What Drives the High Cost of Health Care?

Jennifer Agnello, President

The statistics are shocking. In 2017, U.S. health care spending hit $3.5 trillion, or $10,739 per person. Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year over the 2018 to 2027 period; as a result, the health share of GDP is expected to rise from 17.9 percent in 2017 to 19.4 percent by 2027.

The 2019 Kaiser Family Foundation (KFF) Employer Health Benefits Survey found that the annual family premium for employer health insurance rose 5 percent to average $20,576. On average, employees pay $6,015 toward the cost. A whopping 66 percent of those in employer health plans with high deductibles say they couldn’t pay a medical bill the size of their deductible without going into debt.

Now, let’s talk about the real problems. From all perspectives, there is no one single cause for the rise in costs, nor is there a single solution to contain them. Following are a few of the main drivers:

Pharmaceutical Costs

It’s estimated that prescription drug spending in the United States was approximately $344.5 billion in 2018. The cost has since continued to rise due to a number of factors, including population growth, an increase in number of prescriptions per person, inflation, and changes in the composition of drugs prescribed toward higher price products or price increases.

1 in 4 Americans say they take four or more prescription drugs. According to GoodRx, the average price of brand-name drugs has increased by approximately 30 percent in a nine-month time frame. The average cash price for a 30-day supply of the top 100 brand-name drugs has increased from $300 in October 2018 to more than $400 in July 2019. Specialty drugs have accounted for 41 percent of drug spending in 2018 and are projected to reach 50 percent by 2020.

In most countries, the government negotiates drug prices with drug makers, but when Congress created Medicare Part D, it specifically denied Medicare the right to use its power to negotiate drug prices. Veterans Affairs and Medicaid, which can negotiate drug prices, pay the lowest drug prices. The Congressional Budget Office found that just by giving low-income beneficiaries of Medicare Part D the same discount Medicaid recipients get, the federal government would save $116 billion over 10 years.

Aging Population

According to the World Health Organization, the projected growth of people age 65 or older, worldwide is predicted to rise from 524 million in 2010 to 1.5 billion in 2050. The Centers for Disease Control and Prevention found that Americans are living longer, but increased longevity comes with increased expense. The combined costs of the federal government’s two largest health care programs, Medicare and Medicaid, are projected to nearly double to a combined total of $1.76 trillion in 2025 from $901 billion in 2014.

By 2030 it is expected that more than 60 percent of baby boomers will manage more than one chronic condition, such as hypertension, high cholesterol, arthritis, diabetes, heart disease, cancer, dementia, and congestive heart failure. In 2014, personal health care spending per person for the 65 and older population was $19,098 in 2014, more than five times higher than spending per child ($3,749), and almost three times the spending per working-age person ($7,153).

Lifestyle and Behavioral Choices

More than 70 percent of health care costs are attributable to choices such as obesity, smoking, and alcohol abuse. According to the National Center for Health Statistics, nearly 39.8 percent of Americans are obese and one out of every six children from age 2 to 19 is overweight or obese. This number has doubled for children and quadrupled for adolescents over the past 30 years.

Lack of Adherence to Medical Advice

50 percent of patients DO NOT take medications as prescribed. The results are recurrence of symptoms, duplication of treatment, and increased hospital re-admission rates.

Inefficiencies within the System

Hospitals are estimated to waste as much as $11 billion per year on inefficiencies and unnecessary medical treatments. Preventable mistakes also account for rising costs. As many as 400,000 people die each year as the result of medical error.

Defensive Medicine

The high cost of medical malpractice insurance drives the rise in the practice of defensive medicine. A Gallup survey estimated that $650 billion annually could be attributed to defensive medicine. Duplicate tests, prescribing more drugs, and referring to more specialists provide a protection that offsets the anxiety of being sued.

Increased Utilization = Increased Cost

Increased supply, greater access to health care facilities, newly insured (previously uninsured), growing population, aging population, access to Medicare/Medicaid, new procedures and technologies, recommended increases in preventive guidelines/treatments, newer diseases and treatment categories, new drugs, and increased demand for them are all attributable to increased costs due to increased utilization.

Where is the Transparency?

The rapid adoption and growth of consumer-directed health plans makes it even more critical to have the information needed to compare costs and alternatives. Improvements in transparency will not only assist consumers, but would hold the market accountable. Without accountability for both price and quality, those who suffer the consequences are the consumers both in a general lack of understanding and financially.

We all play a significant role in containing health care costs. Are you doing your part? The expert team at Cornerstone can help you present quality, cost-saving, and creative solutions for your clients. Call us today to learn more.

