By: Brady Bizarro, Esq.
Prescription drugs are some of the most costly benefits for any health plan, especially for those plans that are self-funded. In 2017, total spending on prescription drugs in the U.S. reached $453 billion. Specialty drugs are particularly culpable, accounting for more than one third of all drug expenditures in 2016 despite making up less than one percent of all written prescriptions. In May, the Trump administration released a forty-four-page blueprint for executive action on prescription drug prices, entitled “American Patients First.” The document contained many strategies for combating rising drug costs; but it also focused in on the use of patient assistance programs (“PAPs”) and considered whether they might be driving up list prices by limiting the transparency of the true cost of drugs to patients.
Plan sponsors originally utilized the typical tools available to them to try to offset the cost of specialty drugs: higher copayments, coinsurance, and deductibles. In an effort to mitigate the impact on patients, several pharmaceutical manufacturers developed PAPs to help offset patients’ out-of-pocket drug costs. Some of these programs are very generous. For example, a PAP run by Enbrel offers up to $660 per month toward the cost of a specialty drug for members who would not otherwise qualify for financial assistance.
Assistance programs are marketed as a kind of altruism for patients, which has great public relations benefits. They can also increase the demand for specialty drugs, even when generic alternatives are available. This results in a huge cost to the patient’s health plan. Consider the following scenario: a specialty drug’s list price is $10,000. A generic alternative is available that has a list price of $2,000. The health plan imposes a $500 copay for specialty drugs when generics are available and a $100 copay for generics. In this case, however, the specialty drug manufacturer offers the patient a $450 copay card. For the patient, the out-of-pocket cost for the specialty drug is $50 cheaper than the copay for the generic alternative. The patient chooses the specialty drug, and the health plan pays $9,500. Had the patient selected the generic alternative, the plan would have only paid $1,900.
As the scenario above reveals, PAPs can incentivize patients to choose specialty drugs even when cheaper, generic alternatives are available. For most patients, the only price they are aware of is the amount they pay at the register. The cost to their health plan remains hidden to them, although they eventually feel the effects downstream. In other words, PAPs can save patients money on the front end while driving up the cost to patients on the back end through increased premiums and cost-sharing. With PAPs now in the crosshairs of both plan sponsors and the Trump administration, we should expect new regulations on their use in the coming months.
By: Patrick Ouellette, Esq.
Price transparency has never really been synonymous with health care. In fact, Kelly Dempsey wrote just more than a year ago about how a lack of clear and timely information on hospital billing practices continues to contribute to skyrocketing care costs, and the industry is currently no closer to a resolution. The Centers for Medicare & Medicaid Services (CMS) recently announced that it is attempting to address the issue by revising the pricing disclosure rules currently in place to ensure data is accessible to patients in a consumable format.
CMS responded to cross-industry stakeholders’ calls for greater price transparency by requiring that hospitals post their standard charges in a readable format online. This is not a complete revelation in the sense that hospitals have been required by law to establish and make public a list of their standard charges and individuals had the option to formally request their data in order to gain access. However, effective January 1, 2019, CMS updated its guidelines to specifically require hospitals to make public a list of their standard charges via the Internet in a machine-readable format, and to update this information at least annually, or more often as appropriate.
CMS issued the mandate through its Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) Final Rule:
While CMS previously required hospitals to make publicly available a list of their standard charges or their policies for allowing the public to view this list upon request, CMS has updated its guidelines to specifically require hospitals to post this information on the Internet in a machine-readable format. The agency is considering future actions based on the public feedback it received on ways hospitals can display price information that would be most useful to stakeholders and how to create patient-friendly interfaces that allow consumers to more easily access relevant healthcare data and compare providers.
It remains to be seen (1) how much pushback there will be from providers; and (2) whether having the information provided will be complete enough to ensure better care decisions on the part of individuals. Moreover, this new rule does not change the fact that hospitals may still bill patients based on their respective internal chargemaster rates. However, this news still represents a positive step forward toward transparent pricing, and thus greater competition, in health care.
By: Philip Qualo, Esq.
New York employers and companies with employees residing in the state may soon have to prepare for an additional leave under the state Paid Family Leave Benefits Law (“PFL”). The New York State Legislature recently passed a bill to amend the PFL to include bereavement leave. If signed into law this bill could allow employees to take up to twelve weeks of bereavement leave in a year… with pay.
The PFL, which has been in effect since January 1, 2018, currently provides for job-protected paid time off so employees can bond with newly born, adopted or fostered child children; care for a family member with a serious health condition; or assist loved ones when a family member is called to active military service abroad.
