eric johnson why is health comedyce.com …...why is health insurance so expensive (and what can you...

Why is health insurance so expensive(and what can you do about it)?

ERIC JOHNSON

COMEDYCE.COM

MARCH 19, 2019

efg&m Quarterly Inform and Educate Luncheon

Today’s Topics

• Rising health care costs

• Regulations that don’t work

• The third-party payment system

Cost Drivers

• Employers

• Employees

How to keep costs under control

Why is health insurance so expensive?

COST DRIVERS

Health Insurance is Expensive Because HEALTH CARE IS EXPENSIVE!!Insurance companies pay the bills, so the price we pay for health insurance is merely a reflection of health care prices in America. As health care costs go up, so do health insurance costs.

Prices are going up

Way up!◦ Doctors◦ Hospitals◦ Rx – including specialty drugs

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Constant Battle for Negotiating Power

Health Care Providers Insurance Companies

Mergers & AcquisitionsSmaller Provider Networks

Some providers won’t join networks

Some doctors won’t take insurance

Hospital-based physicians

Docs that won’t accept Marketplace plans

Concierge Doctors / Direct Primary Care

Doctor ShortageThe nation will be short more than 90,000 physicians by 2020 and 130,000 physicians by 2025, according to projections by the Association of American Medical Colleges.

Source: http://www.beckershospitalreview.com/hospital-physician-relationships/8-physician-shortage-statistics.html

What is causing the doctor shortage?Shrinking Supply

• 1 in 3 practicing physicians in the U.S. is over the age of 55 and close to retirement

• 6 in 10 physicians say it is likely many colleagues will retire in the next one to three years

Not enough growth

• The number of Medicare-sponsored residency slots has been capped since 1997

• Medical school graduates may exceed the number of residency positions by 2015

Increasing demand

• By age 65, about two-thirds of senior citizens have at least one chronic disease

• 20 percent of Americans older than 65 see 14 or more physicians and average 40 physician visits each year

• More than 10,000 Americans turn 65 each day

• Some estimates project the Patient Protection and Affordable Care Act will extend health insurance coverage to 33 million citizens

Source: http://www.beckershospitalreview.com/hospital-physician-relationships/8-physician-shortage-statistics.html

Prescription CostsThis Morning:

New government report found that◦ 1 in 3 uninsured Americans

◦1 in 8 insured Americans

cannot afford the price of their prescriptions

What is a Specialty Drug?

Specialty drugs or specialty pharmaceuticals are a recent designation of pharmaceuticals that are classified as high-cost, high complexity and/or high touch.

Specialty drugs are often biologics—"drugs derived from living cells" that are injectable or infused (although some are oral medications).

They are used to treat complex or rare chronic conditions such as cancer, rheumatoid arthritis, hemophilia, H.I.V. psoriasis, inflammatory bowel disease and hepatitis C.

In 1990 there were 10 specialty drugs on the market, in the mid-1990s there were fewer than 30, by 2008 there were 200, and by 2015 there were 300.

Drugs are often defined as specialty because their price is much higher than that of non-specialty drugs.

Simpler Definition

A drug that costs more than $600 per month.

Trends

Use of specialty drugs is

increasing

Cost is increasing at double-digit rates

More specialty drugs are

being approved

Specialty Drugs – Soon 50% of Rx Spend

Specialty drugs treat complex medical conditions and are especially costly. While only 1% of people require these drugs, they comprise about 33% of the cost of prescription benefit plans. These already burdensome costs are expected to rise to about 50% of total prescription drug costs over the next two to three years.

All signs point to specialty drug costs continuing to rise over the next five years, with specialty medications being a major driver of cost in the marketplace for 2018 and for years to come. There’s a robust pipeline of specialty drugs, which are either in development or are about to get FDA approval. Expect more products to come to market that are dramatically more expensive as compared to non-specialty drugs.

