• Defensive medicine is a key driver of the ever-expanding cost of U.S. healthcare
• Defensive medicine has important effects beyond cost
• Tort reform fails to reduce the practice of defensive medicine

1,440 physicians completed the latest survey. Analysis of the responses indicates physicians do not believe PPACA provides the necessary reforms to alleviate their concerns and they gave PPACA an average grade of D.

Key Findings:

• Nine out of ten physicians do not believe PPACA provides effective reform
• 38 percent believe PPACA did nothing to reform the healthcare system
• 31 percent believe PPACA did not go far enough
• 22 percent believe PPACA went too far and will impede physicians’ ability to practice medicine
• 52 percent of physician respondents believe PPACA will negatively affect their practice through    decreased reimbursements, revenues and longer work days
• 20 percent of physician respondents believe PPACA will positively affect their practice as more patients access care and the number of no-pay cases decreases
• 11 percent of physicians are making changes to their practices in response to PPACA, including EMR / HER implementation, changing careers / retiring, opting out of Medicare / Medicaid

Physicians are equally divided on whether PPACA should be repealed (52 percent in favor of repeal
vs. 48 percent).

HSA Qualified Medical Expenses: Confusion between 502 and 213

Confusion exists about what is a qualified medical expense for Health Savings Account (HSA) withdrawals.  Different government sources refer to IRS codes sections 502 and 213, as do industry sources.  Consumers want a list of qualified medical expenses yet no one, not even the government, is willing to commit in writing.

I will attempt to clarify this confusing HSA issue. The Treasury Department has released guidance for HSA implementation and use.  Treasury Notice 2004-2 was issued to clarify HSA rules and issues. Answer 26 of the guidance states “qualified medical expenses are expenses paid by the account beneficiary, his or her spouse or dependents for medical care as defined in Section 213d but only to the extent the expenses are not covered by insurance otherwise.”

This seems clear enough.  So where does the 502 language come into play? IRS Publication 969 (instructions for HSAs) says that qualified medical expenses are explained in Publication 502. I believe 213 and 502 provide essentially the same guidance to HSA beneficiaries. Internal Revenue Code 213d is the actual code section dealing with the definition of medical expenses. IRS Publication 502 is the tax filing instructions when claiming medical and dental expenses on your tax return. Publication 502 is a summary of IRC 213 and is more simply written.

Hopefully, this provides some clarification on this matter.  The aforementioned is my opinion; I cannot render tax or legal advise.  Please consult your attorney or tax advisor to review the facts and circumstances of your particular case.

The study, published by the nonpartisan Kaiser Family Foundation, said the data illustrated some of the tangible benefits that consumers and employers could expect from the embattled 2010 reform law if it survives two major legal and political election-year challenges.

Under the law, called the Patient Protection and Affordable Care Act, health insurers must spend at least 80 percentage of premium revenues on health expenses and quality improvements. The rule is intended to limit the amount the $850 billion health insurance industry devotes to marketing, administration and profits.

Kaiser, a nonprofit healthcare research group, found that 31 percent of consumers in the individual insurance market could expect to receive a total of $426 million in rebates on 2011 premiums, for an average of $127 per person.

About 20 percent of the insurance industry’s market for large employers could receive $541 million, while more than one-quarter of the small group market that serves small businesses could look forward to rebates totaling $377 million. The rebates are due by Aug. 1 and most of the money is expected to go to employers rather than consumers.

The healthcare law has proved unpopular with many voters and could be struck down by the U.S. Supreme Court by the end of June or repealed next year if Republicans gain control of the Congress and White House in the November election. If the high court overturned the law, insurers would no longer be required to comply with the rebate provision.

A main target for public dislike is a reform provision that requires most Americans to buy private health insurance by 2014 as part of a plan to extend health coverage to more than 32 million people who are uninsured.

Reform advocates insist that much of the public’s dislike for the law stems from a lack of knowledge about the advantages it offers to consumers and others.

Some of the biggest rebate payouts are expected in states, including Texas and Florida, where the reform law faces some of its stiffest opposition from Republican politicians and other conservatives.

“While the health reform law as a whole continues to divide the American public, there are tangible changes taking place that benefit consumers,” said Kaiser President Drew Altman.

“Greater regulatory scrutiny of private insurance is improving value and helping to get excess costs out of the system,” he added.

The Kaiser study is based on insurer filings to the standard-setting National Association of Insurance Commissioners and includes rebates already paid and insurer estimates of planned payments on 2011 premium revenues.

