In regulations and other pronouncements issued toward the end of 2012, the government has provided further details on new taxes and fees introduced by the Patient Protection and Affordable Care Act.  Health plan sponsors will be particularly interested in the amounts that they will be assessed to fund various PPACA programs. This guidance includes: Regulations, a fact sheet, and a technical fact sheet on Premium Stabilization Programs for the individual and small group health insurance markets Regulations on Funding for the Patient-Centered Outcomes Research Institute (PCORI) Regulations and FAQs on the Additional Medicare Tax on high-income individuals The assessments to fund these programs will affect insurers, plan sponsors, and employees. Premium Stabilization Programs Beginning in 2014, PPACA requires insurers in the individual health insurance market to offer coverage regardless of an individual's health status or pre-existing conditions, making coverage available to individuals who currently have none. This looming influx of newly insured individuals creates uncertainty for the risks that insurers will assume. To reduce that uncertainty and its possible effect on health insurance premiums, PPACA establishes three specific programs. Building on guidance that it issued in 2011, the Department of Health and Human Services has issued proposed regulations governing these programs. Risk Adjustment Program This permanent program provides increased payments to health insurers that enroll higher-risk individuals. The program applies state-by-state to health plans in both the individual and small group markets, with exceptions for plans that are grandfathered under ACA and certain types of benefit arrangements. The new regulations establish a process for approving a state risk-adjustment program and describe rules that HHS will follow to operate a program in the event that a state does not obtain federal approval or chooses not to operate its own program. The program is funded through a transfer of amounts from plans that enroll lower-risk individuals to plans with higher-risk enrollees. Risk Corridors Program This temporary, federally administered program limits the extent of an insurer's gains and losses from 2014 through 2016. The program applies to qualified health plans offered through an exchange in the individual and small group markets. A cost target is set for each plan, and an acceptable risk corridor is established around that target. Plans with unexpectedly low costs (below the risk corridor) will pay amounts to HHS. Plans with unexpectedly high costs (above the corridor) will receive funds from HHS. The new regulations make adjustments to prior guidance on the program, such as accounting for certain taxes and profits in establishing the corridors. Transitional Reinsurance Program This temporary reinsurance program applies to commercial health insurance in the individual market. The program is funded through required contributions by insurers and self-funded group health plans. It will be in effect from 2014 through 2016. The new regulations establish that HHS will operate the program, paying reinsurance amounts from the program and collecting contributions from insurers and self-funded plans to fund those reimbursements. Under current guidance, it is expected that insurers and self-funded group health plans will be required to contribute $63 per covered life for 2014. That contribution may…

Affordable Care Organizations or ACOs are part of a larger effort by the federal government to move gradually away from the more expensive fee-for-service model, in which providers are rewarded for each additional treatment.  With ACOs, the goal is to replace the FFS model with an integrated system that uses evidence-based standards to coordinate care to avoid unnecessary expenses such as duplicated diagnostics and hospital readmission. ACOs require that providers and insurers share both financial and quality data - something that each side has been highly reluctant to do in the past.  The reward will be that all will share in savings generated by the system.  Personally, I'm not sure there will be any savings to share or if this is the primary point in the first place (see my earlier post on Defragmentation).  While many healthcare theorists believe ACOs may be a major way for the nation to reduce its healthcare costs, it is not a simple fix. In today's competitive environment it is impractical, at best, to get hospitals, doctors and insurers to work together.  Unless of course these entities decide to become vertically integrated, which we're already seeing.  Behemoth hospital networks around the country have been purchasing physician practices then hiring the staff as a prelude to setting up ACOs, and insurers, too, are starting to get involved. Earlier this month Aetna announced a new partnership with Baycare in Tampa, Florida.  Another example, Florida Blue has set up a bundled payment system with the Mayo Clinic -- paying for an episode of care rather than for each individual service.  More widespread is its move that has put more than 700,000 patients in medical homes -- generally with a primary care physician coordinating their care, offering extended hour and other benefits -- so that basic care is easily available, reducing the need for expensive emergency room trips. Unlike the old HMO model, the new medical home involves the insurer paying PCPs more so they spend more time with patients.  The limited data available thus far offers encouraging results. Physicians make more money, but overall costs go down.  The idea is too invest more money upfront to get better outcomes in the long-run.  Medical homes and ACOs are now separate concepts, but they're likely to dovetail in the near future.  Both concepts are emphasized in the Affordable Care Act. The healthcare cost trend was unsustainable...now employers must weigh the impact of future trends and plan accordingly.

