Capstone Blog
Navigating the world of health insurance can be overwhelming, especially when faced with terms like coinsurance, copays, and deductibles. These out-of-pocket costs significantly impact how much you spend on health care. Understanding these terms can help you make informed decisions about your coverage and expenses. Let’s break them down.
Written by: Dan McGill
Health insurance spending is projected to rise by 8.0% for group markets and 7.5% for individual markets between 2024 and 2025—the highest increase in 13 years. This sharp growth is fueled by persistent inflationary pressures, rising prescription drug costs, and increased demand for behavioral health services, with no significant cost-reducing measures on the horizon.
The inflationary trends impacting the healthcare sector since 2022 are expected to persist into 2025, as providers continue to shift their rising operational expenses onto health plans. The expanding use of GLP-1 drugs is poised to further drive-up medical expenses. Meanwhile, innovations in treatments for chronic conditions and higher utilization of behavioral health services continue to push costs upward. Although biosimilars may provide some relief, they are unlikely to fully offset these pressures.
In response to these challenges, healthcare price transparency has emerged as a critical tool for promoting accountability and enabling more informed decision-making. Since its introduction in 2019, transparency initiatives like the Hospital Price Transparency Rule, the No Surprises Act, and the Transparency in Coverage Rule have significantly enhanced visibility into healthcare costs.
For example:
The Hospital Price Transparency Rule requires hospitals to publish standard charges in a machine-readable format.
The Transparency in Coverage Rule mandates insurers and employers to disclose negotiated rates and out-of-pocket cost estimates.
The No Surprises Act protects consumers from unexpected out-of-network charges and introduces Good Faith Estimator tools.
While these efforts have laid a strong foundation, the challenge remains in transforming this transparency into actionable insights that genuinely benefit employers, employees, and other stakeholders. This is where broker-consultants play a pivotal role.
How Capstone Can Help
Data is power. Despite recent legislation, obtaining detailed claims and utilization data continues to be a challenge. That said, there are strategies and emerging technologies that forward-thinking broker-consultants can utilize to access this information to best insulate groups against inflationary pressures.
Obtaining the data is only the first step. Once received, that data needs to be analyzed, organized, and interpreted in order for it to have any value to an organization from an underwriting perspective. The last step in the process is the development of targeted strategies to address trends and reduce claims spend moving forward.
Our Capstone Benefits Team stresses the substantial value to be realized through more proactive employee education. This includes clear explanations of formularies, deductibles, cost-sharing, and utilization management techniques like prior authorization and step therapy. By incorporating real-world examples and online tools that illustrate patient cost-sharing responsibilities, we empower employers and members to make informed healthcare decisions.
In behavioral health, where demand continues to rise, Capstone takes a two-pronged approach. Our internal advocates help employees navigate the challenge of actually accessing quality care, while also working closely with employers on common issues such as reimbursement challenges and balance adequate coverage for mental health services with controlling medical expenses.
With providers expected to impose greater unit cost pressures in the coming years, Capstone can guide health plans in adopting innovative strategies that enhance affordability while continuing to stress quality of care.
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Prescription drug costs in the United States have been rising steadily over the past few decades, and the impact of these rising costs on corporate health insurance plans has been significant. The high cost of drugs and pharmacy services has been a major contributor to the rising cost of healthcare in the United States, and it is a problem that affects everyone, from patients to employers.
According to a recent report by the Kaiser Family Foundation, the cost of prescription drugs has been rising faster than any other component of healthcare spending in the United States. The report found that in 2019, the average cost of a brand-name prescription drug in the United States was $6,798, up from $1,869 in 2006. Generic drugs have also seen price increases, with the average cost of a generic prescription drug rising from $90 in 2010 to $140 in 2019.
These rising costs have had a significant impact on corporate health insurance plans. Employers are finding it increasingly difficult to provide affordable health insurance coverage to their employees, and many are passing on the costs of prescription drugs and pharmacy services to their employees in the form of higher deductibles and co-pays. This, in turn, has made it more difficult for employees to access the medications and treatments they need to manage their health conditions.
According to the AHIP, over 22% of all commercial health plan premiums go towards Prescription Drug costs, while only 11% go towards Doctor Visits and 3.3% towards Emergency Room Costs.
The impact of rising drug costs on corporate health insurance plans has been particularly acute for small and medium-sized businesses. These businesses typically have fewer employees and less bargaining power when negotiating with health insurance providers and pharmacy benefit managers (PBMs). As a result, they often end up paying higher prices for prescription drugs and pharmacy services than larger businesses with more flexibility and options in regards to the group health insurance offerings.
A few of the reasons for our heightened costs of prescription drugs in the United States is increased pressure for expensive R&D, and the lack of price regulation and transparency. Unlike in many other countries, the United States does not have a centralized authority that negotiates drug prices on behalf of the entire population. Instead, drug prices are set by the manufacturers, and insurers and PBMs negotiate prices with the manufacturers on a case-by-case basis.