Take the rarely reported issue of  “name inflation.”  There was a time when a platinum credit card meant something.  You were someone who always paid bills on time, made a bit more money then the average consumer and had proven it over time.  It made you feel special. That you were being rewarded for your diligence. Now, even if one has bad credit he/she can qualify for a platinum credit card. The exclusivity of the platinum credit card has been devalued, but some consumers have yet to recognize this trend.  The travel industry is notorious for such hyperbole.

Many hotels no longer offer standard rooms, but instead offer deluxe rooms. How many times have you booked a superior or deluxe room at a hotel only to be disappointed upon check-in?  You walk into the hotel room and the view is of a brick wall. There is hair in the sink and the room smells like cigarette smoke. Webster’s dictionary clearly states that superior means, “above the average in excellence or of higher grade and quality.”  Inflating terms is a tool the travel industry utilizes to lure unsuspecting customers into making a purchasing decision.  The travel industry is not the only participant in this plague.

Next, let’s look at the rarely reported problem of “title inflation.” It seems as though everyone today is an expert, consultant or specialist.  When confronted with an important decision most of us tend to rely on these so called experts to help guide us through difficult processes. Sometimes we rely too heavily on people based solely upon a title. In most professions, excluding the obvious like a physician or lawyer, there is no special training required in order to be labeled as an expert or consultant. The PBM industry is notorious for this sort of title inflation.

I recently spoke with a benefit consultant from a reputable consulting company not to long ago. Our business together involved a client of hers seeking to reduce prescription drug expenses. Upon conclusion of our re-pricing analysis the results were presented and the savings substantial.  She proceeded to ask,”how am I able to determine if a PBM is fully transparent?”

When she posed this question I was both befuddled and disturbed at the same time. Her client is relatively large at almost 60,000 scripts per year and was grossly overpaying for its pharmacy benefit. They are relying on you [firm] to protect them, but you can’t even though you’re an “expert.”

Plan sponsors must make sure to have a basic understanding of pharmacy benefit management.  It takes some time, but not much.  Participate in webinars and read a blog or two for the most recent industry best practices. Then hold your PBM and its employees accountable by testing them.  If they don’t have the requisite knowledge why are you retaining them? In the healthcare industry, digging a bit deeper than all the hyperbole being offered on the surface may very well save your company quite a bit of money and time.

That’s why many insurance companies now provide treatment cost estimators which provide an easy way to see how much certain procedures and services will cost before a visit to a provider. Armed with this information, employees can make cost effective choices and more informed decisions.

Knowing the costs upfront is important due to their responsibility for paying a portion of their health care costs. And it’s helpful for budgeting aspects of their health benefits and health insurance plans, such as health savings accounts and flexible spending accounts, or for seeing how quickly they may reach their deductible and coinsurance limits.

Employees will need to create a login to their insurance company plan to access these tools. Also, it is important to note that some carriers’ sites display rates billed by the providers and others display the contracted, negotiated rates for in-network providers.

As of this posting, Medical Mutual, Aetna, and United HealthCare use the negotiated rates in their illustrations. However, Anthem uses only the rates billed by the provider, which may not provide an accurate picture to employees about their actual costs.

PPACA: What Will the Supreme Court Decide?

In late March the Supreme Court took the somewhat unusual step of setting aside three days on its calendar just to hear the various aspects of the Constitutional challenge to the Patient Protection And Affordable Care Act. The schedule affirms the universal expectation that the court will issue a ruling on the healthcare law in June, at the height of the 2012 campaign. The Supreme Court sessions began with one hour of arguments on whether it can reach a decision on the reform law before 2014.

There is a possibility that a separate federal law will prevent the courts from ruling until the law’s individual mandate has taken effect. The justices then heard two hours of arguments on the core question of whether the mandate is unconstitutional. And, finally, the court heard two and half hours of arguments on two issues: how much, if any, of the law’s other provisions can be upheld if the mandate is unconstitutional, and whether the health law’s Medicaid expansion is constitutional. There hasn’t been another case in recent memory that’s been argued on this kind of schedule. It no doubt reflects the Court’s own recognition of the complexity and importance of the issues involved.

SBC: Summary of Benefits and Coverage

The Departments of Health and Human Services, Labor, and Treasury, have issued the final regulations for the Summary of Benefits and Coverage. To help consumers better understand and compare health plans, insurers and group health plans are required to provide a new, uniform way to show benefits and define health care industry terms. The effective date for providing the SBC begins on September 23, 2012. Of course, the Supreme Court decision could affect this requirement.