Believe it or not, like it or not, we are 2.5 years into the largest social and financial transition of our lifetimes. Of course, this refers to Healthcare Reform.  HCR will affect every person in the USA. Some rejoice and others lament but its implementation moves forward.  Not all is going according to plan; there have been many bumps in the road. Implementation has been trying but not traumatic up to now; however, the year 2014 will be a test for all. In 2014, two big changes happen. First, community rating begins; carriers will no longer underwrite policies as they do now.  There will be little or no rate differentiation for the risk associated with your group compared to others.  In 2014, industry, sex and health conditions will have nothing to do with the specific rates charged. There will be limited consideration given to age, smoking status, and geography.  If your group is historically a low risk, we expect your cost to increase, if high risk, you may get a breather from rate increases but we don't expect them to decrease.  It is expected that community rating will place significant upward pressure on costs for all in the future.  The second and most significant change will be the introduction of healthcare exchanges or buying pools.  The path of implementation is not clear. EXCHANGES ARE A STUMBLING BLOCK The availability of healthcare exchanges will mean the biggest changes yet.  Businesses will have decisions to make.  Do they stick with the old tried and true group model of providing benefits to their employees or do they drop existing health plans, give employees some cash, and send them to the health care exchange to buy coverage?  Will they do some combination of the two? For some, the decision may be easy, but for most it will be complicated.  Lower paid employees will qualify for huge federal tax subsidies if they buy coverage from the type of exchange defined by the law. Higher paid employees may see their costs go up considerably.  This is especially true since benefits will be paid with after tax money rather than pre-tax dollars. Some employees may get $1000's in subsidy and others may pay $1000's in tax because of reform.  This is all very complicated. The decisions made will affect every employee in your company.  Some may like the new way and some may be devastated.  Calculators available online allows you to check your cost: http://laborcenter.berkeley.edu/healthpolicy/calculator/. Unfortunately, the results are hypothetical.  The actual implementation of exchanges is up in the air. The law places this responsibility in the hands of the state governments. Many states have pushed back and decided not to implement a healthcare exchange.  When states choose not to participate, the federal government is supposed to provide that state’s exchange.  A federal exchange isn't close to being developed. More importantly, the huge federal subsidies are only available if employees buy coverage from state exchanges.  Federal exchanges do not qualify.  Unless this changes, it will be difficult for businesses that had planned to off load their benefit plan to do so. Businesses may find the cost for employees is just too great without those…

A good PBM will successfully deliver on your expectations…which will essentially be minimal disruption for your employees, greater overall savings and, ultimately, a shared vision. The fear of the unknown during a PBM implementation is unnecessary and can be avoided. How? By asking the right questions. 1. Are all network pricing and pharmaceutical manufacturer rebate and financial benefit improvements immediately passed through to us over the contract term? 2. Is the PMPM (per member per month) administrative fee your only revenue stream? 3. How will our implementation begin? 4. Who will be on our team and will we be provided with an Executive Sponsor who can escalate issues? 5. Do you limit the percentage of time committed to servicing your clients? 6. Will you provide some key references and testimonials? 7. Are you URAC-accredited? If so, what does this mean to me, as a client? 8. Based on our claims data, what types of clinical programs do you recommend at the outset? 9. Which clinical programs and initiatives do you recommend in the short and long-term? Tell us how we can collaborate to create a long-term strategy. The bottom line is that you must choose a PBM that validates the big picture up-front, shares your pharmacy benefit philosophy, exudes the passion and commitment required to do the job, and presents a plan for dealing with potential issues and the future.

