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FDA Chief Resigns – Why It’s A Loss for Self-Funding

By: Brady Bizarro, Esq.

When President Trump nominated Scott Gottlieb to be commissioner of the Food and Drug Administration (“FDA”) in March of 2017, critics were quick to point out his deep ties to the pharmaceutical industry. They had little hope that he would have the wherewithal to overcome perceived conflicts of interest and challenge the industry on important issues facing consumers and payers. Scott Gottlieb, however, proved to be a rarity, seemingly immune to regulatory capture. He received bipartisan praise as one of the administration’s most effective regulators. His departure in April will be a loss for the self-funded industry and for healthcare cost containment as a whole.

Dr. Gottlieb focused his efforts in three key areas: rising drug prices, the opioid epidemic, and the underage use of e-cigarettes. Under his leadership, the FDA worked to strengthen and speed up the review process for generic drugs. In 2018, first-time generic approval grew by 24%. In all, the FDA approved 971 generic drugs in 2018, an all-time high. With respect to the opioid crisis, which has killed some 85,000 people since 2017 and led to an enormous spike in treatment costs to payers, Dr. Gottlieb took a hard stance on opioid prescribing limits and approved a mobile app to help those with substance use disorder recovering through outpatient treatment. Finally, under Gottlieb, the FDA cracked down on teen vaping by announcing rules to restrict the sale of flavored e-cigarettes, supported banning menthol cigarettes, and reduced nicotine levels in cigarettes.

Soon after he announced his departure, the Trump administration named an interim replacement, Dr. Ned Sharpless, who now heads the Cancer Division of the National Institutes of Health (“NIH”). The search for a permanent replacement is still underway.


RBP: Sticking It To The Man

By: Jon Jablon, Esq.

Employers, TPAs, and brokers primarily choose to utilize reference-based pricing programs to cut costs. Instilling systemic changes in the industry can also be a goal of those utilizing this methodology, but cost-containment is a much more tangible goal.

The reference-based pricing mentality can carry with it the opinion that medical providers are crooks – charging many times the fair market value of services with no meaningful system of checks or balances. While that may sometimes be accurate, it’s still important to remember the law that surrounds reference-based pricing and, more importantly, balance-billing, when deciding whether to “stick it to the man.” 

Some employers refuse to negotiate balances with medical providers, even if the health plan offers very few or no options for contracted providers. Aside from the Department of Labor’s not-so-favorable stance on this matter (see https://www.phiagroup.com/Media/Posts/PostId/376/unraveling-faq-part-31), medical providers retain the right to send patients to collections, or even file lawsuits against them. Although there is an increasing amount of litigation in the industry regarding this exact topic, there is not yet any concrete guidance that removes a medical provider’s right to send patients to collections or sue a patient.

It’s sometimes tempting to walk away from the bargaining table in frustration, but remember the ramifications on the member if that’s the route taken. My advice is certainly not to bend to any given provider’s whim when it comes to payment – but keep an open mind, and consider the potential consequences associated with every option.


Foreign Drugs: Savings Worth Traveling For

By: Andrew Silverio, Esq.

In recent weeks, we have seen an influx of questions regarding the practice of procuring prescription drugs from abroad, particularly Mexico (Canada has historically been the most popular source).  The issue has also been popping up in the news, and a program for public employees in Utah to venture to Tijuana to pick up their prescriptions is now live.  The potential for significant savings compared to domestic pricing for (essentially) the same drugs is what is driving the popularity of this trend.  We won’t get into the legal standing of this practice – feel free to reach out if you’d like information on that topic – but we wanted to highlight a potential risk that we generally don’t see employers consider when looking at programs like this – not a legal or contractual risk, but a health risk stemming from the drugs themselves.

It is true that drugs manufactured for sale abroad can be chemically identical or sometimes even manufactured in the same facilities as their U.S. counterparts.  However, this is not always the case, and quality control can be an issue, as can more nefarious problems with counterfeit drugs. Countries designated as “Tier 1” (such as Canada) have comparable safety standards to those in the United States, but the fact remains that the FDA has no authority or ability to oversee drugs manufacturer for sale abroad (even drugs that come off the same conveyor belt as their U.S. counterparts).

Even at home, quality control issues happen.  Per a recent CNN article, “there’s no end in sight for one of the largest prescription drug recalls in recent memory.”  Numerous different blood pressure medications, from several manufacturers, have been pulled from shelves due to contamination related to “NDMA” (N-nitrosodimethylamine), a chemical which is used to make liquid rocket fuel.  This chemical, and another which has been identified called NDEA (N-Nitrosodiethylamine), interfere with DNA replication which can result in cancer, and the issue goes back years, not months.  These foreign manufacturers may be taking all the same appropriate corrective action for drugs packaged for sale elsewhere, but the FDA simply doesn’t have the ability or authority to make sure of it. 

