IRS Extends QSEHRA Notice Deadlines

The IRS issued Notice 2017-20, which provided welcome relief for employers who have chosen to move forward in implementing qualified small employer health reimbursement arrangements (QSEHRAs). In general, QSEHRAs allow small employers that meet certain criteria to offer a health reimbursement arrangement, which can provide for reimbursement of individual premiums. While we’ve previously covered the available statutory details related to QSEHRAs, there are still a number of questions facing employers and brokers.

One of the requirements for employers choosing to offer a QSEHRA is that the employer must provide notice to eligible employees. The statute provided deadlines for notice distribution, but was scarce on the information required to be included in the notice. In Notice 2017-20 the IRS acknowledged the need for greater detail and indicated it was prepared to issue such guidance in the near future. In the meantime, the IRS extended the previous March 13th deadline to not less than 90 days following the issuance of applicable guidance.

Additionally, the IRS stated, “Employers that furnish the QSEHRA notice to their eligible employees before further guidance is issued may rely upon a reasonable good faith interpretation of the statute to determine the contents of the notice.”

Despite remaining questions, this notice from the IRS will likely provide some welcome reassurance for brokers and employers that have begun implementing QSEHRAs.

For more information, contact Cornerstone today.

What’s Happening in Washington?

Danny Bradford

Danny Bradford, Corporate Counsel and Compliance Officer

Thanks to Cornerstone and the Ohio Association of Health Underwriters, I was fortunate enough to spend several days witnessing the chaos in our capital first hand. Though I won’t pretend to have answers about what may come next from Washington, I’m excited to share an update from my recent experience attending the National Association of Health Underwriter’s (NAHU) Capitol Conference.

NAHU and its local chapters across the country actively work to ensure that agent and broker interests have a voice in the discussion about the future of health care reform (a breakdown of NAHU legislative issues can be viewed on the NAHU website). While Congress continues the debate over repealing and replacing, NAHU has focused on the stabilization of the individual and small group markets. Regardless of the future of health care reform, everyone, including politicians, carriers, brokers, and consumers benefit from stability in a turbulent marketplace.

Nearly every speaker at the conference began by acknowledging the rapidly changing landscape of health care reform. Though some expect drastic action to come quickly, politicians on both sides of the aisle acknowledged that any change would likely take time.

So what might this “action” look like?

While I will not try to predict the outlook of the post-ACA health insurance market, it’s relatively clear that Republicans will use at least three different prongs to effect change:

1. Administrative Action

2. Budget Reconciliation

3. Legislation

Each prong provides means for changing the existing ACA structure, but also requires greater partisan and bi-partisan support.

As many brokers are aware, significant pieces of the ACA were implemented through administrative action, which can also be modified by administrative action. For example, on Friday, February 10, Tom Price was confirmed as the secretary of The Department of Health and Human Services (HHS), and then February 15, HHS took administrative action and issued proposed regulations addressing market stabilization.

While administrative action can begin quickly through the executive branch, budget reconciliation bills will require the support of 51 senators, while legislative bills will likely require the support of 60 senators.

A number of proposals, including House Speaker Paul Ryan’s “A Better Way” and Price’s “Empowering Patients First Act,” have been discussed in Congress and the in the media. However, most congressional representatives expect a comprehensive plan to be outlined in the coming weeks, which may clarify where the market is headed next. In the meantime, many brokers will continue to do what they have always done: Let politicians worry about Washington, and focus on taking care of their clients.

Cornerstone is committed to being a trusted resource in an ever-changing market, and our experts will keep you updated as we approach complex legislative modifications ahead.

For more information, contact Cornerstone today.

CMS Extends Transitional Policy for Grandmothered Coverage in Small Group Market

The Centers for Medicare & Medicaid Services (CMS) issued a bulletin on February 23rd to the State Insurance Commissioners outlining an extended transition to ACA-compliant policies.

This extension for grandmothered coverage in the small group market allows issuers with renewed policies under the transitional policy since 2014 to renew coverage for policies beginning on or before October 1, 2018, with no extension past December 31, 2018.

States may permit issuers that have renewed policies under the transitional policy continually since 2014.

Read it now.

Six of One, Half Dozen of the Other: Today’s Leading Health Care Cost Influences

Jennifer Agnello, President

Jennifer Agnello, President

Today’s escalating health care costs and its impact on our nation’s economy continues to be at the forefront not only for our industry, but our country and leaders as well. The age-old question of how to finance the health care “system” remains unanswered as costs continue to rise and driving factors remain unconstrained.