In an attempt to rein in its employees' fast-rising prescription drug costs, some employers require its workers to fill prescriptions for maintenance medications (typically chronic conditions like type 2 diabetes) through mail-order pharmacies. Some simple comparison shopping shows that despite formidable bargaining clout, many employers are paying far higher prices for some drugs than ordinary individuals can get walking into retail pharmacies.  Consider the price for Ranitidine 75 mg, the generic form of the popular anti-ulcer medication Zantac. One of my clients paid Express Scripts $36.22 for 90 pills mailed to a worker, who pays an additional $5 co-pay, bringing the total cost to $41.22, according to a re-pricing we completed.  If this same employee had simply walked into their local pharmacy and bought the same Ranitidine prescription it would've cost as little as $10.00 for the same 90 pills.  This is a 400% difference in cost! That this employer pays ESI higher prices for many generic drugs than regular pharmacies charge customers without insurance illustrates the complexities, and potential pitfalls, of prescription drug coverage. It's also a rare glimpse into how such plans work. Traditional pharmacy benefit managers, such as ESI and CVS/Caremark, administer the drug benefits of large employers, acting as the middlemen between the employers and the pharmacies. Such PBMs create large networks of participating pharmacies and use their size to drive down prescription drug prices. Source:  managedcaremag.com Some, including ESI and CVS/Caremark, also own their own mail-order pharmacies, and guilt employers to move more of their workers' prescriptions into the mail business.  Traditional PBMs promise to realize savings for their corporate customers by keeping the overall cost of prescription medications down.  But, they also preserve large profit margins for themselves, as the above prices clearly indicate. Some companies say they are satisfied with the overall savings Medco is providing. But others simply aren't aware of the vast price discrepancies on generic drugs.  How can a company say it is satisfied with the overall savings when they don't even know the actual costs? Too many companies are spending tens of thousands of dollars on products for which they were never given a price list!  These assumed savings are based upon colorful PowerPoint presentations, delivered by PBM account managers, designed to tell you exactly what you want to hear. Because generic drugs are so cheap to begin with, PBMs and retail pharmacies alike typically make big margins on generic drugs, which account for about half of prescriptions filled in the U.S.  That's why pharmacies have a big incentive to switch prescriptions for branded drugs to their generic versions.  Aggressively switching of branded prescriptions to generics does help reduce employers' drug costs. Employers also believe they are getting better prices on branded drugs through PBMs, which is why they are willing to pay bigger markups on generic medications. Mail-order pharmacies generally fill a three-month's supply of medication at once. Traditional PBMs, like ESI and CVS/Caremark, benefit greatly from its mail-order pricing system.  When a patient fills a prescription through the mail pharmacy, the full profit belongs to the PBM, rather than having to…

Effective January 1, 2014, the community rating provision of Healthcare Reform goes into effect for small employers. Experience tells us that costs will increase. Lets take a look at what it may mean to you in dollars and cents. Most have heard that the new Healthcare Reform bill was projected to cost $850 billion. Many of us have heard the revised estimate of $1.2 trillion. Not many of us can explain $1.2 trillion in layman’s terms. The government hasn’t shared specifics about the cost in any meaningful way. So for many, the “cost of healthcare reform” becomes a point of conversation without much reality connected to it. We know the reform will level the playing field in terms of cost. Generally, rating will be based on broad geographical areas with little ability to modify the rates to account for differences in risk. This rating strategy is called “community rating”. Let’s compare community rating to the way groups are currently rated in Ohio (our primary warehouse location). There is general scuttlebutt that the Blue Cross plans will fare the best and gain the most in the healthcare reform implementations. It may or may not be a coincidence that Blue Cross of Michigan also “community rates” their coverage. In Ohio, many groups fall under a formula of rating that takes employee and dependent health into the formula to calculate rates for insurance coverage. In Ohio there are 36 rating tiers. Tier 1 is reserved for the healthiest risk. Tier 36 is the maximum rate applied to the worst risk. Let’s compare the same company as if it were located in Toledo, Ohio, on Alexis Road (1/2 mile south of the Ohio/Michigan border) and then re-rate the same group, except assume the company is located in Lambertville, Michigan, on Smith Road (1/2 mile north of the Ohio/Michigan border). In Ohio they could have a range of rates, from Tier 1 to Tier 36, depending on the health risks present. In Michigan … just one mile north, all companies would pay the same rate because of the community rating system. Here is a rate comparison for a $3000 deductible HSA plan:                                                              Ohio Tiered Rate                               Michigan                                                Best Risk                      Worst Risk           Community Rating Employee Only: $245 $343 $303 Employee/Spouse: $486 $681 $727 Employee/Child: $339 $474 $727 Employee/Children: $485 $678 $878 Family/Child: $580 $812 $878 Family/Children: $726 $1017 $878 Calculate the total premiums of your group to see the cost comparison between tiered and community rating. Most find that community rating is about 50% more expensive than the Tier 1 (best risk) rate and almost 7% higher than the Tier 36 (worst risk) rates in Ohio. Of course, the employer’s dependent status will vary by employer. It is difficult to understand how costs will be less under the new healthcare reform program. This comparison is a casual look at what employers may expect in term of costs. Poor procedures cost thousands… The price…