Currently, NY employees are eligible for PFL for up to eight weeks, with coverage increasing to 10 weeks in 2019 and 2020, and 12 weeks in 2021. Leave can be taken either all at once or in full-day increments. A covered employee may take the maximum time-off benefit in any given 52-week period. PFL is funded through employee payroll contributions that are set each year to match the cost of coverage.
The recently approved bill is brief and simply adds a few sentences to the PFL to cover the death of a family member, which includes a child, parent, grandparent, grandchild, spouse or domestic partner. It would allow for job-protected paid bereavement leave up to the same maximum benefit as other qualifying events under PFL, which is scheduled to reach 10 weeks at 60% of the employee’s average weekly wage, capped at 60% of NY State’s Average Weekly Wage (NYSAWW) in 2020. This leave could be taken any time within the 52-week period from the death of the relative.
As with other leaves mandated under NY PFL, the bill would require employers to continue health insurance coverage for employees on paid bereavement leave as long as the employee continues to contribute to the cost of coverage as before the leave.
The bill is currently under review by Gov. Andrew Cuomo. If signed into law, the bereavement leave amendment will not take effect until January 1, 2020.
By: Chris Aguiar, Esq.
Last week, I teased this blog post on Linkedin with vague commentary about effective cost containment not being just about recovering as much money as possible, but also about being knowledgeable and understanding when its best to cut losses. One of the attorneys in our office is currently working on a file where a benefit plan may be ill-advisedly pushing the limits of the law. You see, in subrogation and reimbursement cases, there is a rule called the “Made Whole Rule”. This rule is one of equity that operates to eliminate a plan’s recovery rights when a plan participant does not recover the full amount of their damages (i.e. they weren’t “made whole”). Now, those of us with private self-funded plans that enjoy the benefit of state law preemption can point to our plan terms and the current state of Federal law which holds that clear and unambiguous language that disclaims application of this rule and others like it will control and allow plans to recover regardless of whether the participant was made whole.
This plan, however, is unfortunately governed by state law as it is not a private self-funded benefit plan; preemption does not operate in its favor. The participant had $800,000.00 in medical damages, alone, and received a $1,000,000.00 settlement. Those numbers alone may indicate to some that the participant was, indeed, made whole. However, the damages discussed above are ONLY the medical damages. We have yet to discuss any other damages, including but not limited to: 1) lost wages (present and future) 2) pain and suffering 3) future care, etc. The list of damages in serious accidents such as this can be extensive, and all of those categories hold considerable value and are compensable in the eyes of the law. The particular jurisdiction in which this plan sits happens to have one of the most aggressive made whole rules in the country, and the judges there tend to be very pro participant. Accordingly, it’s a safe assumption that given the participant will really only receive about $600,000.00 after fees and costs of pursuit – it’s quite easy to see that the participant will not likely be considered to have been “made whole” in the eyes of the court.
Despite that, The Phia Group’s attorney has been able to negotiate for a reimbursement of approximately 20% the Plan’s interest. Should the Plan decide to try to enforce a right of full reimbursement, and the court apply the made whole rule, the Plan will receive no recovery at all and will have endured the extra time, expense, and possibly even media fallout for ‘dragging its participant through this ordeal’, of protracted litigation.
Plans, and we as their advisors, must be cognizant of the rules of the jurisdictions in which we operate and realize when a good outcome is unlikely. Sometimes, even if one has a good case and can win and recover its entire interest, the cost of doing so paired with the inability to obtain reimbursement of the costs of pursuit can render the action moot, because the cost can in many instances outweigh the interest. This is even more true, of course, in situations where the Plan is likely to lose.
Effective cost containment is about looking at the situation and determining the most cost effective approach – winning does not always equate to the best outcome.
By: Corrie Cripps
In June, the US Food and Drug Administration (FDA) issued the nation’s first approval for a drug derived from marijuana-based compounds. The drug’s name is Epidiolex, and is used to treat patients with forms of severe epilepsy (Dravet syndrome and Lennox-Gastaut syndrome).
The drug uses CBD, or cannabidiol, which is an oil that comes from resin glands on cannabis buds and flowers.
Prior to the FDA marketing Epidiolex, the Drug Enforcement Administration (DEA) must reclassify CBD, since it is currently listed as a Schedule I drug. Schedule I drugs are considered to have “no currently accepted medical use and a high potential for abuse.” The DEA is expected to make this change for CBD, but will likely leave cannabis itself at Schedule I.