Finally, in the event a patient visits a foreign country to retrieve their medications and ends up receiving tainted or counterfeit products and having adverse effects (whether due to a lack of FDA oversight or not), that patient will not have the benefit of any domestic laws relating to product safety or medical malpractice.  If any recourse against the manufacturer or pharmacy is available at all, they will likely need to return to the source of the drug and operate within an unfamiliar legal system.  Of course, if the patient’s health plan actively encouraged the patient to get their drugs from a less reputable foreign source rather than the pharmacy up the street, the plan itself could potentially be liable – and a much more appealing target than a foreign pharmacy.


The Opioid Crisis: How Employers & Self-Funded Health Plans Can Combat This Epidemic

By: Philip Qualo, J.D.

Each year more and more Americans overdose on prescription opioid drugs. In fact, the Centers for Disease Control and Prevention (CDC) reported that deaths attributed to opioid abuse and addiction now exceed car crashes as the leading cause of unintentional death in the United States. Opioid addiction has grown exponentially in recent years and is now officially the deadliest drug crisis in American history, more than heroin and cocaine combined.

Opioid drugs are routinely prescribed by healthcare providers for its lawful intended purpose, to treat severe pain. As access to healthcare has increasingly become available to all Americans from diverse backgrounds, this specific drug crisis is unique in that it crosses all social, economic and racial boundaries. This broad demographic substantially increases the likelihood that the opioid epidemic will eventually make its way into every employer’s workforce.

Employers sponsoring group health plans can incur significant financial and legal risks when dealing with plan participant opioid abuse, such as an increased use of emergency room services, hospitalizations, related medical costs, and even an increase in workers’ compensation claims. As a result of opioid abuse, the cost per claim continues to grow, as well as the number of painkillers per claim. For example, a 2012 study conducted by The Hopkins-Accident Research Fund Study, found that workers prescribed even one opioid had average total claim costs that were more than three times greater than claimants with similar claims but who were not prescribed any opioids. 

Employers who sponsor self-funded health coverage have a particular advantage in combatting the opioid epidemic in their own workforce as they have the flexibility to design their health plans in ways that could potentially discourage opioid abuse among plan participants. For example, allowing for low cost access to, or otherwise incentivizing participation in, popular alternatives to pain management. These alternatives provide plan participants with a variety of options to treat pain without the use of prescription drugs. The most common alternatives to pain management are acupuncture, chiropractic care and physical therapy. Such alternatives are likely far less expensive than the financial and legal risks associated with prescription opioid abuse.

Self-funded health plans also have the ability to ensure that healthcare providers in their networks are following CDC guidelines. These guidelines are intended to improve the way opioids are prescribed to ensure patients have access to safer, more effective chronic pain treatment while reducing the number of people who misuse, abuse, or overdose from these drugs. In the alternative, self-funded health plans could consider implementing a three-day limit on opioid prescriptions for initial pain treatment as the CDC has found that the probability of addiction increases on day four.  

Regardless of how employers and/or plan sponsors choose to address the opioid epidemic, it is important that employees and plan participants are educated about opioid abuse and its potential consequences.  Employees that are educated about the drug crisis and their healthcare options are more likely to make informed decisions regarding their pain.


Too Early to Worry About 2020? Never!

By: Kelly Dempsey, Esq. & Corrie Cripps

ACA changes are few and far between these days – a lot of talk, but not a lot of action…yet. There are two things health plans should pay attention to and one is likely a welcome change. The less exciting of the two is a quick update to the preventive care rules, while the more exciting proposal is relating to the exclusion of certain prescription drug charges from the out-of-pocket maximum. While this proposal doesn’t solve all the drug copay card problems at once, it’s a step to help plans control prescription drug spend.   

New Preventive Care Guideline
The United States Preventive Services Task Force (USPSTF) issued a brand new “B” recommendation on February 12, 2019. The new recommendation requires plans to provide interventions to prevent perinatal depression. The USPSTF found that counseling can help prevent perinatal depression in persons at increased risk, and recommends that clinicians provide or refer pregnant and postpartum persons who are at increased risk to counseling interventions.

As a reminder, this new recommendation impacts non-grandfathered plans. Non-grandfathered plans are required to provide coverage for certain preventive care services in-network at 100% with no cost-sharing. Included in the list of services are USPSTF guidelines with an A or B rating. Employers that offer robust medical plans, as well as limited medical benefit plans, such as preventive only plans, will need to make the necessary modifications. Timing of applicability of new recommendations is a little confusing, as such, Phia’s best practices are to implement new guidelines into plans with the first plan year beginning on or after the recommendation is issued.