The Signed Waiver: Important Protection

Most employers have some people in their workforce that do not need or want benefits for various reasons. Much of the time it is because they are covered by their spouse’s health insurance plan; although, other reasons do exist.

If your company has employees that are eligible to participate in the health insurance plan but have chosen not to for any reason, we suggest that you have them sign a “waiver of participation” form. This form is generally provided by your insurance carrier and normally is required to be completed by non-participating employees.

The signed waiver is your only protection against allegations that you did not offer coverage to an employee. The question of whether or not you allowed the employee to participate can easily be proven if you have a waiver that has been signed by the employee. Of course, this is not an allegation that comes up often. When it does, it is usually because there are outstanding claims and no insurance to cover them. This is a liability that most employers are not interested in self-insuring. A properly signed waiver is the best protection against this happening to your company.

From Wikipedia, “A true duopoly (from Greek duo δύο (two) + polein πωλεῖν (to sell)) is a specific type of oligopoly where only two producers exist in one market. In reality, this definition is generally used where only two firms have dominant control over a market. In the field of industrial organization, it is the most commonly studied form of oligopoly due to its simplicity.”

The merger of ESI and Medco essentially creates a duopoly.  Combined with CVS/Caremark, the nation’s second largest PBM, the two companies account for 73% of all prescriptions dispensed in the USA. Pharmaceutical manufacturers eager to place expensive brand prescription medications onto PBM formularies will experience more pressure from ESI to increase rebates and lower prices.  

All full-time and part-time employees are counted when determining if an employer had at least twenty employees in the previous calendar year. Part-time employees are counted as fractions of full-time employees based on the number of hours worked by full-time employees in that business. For example, if a full-time employee normally works a 6-hour day, then two part-time employees working three hours a day equal one full-time employee. Additional guidance and rules apply.

— Claim Problems —

Insurance carrier claim processors all too often look for reasons to deny a claim. At TransparentRx the mindset is different. We look for ways to get claims paid; thereby, satisfying your employees with the outcome. We don’t win every dispute, but we are successful much of the time. We encourage you or your employees to contact your broker if you’re experiencing claim difficulties.

— Dropping Coverage in Anticipation of Divorce —

Q: If an employee drops coverage on his spouse during open enrollment and the reason he is dropping her is in anticipation of a divorce, what are the requirements of the plan offering her COBRA coverage? Are there employer obligations regarding dropping the spouse’s coverage?

A: Yes. If coverage is reduced or eliminated in anticipation of a COBRA qualifying event, and the individual whose coverage was previously terminated or reduced is considered eligible for COBRA at least as of the qualifying event, the spouse must be offered the coverage, effective at least from the date of the qualifying event, which in this case is the divorce.

The final COBRA rules note that if an employee cancels a spouse’s coverage in anticipation of divorce or legal separation, “Upon receiving notice of divorce or legal separation, a plan is required to make COBRA continuation coverage available, effective on the date of the divorce or legal separation (but not for any period before the date of the divorce or legal separation).

— Small Business Health Care Tax Credits —

TransparentRx thinks it is important for employers to study and understand this section of the code, since some planning opportunities exist that could help them qualify for the maximum credit available. The availability of the Small Employer Tax Credit may encourage some employers to proceed with additional layoffs or terminations and to halt any plans to add employees in order to maximize their tax credit.

Below is a link to the IRS Website regarding the Small Business Tax Credit:
http://www.irs.gov/newsroom/article/0,,id=220839,00.html

In most RFP processes conducted by brokers or HR generalist consultants, they simply send out the request, get the top three bids and ask you, the payor, to select the vendor with the lowest price points.  The big problem here is that in most cases the price points for which your decision is based are often perceived and not real.  In fact the prices are often trivial!  As a payor your questions should be…

There are thousands of insurance sales people in this country. All can sell health insurance products and services to your firm. With that number of “suppliers” to choose from, how do you select the best organization to which you will entrust your employee benefits?

Be assured, TransparentRx, LLC is committed to customer service for our clients and the employees of our clients. Competitors have said, “When it comes to service, we are just like TransparentRx.” We are proud of the comparison but encourage you to dig a little deeper.

How should you evaluate the service attitude of one insurance agency vs. another? Open-ended questions are one of the best ways to get an in-depth look at someone’s service attitude. Some questions you might ask:

• What is the best way for my employee to resolve a claim problem?

• Are employees encouraged to call the agency for personal assistance or to call the insurance company themselves?

