Author Archives | Rick Ewers

About Rick Ewers

Mr. Ewers is an analytical consultant providing financial analysis, vendor evaluations, market & compliance analysis, as well as national industry trending for group employers.

Are Consumer-Direct Health Plans Working?

February 22, 2017


Qualified high deductible health plans (Q.H.D.H.P.), also known as “Consumer-Directed” plans, have been around for a number of years.  Enrollment in these plans has increased over the past decade.  Q.H.D.H.P. plans have a high deductible component which must be met before benefits are paid typically at 100%.  The minimum deductible amount is determined by the Internal Revenue Service (I.R.S) each year.  For 2016, the minimum deductible is $1,300 for individual and $2,600 for family.

According to the Kaiser Family Foundation, eight percent of employees were enrolled in a Q.H.D.H.P. in 2009. By 2015, enrollment had increased significantly to 24 percent.  During this period, out-of-pocket annual costs on average rose approximately 230 percent.   Surveys indicate about 46 percent of employees shoulder a plan deductible of $1,000 or more.

Analysis of the healthcare utilization of employers implementing high deductible plans shows the cost of care decreasing when followed over a 3 year period versus employers who do not implement these plans.

Part of the decrease in utilization comes from a larger portion of “first dollar” medical costs being paid by the employee because of the higher deductible. Another probable factor is plan participants are giving careful consideration before obtaining medical services.  In fact, this consumer behavior was one of the purposes behind why these plans were created along with lowering insurance premiums.

The “Consumer-directed” focus of Q.H.D.H.P. plans is based upon the assumption patients will research the most cost-effective ways to handle their treatment.  If a patient decides to move forward with care then the hope is they will conscientiously shop for the best possible price on their healthcare services.  Some patients may ultimately decide to defer or forego certain medical care.

Shopping for the best price on healthcare sounds great in theory, but can be more difficult to achieve in practice. However, tools and resources are available to assist.  It is important for plan participants to have the knowledge on how to access.

Finding a good deal on prescription drugs tends to be simple. There are many websites and apps available to help.   As an example, GoodRx allow consumers to enter the name and dosage of a medication and receive a list of pharmacies offering discounted pricing in their immediate area. In addition, many large retailers such as Walmart, Kmart, Sam’s Club and Costco advertise flat and discounted co-pays for basic medications.

Conversely, shopping for medical services is much more complex as compared to the transaction of buying a 30 day supply of pills. However, websites do exist for finding the geographically adjusted fair market price for a particular medical procedure.  These websites include Healthcare Bluebook, Clear Health Costs and New Choice Health.   You may be comforted in knowing the reasonable price for your heart transplant is $125,916, but you probably have no clue on what to do next.   And you would not be alone in this lack of knowledge.

As consumers, we are accustomed to shopping online for the lowest price on items such as electronics, hotels or airline tickets. But when it comes to healthcare, most people do not give a second thought to how much it costs.  The idea of price shopping health service is gaining traction though.  Many patients do not realize they ultimately have control over where medical services are performed.  Most usually rely only upon their physician’s advice.

You have probably seen commercials from a local imaging center which includes dramatizations of patients learning how much an imaging exam is going to cost at their local hospital. They later sigh in relief as they learn the imaging center pricing is much less expensive and gives same day results.  They happily announce they are going to tell their doctor they want their imaging exam to be done at this center.

This imaging center has an online tool for patients to obtain a price quote beforehand for a particular exam with discounts given for upfront cash payments. Most healthcare providers do not yet offer services in this manner, but this practice is catching on with the popularity of consumer-directed plans.

There is an open question on whether consumer-directed plans are actually working to reduce health expenditures or are they simply causing patients to forgo medical care today that will become high dollar expenses later.

If the latter ends up being true, our health care delivery system is potentially looking at a tremendous spike in costs given the sheer number of patients covered under these plans. In any event, the lower medical trend being seen in these plans today must be acknowledged.  Something is obviously going right with this plan design.

Surveys indicate many patients enrolled in consumer-directed plans have limited knowledge on how the plan even works. Under the mandates of the Affordable Care Act (A.C.A.), preventative care is offered with $0 co-pays or very little out-of-pocket cost.  In fact, the preventative care benefit is a base benefit of consumer-directed plans even if the A.C.A. mandates goes away.  However, many enrollees have no idea this benefit is included and may skip preventative care.  As a result, health conditions that could be caught and treated early may not be found until late in the game. Routine colonoscopy at age 50 is a perfect example.  A colon polyp found today may prevent major surgery and perhaps even death from colon cancer down the road.