There are some efforts underway to address the problem of rising drug costs in the United States. For example, several states have passed laws allowing the importation of prescription drugs from Canada and other countries where drug prices are lower. However, these efforts are limited in scope and may not be enough to address the larger problem of rising drug costs.
Larger employer groups and organizations that are “experience rated”, or in an alternative-funded group health arrangement, often have an opportunity to directly impact their prescription drug spend, thus directly impacting their group health insurance costs. As opposed to “fully-insured” health plans that include bundled vendors with little flexibility, many self-funded programs allow for an unbundling of services including Pharmacy Benefit Managers (PBMs), which gives the group more power to negotiate the most favorable contracts, pricing, and rebates. In addition to the PBM flexibility, these groups also have the ability to implement proactive drug advocacy and oversight programs to further control and reduce annual drug spend while still providing optimal care and coverage to their employees. We recommend speaking to your broker or consultant regarding these options, or contact a member of our Capstone Benefits Team for more information: Benefits@CapstoneGrp.com
In conclusion, the rising cost of prescription drugs in the United States continue to negatively impact corporate health insurance plans, and ultimately consumers & patients. While there are some efforts underway to address the problem, more needs to be done to ensure that everyone has access to the medications and treatments they need at a price they can afford. This will require a concerted effort by policymakers, healthcare providers, consultants, and the pharmaceutical industry to find solutions that work for everyone.
Written by: Dan McGill and Joseph T. Fox
Many organizations have concluded that adding mental health benefits to their Employee Benefits Package far outweighs the cost.
The U.S. Surgeon General recently issued a public health advisory on children’s mental health and how COVID-19 pandemic-hardships have played a role in the emerging crisis. The advisory emphasized the increased rate of depression and anxiety diagnosed in children. In addition, experts say the changes the pandemic has brought upon families, like schools alternating between virtual and in-person learning, extracurricular activities being canceled, and an overall decrease in interaction have impacted children's behavior and mental health.
Changes in routine for families due to the pandemic can also affect parents' mental health, while they try to juggle work, keep their home life stable, and protect their children’s health. This mental health crisis isn’t exclusive to children and parents either, as many Americans living alone reported feelings of loneliness, depression, anxiety and stress. Millions of Americans are struggling with mental health related issues, yet seeking treatment, and even more importantly coverage for that treatment, has become a daunting task.
Americans are facing a severe shortage of available mental health professionals, with some in-network providers leaving networks as the reimbursement rates have remained consistently low from insurance carriers. The demand and lack of adequate compensation for mental health providers, including psychiatrists, psychologists, licensed clinical social workers, counselors, and marriage and family therapists, has led to a workforce crisis along with increased out-of-pocket service fees. As a result, most consumers are forced to pay out of pocket for standard therapy ranging from $100 to $250 per hour. This is a significant financial hardship for most people seeking care and treatment. The U.S. Substance Abuse and Mental Health Services Administration found that 50 percent of those who have mental illness cited mental health care expenses as the reason they didn't obtain treatment, making it the #1 reason identified.
At Capstone Group, we are committed to tailoring solutions for clients to make mental health services more easily and readily accessible, even if those solutions hadn’t previously been established in the marketplace. For example, we have recently helped some of our most forward-thinking and innovative client partners incorporate a unique and novel product into their overall Employee Benefits program in a direct effort to address many of the issues outlined above; A Mental Health HRA.
This HRA sets aside funds for the employee or members of their family to find care without worrying about whether that specific provider is “in-network” relative to their medical insurance plan. By implementing an employer-sponsored mental health HRA, employees and their families can utilize funds set aside by the company to cover the cost of services like psychiatrist visits, Mental Health counseling, addiction counseling, Psychoanalysis with a letter of medical necessity, and other qualified Mental Health Therapy. In addition, these HRA funds can go towards services such as genetic testing through third-party vendors like Genomind PGX Express Test prescribed by a psychiatrist. These tests identify the types of medication that will work best for an individual and cut down on the trial-and-error period that most patients go through before discovering what truly works best for them.
Capstone Group, as an organization, has made Employee Wellness and Mental Health a top priority. This is reflected in our daily meetings internally and with our client partners. If you would like more information on building a strategy and implementing solutions to help your workforce navigate the mental health landscape, Capstone Group would welcome the opportunity to start a conversation.
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As a reminder, insurance carriers are required to satisfy certain medical loss ratio (“MLR”) thresholds. This generally means that for every dollar of premium a carrier collects with respect to a major medical plan; it should spend 85 cents in the large group market (80 cents in the small group market) on medical care and activities to improve health care quality. If these thresholds are not satisfied, rebates are available to employers in the form of a premium credit or check.
If a rebate is available, carriers were required to distribute MLR checks to employers by September 30, 2021.
Importantly, employers must distribute any amounts attributed to employee contributions to employees and handle the tax consequences (if any).
This does not apply to self-funded plans.
What to do with MRL Rebate Checks?
What will the Rebate amount be?
Will there be any Communication?
What are the tax consequences?