Drug Copay Cards and Out-of-Pocket Maximums
Annually the U.S. Department of Health and Human Services (HHS) issues proposed regulations with benefit and payment parameters. Generally this just means employers and plans are put on notice regarding inflation updates to certain figures such as the ACA out-of-pocket maximum limits. This year HHS is throwing a likely welcome curveball - HHS has proposed to allow self-insured group health plans to except certain cost-sharing from the maximum out-of-pocket limit if certain things occur related to prescription drugs. The rule would allow plans to exclude from the out-of-pocket totals the amount the plan must pay when a plan participant selects a brand drug when a medically appropriate generic drug is available and amounts associated with drug manufacturer coupons for specific prescription brand drugs that have a generic equivalent.

 


To RBP, or Not to RBP: That is (one) of the Question(s)

By: Ron E. Peck, Esq.

Why do employers offer health benefits to employees?  Some might point to the Patient Protection and Affordable Care Act (“PPACA” or “ObamaCare”) and say the law forces them to do so.  Yet, prior to the law’s passage in 2010, many (if not most) employers voluntarily offered health benefits to their employees.  There are a number of reasons for this, but suffice it to say, it was meant to attract and retain the best talent.

Indeed, once upon a time, health benefits were just that – “benefits.”  Now, it’s assumed health insurance is included in an employment package, and what was once a benefit is now an entitlement.

Why does this matter?  It matters for many reasons, but as it relates to reference-based pricing, or “RBP,” it matters insofar as RBP ultimately – more often than not – puts the patient (“a/k/a” the employee or their family) in the crosshairs when disputes arise between providers of healthcare services, and the benefit plans that utilize an RBP pricing methodology.

Perhaps – long ago – when health benefits were welcomed as “icing on the cake,” the fact that an individual may be limited in who or whom they could utilize for care, or risk being balance billed the difference between what the plan pays and what the provider charges, would not have been so onerous.   The employee might have thought, “Heck!  It’s better than nothing; and I suppose I could avoid the bill by selecting a provider that works with my plan.”

Today, however, not only do we expect to receive health benefits, but we are outraged when our out of pocket expenses increase.  This attitude, on the part of plan participants, is anathema to RBP.

At the same time, recall that RBP is a response to changing opinions as they relate to networks, and PPOs.  Looking back in time, one of the values inherent in PPOs was a discount off of provider billed charges.  It was assumed – “back in the day” – that the billed charges against which the discount applied were reasonable, and as such, getting discounts on top of reasonable charges had value.  The fact that the provider, by agreeing to accept the network rate as payment in full, had the secondary impact of protecting patients from balance billing, was just icing on the cake.

Today, however, we recognize that billed charges are so exorbitant, that network discounts do next to nothing to counter the abuse, and thereby are worthless.  As a result, the thing that once was a secondary benefit of network enrollment – balance billing protection for the patient – has become, more or less, the only valuable element of a network.  Yes; if asked why they are still using a network, most plans would not state it’s for the discount, but rather, it’s to avoid balance billing and protect patients.

Thus, we must ask ourselves – how much will we pay to avoid balance billing and protect patients?  If a provider charges $60,000, there is a discount of 30% ($18,000), $42,000 is thus expected as payment, and the reasonable fee is $5,000, is it worth $37,000 to protect the patient from balance billing?  If not, what will you pay – instead – to protect patients, if anything?

This is ultimately the question every plan contemplating RBP must ask itself.  How much more, beyond reasonable charges, am I willing to pay to protect my plan participants?

Piling onto this, politicians, lawmakers, regulators and courts seem more than happy to offset the rising cost of healthcare onto the benefit plans as well.  From FAQs released by the DOL, indicating that a failure to offer “adequate access” (“a/k/a” a network) will result in balance billed amounts counting against maximum out of pockets – and thus make the remainder of the billed charges owed and payable by the plan, to court decisions overturning previous rulings that determined hospitals can’t force patients to agree to pay whatever the hospital charges and sought to calculate fair prices when no fee was agreed upon, those in power seem dead set on allowing providers to charge whatever they want, and protect patients from any undue out of pocket expenses – by forcing plans to either contract with providers, or pay the cost.