Source: https://www.truveris.com/resources/2018-specialty-drug-trends-employers

Price, Not Utilization, Driving Costs

Source: http://ww2.cfo.com/health-benefits/2017/09/specialty-drug-costs-soar-2018/

But while some of plan sponsors’ rising drug costs are attributable to greater utilization, the impact of increased pricing is more than four times as great. The same trend is evident for spending on hospitals and physicians, but to a much lesser degree (see chart).

Top Specialty Drug Categories

• The report found that the cost of these drugs, which are commonly used to treat patients with cancer, will increase 4.96% in the next year.1. Antineoplastic Drugs

• The authors said that DMARDs will be the largest driver of cost increases in 2018. This drug class is projected to skyrocket 11.95%. Due to the prevalence of DMARD use, this uptick in costs may have a significant impact on overall spending.

2. Disease-Modifying Anti-Rheumatic Drugs (DMARDs)

• This class of drugs is used to treat patients with serious and debilitating conditions, such as Crohn’s disease and multiple sclerosis. The cost of immunomodulatory drugs is projected to increase 8.93% in 2018, according to the study.

3. Immunomodulatory Agents

• Although HCV antiviral drugs have driven a majority of specialty spending over the past few years, it may not be the case in 2018. The cost of these treatments is only projected to increase by 2.02%, likely due to the emergence of competitors and lower cost options.

4. Hepatitis C Virus (HCV)

Source: https://www.specialtypharmacytimes.com/news/top-8-specialty-drug-categories-driving-spending-in-2018

Top Specialty Drug Categories

•This drug class is only estimated to increase 3.94% in 2018, according to the study.5. Immune Globulin

•These treatments are often used to treat adverse effects from chemotherapy and other conditions, making them a crucial component of many regimens. Vizient reports that costs for hematopoietic drugs will rise 7.09% during 2018.

6. Hematopoietic Drugs

•Notably, the cost of vaccines used to prevent pneumococcal disease and human papillomavirus are expected to increase 5.32%, according to the report.7. Vaccines

•With the growing prevalence of diabetes in the United States, access to treatment is crucial. Diabetes drug costs are projected to increase 3.62% in 2018.

8. Diabetes

Source: https://www.specialtypharmacytimes.com/news/top-8-specialty-drug-categories-driving-spending-in-2018

Specialty Drug Pipeline

Biosimilars will be an increasingly important part of the specialty pharmaceuticals market, and 2017 is set to be a banner year for new cancer biologics approval.

Leading specialty therapy classes include inflammatory conditions, cancer, multiple sclerosis, HIV, and Hepatitis C.

After a dip in specialty drug approvals by the FDA last year, 2017 is on track for 30 approvals—more than any previous year except 2015. Thirteen cancer drugs have already been approved this year and seven drugs for inflammatory diseases could be approved next year.

Source: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/specialty-drug-pipeline-predictions-seven-key-areas-watch

Biosimilar PipelineBiosimilars are still a nascent field but with more than 70 biologic patent expirations by 2021, biosimilars are set to become an important part of the pharmaceuticals market.

Resolution of regulatory ambiguities and maturation of the biosimilars market, as agents that the FDA deems to be interchangeable with their reference biologics lead to more competition, will yield cost savings.

The biosimilar naming issue has yet to be resolved. The FDA released much-anticipated guidance for biosimilars naming in January, announcing that biosimilars will be named using reference biologics’ generic name plus a random four-letter suffix.