 

Resources

https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/highlights.pdf

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/average-family-premiums-top-$20,000.aspx

https://www.goodrx.com/blog/brand-name-drugs-getting-more-expensive-july-monthly-report/

https://www.pharmacytimes.com/publications/issue/2016/january2016/the-aging-population-the-increasing-effects-on-health-care

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://nahu.org/media/1147/healthcarecost-driverswhitepaper.pdf

https://www.cdc.gov/nchs/data/factsheets/factsheet_nhanes.htm

https://www.hopkinsmedicine.org/news/media/releases/study_suggests_medical_errors_now_third_leading_cause_of_death_in_the_us

https://www.forbes.com/sites/realspin/2013/08/27/defensive-medicine-a-cure-worse-than-the-disease/#6a6c4e827c95

https://avalere.com/insights/us-healthcare-spending-projected-to-grow-5-5-annually-through-2027

https://www.statista.com/statistics/184914/prescription-drug-expenditures-in-the-us-since-1960/

https://www.statista.com/statistics/184914/prescription-drug-expenditures-in-the-us-since-1960/

https://www.prnewswire.com/news-releases/express-scripts-reduces-employers-annual-prescription-drug-spending-growth-rate-to-historic-low-in-2017-300594171.html

http://www.crfb.org/press-releases/fact-sheet-how-much-money-could-medicare-save-negotiating-prescription-drug-prices

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

https://nahu.org/media/1147/healthcarecost-driverswhitepaper.pdf

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3068890/

https://www.healthitoutcomes.com/doc/billion-wasted-annually-due-to-inefficient-communication-technology-0001

Quoting the Ohio Chamber MEWA for Current UHC and AllSavers Group Customers

UnitedHealthcare (UHC) is not requiring applications at this time to review the suitability of current cases for the Ohio Chamber MEWA. See the linked PDFs below on migrating current business. Your Cornerstone representative submits these quote requests on your behalf to the UHC renewal contact. Please feel free to contact us with any questions.

Ohio Chamber MEWA Fully Insured Migration Checklist

Ohio Chamber MEWA All Savers Migration Checklist

Shopper’s Guide to Navigating Discount Drug Programs

It’s no secret that the cost of pharmaceuticals in the US is soaring. According a report published by Health Affairs in January 2019, the cost of oral and injectable brand-name drugs has increased annually by 9 and 15 percent, respectively, between 2008 and 2016. The research concluded that the rising cost of generic and specialty drugs were driven mostly by new product entry while the rising costs of brand-name drugs were a result of existing drug price inflation.

In the face of soaring drug prices, consumers have found an ally in their local big box stores, such as Walgreens, Walmart, Kroger, Target, etc. Roughly 4 out of 10 Americans rely on these programs to find savings for their prescription drugs. Generic drugs are often the focus, though brand-name and specialty drugs are also offered. Recent data shows that these drugs account for 85 percent of the retail pharmacy medicines prescribed in the US.

Retailers are able to sell pharmaceuticals at such deep discounts because they buy in bulk or they use membership fees to offset costs. Some stores say they will lose money through their pharmacy programs, but expect to make up the difference through sales elsewhere in the store, especially with big ticket items like jewelry and electronics.

There are numerous differences among the programs offered by each retailer. Some pharmacies require a membership or an annual fee, while others require only a doctor’s prescription. Some memberships need to be renewed annually, while others are more open-ended. Learning the differences among each can be vital in finding the cheapest and most convenient retailer.

Generic medications included in these programs may even be cheaper than an insurance co-payment. For example, if there is a $10 co-pay, but the drug needed is offered by a pharmacy for $4, the consumer  should be eligible for the cheaper price. Consumers should also ask the pharmacist how this coordinates with Medicaid and Medicare.

Consumers who prefer to shop at their local drug store should check and see if their corner pharmacy will match the price of the big box store.

When it comes to price matching medications, it’s important to do your homework. Determine which retailers offer the best value by asking what and who is covered and whether or not there is a membership fee. The savings can be significant.

Resources

https://www.consumerreports.org/drug-prices/drug-discount-programs-can-save-you-big-on-generics/

https://www.healthaffairs.org/doi/10.1377/hlthaff.2019.00520

ACA W-2 and SBC Reporting: FSA Focus

There are a number of Healthcare Reform requirements for plans with employer contributions to a health Flexible Spending Account (FSA) including:

  • Employers must report the total cost of any group health coverage provided to employees if they prepared 250 or more W-2s for tax year 2018. The cost is not taxable. Employer contributions to health FSAs are required to be included in W-2 Box 12, Code DD.
  • Employers must distribute a Summary of Benefits and Coverage (SBC) at open enrollment for most of their group health plans. If the plans include a health FSA as non-excepted benefits, the requirement to submit an additional SBC may be met by referring to the health FSA benefit in the SBC where applicable. There are some conditions  that define a Health FSA as an excepted benefit including:
    • You offer other group health coverage and
    • You do not offer employer contributions greater than $500 to any employee that is not a dollar for dollar match.