According to the National Health Expenditure Accounts (NHEA), which measures annual U.S. expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care:

In 2015, U.S. health care spending increased 5.8 percent to reach $3.2 trillion, or $9,990 per person. The coverage expansion that began in 2014 as a result of in the Affordable Care Act continued to have an impact on the growth of health care spending in 2015. Additionally, faster growth in total health care spending in 2015 was driven by stronger growth in spending for private health insurance, hospital care, physician and clinical services, and the continued strong growth in Medicaid and retail prescription drug spending. Lastly, the overall share of the U.S. economy (GDP) devoted to health care spending was 17.8 percent in 2015, up from 17.4 percent in 2014.

From all perspectives, there is no one single cause for the rise in costs, nor is there one single solution that would contain them. We need to fully understand the contributors to what many call a “national crisis.” Following are a few of the main drivers:

Pharmaceutical costs: It is estimated that Rx spending in the U.S. was approximately $457 billion in 2015: $328 billion (71.9 percent) for retail drugs and $128 billion (28.1 percent) for non-retail. Factors in the rise in drug spending include: population growth, an increase in the number of prescriptions per person, inflation, and changes in the composition of drugs prescribed toward higher price products or price increases. According to Express Scripts, the average price of brand name drugs increased 16.2 percent in 2015 and 98.2 percent since 2011. Expenditures on specialty drugs are rising more rapidly than other drugs. Despite being used by only 1to 2 percent of the population, specialty medications accounted for 37 percent of the drug spend in 2015 and are projected to reach 50 percent by 2018.

Aging population: According to the World Health Organization, the number of people aged 65 or older is projected to grow from an estimated 524 million in 2010 to nearly 1.5 billion in 2050 worldwide. By 2030 it is projected that more than 60 percent of baby boomers will be managing more than 1 chronic condition (including hypertension, high cholesterol, arthritis, diabetes, heart disease, cancer, dementia, and congestive heart failure — heart disease, stroke and cancer have been the leading chronic conditions in “high income” countries). 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.

Lifestyle and behavioral choices: As much as 70 percent of health care costs are attributable to choices such as obesity, smoking and alcohol abuse and according to the National Center for Health Statistics, nearly 35 percent of the American population is obese. One out of every six children age 2 to 19 is overweight or obese. According to the Centers for Disease Control, this number has doubled for children and quadrupled for adolescents over the past 30 years. Cigarette smoking is the leading cause of preventable disease and death in the U.S. and in 2015, 15 out of every 100 U.S. adults (15.1 percent) smoked and more than 16 million Americans live with a smoking-related disease. Each smoker costs an employer an additional $5,128 per year in health care costs and lost productivity. Injection drug use often causes Hepatitis C and the disease becomes a chronic condition in 75 to 85 percent of all infected. Hepatitis C is the leading cause of liver transplant in the U.S. Unfortunately, consumers often choose to seek medical solutions for lifestyle choices instead of changing their behavior.

Lack of medical adherence and inefficiencies within the system: It is estimated that nearly 50 percent of patients do not take medications as prescribed. This results in recurrence of symptoms, duplication of treatment and increased hospital readmission rates. Hospitals are estimated to waste as much as $11 billion per year on inefficiencies, unnecessary medical treatments and prescriptions are costing billions and preventable mistakes also account for rising costs-as many as 400,000 people die each year as the result of medical error.

Increased utilization: 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 (i.e., HIV/AIDS, gastric bypass), new drugs, and increased demand, among others, all contribute towards increased utilization/increased costs.

Defensive medicine/Medical malpractice costs/Cost-shifting by providers: (I will lump these together because I mentioned I would only give “6” examples and I need to keep you interested!) With more Americans insured under the federal health care system (Medicare/Medicaid), providers are offsetting their losses from declining reimbursements by shifting their costs onto private payers. High costs of medical malpractice insurance drives the rise in the practice of defensive medicine. Ordering more or duplicate tests, prescribing more drugs, and referring to more specialists provide a protection which offsets the anxiety of being sued. Medical malpractice is said to add between $55 billion to $200 billion annually and combined with defensive medicine accounts for 7.2 to 12.7 percent of the increase in health care costs.