Source: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/specialty-drug-pipeline-predictions-seven-key-areas-watch

Specialty Drug Pipeline

Source: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/specialty-drug-pipeline-predictions-seven-key-areas-watch

Specialty Drug Pipeline

Source: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/specialty-drug-pipeline-predictions-seven-key-areas-watch

Specialty Drug Pipeline

Source: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/specialty-drug-pipeline-predictions-seven-key-areas-watch

Specialty Drug Pipeline

Source: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/specialty-drug-pipeline-predictions-seven-key-areas-watch

Specialty Drug Pipeline

Source: http://managedhealthcareexecutive.modernmedicine.com/managed-healthcare-executive/news/specialty-drug-pipeline-predictions-seven-key-areas-watch

“Affordable Care” Act Regulations

Essential BenefitsModified Adjusted Community Rating

Old Rating Rules for Small Employers1. Actuaries rate based on case characteristics

• Group size (20% variation allowed)

• Industry (15% variation allowed)

• Age mix of group

• Gender mix of group

• Location

2. Underwriters don’t do anything

• Medical conditions

• Longevity with carrier

• Other risk characteristics

• “Rate up” of 67% allowed year one and 15% at renewal time

Modified Adjusted Community Rating (ACR)1. Actuaries rate based on case characteristics

• Group size (20% variation allowed)

• Industry (15% variation allowed)

• Age mix of group

• Gender mix of group

• Location

2. Underwriters don’t do anything

• Medical conditions

• Longevity with carrier

• Other risk characteristics

• “Rate up” of 67% allowed year one and 15% at renewal time

3 to 1 basis

lifestyle choices

Age: 3 to 1 Tobacco Use: 1.5 to 1 Family Status

Geographic

Regions

Wellness Programs:

Up to 50%

Not Gender

or Medical

Premium Variations Allowed For:

Some win…

Some lose…

Rate Compression

Rate Shock

Large Employers

Essential Benefits

• Do not have to cover any essential benefits except preventive care

• Cannot have annual or lifetime limits on any essential benefits that are covered

Modified Adjusted Community Rating

• Does not apply

• All plans are guaranteed issue

• Rating based on claims experience, participation is permitted

The Third-Party Payment SystemWhile we like to say that health insurance is expensive because health care is expensive, the fact is that people with insurance use more healthcare than people without.

Often, providers will order additional tests or recommend more expensive procedures simply because people have health insurance and someone else is paying the bill.

One of the purposes of health care consumerism is to curb utilization and give consumers an incentive to make better healthcare decisions.

Compound Interest

$350 $385 $424 $466 $512

$564 $620 $682 $750 $825

Even if costs go up at a steady rate, each year the same percentage increase represents a bigger and bigger dollar amount.

WHAT EMPLOYERS

NEED TO KNOW

On initial enrollment and at renewal time, employers have various options available to them.

Those options will vary depending on the size of the group, the group’s current health coverage, the health of the employees and the group’s claims experience, and the type of company (proprietorship or husband-and-wife group, LLC, bigger company with lots of employees, etc.).

Grandfathered or Transitional Plans

Many groups with a grandfathered plan (in place prior to March, 2010) or a transitional plan (in place prior to October, 2013) will just want to renew as is.

If your company is still relatively healthy, then your grandfathered or transitional plan renewal rates will normally beat the rates on an ACA metallic plan.

If you see a big increase at renewal time, however, that may mean that you’ve had a bad claims year and it may be time to consider an ACA metallic plan.

ACA Metallic Plans

If you currently have an ACA metallic plan, you may have some options to help save your company and your employees some money. Here are a few ideas:

1. Offer Multiple Plan Options

2. Mix PPOs with HMOs

3. Mix Copay Plans with HSA Plans

Offer multiple plan options

Most insurers will now allow you to offer multiple plan options, even if no employees initially enroll in one or more of the plans.

By offering multiple plans, you give your current employees and potential new hires some different pricing and coverage options, which can be especially important to employees who might want to cover their dependents.

Blue Cross Blue Shield of Texas, for instance, allows you to offer up to six different plans, and because the required employer contribution is based on 50% of the employee only cost for the lowest-priced plan offered, this is a great way to minimize the amount you have to contribute for your group health plan.

Mix PPOs with HMOs

Many employers have a bias toward PPO plans, which do not require a primary care physician, do not require referrals to see a specialist, and offer an out-of-network benefit.