Employees may not fully understand how the health savings account (H.S.A.) component works alongside the high-deductible plan. This would seem a simple concept, but it should not be taken for granted that all participants have sufficient knowledge.  Employees may not understand the funds held in their H.S.A. represent real dollars.

These funds can be used to pay for medical expenses but are also allowed to accumulate (with potential for return on investment) if they are not used.   The contribution maximum for 2017 is $3,400 for single coverage and $6,750 for family.  Employees need to know the account stays with them as they change jobs, medical plans or eventually retire.  The money in the H.S.A. can be withdrawn without penalty at age 65 similar to an I.R.A..

Employees (and employers) realize a savings on their monthly contributions to the group medical plan because the premiums are lower on an HDHP plan. Savings are also realized from the full tax-deductibility of their employee contributions into their H.S.A..  Many employers also make a contribution into an employee’s account.  Employees and employers alike can save an additional 7.5% in F.I.C.A. taxes.

So what can be done today to encourage the continued forward momentum and cost savings of consumer directed plans into the future?

  • Provide education to plan participants to assure they fully understand the benefits of the plan especially preventative care. Be sure your employees understand the health savings account component and the significant savings potential it offers.
  • Make members aware of online tools which are helpful in finding the most cost effective care.
  • Offer lower cost alternatives to incent members to receive needed healthcare.   Telemedicine services and retail clinic care both offer members value by providing lower cost care. According to Mercer’s Survey of Employer Sponsored Health Plans, savings to the member can be significant.   A usual telemedicine visit charge is about $40 and retail clinics are about $60. Both of these yield savings as compared to $125 for a physician office visit.

In summary, consumer directed health plans are a familiar component in today’s employee benefits arena. To assure their continued success, it is important for plan sponsors, payers and providers to remain diligent in staving off any unplanned negative effects so that true long term cost savings can continue to be realized.

Continue reading...

The Heroin Epidemic

January 31, 2017


Over the last few years, it is likely you have seen news reports chronicling the escalating problem of heroin addiction in this country.

Heroin use has been at an epidemic level for years.  Heart-breaking statistics are tracked by several organizations.

Perhaps remembered as an illicit drug of the 60’s, heroin at one point in time was actually sold legally in this country.  In 1906, the American Medical Association approved the drug for general use with the recommendation that it be used in place of morphine.  At the time, heroin was promoted as non-addicting.  Before long, 200,000 people in New York City alone were addicted.  The Harrison Narcotics Act was passed in 1914 with the hopes it would put an end to the abuse.

Opiates, to which heroin is a subset, have been around for thousands of years and were originally produced from the opium poppy.  Morphine is another opiate derivative also produced from the poppy.

In 1874, scientists created heroin while attempting to create a less additive form of morphine.  The end result actually ended up being twice as strong with even greater potential for addiction.  This new “wonder drug”, as it was thought of at the time, was dispensed over-the-counter to treat an array of maladies down to a simple cough and cold.  Its propensity for addiction was not discovered until later.

The typical heroin user in the United States today is a white male, aged 18-25 years old, living in the suburbs.  Heroin use is found across all segments of society; in urban, suburban and rural areas.  It is not limited by income or socioeconomic standing.

The heroin of today is more potent and pure which increases the risk for addiction, overdose and death.   Some of the factors contributing to the escalating use of these drugs include the creation of synthetic opioid prescription pain relievers.  Synthetic opiates such as Vicodin, OxyContin and Percocet were approved by the Food and Drug Administration in the 80’s and 90’s.  The fact that they are synthetic does nothing to remove the risk of addiction.

Addictive behavior can develop innocently from a prescription given by a physician to manage pain.   The risk is particularly high for adolescents.  The structure of the adolescent brain puts them at risk for quickly developing addictive behaviors.  Abusers of synthetic opioids often make the switch to less expensive heroin once their addiction is set.

Heroin has been flooding into the United States from Mexico as drug farmers make the switch from marijuana to more profitable opium poppies.  This is a side result of the decriminalization of marijuana which has caused the wholesale price of pot to drop.  It is now more profitable for Mexican drug farmers to fill their fields with poppies in lieu of cannabis.  Cheap heroin continues to flow in this country at a time when controls have tightened on prescription opioid pain killers making them more difficult to obtain and expensive.

In 2016, two million people were reported to have a substance abuse problem related to prescription opioid pain medication and almost 600,000 were addicted to heroin.  The CDC estimates the annual cost of the opioid epidemic in the United States at $78.5 billion including the cost of providing health care, lost productivity and treatment programs.

For employers, employees prescribed just one opioid medication have average workers’ compensation claims costs that are four times more than those who are not prescribed these medications according to the National Safety Council.   Opioids comprise about a quarter of all prescription drug costs for workers’ compensation.  Experts in the field cite that an employee taking opioid medications for over three months typically does not return to work due to drug dependency and other illness and effects.