• What is the “problem resolution process” in your agency?

• Tell me about your staff.

• One person can only do so much; depth of staff is critical to an agency’s “service attitude”. What is your “commitment to service”?

• Is it written, verbal, or off the cuff? A written Commitment to Clients is one benchmark that an agency takes service seriously.

• Can I have a copy of your mission statement?

• Does the agency mission statement talk about growth and new sales or… focus on an attitude of service?

• What is your hiring process for service personnel?

• How do they uncover the “service attitude” of prospective employees… interviews, personality testing, references, or has it not been thought out?

• What do I do if I have a question about COBRA?

Insurers are able to enforce contractual provisions and enforcement could include cancellation of coverage. Is it possible that insurers have begun an effort to become more profitable by cancelling high risk groups that do not abide by all of the agreed upon contractual language? Two popular insurance companies have recently begun performing “eligibility audits” in an effort to determine if contract terms are being honored by employers. It may be a coincidence that the groups chosen for audit were groups known to have high claims and who were unprofitable for the insurer.

One insurance company sent a letter to the employer asking for a great deal of confidential payroll information. Normally the broker would be copied on such a communication; however, this was not the case in this instance. The letter stated that coverage would be cancelled if the requested information wasn’t received by a specific date. The business owner intended to provide the requested information but misplaced the letter by mistake. Several days after the deadline, a cancellation letter was received from the insurer. There was no follow up letter or second request sent. Health insurance coverage was cancelled for 23 employees and families, many of whom have serious medical conditions. While this may be an isolated incident, it may also be the start of a new tactic insurers are using to deal with some of the more difficult regulations they face. Time will tell.

The 51-500 employee market is somewhat different in that there are no rate caps to which carriers must abide. There is no need for a carrier to cancel a contract like in the smaller case market. Carriers simply raise rates to the breaking point for an employer. The employer will change carriers or dramatically modify benefits. Either way, the carriers profitability problem gets resolved.

The lesson to be learned is that informational requests by your insurer must be taken seriously and acted upon promptly in order to protect you and your employees from a similar outcome. Act on the request immediately by bringing your broker/consultant into the loop right away. They’ll help you navigate through in the “world of health insurance.”

Does your company provide insured short and long-term disability benefits? Have you updated the insurance company on the earnings of your employees recently? Do you increase the maximum benefits periodically to provide adequate coverage for your higher paid employees?

In the rush to get products out the door and to pay the bills, reporting salary increases to your carrier may not be a very high priority. Reporting salary increases when they occur or at least annually assures that maximum benefits will be paid to a disabled employee. This will also eliminate retroactive premium requests from the carrier.

The value of rigorous and regular eligibility audits has continued to prove itself to TransparentRx throughout the years. An eligibility audit is simply verifying that all employees and dependents associated with your company are enrolled or not enrolled appropriately in your benefit plans.

The audit can save money now and it can reduce liability for an employer. Saving money now refers to premium dollars being spent on dependents that should not be covered on your plan. The dependent may be ineligible according to the terms of your contract or the employee may no longer desire coverage for the dependent. The audit may also uncover situations where an employee is not paying the correct contributions for coverage elected. Insurance carriers are very strict about refunding premiums for employees or dependents that were enrolled in error, yet a mistake can result in thousands of dollars in overpaid premiums.

There is a great deal of risk shifted to an employer when non-eligible individuals are on the health insurance plan. It is a common belief that if an employer is paying the premium for someone, they are covered for medical expenses up to the policy limits. This is not the case. Individuals are covered if they meet the eligibility requirements of the plan. Frequently, small claims never get challenged. Inappropriate enrollment is most often discovered when there is large claims to be paid. In that case, the insurer can retroactively terminate someone and not be held responsible for the claims. If this happens, fingers most often point to the offending employer for payment of the claim.

The solution is a regular enrollment audit that compares an employer’s desired coverage with the actual enrollment with consideration for insurance company eligibility rules. Twice yearly is not too often and the process gets easier each time it is done. Of course the audit should look at payroll records to be certain the correct deductions are being charged.

Average Wholesale Price (AWP) – A published suggested wholesale price for a drug, based on the average cost of the drug to the pharmacy. AWP is often used by pharmacies to price prescription drugs.

Benefit Administration – The administration of drug benefit designs. It includes setting up and maintaining the drug coverage and exclusions, setting limits on drug coverages, and defining member cost sharing requirements.