If the conditions above are not met, your plan is considered a non-excepted Health FSA plan, which is subject to the SBC requirement.

Click here to learn more about W-2 reporting requirements from the IRS.

Click here for information from CMS about SBC requirements.

Click here for information from the DOL about SBC requirements.

Don’t Miss the Deadline to Submit Client Referrals!

The Annual Enrollment Period for Medicare plans runs from October 15 to December 7, 2019, and the Open Enrollment season for ACA plans runs from November 1 to December 15, 2019.

We can help you! As a Cornerstone broker, you have exclusive access to the Agency Services Program, which enables you to refer clients that are outside your scope to ARC Benefit Solutions. The best part? You still get paid while we do the heavy lifting.

Referral Deadlines and Processes for the 2019 Enrollment Season

Through the busy season, we will continually provide the highest quality of service and support to your referred clients. However, due to the high volume of client referrals during the enrollment seasons, priority will be given to referrals received on or before November 30, 2019.

It is easy to refer to us! You can use the hyperlink below or the client can call us directly at our toll-free # 1-877-432-8803. A full process document is laid out in the link below for your reference.

Here are a couple things to consider during the busy enrollment season:

  • Referrals are managed first in/first out
  • A minimum of three client outreach attempts will be made, which will be a combination of phone calls and emails.
  • Priority is given to referrals received on or before November 30, 2019. Every effort is made to ensure outreach to the client occurs within 48 hours. Turnaround time may be delayed during peak periods as we get closer to December 15.

Incomplete submissions will be returned requesting missing information.

Review the referral process

Submit a referral

About the Cornerstone Agency Services Program

LAST CALL for Anthem SOCA MEWA Training in 2019!

Anthem and Cornerstone are offering group agents one last chance this year to get trained on the very competitive SOCA MEWA plans.

This is open to agents who wish to get appointed with Anthem SOCA MEWA and existing SOCA MEWA agents who want a refresher or update.

DATE: Wednesday, October 16

TIME: 10:00 am

WHY:   

  • One of the most competitive products for healthy small groups!
  • If you aren’t certified to sell it, it won’t be offered to your renewing groups if they qualify.

Please click below to REGISTER.

Once you register, you will receive the meeting details

Click here to register.

EMPLOYER ACTION REQUIRED: Distribute Medicare Part D Notices by October 15

Group health plan sponsors must provide Medicare Part D “creditable coverage” notices prior to October 15, 2019, the start date of the Medicare annual enrollment period for Part D, Prescription Drug coverage (open enrollment runs from October 15 to December 7, 2019).

Most plan sponsors use the Model Medicare Part D Notices provided by the Centers for Medicare and Medicaid Services (CMS) to notify affected plan participants. Links to all the model letters (in English and Spanish) are available here in .pdf format. Cornerstone has provided versions of the notice in Word Document format for your convenience.

Creditable Coverage Notice

Non-Creditable Coverage Notice

The carriers plan listings and/or links to their creditable coverage site are available below:

Aetna: Please contact your Broker Advisor for more information.

Anthem: Click here.

Humana: Click here.

UnitedHealthcare: Click here.

Medical Mutual: COSE requested. All other plans, click here.

The October 15 deadline applies for all group health plan sponsors, regardless of plan year, plan size, employer size, grandfather status, or whether the plan is insured or self-funded.

Employers who send out Open Enrollment packets prior to October 15 often include the Medicare Part D notices in the Open Enrollment packets to avoid the extra cost and administrative burden of sending them separately.

Because these notices have not changed since 2018, employers who provided these notices earlier this year are not required to provide them again.

Employers are also required to notify CMS online annually that they have sent out these Part D notices. The notice to CMS is due within 60 days after the start of the plan year. See the last paragraph of this article for details.

When Is the Medicare Part D Notice Required?

Medicare Part D notices must be provided at least once annually, prior to October 15th, which is the beginning of the Part D annual enrollment period. Additional notices must be provided if the employer-provided coverage changes (from creditable to non-creditable, or vice-versa), if the individual requests a copy of the notice, and when an individual first enrolls in the employer plan.

Why is the Part D Notice Required?

The reason plan sponsors are required to provide Part D Notices is because a penalty will be imposed on an individual if he/she, after becoming eligible for Medicare Part D coverage, has a lapse of “creditable” prescription drug coverage for a period of at least 63 days. Additionally, such individuals may have to wait until the following October to join. An individual can elect either Medicare prescription drug coverage or other “creditable coverage” to avoid having a lapse in coverage. Thus, Medicare-eligible participants in employer group health plans must know whether or not the employer group coverage is “creditable” so they do not unwittingly incur a late enrollment penalty.