Today’s heroin is so pure that users who would normally shy away from it as an intravenous drug can instead choose to inhale or snort heroin as a powder.   Sadly, after becoming addicted, many users later turn to I.V. drug use.  Addicts report first time drug use as young as age 12.

Heroin is one of the most difficult drugs of addiction to beat because of the way it affects the pleasure centers of the brain.  Recovery statistics are hard to track but it is estimated that only about 1 in 5 addicts successfully escape the vice-like grip of this drug.  Multiple relapses are common along with legal and criminal consequences.  The typical user (and family) struggle through the cycle of recovery and relapse for many years.

The explosive growth of this epidemic has resulted in new strategies being formulated to fight the battle.  The traditional thinking of treating addicts as criminals by jailing them for drug possession is being re-thought in many communities.  The realization addiction is not a crime but instead an illness is reshaping the way to fight this epidemic.

On February 2, 2016, President Obama announced his proposal to fund $1.1 billion toward the heroin and prescription opioid epidemic.  This funding was subsequently approved by Congress and provides:

  • $920 million to support cooperative agreements with states to expand access to medication-assisted treatment for opioid use disorders. States will receive funds based on the severity of the epidemic and on the strength of their strategy to respond to it. States can use these funds to expand treatment capacity and make services more affordable.
  • $50 million in National Health Service Corps funding to expand access to substance use treatment providers. This funding will help support approximately 700 health providers who can administer substance use disorder treatment services, including medication-assisted treatment, in areas across the country most in need of these specialists.
  • $30 million to evaluate the effectiveness of treatment programs employing medication-assisted treatment under real-world conditions and help identify opportunities to improve treatment for patients with opioid use disorders.

In an effort to save lives, the drug Naloxone is being made more readily available across the country.  Naloxone is able to reverse the effects of an overdose which can be lethal by shutting down a person’s respiratory system.   This drug, also known under the brand name Narcan, can save lives if administered in time.   Police in many cities are being trained and supplied with Narcan as they are often the front line responders in many overdose situations.  Pharmacies in some communities are able to sell this medication without a prescription.

Messaging is being delivered in communities to let addicts know they will not be prosecuted for heroin possession for simply bringing an overdosing friend to appropriate treatment.

Hopefully these efforts are successful in turning the tide of this terrible epidemic.  Opioid and heroin addiction destroys the life of the addict.  It also can deeply affect the lives of everyone around them in the process.  The agony of dealing with a loved one with addiction is at times almost unbearable.  If you have not personally been affected you can be sure a friend, neighbor or co-worker probably has.

It’s important for parents of adolescents and teens to learn and be vigilant for clues signaling their children may be using.  Changes in behavior and appearance are usually noticeable as addiction becomes more severe.

Discovery of paraphernalia used to prepare or consume heroin in places such as a child’s room, car or clothing is another definite early warning sign of heroin abuse.  Some of these items may be easy to overlook at first so it is important to be wary.  They include small plastic bags with residue, burned spoons, aluminum foil or gum wrappers with burn marks, short straws possibly melted or burned, shoelaces missing (used to tie off for injection), glass pipes and needles or syringes.

If you suspect or have discovered someone close to you is using do not panic.  Resources are available to assist you and your loved ones with addiction.  The path to recovery from heroin addiction can be a long one but it is important to get help right away.

Here are some resource links:

As an employer, there are steps you can take to join the fight while protecting your employees and their families.

  • Provide education on the risk presented by prescription opioid pain medications.  Advise your employees to question if an alternative medication can be used to control pain such as ibuprofen.
  • Train supervisors to recognize signs of possible impairment and promote understanding of your company drug use and testing policies.  It is also important to understand how the federal Americans with Disabilities Act provides protection to employees with disabilities being treated with over-the-counter or prescription medications.
  • Promote your Employee Assistance Program as confidential access to substance abuse treatment resources.  Be sure your medical plan provides employees full access to quality treatment.
Continue reading...

Narrow Health Plan Networks

January 24, 2017


A cost containment strategy for health plans making resurgence in recent years has been offering narrow provider networks which limit the doctors or hospitals accessible under the in-network benefits of the plan. Services obtained from doctors or hospitals outside of this limited network are considered to be out-of-network and subject to higher deductibles and co-insurance (with the exception of emergency services which must be covered the same as in-network).

The drivers behind offering narrows networks is the lower costs realized by excluding higher cost providers.  Savings amounts vary but are estimated to be in the range of 5 to 20%.  Narrow networks have been around for a number of years (most recently seen in the 1990’s) but have again become more commonplace today due to the escalating cost of healthcare.