Capitated Contract – A very rare contract among PBMs. It is used when a PBM agrees to assume financial risk for a client’s drug spending. Capitation is a set dollar amount, established by analysis of pharmacy claims data, used to cover the prescription costs for a member, usually set at a per member per month rate (PMPM).

Claims Adjudication – The online processing of a prescription drug claim. Most claims are submitted electronically at the point of service (the retail or mail pharmacy).

Client – A MCO, employer, or insurer that contracts with a PBM to administer their drug benefits and cost control programs.

Co-pay – A fixed dollar amount paid for every prescription.

Co-insurance – The fixed percentage members pay of the cost of each prescription.

Deductible – A specific annual dollar amount that a member must pay out-of-pocket for prescription drugs before the drug benefit program begins.

Disease Management Programs – Programs developed by PBMs to identify and categorize patients (especially those with chronic conditions) and to direct these patients towards a specific treatment protocol.

Fee-for-Services Contract – The most common pricing arrangement PBMs have with their clients. Under the contract, PBMs are paid for the administrative services they provide, and they do not assume the risk for the cost of the drugs dispensed.

Formulary – An approved list of branded (and generic) drugs developed by the PBM, or the client.

• Open Formulary – A list of recommended drugs. Under this structure all drugs are reimbursed irrespective of formulary status. However, a client’s plan design may exclude certain drugs (OTC, cosmetic, and lifestyle drugs).

• Incented Formulary – An incented formulary applies differential co-pays or other financial incentives to influence patients to use, pharmacists to dispense, and physicians to write formulary products.

• Closed Formulary – A closed formulary limits reimbursement to those drugs listed on the formulary. Non-formulary drugs are reimbursed if the drugs are determined to be medically necessary, and the member has received prior authorization.

Health Care Financing Administration (HCFA) – the federal agency that administers Medicare, Medicaid, and the State Children’s Health Insurance Program (SCHIP).

Ingredient Cost – The cost to the pharmacy for dispensed drugs (AWP – discount %).

Click here to register for: “How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels.”

Mail Pharmacy – Mail pharmacies dispense a 90-day supply of drugs through the mail; typically used for chronic conditions. Most pharmacy benefit plans offer a mail pharmacy service as a way to promote cost savings and improve access.

Managed Care Organization (MCOs) – A broad term encompassing a variety of healthcare delivery systems utilizing group practice and providing an alternative to fee-for-service health plans. The primary goal of a MCO is to create incentives to use a prepaid and organized healthcare system that serves a defined population.

Manufacturer – A company that manufacturers branded and/or generic pharmaceuticals.

Maximum Allowable Cost (MAC) – The price basis for generic drugs which is typically 50–60% below AWP. PBMs can either set the MAC prices themselves, or use the MAC prices set by HCFA for Medicaid beneficiaries.

Member – A covered individual within a health plan.

PEPM – Per employee per month.

PMPM – Per member per month; in an employer plan includes employees and their covered dependents.

Pharmacy Benefit Manager/Management (PBM) – A company providing administrative and clinical services through a complex system that includes retail pharmacies, manufacturers, clients, physicians, and members. These companies administer drug benefits and drug cost control programs for their clients, and secure substantial discounts from retail pharmacies and drug manufacturers. PBMs establish and maintain large pharmacy networks with chain and independent pharmacies. Also, PBMs contract with manufacturers of branded products to receive rebates and administrative fees.

Pharmacy Network – Specifies which pharmacies are approved for members, and includes retail, mail, and in some cases specialty pharmacies.

Prior Authorization – A prior approval process that allows prescription drugs to be dispensed to members only when specific conditions have been met.

Shared Savings Contract – A contract between a PBM and a client that provides incentives for both sides to collaborate and run the pharmacy benefit effectively and to share in the overall cost savings.

Therapeutic Substitution Programs – Typically operated in mail pharmacies to encourage physicians and patients to switch from the drug prescribed to lower cost, comparable drugs. Substitution requires physician and typically member permission.

Rebates – Paid by manufacturers to PBMs for the sale of branded drugs to PBM members.

Usual and Customary (U&C) – The price pharmacies charge to cash paying customers for prescription drugs.

Utilization Management Programs – Programs designed to lower drug costs and utilization and to encourage the use of generics or preferred products. These programs include services such as prior authorization, drug utilization review (concurrent and retrospective), academic detailing programs, and patient education.

Click here to register for: “How To Slash the Cost of Your PBM Service, up to 50%, Without Changing Providers or Employee Benefit Levels.”