As a valued reader of the Payors Guide to Pharmacy Benefit Managers, we are happy to provide you with this week's newsletter - It's News to me!  We are focused on your success and thankful for the partnership to provide helpful cost-saving solutions and information.  Have a great day! Discount Prescription Drug Coupons No BargainWith the popularity of daily-deal sites such as Groupon, it probably shouldn't be surprising another industry is capitalizing on the concept.  As the cost of prescription drugs soars, more patients are turning to online coupons, drug company discount cards and promotional offers in magazines to save money. Read more (USA Today) Top 100 Drug Store Markets: Dueling formatsIn the battle for market share among chain drug retailers, store formats are pre-empting numbers.  Rather than seeking to dominate metropolitan areas by saturating them with new stores, drug chains are seeking to draw shoppers with distinctive retail concepts.  Read more (Chain Drug Review) Healthcare Collaboration Strategies Gaining GroundWith looming budget, pressures and payment penalties, one would think most executives of high-performing organizations wouldn't eagerly share their “secret sauce” for better outcomes and lower costs, lest it give competitors an edge.  Read more (Health Leaders) Medication Bar-Coding Reduces Errors, Ushers Big SavingsA newly implemented medication bar-coding system at the Michigan-based Beaumont Health System helped the organization prevent some 23,500 possible drug errors within a six-month time period, officials announced Friday.  Read more (Healthcare IT News) Emerging Trends Shaping the Future of Medication AdherenceBased on recent patient and prescriber research and extensive experience in implementing comprehensive adherence solutions, the trends identified suggest that effective solutions must address the underlying barriers to adherence with integrated solutions designed to modify behavior.  Read more (Journal of Patient Compliance)

Large employers and insurers such as Blue Cross & Blue Shield, United Healthcare and Aetna are offering telemedicine as a way to lower overall healthcare costs.  Specifically, physician visits are cheaper thus reducing the total costs for new and refill prescriptions, if applicable.  Supporters also see it as a way to fight the impending doctor shortage.  Some, however, are concerned about the trend. Opponents say getting medical advice over a computer or telephone is appropriate only when patients already know their doctor.  Others are concerned that lower co-payments, and other incentives, will spur consumers to see doctors or nurses online just too save money.  The argument is that people will choose the more economical option, even if it is not the option they want.  Employers, however, will reap the most benefit. Employees appreciate the low cost, convenience and efficiency.  Online consultations can run as low as $10 compared to $100 for a face-to-face visit.  The global telemedicine business is projected to almost triple to $27 billion in 2016, according to BBC Research.  Virtual care is a form of communication whose time has come and can be instrumental in lowering costs. One major obstacle remains.  Many state medical boards make it difficult for doctors to practice telemedicine, especially interstate care, by requiring a prior doctor-patient relationship, sometimes involving a prior medical exam.  The situation in these states is getting worse, not better.  In 2010, the Texas Medical Board effectively created a rule which blocks a physician from treating new patients via telemedicine. The only exception is if the patient has been referred by another physician who evaluated him or her in person.  The Texas Medical Board insists on licensing doctors in their state so that if something goes bad, a patient is injured, they have means to help.  From my point of view, this is a fair argument provided it is true.  Some medical boards are reducing restrictions, in mostly rural states, such as Nevada and New Mexico easing the licensing process. The most common problems treated online are routine sinus and bladder infections, pinkeye, upper respiratory illness and minor skin rashes.  The patient completes a questionnaire (takes about 15 minutes) then connects with a physician via webcam, Internet connection and microphone.  The physician then sends an electronic prescription to the pharmacy that can be picked up in minutes. NowClinic and Virtuwell are just two companies that currently offer this type of service to employers. Telemedicine is not intended to replace the intimacy of a patient-doctor relationship instead the intent is to supplement it through efficiency and lower costs.  Every self-insured employer should be taking a serious look into telemedicine for both its employees and bottom line.