The use of narrow networks is very prevalent in the plans offered through the State Exchanges under the Affordable Care Act.   Modern Healthcare reports that about 70% of plans offered through State Exchanges in 2014 included limited networks with premiums that were up to 17% less expensive that more inclusive broad networks.

Narrow networks have also been used in Accountable Care Organizations (ACOS).  ACO   providers receive financial rewards by offering care that meets certain quality and cost-saving targets. The smaller size of the network in an ACO arrangement makes it easier to manage a patient’s care. Narrow networks are also being included today in the group health plans offered by large employers.

One of the biggest challenges is assuring the health care consumer is fully aware of the limited nature of the in-network coverage offered by their choice of a narrow network plan.  The narrow network can be an excellent fit for a fully engaged educated consumer who has selected this particular plan with the objective of saving on health insurance costs while maintaining quality care.  Conversely, it can be a nightmare for an ill-informed consumer who can potentially incur significant expenses at much lower out-of-network reimbursement levels.

The Kaiser Family Foundation conducted a poll in February 2014 which found 51% of survey respondents would rather have a plan that costs more but allowed them to see a broader array of doctors and hospitals.  While 37% would rather have a plan that was less expensive with a more limited range of health care providers.  The survey also found that individuals who are either responsible for purchasing their own coverage or uninsured were more likely to select a less expensive narrow network health plan over a more costly broad network by a margin of 54% to 35%.

In summary, the acceptance of narrow network plans continues to be mixed.  These limited networks offer the opportunity for savings to insurers, employers and health plan members but also come with additional complexity for less savvy consumers of health care.

Continue reading...

High Dollar Specialty Meds …. The New Normal?

November 11, 2016


The escalating cost of specialty medications has been a topic of discussion for many years.  In 2009, specialty meds were reported to be about 23% of total pharmacy spend.  And in just 5 years this grew to 33%.

Specialty meds were initially used to treat a small population of individuals with serious or complex health conditions.  They have expanded in recent years to treat a larger number of conditions and are being used for extended periods of time.  Drug manufacturers have kept the pipeline full as they work to create additional high dollar specialty meds for an expanding array of health conditions.

Pharmacy costs are responsible for an average of 20% of total group health plan expenses.  Insurers, employers and plan sponsors watch with concern as the cost of specialty meds continues to rise.

What’s driving these spiraling costs?  Here’s are some examples of specialty meds which are contributing to these costs:

Sovaldi made headlines several years ago as the $1,000 a pill breakthrough hepatitis C medication.  It was heralded as a cure for over 89% of patients with hep C.  And it was able to achieve this result in as few as 12 weeks with a price tag per treatment regimen of almost $100,000.  Not long after that several more high dollar hep C medications came onto the market with similar price tags.

New biologic medications continue to be created treating an array of complex health conditions. Biologics are created through a tightly controlled process proprietary to a particular manufacturer.  The proprietary nature of biologics often allows a manufacturer to set a high price since they are the sole source.  And it is difficult for another manufacturer to create a comparable medication, called a biosimilar, so these drugs on average are the only treatment available for as long as 12 years.

Biologics such as Enbrel and Humira improve the lives of those afflicted with serious conditions such as rheumatoid arthritis, psoriatic arthritis, Crohn’s disease and ulcerative colitis.  These medications carry an annual price tag of $40,000 or more.   Even common conditions such as high cholesterol have new biologic drug treatments available costing $14,000 a year or more.

Innovative cancer treatments using targeted therapies of monoclonal antibodies have been introduced.  These therapies are able to successfully treat without the dreaded side effects of traditional chemotherapy agents.  Ibrance is one such therapy holding great promise in the treatment of breast cancer at a cost per treatment of over $124,000.  Keytruda made front page news in former President Jimmy Carter’s successful battle against advanced melanoma.   Remarkable results with a remarkable price of over $150,000 per year.

Few will argue how miraculous and life-changing these innovative treatments have become.  The challenge continues to be providing these medications without straining the healthcare delivery system to the breaking point.  There are cost-saving strategies that can be taken to help reduce the financial impact of these meds.

Some specialty medications have already been on the market for a long time and multiple meds have become available from different manufacturers.  Multiple medication selections allow a preferred choice to be made by insurers, plan sponsors and consumers.  Some specialty meds now even have lower cost generic equivalents available.

Implementation of additional higher dollar Rx co-pays tiers for specialty meds by health plans can help guide members to select lower cost meds as the first choice in their line of treatment.  These co-pays also allow part of the cost of these medications to be carried by the member.  Specialty co-pay tiers can be designed, for example, using a stepped tier 4 and 5 with increasing dollar co-pays depending on which medication is selected.  These co-pays can also be structured in the form of a percentage of co-insurance up to a maximum dollar amount per script.