However, HMO plans with comparable benefits are priced significantly lower and may be an attractive option for some employees.

Remember, just because YOU don’t like choosing a primary doctor or getting referrals, that doesn’t mean your employees will mind. They might appreciate the lower price point and/or more comprehensive coverage that an HMO plan offers.

Mix copay plans with HSA plans

Some employees still prefer predictable, flat-dollar copayments for doctor visits and prescriptions, but HSA plans have grown in popularity with both employers and employees for the past several years.

These plans do not have up-front copayments; instead, members pay the contracted price until they’ve met their calendar-year deductible. However, they do offer a significant premium savings versus copay plans, and they allow members to set up an HSA and pay for qualified medical expenses with tax-free dollars.

Whether the employee is a low-, medium-, or high-utilizer, HSA plans are usually the more cost-effective option.

Three Good Reasons to Offer Multiple Plans:

Give employees options

Increases employee satisfaction and

therefore increases ROI

Increases consumerism

Choice, including choice of plans, is a

big part of consumerism

Contribution strategy

Base contribution on lowest-priced

plan offered

Level-Funded Plans

These are self-funded plans for small employers.

Modified adjusted community rating rules do not apply.◦ This means the carrier can rate based on industry, group size,

gender, and age (with wider age bands).

◦ It also means the carrier can underwrite based on medical conditions.

These plans are NOT guarantee issue, so they can be declined.

This can be a good option for healthy groups with good demographics.

Association Health Plans (AHPs)

This is a brand-new option that could be good for certain small employers.

AHPs are fully-insured and written on a large group platform.

They are guarantee issue for groups that meet the contribution and participation requirements, and medical underwriting is not allowed.

Because this is based on large group rules, modified adjusted community rating does not apply. Carriers can rate based on industry, group size, gender, and wider age bands.

Older Workers

Under the ACA’s Adjusted Community Rating rules, older employees can be charged as much as 3x as much as younger workers.

On self-funded and association plans, gender and age are factored together and older workers could be charged 8x as much as younger workers.

In either case, it is in the employer’s interest for these older workers (age 65+) to drop off the group plan and sign up for Medicare.

However, employers CANNOT force or pressure these older workers to drop off the group plan. They have the same rights as any other active employees.

Employers CAN educate employees about their options, though, and this could cause some older workers to make the decision to go onto Medicare instead.

Advantages to Employee

Better coverage (lower deductible and OOP)

May save on premium

If the older employee is an owner, will benefit from lower company premiums.

For employees of smaller companies, they should take Part B even if on the group health plan or they risk having big out of pocket costs if the carrier assumes they have Part B.

Employers with fewer than 20 employees

May be able to pay for the Medicare Part B, Medicare Part D, and Medicare Supplement premiums for their active employees.

This is called a Medicare Premium Reimbursement Arrangement.

Mom & Pop Businesses

If you have a sole proprietorship without any employees, you may have a difficult time getting group health coverage because insurers normally require that there be at least two owners, two employees, or an owner and a W-2 employee to constitute a group.

However, if you file a schedule C with your tax return, are married, and file jointly, then your spouse is actually considered a co-owner of that business (even if he or she does not work in the business), and you should be able to qualify for a group plan

Employers Having Difficulty Meeting Participation and Contribution

If you’re having trouble meeting the insurer’s required contribution amount, or if the amount the employees must pay for their share of the health insurance is causing them to decline coverage, you might want to consider a “no contribution, no participation” plan.

Each year, between November 15 and December 15, small employers with 50 or fewer employees have the option of enrolling on a guaranteed-issue basis in a fully-insured plan even if they cannot meet the carrier’s contribution and participation requirements.

Because there’s such a small enrollment window, and because it’s during the busy time of the year, please do not wait until the last minute to take advantage of this option.

Other options if you’re having trouble with contribution / participation

1. Offer multiple plan options – contribute based on the lowest-cost plan and offer the other plans as a buy-up.

2. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) – not recommended at this time because the individual market is a mess.