I have personally advocated for working directly with providers, identifying value, and finding ways to create win-win scenarios without increasing how much the plan pays; instead offering providers things of value – other than cash – that incentivizes them to accept plan maximums as payment in full.  Yet, this effort is put into serious jeopardy whenever anyone “forces” a plan to enter into contracts or networks with providers.  Politicians and providers seem to treat (or want to treat) “networks” like a silver bullet.  The issue is, however, that networks are just a nice label for a “contract.”  If any rule or law “requires” a payer to enter into a contract with a payee, and failure to do so results in penalties for the payer, it puts an unfair advantage in the hands of the payee.  One key to successful negotiation – whether it be a provider network deal, buying real estate, or settling a law suit – if both sides don’t have something to gain, something to lose, and the freedom to leave the table, the “deal” won’t be fair.

As a result, the DOL FAQs, case law, and proposed laws that would “force” a payer (plan, carrier, etc.) to broaden their network, and force them to sign a deal with a provider, will result in one-sided deals, as providers know that the payer cannot “leave the table” without a deal.

These are all things one must consider when asking themselves whether to RBP or not to RBP.


The New Medicare and Medicaid Bills

By: Erin Hussey, Esq.

There has been a lot of talk lately about the progressive push for Medicare-for-All. For instance, Rep. Pramila Jayapal (D-Wash.) is seeking to introduce an updated bill called the Medicare for All Act of 2019. If passed, this bill would transform the U.S. health care system as it would essentially create a “single-payer” system run by the government. Medicare-for-All has also created a lot of uncertainty. For example, Medicare does not cover certain long-term care and does not include coverage for hearing, dental, vision or foot care, but supposedly the bill proposes to add some of these benefits.

Given the uncertainty of how a Medicare-for-All model would work in the U.S., there could be more support for a bill that was introduced on February 13th, called the Medicare at 50 Act. Sen. Debbie Stabenow (D-MI) and Rep. Brian Higgins (D-N.Y.) introduced this bill which details a Medicare buy-in option for Americans ages 50 to 64, who have not reached the Medicare eligible age of 65. This would allow individuals in that age range to buy Medicare plans instead of purchasing on the Obamacare marketplaces if they do not have coverage through their employer, or as an alternative option if they do have coverage through their employer. Stabenow believes this will allow for lower premiums than what is offered on the individual market and the bill would allow those who qualify for the marketplace subsidies to utilize those funds to buy into Medicare. She also believes the bill would get bipartisan support and that it’s something that could work right now, whereas Medicare-for-all is a more drastic undertaking for the U.S.

To add another layer to the above, Sen. Brian Schatz (D-Hawaii) and Rep. Ben Ray Luján (D-N.M.) re-introduced a bill on February 14th called the State Public Opinion Act. This bill would allow those who are not already eligible for Medicaid to buy into a state Medicaid plan regardless of their income.

We will be watching to see how these bills play out and to see how much support they receive from both sides of the aisle.

 


Hey, Watch Your Language!

By: Jon Jablon, Esq.

This is a topic we’ve discussed numerous times in memos, phone calls, conferences, webinars, and any other time reference-based pricing is discussed – and it continues to be a relevant topic throughout the industry. A health plan utilizing some sort of RBP will get the most bang for its buck if the language in its SPD is strong – and of course if the language is weak, the plan’s payment methodology will be extremely difficult to enforce, and could even subject the Plan Administrator to liability.

Simply put: if your plan is using reference-based pricing – whether for all claims, only out-of-network claims, facility only, or any other subset of claims – your plan must have clear and accurate language.

Clear language describes what the plan will pay in a comprehensible manner. An example of clear verbiage is “This plan’s benefits equal 150% of the applicable Medicare rate, when such rate can be calculated by the Plan Administrator.”

An example of unclear verbiage is “All claims are paid at 150% of Medicare. Participating facility claims are subject to this rate only if the physician is nonparticipating. All facility claims are paid at the lesser of the reference based pricing amount or 70% of billed charges when inside the plan’s service area.” (Both examples are direct quotes from SPDs.)

Accuracy is just as important as clarity, if not more; an example of accurate verbiage is “When a given service is performed by an in-network provider, the Maximum Allowable Charge will be the PPO rate applicable to that provider. For all other claims, this plan pays the lesser of the following factors…”.

An example of inaccurate verbiage is “All in network claims are subject to code review and will be paid based on an amount deemed usual and reasonable and customary by this Plan, including but not limited to a multiple of the prevailing Medicare allowance.” (Again, both quotes are taken from real SPDs).

These are just a few examples of what we see on a daily basis; as medical providers begin to treat RBP differently than ever before, it is similarly more important than ever to make sure the plan’s language is optimal.

As a final note, the idea that language needs to be strong, clear, and accurate applies to all plans – not just those using RBP. It just so happens that RBP is a bit more novel than other traditional plan designs, so RBP language is sometimes less well-established in many SPDs. But together, as an industry, we can fix that!