It is also important for plan sponsors and employers to consistently review the discounts and rebates offered through their pharmacy benefit manager to assure they are taking advantage of price competition between manufacturers of various meds.

In summary, specialty meds are here to stay.  Being diligent in effectively managing the potential high cost is key to mitigating the financial impact.

Continue reading...

Electronic Medical Records in 2016 – A Success Story

August 19, 2016


It’s been three years since we posted “Update 2013-Electronic Medical Records-What’s next?”. Back in 2013, Electronic Medical Records (EMRs) were a relatively new technology most health care providers were working to adjust to.  Since then a great deal of progress has been made in getting doctors and hospital to adopt this new system of recording the health information of their patients.

As mentioned in our previous article, the Federal government began investing over $31 billion in 2011 in the form of incentives payments to physicians and hospital to spur the move toward using Electronic Medical Records. Today almost every hospital and about 75% of physicians have implemented EMRs.  And although the use of EMR systems has become prevalent, physicians still continue to complain about having to use them.

Earlier this year at the Healthcare Information and Management Systems Society Convention, Dr. Karen DeSalvo, National Coordinator for the Health Information Technology at the Department of Health and Human Services, announced more work is now needed to reform our health care delivery system so that we can begin to reap the most value from that investment.

Three year goals were established in January 2015 in the form of a draft interoperability roadmap, Connecting Health and Care for the Nation. Progress has been made in connecting networks in both private enterprise solutions and public health exchanges.

Dr. DeSalvo mentioned two mobile apps are still needed. One will be used by consumers while the second will be for clinicians.  These apps will enhance interoperability of EMR systems at a cost of $175,000 each.  Development of “an open resource” website is also needed which will make it easier for developers to publish apps.

These initiatives are reflective of the need for EMR systems to make the lives of health care providers simpler instead of more complex. And to give patients improved access to their medical information and a better way to communicate with their doctors.

Key trends continuing in 2016 according to an article published in Healthcare IT News include the following:

  • Cloud-based EMR services which will reduce the costs of implementation and updating of EMR systems.
  • Improved patient portals with additional features allowing a heightened level of access and patient recording of health information.
  • Growth of telehealth estimated to hit over $30 billion by the end of the decade. The expansion of this service is expected to mesh well with the growing senior population.
  • Mobile friendly EMR systems that allowing providers to untether from a computer screen.

Opening the avenues of access to health information also increases the risk of a data breach. The hacking of personal medical information holds great potential in the quest by the unscrupulous for identify theft and other cybercrimes.  Data security is of utmost importance especially when accessing through mobile devices or other cloud based services.  It is vital for systems to maintain the utmost level of cybersecurity during implementation and as updates are made for additional features.

In summary, a great deal of progress has been achieved in EMRs in the past several years. Enhancements and improvements being implemented today and in the near future will further solidify this technology into our health care delivery system. The ultimate payoff will be improved patient care and reduced cost of health care.

Continue reading...

FSA Discrimination Testing

February 12, 2016


Discrimination testing of an FSA plan is required on an annual basis to assure the plan has been implemented to the benefit of all employees and not just a select few. To meet the qualifications for tax-favored status, an FSA plan cannot discriminate in favor of Key or Highly Compensated employees.

Before reviewing the discrimination testing requirements let’s learn more about these two types of employees:

Key employees include:

  • An officer receiving annual pay greater than $170,000*; or
  • An employee with either
    • Greater than 5% ownership in the business; or
    • Greater than 1% ownership in the business with annual pay of more than $150,000*.

Highly compensated employees include:

  • Officers of the company;
  • An owner of at least 5% of the company for the applicable plan year being tested or in the 12 months preceding the tests;
  • Any employee with gross annual compensation before deduction of more than $120,000* during the 12 months prior to the testing year;
  • The spouse and dependent children of an employee meeting the highly compensated definition are considered to meet the definition of highly compensated as well.

*Salary amounts given are for years 2015 (subject to index adjustment for future plan years).

FSA discrimination testing includes review of Eligibility along with Contribution and Benefit which demonstrates compliance as follows:

Eligibility Test

Eligibility to participate in an FSA plan must not discriminate in favor of highly compensated employees. Meeting the eligibility testing requirement generally includes the following:

  • 70% or greater of all non-excludable employees must benefit (regardless of their status as a highly compensated or non-highly compensated employee);
  • 80% or more of these employees who are eligible to benefit; and
  • Employees qualifying under a classification that does not discriminate in favor of highly compensated employees.

