500 companies in health care, manufacturing, information technology and financial services.
Here, the top 7 trends for large health care purchasers to watch as we head into 2022.
1. The workforce will remain in upheaval
Providers and other employers continue to grapple with the unfolding impact of the Great Resignation. Difficulty recruiting and retaining staff will remain an ongoing problem for many provider organizations. One consequence will be the continued ascendance of telehealth and other virtual care services. Separately, the loss of employer-based insurance for many workers who’ve left their jobs will likely increase self-pay, health exchange and Medicaid patients, resulting in a worsening payer mix and continued financial pressure on providers.
2. Providers depend on employers for profits
According to a recent RAND study, hospitals charge employers, on average, about 250% of Medicare rates. The premium over Medicare can range for 130% in Iowa to 300% in California. The reality is that providers are dependent on self-insured and commercial payers for their entire margin; purchasers that can’t or won’t consider shifting provider networks to compel some level of competition will continue to be subjected to the highest charges.
3. Choice has been conflated with quality
Employers are beginning to understand that in opting for broad, open provider networks over the years, they’ve undermined their own ability to direct employees and members to the highest-quality, most efficient provider organizations. This recognition is supported by surveys that show consumers themselves are willing to trade choice for quality.
That’s why, increasingly, large employers/purchasers are measuring and contracting with teams and individuals that meet their standards for quality and service and respond to their concerns, stepping away from one-size-fits-all arrangements with large health systems. PBGH members, for example, report quantified success through direct purchasing relationships with systems that are eager to innovate and demonstrate quality. Passively accepting health plan reports is a thing of the past as employers gain the experience and data needed to scale new approaches.
4. Consolidation will continue
Mergers and acquisitions across all levels of health care will continue as organizations negatively impacted by the pandemic are picked up by those interested in broadening their footprint or extending vertical integration. This trend will increase the market share of the most powerful health systems and reduce potentially more cost-effective alternatives for purchasers.
5. Investment in digital point solutions will keep growing
Venture capital investment in digital health solutions has doubled over the past several years to approximately $14.7 billion this year, and the trend is expected to continue. Fundamental questions remain about whether these solutions are truly adding value or simply increasing fragmentation and cost across the system. Employers are overwhelmed by the sales pitches they receive from new companies vying for their business and are looking for trusted sources that use clinical rigor and data-based outcomes to help them assess their value and create needed standards in the market for new entrants.
6. Addressing the health care inequities exposed by the pandemic will become a priority for providers and purchasers alike
The risks of hospitalization and death for marginalized people in the U.S. are two-to-three times higher than for white people. Organizations will continue looking for opportunities to close this gap by improving access and finding innovative ways to address social determinants of health. Such efforts can include innovative maternity care that reduces disparities and improves quality and outcomes and the broad adoption of patient-reported outcomes, which offer an ideal means for gaining insight into the care process and how its experienced by patients.
7. Employers have an historic opportunity to impose greater control over the health care supply chain
Because the pandemic has caused significant upheaval across the health care system and created financial stress for many provider organizations, purchasers have an unprecedented opening to leverage their buying power in pursuit of higher-quality, lower-cost care. However, they can have an impact only if they’re willing to act in concert. Alignment on priorities and implementation is critical to advancing the change we need. Purchasers must become more aggressive in designing benefits that favor high-value delivery partners.
Price Transparency Offers Opportunity to Employers and Purchasers
November 10th, 2021
What is hospital price transparency?
A landmark federal rule requires the nation’s 6,000 hospitals to make pricing data available publicly. This requirement includes plan-specific negotiated prices, not just the “chargemaster” prices, for every item or service.
The rule was supposed to help consumers and purchasers shop more intelligently for health care services. However, due to variable compliance and huge discrepancies in how the data is presented by reporting hospitals, it has been difficult to benchmark or compare data across hospitals.
Why haven’t hospitals complied?
Hospitals that have been slow to comply with the transparency rule have faced a penalty of only $300 per day. This is a very small financial hit to hospitals – large or small.
In early November, the administration finalized a rule to increase to the penalty that takes hospital size into account, raising penalties as high as $2 million a year for large hospitals that fail to make prices public. This increase in penalties will go into effect in January 2022.
What does this mean for employers?
Employers can use this information to drive value-based purchasing.
- As data becomes more complete over time, price information can be used to structure requirements in the procurement process and negotiate better contracts.
- Better price information will give employers and other health care purchasers more insight into how their contracted hospitals compare on price with other hospitals, both overall and on an item-specific basis.
- The availability of specific price information allows for better consumer decision support tools, more member engagement and better member education.
Health Plan Opportunities:
- Health plans will be able to use the data to negotiate better contracts with providers.
- Price data can also be used in conjunction with quality and patient safety ratings to design benefits that support the use of high-performing, lower-cost providers.
- Networks can be designed based on value, and variation that does exist will be easier to identify.
Bottom Line: Price transparency means health care purchasers have access to more information to determine value and improve affordability for their employees and members.