Currently CBD is legal to purchase in only some states. In the states where medicinal or recreational marijuana is legal, CBD is legal. In 17 other states, there are specific laws about what CBD products can be used by whom and for what.
If the DEA reclassifies CBD so that it is no longer a Schedule I drug, thus making CBD legal at the federal level, plan sponsors will need to determine if/how they want to address this in their plans (i.e., if they want to specifically exclude or cover it). Plan sponsors will need to determine how this change will impact their plans, including stop loss.
The Affordable Care Act has endured quite the onslaught in the past year and a half. From seeing its outreach budget cut in half to the elimination of the individual mandate, Obamacare has really taken a beating. Now, the Trump administration has dealt another destabilizing blow to the healthcare law. On Saturday, the Centers for Medicare and Medicaid Services announced that it would be forced to suspend some $10.4 billion in so-called “risk-adjustment payments” to insurance companies. These payments were designed to stabilize insurance markets by offsetting the cost to insurers who took on sicker, costlier patients.
This move came because of a February ruling by U.S. District Judge James Browning which held that the Department of Health and Human Services could not use statewide average premiums to come up with its risk-adjustment formula. In the view of the court, the agency wrongly assumed that the Affordable Care Act required the program to be budget-neutral. The Trump administration promised to appeal this federal court ruling, but in the meanwhile, it announced its decision to suspend billions in payments to insurance companies.
While the suspension of risk-adjustment payments directly impacts the fully-insured market, it will inevitably have a spillover effect into the self-insured market. Insurers have indicated that if these payments are not restored, they will be forced to raise premiums in 2019. You can bet that they will look to make up losses in their self-insured lines of business as well. That said, since healthier, less-costly employees tend to be in self-insured plans, the effect may not be so bad. Plans with more costly groups of employees will suffer far more.
Importantly, the Trump administration could issue a new administrative rule to address the concerns raised by the federal judge in New Mexico. It is unclear if the administration will respond, or will wait to fight the battle at the appellate level.
By: Erin M. Hussey, Esq.
Back in 2016 the American Association of Retired Persons (“AARP”) sued the Equal Employment Opportunity Commission (“EEOC”) claiming that the EEOC’s wellness incentive rules that apply to wellness programs were coercive. Specifically, the AARP was referring to wellness programs that involve disability-related inquiries or medical examinations and those that ask plan participants to provide family medical history or genetic information.
As a result the major issue in the AARP v. EEOC case was whether an employer can sponsor that type of wellness program and apply an incentive or penalty of up to 30% of the cost of self-only coverage and still be considered a “voluntary” wellness program under the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”). The court found that the EEOC "failed to adequately explain" the 30% maximum and the EEOC has been directed to re-write their workplace wellness rules for an effective date of January 1, 2019.
The EEOC is supposed to issue proposed regulations on August 31, 2018. If the EEOC does not re-write new rules, then the old rules will be vacated instead of being replaced with new rules. Thus, there are two paths the regulators may take:
We won’t know which path to pursue, however, until August 31, 2018. In the meantime employers should review the following considerations:
*Note: This ruling does not affect wellness programs that provide incentives for programs that do not require the above-noted ADA and GINA protected information to be disclosed (i.e., programs for smoking-cessation, nutrition, weight-loss). The above-mentioned EEOC wellness rules are separate from the Health Insurance Portability and Accountability Act (“HIPAA”) and the Affordable Care Act (“ACA”) wellness rules and the above ruling has no effect on these rules.
By: Jon Jablon, Esq.
You asked whether your clients can decide to not utilize their wrap network for a given claim, right? Oh, you didn’t? Well, why didn’t you?
We get it. Wrap networks are very simple to use and they guarantee against balance-billing. Those are great things. But despite the ease of use, do wrap networks offer the best bang for your buck?
Research shows that the average wrap network discount ranges from 18% to 25%. There may be outliers, though; if you’ve got a 65% discount, it’s often worth it to take it with no questions asked. But if you’ve got a 20% discount on a very large claim, it will probably be beneficial to explore other options. In many cases, individualized negotiations can yield far better results than wrap discounts, since wrap discounts are pre-determined and predicated on arbitrary percentages off arbitrary billed charges. When negotiating a claim on an individual basis, though, there’s an opportunity to use benchmarks (such as Medicare), examine the specifics of the bill, and actually discuss the claim and its merits with a human being. More often than not, individualized negotiations yield better savings than pre-negotiated wrap discounts.