New Action on Drug Pricing: Medicare-Like Rates?

By: Brady Bizarro, Esq.

In 2012, the annual cost of insulin needed to treat patients with type 1 diabetes was $2,864. Today, the cost has risen to over $6,000. For working-class families already struggling to keep up with everyday expenses, this increased economic burden has forced some to choose between food and life-saving medication. CBS News has reported that more than one-quarter of Americans living with diabetes have cut back on their insulin usage to ration their supply, and that can be dangerous. Skyrocketing insulin prices are just one example of high prescription drug costs, which the Trump administration has made it a priority to address.

We have written a lot before about the administration’s proposals to lower drug costs: from ending pharmacy gag rules to outlawing the use of co-pay coupons, ideas for controlling costs were in no short supply. Ideas and tweets, however, have a limited impact. Real legislation is needed to produce meaningful reform, and as we are now well into 2019, there are indications that bipartisan action may be on the horizon.

Soon after taking over powerful congressional committees, Democrats began scheduling hearings and reaching out to drug companies asking for detailed information regarding their pricing practices. On February 7th, Democrats, including 2020 hopeful Senator Sherrod Brown (D-OH), unveiled a bill that would allow Medicare, the largest purchaser of pharmaceuticals in the country, to negotiate drug prices directly with drug manufacturers. The Medicare Negotiation and Competitive Licensing Act would permit such negotiations and strip drug manufacturers of their patent protection for a drug if those negotiations failed. For self-funded plans, this is key. Not only would negotiated Medicare rates provide a benchmark for pricing (as is the case for most medical services), but failed negotiations would allow generic versions of expensive drugs to market much earlier than previously allowed by law.

For now, lawmakers are hoping to get President Trump to support this bill. The president’s support would put significant pressure on Republican congressmen to support the bill. As always, we will bring you the latest developments as they unfold.


Self-Funding Comes in Many Forms - When Describing, Take Care to do so Accurately!

By: Chris Aguiar, Esq.

I read what I thought was a decent article this week on some of the advantages of self-funding but wanted to take an opportunity to comment/elaborate.  Always great to see self-funding be touted in the public eye via highly visible media sources.  It can certainly be difficult to give a very detailed explanation of this complex risk model in a capped word count article, but something jumped out at me that I thought relevant to note.  The author describes self-funding generally as “the employer pays for its own employees’ claims, or at least to a certain amount, while larger claims would be handled by insurance companies”.  Certainly that is a model we’ve all seen, but it is indeed only one model and the exact kind of description that drives the misconception that a self-funded plan that uses a traditional stop loss model is not fully self-funded and is therefore insured.

It's important to understand that many self-funded plans do not utilize the hybrid approach this description implies.  To the casual observer this description suggests that a $1,000.00 claim is paid by the self-funded plan while a $100,000.00 claim is paid by some other health insurance arrangement entered into by the employer; that’s simply not accurate, certainly not among The Phia Group’s clientele.  Rather, for many self-funded plans the plan is at all times responsible for the medical bills and, only after the paying, seeks reimbursement from another insurance company.  That company from which the plan seeks reimbursement is not a health insurance carrier, rather, it’s a financial insurance vehicle that protects and ensures the viability of the Plan to make sure benefits continue to be available for all employees/beneficiaries of the plan.

So, just like the $1,000.00 medical bill, the employer/self-funded plan receives the $100,000.00 claim and must evaluate whether it is eligible for coverage and provide said coverage.  Only then, does it submit a reimbursement request (assuming the $100,000.00 is above the applicable deductible).  It is often the case that for some reason or another, the plan allows for coverage but the request for reimbursement is denied under the terms of the stop loss insurance policy.  Certainly, that self-funded plan would tell you that they were unable to “transfer the risk” on that particular claim.

The description above alone is almost 350 words – so we certainly can’t expect an article of about 750 words intended to cover both self-funding and Direct Primary Care, one of the more innovative approaches being utilized by employers to provide more cost effective health plans to their employees, to describe it in depth.  Notably, the author did not quote Mr. Thaxter when making that description, so it’s impossible to know exactly how it was described to him.  As practitioner in the self-funded space, it’s incumbent on us to do everything we can to educate those who are self-funded, or looking to become self-funded on the benefits, the risks, and strategic and innovative steps that can be taken to minimize the risk and maximize the reward – more cost effective medical benefits!

Catch the article here - https://thebusinessjournal.com/self-funded-insurance-options-come/?fbclid=IwAR3D-CxhWa1vrUy1lkmNMKJTt3cAuucs6v5q7zT4mkQA7ytD9oBQsyl92Pc