Contribution and Benefit Test

The test for contribution and benefit (which is also known as the Utilization Test) determines the plan is not discriminating to the benefit of highly compensated employees thereby assuring all eligible plan participants have the same opportunity to elect the non-taxable benefit. All participants and their dependents must have the same treatment in regard to required employee contributions, maximum benefits and waiting periods.

The following tests are required to demonstrate compliance in this regard:

  • Key Employee Concentration Test must show key employees are not receiving greater than 25% of the non-taxable benefits in total.
  • Dependent Care Spending Account Test must show the average benefits received by non-highly compensated employees are at least 55% of the average benefit received by highly compensated employees. Also, testing must show shareholders and owners of at least 5% of the company are not receiving more than 25% of the total dependent care benefit.

IRS Reporting Requirements

Form 5500 must be filed for all FSA plans no later than 7 months after the end of the plan year. Compliance and testing results are subject to audit by the IRS.

In closing, as with all Employee Benefit plan discrimination testing, it is imperative that proper oversight be conducted by the plan administrator to assure continued regulatory compliance. Such oversight includes appropriate review prior to commencement of the benefit plan year as well as periodic review during the year to assure continued compliance by events such as employees entering or leaving the plan or by employee election changes due to a qualifying event.

The contribution limitation which went into effect on January 1, 2015 of $2,550 on Health FSAs and $5,000 on Dependent Care FSAs will reduce the likelihood of non-compliance, but appropriate oversight is still vital.

Additional information on other discrimination testing requirements can be found on the J.W. Terrill News and Compliance Blog.

Revised February 12, 2016


Continue reading...

Presenteeism…a “not so apparent” cost

November 17, 2015


We are all familiar with the term “absenteeism” and its effect on productivity when employees don’t show up to do their jobs. However, “presenteeism”, a term given to the situation when an employee reports to work when ill or not operating at their usual level of performance, costs employers even more.

Unlike absenteeism, the costs of presenteeism are harder to calculate.  It may be difficult to tell when an employee’s performance is suffering because of illness or other medical conditions.  Presenteeism results not only from being acutely ill with something like a cold and flu.  It can also be the result of home life stress or chronic conditions such as diabetes, depression, alcoholism, migraines and asthma.

When employees report to work sick and contagious they also risk infecting other employees and customers.  This increases the degree of lost productivity. The estimated cost of presenteeism to employers ranges from $150 billion to $250 billion annually.

Strategies to combat presenteeism include implementing paid sick days encouraging employees to stay home when ill.     Also, reviewing company policies to be sure nothing exists that makes an employee feel compelled to come to work sick.  Other strategies include providing telecommuting options, corporate wellness programs and other company programs promoting healthy work life balance, carry over of unused sick days as a reward for working hard and cross-training of employees so others can perform work functions when a co-worker needs to be out.

Continue reading...

Spousal Exclusions

November 13, 2015


The cost of providing health care has become an increasingly larger expense for employers.  Many employers are seeking strategies that will help limit exposure to members perceived as having higher cost.   Studies indicate spouses enrolled on a health plan cost more than other comparable enrolled members.  This make spouses a focus for cost control.

The Affordable Care Act (ACA) requires employers with 50 or more full-time equivalent employees to provide health coverage to full-time employees and dependent children up to age 26; however employers are not required to cover spouses.  Because of this employers are able to choose from several different strategies to reduce the expense of dependent spouses.

These strategies include:

  • Increasing the employee’s contribution rate for dependent coverage
  • Adding a spousal surcharge to cover a spouse who elects to be covered as a dependent on the plan even though other coverage is available to them
  • Exclude all spouses from the plan (regardless if other coverage is available)
  • Exclude working spouses from enrolling if other coverage is available through their employer

Let’s discuss the ramifications of these strategies in more detail.  While on the surface these may appear to be effective cost controls, there are some long-term outcomes to be considered.  Employers who are early to implement may realize some short-term savings as spouses are pushed off their plan.  However, the result over the long-term in a world where all employers push spouses off their plans may ultimately result in a cost increase.

In this future world, employers will likely be covering new employee participants pushed off of dependent coverage.  These employers will be responsible for subsidizing the cost of employee-only coverage on these former dependent spouses.  According to the 2013 Kaiser Family Foundation survey, employers paid 82% toward the cost of employee-only coverage and 71% toward family.   Therefore, employers might in-fact be subsidizing a larger portion of the contribution.

In summary, the short-term spending reductions can be perceived as immediate and enticing while the long-term possibilities more distant and intangible.  It remains to be seen if the long-term consequences are enough for employers to re-evaluate these strategies.  In any event, employers should be prepared to see their cost savings diminish over time.