In a recent poll of many of The Phia Group’s clients, 75% of those who responded indicated that they weren’t aware that they were able to forego utilization of the wrap network on a case-by-case basis. It’ll depend on the contract, but in just about every case, a health plan does have that right.
Plus, if a negotiation outside the wrap isn’t successful, the health plan will still have the wrap discount to fall back on!
If you need a contract reviewed, The Phia Group can do just that – and if a benefit plan incurs a large claim that should have a better rate than what the wrap will offer, let us know as soon as possible, because we can help.
By Patrick Ouellette, Esq.
The Federal Drug Administration (FDA) recently issued the nation's first approval for medicine derived from marijuana-based compounds, cannabidiol (CBD). Given this news, the next reasonable question for the self-funded industry is how it will impact health plans’ coverage and exclusions of medicinal marijuana.
This has been and continues to be an unsettled area of law between federal and state statutes. Up until now, medicinal marijuana was not approved by the FDA and thus typically would either not fall under a plan document’s definition of a drug or otherwise be excluded. Traditionally, a plan offering CBD as a benefit had, on the surface, appeared to violate federal law because marijuana has been illegal at the federal level. Simultaneously, CBD was considered legal in many states, creating a conflict between federal and state law.
The FDA approval will likely not affect plans that want to continue to exclude all types of marijuana; if such plans have not already, they would only need to broaden their plan document exclusion language a bit to account for medical marijuana. Plans that do want to cover medical marijuana, however, may now see less risk in doing so now that a CBD product has been approved by the FDA. From a statutory perspective, these plans have the authority to dictate whether or not they want to cover FDA-approved CBD. Importantly, despite the fact that these plans will now have more flexibility to cover CBD, there are still administrative consequences to consider.
You can reach out to the Phia Group Consulting team here to discuss the effect of the FDA’s approval on your plans or clients.
By: Jen McCormick, Esq.
Massachusetts Governor Charlie Baker signed landmark legislation on June 28, 2019. The legislation, referred to as the “Grand Bargain” Act will increase the minimum wage and create a generous paid leave program. Massachusetts employers should begin to prepare for the impact of this new paid leave program.
The new paid leave program will be available for eligible individuals as of January 1, 2021. All private Massachusetts employers will need to provide eligible individuals with paid family and medical leave, funded via the payroll tax (discussed below). In general, eligible individuals include (a) current (full-time) employees of a Massachusetts employer; (b) self-employed individuals who elected coverage under the law and reported self-employment earnings; and (c) certain former employees. Generally, these individuals will be entitled to 12 weeks of paid family leave to (a) provide care for a family member due to the family member’s serious health condition; (b) bond with their child during the first 12 months after the child’s birth or during the first 12 months after placement of the child for adoption or foster care; or (c) attend to obligations arising because a family member is on active duty or been notified of an impending call to active duty in the United States armed forces. Upon return from paid leave, the individuals must be restored to their equivalent position with the same status, pay, benefits and seniority.
Pursuant to the regulations, a new state agency (the Department of Family and Medical Leave) was created to assist in the administration of this new program. This agency is required to issue proposed regulations regarding the implementation and administrative processes for this new paid leave program by March 31, 2019. The new paid leave program will be funded by a mandatory .63% payroll tax contribution (as adjusted by the agency on an annual basis), which is to be collected by the agency. Employers and employees may contribute towards the cost of the tax. Note, however, that certain small employers will be exempt.
The paid leave will be subject to a one-week waiting period during which no benefits will be paid, however, employees may (but are not required) to use other paid leave (i.e. sick or vacation time). Eligible individuals may receive up to a weekly benefit cap of $850 (as adjusted by the agency). In certain instances, paid leave taken under this program may also qualify under the Family Medical Leave Act (FMLA) or the Massachusetts Parental Leave Act. The new paid leave program is to run concurrent with those protected leaves.
Importantly, pursuant to this program employers must maintain an employee’s existing health insurance for the leave. As the qualifications for this program do not necessarily align with those under FMLA, employers will need to review their existing employee handbooks and health insurance plans to ensure this will not create a gap in coverage. In addition, the regulations note that this program is not intended to interfere with any existing employer programs that may offer greater benefits. For impacted Massachusetts employers, in addition to reviewing current handbooks and materials, this regulation may create the opportunity to expand upon current benefit offerings to ensure compliance with the new law. For example, maybe an employer will want to investigate a self-funded paid leave program.
Stay tuned as administrative regulations are expected in early 2019 to assist employers with the implementation of this new paid leave program.