So what can we do to contain costs? As stated previously, there is not one perfect solution, however the surge in consumer-driven health care and innovative benefit design, wellness solutions, self-funding mechanisms, and reimbursements made to providers based on quality versus quantity (pay for performance) are a good start. Through education and the presentation of quality choices we can help control costs without losing quality care.

Let the experts at Cornerstone assist you in creating and presenting quality, cost-saving, creative solutions for your clients. Call us today to learn more.

For more information, contact Cornerstone today.

Rep. Price Confirmed for Secretary of Health and Human Services

Tom Price, previously Republican representative from Georgia, has been confirmed as the secretary of Health and Human Services with a vote of 52–47. Price is expected to implement the repeal and replacement of the Affordable Care Act and will be responsible for a department with an annual budget of more than $1 trillion. Price stated that his goal as the head of HHS is to give everyone access to health insurance.


Tom Price Confirmed as Secretary of Health and Human Services

Tom Price Is Confirmed as Health Secretary

Merger Between Anthem and Cigna Blocked by Federal Judge

U.S. District Judge Amy Berman Jackson of the Federal District Court for the District of Columbia blocked a proposed $48 billion merger between Anthem Inc. and Cigna Corp. The block came two weeks after the proposed merger between Aetna and Humana was blocked on antitrust grounds.

The judge decided that the proposed merger would be ‘harmful’ to customers and violated federal antitrust law becuase it of its ‘anticompetitive effects.’

In the beginning, the two companies said the merger would create a more ‘diversified’ health insurer, though there was eventually a disagreement that Judge Jackson called ‘the elephant in the courtroom.’

A press release from Anthem states that the company ‘intends to file a notice of appeal and request an expedited hearing of its appeal to reverse the Court’s decision so that Anthem may move forward with the merger…’



Federal Judge Blocks Anthem’s Planned Acquisition of Cigna

Judge, Citing Harm to Customers, Blocks $48 Billion Anthem-Cigna Merger

Anthem Responds to U.S. District Court’s Decision on Acquisition of Cigna

Aetna Plans to Stay Out of Individual Market in 2018 Following 2016 Losses

Mark Bertolini, chairman of Aetna Inc., stated that the company would not be involved in the individual market throughout 2018 because of the uncertainty of legislative changes. The company hopes to return to the market in 2019 when there is expected to be a new system in place.

Executives from the company said that involvement in the individual market in 2016 led to a $450 million loss, which was much higher than the company anticipated. An antitrust judge suggested that the company may be using concerns in the individual market to leverage its proposed acquisition of Humana, Inc. According to Bertolini, Aetna is still reviewing the antitrust case ruling and may file an appeal.

For more information, click here.

President Trump’s Nominee for HHS Does Not Support Privatization of Medicare

Price was previously noted as supporting the privatization of Medicare, though he commented that his role as health secretary would prompt him to make decisions differently than when he was in his role as congressman.

The HHS nominee was also under scrutiny from Democratic Senator Ron Wyden for stock trading as a lawmaker, which included health industry stocks that could be affected by legislation. The Senator noted the stock trading as a “conflict of interest” and “an abuse of position.” Price maintains that his work with stock trading was ethical and completely transparent.

Click here for the full article.

Aetna’s Proposed Merger with Humana Prompts Concerns of Reducing Competition in the Marketplace

U.S. District Judge John Bates intercepted Aetna’s proposed acquisition of Humana, a deal the judge declared was “presumptively unlawful” in the private marketplace. The proposed $37 billion acquisition, which was focused on Medicare Advantage plans, a market in which Humana is particularly strong, was blocked because it was thought that it would lessen competition for Medicare Advantage plans in the marketplace. The judge declared the merger would not be in the best interest of the companies’ consumers, especially in other markets where the merger would have a large share of business.

Judge Bates commented, “The court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the anticompetitive effects for consumers in the challenged markets.”

This interception came just 6 months after a proposed merger between Anthem and Cigna was blocked by the Justice Department.

This is a developing story. Stay tuned for more information regarding the Aetna-Humana merger proposal.


Judge Blocks Aetna’s $37 Billion Deal for Humana, The New York Times

Judge Cites ‘Serious Concerns,’ Blocks Aetna’s $37B Merger with Humana, BenefitsPro

President Trump Signs Executive Order to Minimize Burdens Caused by ACA

According to the executive order, the secretary of the U.S. Department of Health and Human Services and other executive departments have the authority to “minimize ACA-related burdens” that would be fiscally or regulatorily burdensome on “individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products or medications.”

Read the full story here.