Continue reading...

Compounding Pharmacies and Potential for Fraud

May 27, 2015


In the early days of pharmacy, compounding was a common practice.  Chemical ingredients were regularly combined to produce medicinal products.  This is even reflected in the mortar and pestle logo used by one of our major drug store chains.

But in today’s world, almost all of our medications are manufactured by pharmaceutical companies.  Drug creation and manufacturing is tightly controlled and regulated by the Food & Drug Administration (FDA) to insure product safety and consistency.

However, drug compounding has not disappeared.  In fact, in recent years it has become an increasing cost share of medications being dispensed.  In some instances, compounding is necessary for valid reasons such as modifying a medication from a pill to a liquid form to make it easier to swallow or to remove an ingredient a patient is allergic to.  Flavoring can be added to make a medication palatable for small children or a dosage adjusted for infants. It allows a medication to be tailored to an individual patient’s particular needs.

A compounding pharmacist essentially follows a recipe to create a customized formula for a patient.  Because of the customized nature of these drugs they have not been approved by the FDA.   Compound pharmacies are only regulated at the state level with a minimum amount of oversight.

This minimal regulation has opened the door to the possibility of fraud and abuse fueled by the lure of significant profits.  Compounded drugs can be difficult to track and examine for utilization because they do not use the standard National Drug Codes (NDC) of traditional medications.  This presents a challenge for payers in determining if providers are overbilling or doubling billing for compounded drugs.

A common scheme used by an unscrupulous provider is to produce a cream or ointment by combining traditional drugs and other chemicals and then bill a payer a greatly inflated amount for a compound they created at a fraction of the cost.

These practices are of concern not only because they can contribute to the rising costs of health care paid by employers, insurers and plan sponsors, but also because of the impact on patient safety.

This has placed compounding pharmacies on the radar for increased oversight by states and other organizations.  Insurers and plan sponsors are implementing systems and other procedures to trigger reviews and validation of billing and claims payment related to compound medications. Some compounded drugs are valid and benefit the patient, but those produced for fraud and abuse are of great concern.

As in most situations involving fraud and abuse, unscrupulous providers will undoubtedly concoct new schemes attempting to circumvent regulations and reviews.  It is important that regulators and plan sponsors keep pace with those attempts for the sake of patient safety and cost control.

Continue reading...

Supreme Court Hearing Same-Sex Marriage Cases

February 3, 2015


The U.S. Supreme Court recently announced it will hear cases in a possibly historic ruling on whether same-sex couples can marry across the entire United States under the Constitution.

As of the publishing of this article, same-sex couples are allowed to marry in 37 states and the District of Columbia. Roughly two-thirds of these states have had the ban on same-sex marriage declared unconstitutional through judicial action vs. approving through legislative action.  Rulings are pending appeal in several other states including Missouri. Same-sex couples in the state of Missouri at the present time can only marry in St. Louis and Kansas City pending the appeal process.

The Supreme Court will hear cases relative to overturning bans in the states of Kentucky, Michigan, Ohio and Tennessee. The time normally allotted for arguments will be expanded from one hour to 2 ½ hours.

The justices will consider two questions. One question being whether or not the U.S. Constitution requires a state to issue a marriage license to a same-sex couple. The second being whether or not a state must recognize a same-sex marriage performed in another state or jurisdiction.

Arguments will be made in April with a decision expected in the latter part of June.

We will continue to monitor and report as the situation develops.

Continue reading...

Missouri Same-Sex Marriage Ban Unconstitutional

November 10, 2014


The first week of November has been a busy one regarding developments striking down the same-sex marriage ban in Missouri.

On November 5, St. Louis Circuit Judge Rex Burlison held, “the Court finds and declares that any same-sex couple that satisfies all the requirements for marriage under Missouri law, other than being of different sexes, is legally entitled to a marriage license.” The Court went on to hold that the Missouri same-sex marriage ban violated the Equal Protection Clause of the Fourteenth Amendment.

Judge Burlison‘s ruling came as a result of a case filed earlier this year by the State of Missouri against the Recorder of Deeds and Vital Records for the City of St. Louis. The case sought to restrain the City of St. Louis from issuing additional marriage licenses to same-sex couples following the issuing of such marriage licenses in June, 2014. Judge Burlison’s opinion is available here.

Two days later, on November 7, U.S. District Court Judge Ortrie D. Smith issued a similar ruling in Kansas City striking down Missouri’s 2004 constitutional amendment precluding same-sex couples from marrying. Judge Smith held that the state’s ban on same-sex marriage “violates the Due Process Clause and the Equal Protection Clause of the Fourteenth Amendment.” The Court explained that Missouri “would permit Jack and Jill to be married but not Jack and John. Why? Because in the latter example, the person Jack wishes to marry is male. The State’s permission to marry depends on the genders of the participants, so the restriction is a gender-based classification.” Judge Smith’s opinion is available here.