3. New HRA option starting in 2020 – we don’t have final rules yet, and it also won’t work until the individual market improves, but it does fix some of the things that make QSEHRAs unworkable.

For large and self-insured employers

You need your employees to be better healthcare consumers.

This involves buying less health coverage and giving employees both the incentive and the tools to make better healthcare decisions.

CONSUMER RESOURCES

Even with health insurance, out-of-pocket health care costs are a challenge for a lot of people.

Fortunately, there are some great resources available that might help you save money on or at least estimate your costs for various health care services.

The point here is that health insurance is great for big, unexpected, and catastrophic claims, but for smaller expenses like doctor visits and prescriptions, you may want to look at some alternatives to see if you can save some money.

Supply and Demand

Demand Side

Increase Cost Sharing

Supply Side

Reduce Available Providers

The Good News

When consumers have a problem,

the market delivers a solution.

Urgent Care instead of Emergency Room

Doc-in-the-Box instead of Doctor’s Office

On-Site Medical Clinics

Telehealth instead of ER, Urgent Care, or Retail Clinics

Safe

• No mal-practice lawsuits

Effective

• 70% of doctor visits can be handled over the phone

• 91% of issues solved on first call

Convenient

• No leaving work

• No waiting for appt.

Inexpensive

• Affordable consult fee

• Sometimes no consult fee

Virtual Visits

Most insurers now provide a telehealth benefit to their members.

This gives you and your covered dependents the ability to pick up the phone, call a doctor, and describe your symptoms

If the doctor is able to diagnose you over the phone, he or she can even write you a prescription if medically necessary.

Doctors on Demand Teladoc MDLive Doctors on Demand

Save Money on PrescriptionsAgain, 1 in 8 people WITH health insurance have trouble affording their prescriptions according to a new government study.

This is worrisome because some people choose not to have their prescriptions filled, reduce the dosage to make it last longer, etc.

To help make sure you are getting the medications your doctor prescribes, here are a number of ways to save on prescriptions.

Be sure to use a preferred pharmacy, not just one that is in-network

Some insurers now offer lower copayments if you use a preferred in-network pharmacy.

For instance, both Walgreens and Kroger are contracted pharmacies in the Blue Cross Blue Shield of Texas network, but Walgreens is a preferred pharmacy and offers better prices for both generic and brand name drugs.

On its small group copay plans, BCBSTX has a six-tier prescription drug benefit: $10, 20, 70, 120, 150, 250.

If you use a preferred pharmacy, though, you’ll pay less for the first four drug tiers: $0, 10, 50, 100, 150, 250.

You can also receive preferred pricing by using the mail-order service, which allows you to get a 90-day supply of maintenance drugs.

Use the carrier’s pricing tools to find a lower-priced pharmacy

Many insurers allow members to compare drug prices at different pharmacies by logging in to their member portal.

This can be especially helpful if you have an HSA-compatible plan that requires you to pay the full contracted price of prescriptions prior to the plan deductible.

Because different pharmacies will have different negotiated rates, it pays to shop around.

Switch to a GenericTo save money on your monthly prescriptions, one of the easiest and most effective steps you can take is switching to a generic.

Generic drugs are chemically and therapeutically equivalent to their name brand counterparts but are usually much less costly. If you take a brand name prescription, you should ask your doctor if a generic is available and if it would be safe for you to try it.

You may also want to take a look at the $4 and $5 generic drug programs that are available through various pharmacies. The savings may be greater and the cost may be lower than it would be if you ran it through your health insurance plan.

You may find that your health plan actually requires you to take a generic if available; if you still want the brand name drug, you may be required to pay the generic copayment plus the difference in price between the generic and the brand. Note that specialty drugs are usually biologics and do not have a generic, though we may soon see “bio-similars” for some of these medications.