Of all the deceptive practices employed by health insurers, affecting both patients and plan sponsors, out-of-network coverage or lack there of may stand high above the rest.  In 2009, health insurers were accused of manipulating data which ultimately resulted in overpayments [patient] amounting too several hundred million dollars. The insurers settled and agreed to set up an objective database of doctors' fees that patients and plan sponsors could rely upon.  However, the settlement didn't require insurers to use it.  Instead of using the new $95 million database, all of which was paid for by insurers, they pulled the classic bait and switch.  Insurers began determining out-of-network reimbursement rates based upon Medicare rates. In most instances, a policy mimicking Medicare rates reduces reimbursement more drastically than the initial rates regulators were trying to increase.  Doctors receive lower payments for services rendered and patients have significantly higher out-of-pockets costs.  I don't defend insurers' exorbitantly low out-of-network rates, but can you can see the hypocrisy from regulators in so far as Obamacare? Today, most health plans have one level of benefits for care rendered by an in-network provider and a lower benefit for services from an out-of-network provider.  Insurance carriers encourage use of in-network providers because doing so helps control claim costs. In-network providers have contracted with the insurance companies to provide medical care at reduced prices.  In exchange, the insurance companies direct patients to the in-network providers.  The arrangement increases business for the providers and decreases claims cost for the insurance company. Treatment out-of-network is a different story.  Out-of-network providers have no agreement or incentive to reduce prices and control cost.  At times, however, they may provide a level of care or service that a particular patient needs or wants.  Patients seeking care out-of-network need to be aware of the way their benefits will be calculated.  There is more to it than the out-of-network deductible and co-insurance. Insurance policies have clauses and exclusions against treatment that is not medically necessary. There are also provisions that the carrier only allows the Usual, Customary, and Reasonable (UCR) charge for a service provided.  Over the last few years, many carriers have begun to define their allowable charge or UCR limit as the amount negotiated with in-network providers.  The difference can be substantial.  For instance, if the retail price of a surgery is $4000, the discounted amount could be $2500, a $1500 discount. When his son, Ethan, was a baby, doctors said he had a rare liver disease.  The family, which was in a health maintenance organization, had to appeal three times to get approval for the out-of-network surgery that saved the boy, now 10.  So Mr. Glaser was overjoyed two years ago when his employer switched to a PPO that promised out-of-network coverage.  Including premiums and deductibles, he and his employer paid about $14, 600 a year for family coverage.  But he discovered that at 150% of Medicare rates, it still fell far short.  In the case of a $275 liver check up, for example, the balance due was $175. (NY Times 4/24/2012) Jennifer C. Jaff said she…

Express Scripts – Incumbent PBM Total Retail Retail Brand Generic RX COUNT 7,257 2,769 4,488 AWP $809,015.64 $513,092.61 $295,923.03 INGREDIENT COST $587,723.37 $429,827.37 $157,896.00 DISPENSE FEE $8,799.05 $4,065.80 $4,733.25 GROSS COST $596,522.42 $433,893.17 $162,629.25 MEMBER COPAY $50,959.29 $29,030.77 $21,928.52 PLAN COST $545,563.13 $404,862.40 $140,700.73 AVG. DISCOUNT 27.00% 16.00% 47.00% TransparentRx, LLC Total Retail Retail Brand Generic RX COUNT 7,257 2,769 4,488 AWP $809,015.64 $513,092.61 $295,923.03 INGREDIENT COST $517,006.90 $432,483.51 $84,523.38 DISPENSE FEE $17,672.50 $6,712.50 $10,960.00 GROSS COST $534,679.40 439.196.01 $95,483.38 MEMBER COPAY $50,959.29 $29,030.77 $21,928.52 PLAN COST $483,720.11 $410,165.24 $73,554.86 AVG. DISCOUNT 36.00% 16.00% 71.00% PER YEAR NOTE SPREAD SAVINGS $61,843.02 Identified spread (the difference between the PBM pharmacy contract and the PBM plan contract) typically retained by the PBM. REBATES $18,142.50 The average expected Rebate is $2.00 to $3.00 per claim. GENERIC UTILIZATION RATE 62.00% $34,000.00 Estimated savings on four targeted Generic/Therapeutic Switches. MAIL-ORDER DISPENSING RATE 25.00% $29,000.00 Estimated savings when 35% of Rx's dispensed via retail change to our mail-order program. TOTAL SAVINGS $142,985.52 - $36,461.31 PEPM* = $106,524.21 *PEPM or per employee per month fee.