To prepare for open enrollment, group health plan sponsors should be aware of the legal changes affecting the design and administration of their plans for plan years beginning on or after Jan. 1, 2021. Employers should review their plan documents to confirm that they include these required changes.
In addition, any changes to a health plan’s benefits for the 2021 plan year should be communicated to plan participants through an updated summary plan description (SPD) or a summary of material modifications (SMM).
Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, when applicable—for example, the summary of benefits and coverage (SBC). There are also some participant notices that must be provided annually or upon initial enrollment. To minimize costs and streamline administration, employers should consider including these notices in their open enrollment materials.
A recent court decision highlights an administrative process known as cross-plan offsetting. Briefly, cross-plan offsetting is a mechanism used by third-party administrators (“TPAs”) to resolve overpayments to a provider made through one plan by withholding (or reducing) payment to the same provider through another plan.
Based on the court’s ruling, employers should review and understand whether their TPA engages in cross- plan offsetting and whether there is language in the plan documents to support this practice. Further, it is advisable to review whether to continue cross-plan offsetting or “opt-out” of this practice.
The following FAQs are intended to explain cross-plan offsetting and highlight some of the issues identified with this practice.
A TPA may determine that it overpaid a provider when reimbursing a claim for a group health plan. Instead of seeking recoupment for the specific overpayment from the provider, the TPA reduces a future payment made by another group health plan to that provider by the amount owed. This practice is generally applied to out-of-network providers.
On January 15, 2019, in Peterson v. UnitedHealth Group, Inc., the court determined that the cross-plan offsetting was impermissible when the written plan terms did not authorize this practice. Because the court determined the plan documents lacked authorization, it did not have to address whether the practice of cross-plan offsetting itself violated ERISA.
According to the court, cross-plan offsetting, as a practice, violates ERISA unless the plan documents specifically authorize it. If the documents are silent, vague, or have broad interpretative authority (without express authorization), the practice is not permissible.
The question the court did not answer directly is whether cross-plan offsetting, even with appropriate plan language, violates ERISA. The court expressed concern that cross-plan offsetting is in some tension with the requirements of ERISA.
While not deciding the issue, the court recognized that at the very least, the practice approaches the line of what is permissible.
The Department of Labor is also concerned that this practice raises ERISA issues, both violations of fiduciary duty as well as prohibited transactions (self-dealing) as outlined in their amicus brief. So, while the court did not rule on these issues, the Department may take a harder look at TPA practices and payments when auditing employer-sponsored group health.
Perhaps. Typical administrative service agreements from TPAs indicate that a TPA will make reasonable efforts to recover any overpayments, but that it is only liable in the case of its gross negligence or willful misconduct. In this case,
an employer will generally be responsible for paying for the overpayment where the TPA does not recover it from the provider using ordinary efforts. This could result in increased costs to the plan.
The plan may be able to engage in “same-plan” offsetting. This means, within the same plan, offsetting overpayments made to an out-of-network provider for one plan participant by reducing a separate payment made to the same provider for a claim of another participant in the same ERISA plan. This practice, which should be disclosed in the plan documents, likely does not trigger similar ERISA issues that cross-plan offsetting does. However, as most plan claims are paid in-network, the potential for the TPA to be able to offset claims with the same out-of-network provider under the same plan may be limited. Further, plans must provide appeal rights to participants in the event they receive a balance bill for offset amounts in dispute.
Self-funded health plans may receive letters from their TPAs regarding cross-plan offsetting practices. Some TPAs will provide the plan sponsor the opportunity to “opt-out” of cross-plan offsetting practices.
Regardless of whether you received a notification or not, employers with self-funded plans should ask their TPAs whether they engage in cross-plan offsetting.
If the TPA does not use cross-plan offsetting, there is no issue.
If the TPA uses cross-plan offsetting, then the employer (as plan sponsor and plan fiduciary) should consider the following:
• An Opt-Out of cross-plan offsetting is available. If the TPA permits the employer/plan sponsor to opt- out, employers should decide whether they think the potential benefit to cross-plan offsetting is greater than their risk tolerance for a potential ERISA violation.
• Opting out. Opting out of cross-plan offsetting is the most conservative approach considering the court’s ruling and DOL’s interpretation. If choosing to opt-out, keep records of the decision and monitor TPAs to ensure that they are administering the plan consistent with the written plan terms.
• Opting in. Employers who stick with cross-plan offsetting should ensure that their plan document and summary plan description specifically authorize and outline the cross-plan offsetting process. Consider making the TPA a claims fiduciary with respect to the plan. There is a heightened risk of DOL intervention and/or litigation from providers. We recommend employers continuing cross-plan offsetting review this decision with counsel.
• No Opt-Out Available. If the TPA does not permit the employer to opt-out, the employer should be comfortable with the practice or consider moving to another TPA. We recommend employers choosing to permit cross-plan offsetting review this decision with counsel. Plan documents should include language authorizing the practice.
* This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. ©2019 Emerson Reid, LLC. All Rights Reserved. CA Insurance License #0C94240. *