One other note: just because your drug doesn’t currently have a generic equivalent doesn’t mean that it won’t in the future. Be sure to check with your doctor from time to time to see if a generic is available. If you see a big increase in the cost of your brand name medication, that’s one sign that a generic may now be available. Insurers often increase the price of a brand name drug when a generic is introduced to steer people to the generic.

Use a Discount CardInsurers contract have different contracted rates at different pharmacies for different drugs. One pharmacy might offer the best price on one drug while another pharmacy might offer the best price on a different drug, so if you do some shopping you may be able to save some money.

You might also consider using a discount card like Good Rx to see if you can get a better price. These cards are not insurance but rather provide a discount on both generic and name brand prescriptions.

Some of these discount programs have an app that you can download on your cell phone; others allow you to print a coupon that can be used when you visit the pharmacy.

One other big benefit of these prescription discount programs is that they allow you to see how the price varies from one pharmacy to another. Sometimes switching to a generic isn’t enough – you actually have to switch drug stores.

One important note: because these drug cards offer discounts outside your health plan, you won’t receive credit toward your deductible for prescriptions purchased with a discount card, though you might be able to fill out a form with the insurer to get credit after the fact if you use a network pharmacy.

Ask your doctor for samplesPrescription drug makers have a marketing arm that reaches out to doctors to educate them about the prescriptions they offer and try to convince them to prescribe their drug instead of their competitors’ medications to their patients. As part of this effort, they often provide the doctor with samples that they can give patients to monitor the drug’s effectiveness.

To save money on your prescriptions, particularly if you have a fairly new and expensive medication, as your doctor if he or she has samples that you can have. If they have them, most doctors will be happy to help you out.

Apply for a prescription assistance program

Most pharmaceutical companies have programs available for people who cannot afford their prescriptions.

The amount of assistance available will vary depending on the drug and the cost-sharing requirements on your health plan, but if you are having difficulty paying for an expensive prescription medication, contact your doctor to see if he or she can help you apply for a prescription assistance program.

Health Care Pricing Tools

If you have a big procedure coming up, or if you’re simply trying to determine whether you should enroll in

a copay plan or an HSA-qualified plan, you can use a price transparency tool to research the cost of various

health care procedures.

The more informed you are as a consumer, the better decisions you can make.

From your insurance company

Most insurers offer some sort of pricing tool that allows you to compare contracted rates between healthcare providers.

After logging in to the insurer’s member portal, consumers can see what doctors, hospitals, and other providers charge for various medical procedures.

This is especially helpful when the member has a big deductible to meet before the health plan starts paying for medical claims.

Texas Healthcare Costs Website from the Texas Department of Insurance

This easy-to-use website allows you to see the average retail prices as well as the average rate after applying the insurance discount for a wide range of medical procedures across the state of Texas.

While you cannot search pricing by healthcare provider, it is helpful to know the approximate amount you should expect to pay for a planned office visit or planned procedure.

Click here to search for pricing info.

Health Savings Accounts

Perhaps the best resource available to healthcare consumers is a Health Savings Account.

This tax-advantaged account allows you to pay for eligible medical expenses with tax-free dollars.

If eligible, you should go ahead and set up your HSA, even if you do not plan to make a big deposit on day one.

Consumers who have established their Health Savings Account can still pay with tax-free dollars when they have a claim even if they don’t yet have the money in their account to cover the expense.

Concierge Doctors and Direct Primary CareThese doctors do not accept health insurance

Instead, you pay a monthly or annual fee for unlimited access to medical services (doctor visits, phone calls, email)

Not an HSA-eligible expense, though some providers have found a way around it. Bills have also been introduced that would alleviate this problem.

Reference Based Pricing

By getting rid of the network altogether, health plans can allow consumers to go to whatever provider they want.

78

Medical TourismGrowing in popularity, especially among large, self-insured companies.

Cost of travel and procedure is often less than the procedure alone in the United States.

Many physicians are trained in the United States.

Thank You!

AnyQuestions?