Attorney General Chris Koster is appealing both rulings.

In the interim, what do these decisions mean for the residents of Missouri? And what are the impacts relative to employee benefit plans? For the time being, it is primarily “wait and see”.

In the short term, same-sex couples are immediately able to file for marriage licenses in St. Louis City and St. Louis County. In fact, same-sex couples have already been married at the City Hall in St. Louis. Questions remain as to how the ruling will be handled by other counties in Missouri. If the decisions are upheld on appeal, same-sex spouses will have the opportunity to access employee benefits offered to legally married couples. In that circumstance, it will be important for employers to review policies and procedures related to the treatment of same-sex spouses to insure those policies are both in line with the intent of the employer and in line with federal and states laws.

In the longer term, a host of state laws will need to be reviewed and additional legislation will need to be drafted if the decisions are deemed final.

We will continue to follow this topic for additional developments and provide updates as they become available.

As of the publishing of this article, same-sex marriage is legal in 32 states and the District of Columbia.

Please reference our previous articles for additional information:




Continue reading...

Sovaldi: Bane or Blessing?

July 15, 2014


In 2013, the Food and Drug Administration approved a new hepatitis C drug marketed under the brand name Sovaldi. This drug, developed by Gilead Sciences, is a specialty medication taken once-a-day along with other antiviral meds. Sovaldi is reportedly effective in curing 89% of patients infected with the hepatitis C virus in as little as 12 weeks.

Hepatitis C (hep C) is a chronic infectious disease affecting the liver. It is the leading cause of liver transplantation and is frequently asymptomatic for many years. It can ultimately lead to cirrhosis progressing to liver failure, liver cancer and also life-threatening gastric varices. An estimated 150-200 million of the world’s population are infected with the virus. Over 3 million infected individuals reside in the United States alone.

The virus was discovered in the 1980’s and had only a 5% cure rate. Subsequent treatments for hep C were developed with a cure rate of about 50%. This treatment included weekly injections for up to 48 weeks often with serious side effects. The side effects were sometimes so severe that treatment had to be discontinued.

The development of Sovaldi is yet another example of an incredible medical breakthrough with the potential to improve the lives of millions. It is remarkable that a disease with only a 5% cure rate three decades ago is now almost 90% curable!

So what’s the catch?

Sovaldi costs $1,000 per pill with an average treatment regimen costing an estimated $84,000! To put this in perspective, if every person infected with hep C in the United States were treated with a regimen including Sovaldi the costs would approach $300 billion! That is equivalent to what is spent to cover all other prescription medications used in the United States combined!

Gilead Sciences has been the focus of criticism and heightened scrutiny on the pricing of this revolutionary medication. Sources indicate the cost to manufacture is significantly less than the $1,000 per pill price tag. The drug is also reportedly available outside the United States at a substantially reduced price.

Questions loom as to how the Company can justify this pricing structure particularly when the majority of patients infected with hep C are in a population where Medicaid and state funding bear the bulk of the costs. Gilead contends the cost of Solvaldi is priced in line with the average cost of other hep C treatment regimens. They also argue their cure brings savings to the overall cost of health care in the long term.

As with all medications, the pricing of a drug does not lie solely in the cost of manufacturing. Substantial investment is made in research and development. Gilead reportedly paid over $11 billion to acquire the company that developed this medication before bringing Sovaldi to market.

It is a double-edged sword balancing corporate profits against true medical breakthroughs that can cure or manage serious diseases. If pharmaceutical companies did not stand to profit from the creation of these life-saving drugs what incentive would there be to take the substantial risks to create them?

Gilead is not the only drug manufacturer with cutting-edge cures for hep C.   Merck is currently developing a drug reported to be 100% effective in curing all strains of hep C in less time than the Gilead pill.   As with Gilead, Merck acquired another firm which developed the drug being used in the development of their cure at a premium price of $3.85 billion. No information is available yet on how much the Merck pill will cost.

In summary, billions of dollars in profit have been made and will continue to be made on specialty medications used for the treatment of serious conditions such as hep C, cancer, multiple sclerosis, H.I.V. and cystic fibrosis.

As a society, how do we balance corporate gains against the substantial costs that strain our health care payer systems?   Where is the middle ground between returning shareholder value and improving and saving the lives of those afflicted with serious health conditions? The discussion around the high cost of medications like Sovaldi will undoubtedly continue and be articulated again and again as new and even more expensive specialty meds continue to be created.

Continue reading...