Additional Details on the Disclosure Requirements

  • Group health plan sponsors to whom this disclosure requirement applies include employers and Unions; multiple employer welfare arrangements (MEWAs); federal, state and local government employers; and churches.
  • The Part D Notice must be provided not only to Medicare-eligible active working employees and their dependents, but also to participants who are retired, on COBRA, or disabled and covered under the employer’s prescription drug plan.
  • Although the requirement is only that “Medicare-eligible” individuals be provided this notice, employers often provide it to all plan participants and dependents, because of the practical difficulty of knowing who is Medicare-eligible.

Annual Notice to CMS Also required, though not by October 15th

Additionally, plan sponsors are required to notify CMS annually, via the CMS website (Online Disclosure to CMS form). This notice must be made within 60 days after the beginning of the plan year (or contract renewal date, for small plans that do not file Form 5500s so do not specify a plan year), and it pertains to the creditable coverage status for the prior plan year. For calendar year plans, this notice must be provided to CMS no later than March 1.  Sponsors of non-calendar year plans should mark their calendars to make sure the disclosure to CMS is made within 60 days after the beginning of the plan year. (E.g., for an April 1 plan year, the CMS online disclosure should be made no later than May 30.)

Additionally, if applicable, plan sponsors must complete the Online Disclosure to CMS Form within 30 days after termination of a prescription drug plan or within 30 days after any change in creditable coverage status.

For additional information, click here for the main CMS webpage that provides guidance on “creditable coverage.” Or you can visit the web page at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/

ATTENTION: ACA FFM Certification Reminder

Agents with active on-exchange plans who want to receive renewal compensation must re-certify by the end of 2019. In addition, agents offering on-exchange coverage must certify prior to selling any plans during the 2020 open enrollment period.

Follow these steps to certify:

  1. Go to the CMS Enterprise Portal and log in
  2. Update your information on your Marketplace Learning Management System (MLMS) agent/broker profile
  3. Complete the Marketplace training requirement.
  4. Read and accept the applicable Marketplace Agreement(s)
  5. Print your 2020 Registration Completion Certificate
  6. Confirm your registration by using the Registration Completion List
  7. Please forward a copy of the registration completion certificate to Geoff Beglen at Cornerstone

Questions? Contact individual expert Geoff Beglen.

Signed Application Requirements for the Fourth Quarter

Effective Date and Application Requirements for December 1 and January 1 effective dates for Small Group.

Below is a list of carriers that will allow applications to be submitted for underwritten rates within 90 and 120 days of the effective date. Contact your Cornerstone Broker Advisor for additional information.

CARRIER

90 OR 120 DAYS

AETNA FUNDING ADVANTAGE 120 days (1/1/20 effective dates only)
ANTHEM SOCA 120 days from the date the applications are signed or 90 days from the date the employer’s paperwork is submitted.
ANTHEM CHAMBER ADVANTAGE 90 days
ANTHEM CHAMBERCARE HEALTH ALLIANCE 90 days
ALLSAVERS 120 days (12/1/19 & 1/1/20 effective dates)
UHC MEWA 120 days (12/1/19 & 1/1/20 effective dates)
HUMANA LF 90 days
MMO COSE MEWA 120 days (1/1/20 effective dates)

UnitedHealthcare Ohio Chamber MEWA Plans and Forms

We are excited to announce that the Ohio Chamber MEWA with UHC is ready to go. We will begin quoting immediately for a 9/1 effective date. That’s right! If you have a group that completed FormFire applications and didn’t get their decision made in time, we can still get you the 9/1 effective date.

The Ohio Chamber offers affordable membership for your clients and is required at the time of sale only. Click the link at the end of this message to access the available plan designs and all the necessary enrollment information.

The highlights below give you the details and value added benefits that your client will receive with the Ohio Chamber MEWA.

OHIO CHAMBER OF COMMERCE MEWA

  • Available for employer groups with an ATNE of 2–50
  • 15 Plan Portfolio (below)
  • Full National Choice Plus Network
  • Common 1/1 Renewal Date
  • Extended contracts available for 9/1 to 12/1 – RENEWAL 1/1/2021!
  • Applications accepted for 120 days from signature for 10/1 through 1/1 effective dates
  • Ohio Chamber Membership Required (or discounted Affiliate Membership)
  • $30 PEPM Commission Structure
  • Full UHC Value Added Benefits, including:
    • Real Appeal
    • Motion on all HSAs
    • Employer eServices
    • UnitedHeatlhcare Mobile
    • MyHealthcareCostEstimator
    • Virtual Visits

AHP_EE_Enrollment_Form_OH_final_fillable
AHP_EE_Health_Addendum_OH_final_fillable
AHP_ER_Application_OH_final_fillable
All Savers Plan Sponsor Certification Form
OCC MEWA Quote Install Checklist
OCC MEWA Quote & Install Checklist
OCHBP_Broker_Aug_2019
OH CHBP_Payment Authorization form
Ohio Chamber MEWA Coversheet & Census
Ohio Chamber Plan Grid